Lombardo v. Federal Commissioner of Taxation.

Judges:
Toohey J

Court:
Federal Court

Judgment date: Judgment handed down 5 March 1979.

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Toohey J.: The taxpayer seeks leave to appeal against a decision of the Supreme Court of Western Australia dismissing his appeal from a decision of a Board of Review confirming assessments of income tax made in respect of the years ended 30 June 1968, 1969 and 1973.

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ATC 4080

Wickham J. held that he had no jurisdiction to entertain the appeal, adding:

``... that should I be wrong in that conclusion, I have heard the evidence of the parties and their witnesses and I am in a position to make a decision... should the case go any further and be returned to me for that purpose.''

Section 25(2) of the Federal Court of Australia Act 1976 enables an application for leave to appeal to be heard and determined by a single Judge or by a Full Court. The application came before me as a single Judge. This has some implications that I shall mention in these reasons. The merits of the application were canvassed at some length by counsel for the taxpayer and the Commissioner and in view of the relative novelty of the application I reserved my decision.

Section 196(5) of the Income Tax Assessment Act 1936, that makes leave to appeal necessary, does not define the circumstances in which leave may be given nor does it prescribe any criteria to be applied. Nevertheless there are provisions in the Act which throw some light upon the exercise of this discretionary power.

Section 196(5) itself contrasts the ``leave'' required to appeal to the Federal Court with the ``special leave'' required to appeal to the High Court. Similar expressions appeared in sec. 35 of the Judiciary Act 1903, as it stood until 1976, although the reference to leave to appeal was in relation to interlocutory judgments where otherwise an appeal would lie as of right. For that reason the judgment in
Ex parte Bucknell (1936) 56 C.L.R. 221 is not entirely in point. But in the course of a joint judgment the Court emphasised that in the case of an application for special leave:

``there must be special circumstances in the case in order to justify the granting of the application.... But, in the case of orders from which an appeal does not lie without leave only because they are interlocutory, it is clear from the terms of the section that the existence of special circumstances is not made necessary in order to justify the grant of leave to appeal.''

(at p. 224).

Likewise, although it may be at best a negative consideration, the existence of special circumstances is not necessary before leave to appeal to the Federal Court may be granted.

Section 196(1) of the Income Tax Assessment Act provides for an appeal to a Supreme Court from any decision of a Board ``that involves a question of law''. The meaning of that expression has been canvassed in a number of decisions. See for instance
Krew v. F.C. of T. 71 ATC 4213; (1971) 45 A.L.J.R. 324. It is not necessary to refer to them; the point is that the involvement of a question of law is all that is necessary to ground an appeal from a Board to a Supreme Court. To appeal from a Supreme Court to the Federal Court leave is required. The conclusion is inevitable that the existence of a question of law is not of itself enough to warrant that leave. Something else is required. A question of law that is important or of general application is, no doubt, sufficient but there may be other considerations that justify leave.

The notice of appeal to the Supreme Court identified the questions of law involved in the decision of the Board in this way:

``1. The proper construction of Section 26(a) of the Income Tax Assessment Act 1936.

2. Whether the Appellant acquired his interest in the properties referred to in the decision of the Board of Review as `Helm Street' and `Clay Lands' for the purpose of profit making by sale.''

Before the Supreme Court the Commissioner submitted that no question of law was involved. Wickham J. reserved decision on that question until he had heard the evidence; in the end he accepted the submission.

Although several questions of law were claimed by the taxpayer to be at least potentially involved in the decision of the Board, the ``important question'' said to warrant leave was whether a taxpayer, assessed under the provisions of sec. 26(a) of the Income Tax Assessment Act, can appeal to a Supreme Court against a decision of a Board of Review. In my view the question cannot be proffered in that wide form. There may be decisions of a Board concerning an assessment under sec. 26(a) that incontestably involve a question of law, hence are appealable. Decisions turning on the meaning of ``acquired'', ``purpose'' and ``profit making by sale'' fall into this category.

On examination, it appeared that what the taxpayer was really saying was that the application of a statutory provision such as sec. 26(a) to the facts as found will always involve a question of law, even when the contention falls short of saying that there was no evidence on

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ATC 4081

which the Board might reasonably have reached its conclusion. Wickham J. did not accept this. He took as his starting point a passage from the judgment of Fullagar J. in
Hayes v. F.C. of T. (1956) 96 C.L.R. 47 at p. 51:

``Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally - so far as I can see, always - be a question of law.''

Wickham J. was of the view that Fullagar J. was simply restating what had been said by Latham C.J. in
F.C. of T. v. Miller (1946) 73 C.L.R. 93 at 97 and what had been said earlier by Lord Parker in
Farmer v. Cotton's Trustees (1915) A.C. 922 at p. 933. There is a difference of language involved; the earlier cases expressly introduced the element of construction by speaking of ``the provisions properly construed of some statutory enactment''. Whether in the end the three Judges were applying the same test may be arguable. Sitting as a single Judge, hearing an application for leave to appeal, I do not think it is for me to try to resolve that argument. My inquiry should be directed to the existence of an arguable question, the implications of that question for the case in hand and, if urged as a reason for leave, its wider implications.

The correctness or otherwise of the decision challenged may be a relevant consideration when the application is before a Full Court.
Fredericks v. May (1973) 47 A.L.J.R. 362. Sitting as a single Judge, particularly when the correctness of the decision was not fully argued, the situation is different. If leave is granted, the Full Court is not bound by any view of the law I take, but it seems to me undesirable that a single Judge should grant leave on the basis that the decision of the Supreme Court was wrong. That is a matter for the Full Court.

If leave is granted and the appeal is upheld, the matter will be remitted to Wickham J. It may be that from his Honour's decision leave to appeal will again be sought, either by the taxpayer or the Commissioner. That should not stand in the way of this application. For this taxpayer substantial sums of income tax are involved, not only in respect of the years assessed but, I am told, in regard to later years for which assessments will be raised arising out of the same transactions. The taxpayer's reference to the Board was heard jointly with those of his father and brother. Their assessments were confirmed and the competency of their appeals, pending in the Supreme Court, will be affected, if not determined, by a decision on an appeal by this taxpayer.

In my view these are good reasons for granting leave to appeal, especially as there is a question of law to be argued, the answer to which may throw light on the scope of appeals from Boards of Review to Supreme Courts.

There will be leave to the taxpayer to appeal. At the request of the parties I reserve the question of costs. If there is any other matter arising from these reasons, requiring directions or any procedural order, either party may apply within 14 days.