Federal Commissioner of Taxation v. Nixon.

Judges:
Lockhart J

Court:
Federal Court

Judgment date: Judgment handed down 6 September 1979.

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Lockhart J.: This is an application by the Commissioner of Taxation for leave to appeal from a decision of the Supreme Court of New South Wales allowing the taxpayer's appeal from a decision of the Board of Review (No. 1) confirming the Commissioner's amended assessment of income tax in respect of the year of income ended 30 June 1970. The source of the Commissioner's right to appeal to this Court by leave is the Income Tax Assessment Act 1936 sec. 196(5).

As Toohey J. observed in
Lombardo v. F.C. of T. 79 ATC 4079 at p. 4080:

``Section 196(5)... does not define the circumstances in which leave may be given, nor does it prescribe any criteria to be applied.''

I agree with his Honour's conclusion; and I agree with his Honour that the existence of a question of general or public importance or special circumstances is not necessary before leave to appeal to this Court may be granted.

In my opinion, the existence of a question of law generally will not, per se, be enough to warrant leave. I agree with Toohey J. that a question of law that has importance or is of general application is sufficient, but there

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may be other considerations that justify leave. I also agree with his Honour that when the exercise of this Court's power to hear an application for leave to appeal is exercised by a single judge of this Court pursuant to the Federal Court of Australia Act 1976 sec. 25(2) the Court's 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.''

The appeal to the Supreme Court of New South Wales arose out of the disallowance by the Commissioner of an objection by the taxpayer to the inclusion of an amount of $26,747.00 in the assessable income of the taxpayer for the year of income ended 30 June 1970 representing the sale of shares held by the taxpayer in Tasminex N/L which the Commissioner included in the taxpayer's amended assessment as profits arising from the sale of property acquired by the taxpayer for the purpose of profit-making by sale within the meaning of sec. 26(a) of the Assessment Act.

On 25 March 1975 the taxpayer requested the Commissioner to refer the objection to the inclusion of the abovementioned sum of $26,747.00 in his assessable income to a Board of Review for review.

The reference was heard by the Taxation Board of Review No. 1 on 7 and 8 August 1978, and the Board unanimously confirmed the taxpayer's assessment to income tax for the year ended 30 June 1970.

By notice of appeal filed on 28 September 1978 the taxpayer appealed to the Supreme Court of New South Wales from the Board's decision. The appeal to the Supreme Court was heard by Hunt J. who on 26 July 1979 made orders upholding the appeal with costs.

It appears from the material and arguments before me that the questions involved in the appeal included the following:

• (a) whether the taxpayer had acquired the shares, the realization of which gave rise to profit, for the purpose of profit making by sale in terms of sec. 26(a) of the Assessment Act;
• (b) whether the taxpayer had discharged the onus or proving that the intention of profit making by sale had not existed; and
• (c) whether the decision of the Board of Review involved a question of law such that the Supreme Court had jurisdiction to hear and determine the appeal.

This application for leave is sought upon grounds which include the following:

• 1. That his Honour erred in concluding that the taxpayer had not acquired the shares for the purpose of profit making by sale, the proper inference to be drawn from all the evidence pointing to the opposite conclusion;
• 2. That his Honour erred in concluding that the Board of Review had misdirected itself in relation to the discharge by the taxpayer of the statutory onus of proof provided by sec. 190(b) of the Assessment Act; and
• 3. That his Honour should have held that it was open to the Board of Review on the evidence before it to hold that the taxpayer had not discharged the statutory onus of proof provided by sec. 190(b), and that his Honour should have been satisfied on the evidence before him, and from the proper inferences to be drawn therefrom, that the taxpayer had not discharged the onus of proof required by sec. 190(b).

It has been submitted by Mr. Conti Q.C., who appears with Mr. Marks for the Commissioner, that the question which would be raised upon appeal to this Court would involve, inter alia, the questions of the proper construction of sec. 26(a) and 190(b) of the Assessment Act; that the decision of Hunt J. is attended by doubt and uncertainty

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having regard to a number of matters, including the fact that the opposite conclusions were unanimously reached by the Board of Review; and that this Court would be in as good a position as Hunt J. to determine the proper inferences to be drawn from the evidence of the case, particularly the evidence of the taxpayer and his niece Janet Muriel Draper; and that if this Court enters upon the task of considering that evidence it would, whilst giving due weight and respect to the conclusions of his Honour, reach the conclusion that the shares in question were acquired for the purpose of profit making by sale.

It is also submitted by Mr. Conti that a question of law involved is whether his Honour's conclusion to the effect that the Board of Review had misdirected itself in relation to the nature of the onus of proof required by sec. 190(b) of the Assessment Act was relevant and, if relevant, correct.

Mr. Conti has also submitted that a further question of law involved is whether, assuming his Honour was correct in accepting the taxpayer as a witness of truth, nevertheless, when the evidence is viewed as a whole, this Court would be compelled to reach the conclusion, based on the principles enunciated by the High Court in a number of cases, including
Warren v. Coombes and Anor. (1979) 53 A.L.J.R. 293 that the taxpayer had not discharged the requisite onus of proof for the purposes of the Assessment Act.

It has also been submitted by Mr. Conti that in a case such as this, where the evidence before the Supreme Court had a dual source, namely evidence that was before the Board of Review, and evidence, including viva voce evidence of witnesses, led for the first time before the Supreme Court itself, there should be a determination of the proper principles to be applied by this Court in deciding the circumstances in which findings of the Supreme Court are liable to be reviewed, especially where they rest to some extent on inferences to be drawn from the evidence together with findings of credibility in favour of the taxpayer.

In my opinion not only are there questions of law to be determined on the hearing of any appeal from the order of Hunt J., but there are some questions of general importance which arise in the case. I summarise them as follows:

• A. The circumstances in which this Court will review conclusions of the Court from which the appeal lies, which raise inferences to be drawn from evidence, some of which is given before a tribunal such as a Board of Review under the Assessment Act and balance is led before the Court itself;
• B. The relevance of his Honour's conclusion in the present case to the effect that the Board of Review had misdirected itself in relation to the nature of the onus of proof required by sec. 190(b) of the Assessment Act;
• C. The principles to be applied in determining whether a decision of the Board of Review does involve a question of law for the purposes of sec. 196(1) of the Assessment Act; although I must say at once that it is certainly possible that this question of law may not in fact arise on any hearing of the appeal before a Full Court of this Court. On the other hand it is clear from the argument that it may arise.

I have said already there are in my view questions of law to be argued before the Full Court of this Court. I need not enumerate them all except to say they would include those I had described earlier and prefaced by the letters (a), (b) and (c).

Mr. Conti Q.C. also submitted that there were some discretionary matters that I ought to take into account in favour of granting of leave. These were disposed of in the course of argument against the Commissioner. I need not refer further to them.

This is not a case in which the Commissioner maintains that it is a test case or one that will determine the fate of other pending assessments or assessments under review or appeal. In my view the only basis that exists for the granting of leave is the fact that there are some questions of general importance involved.

Accordingly I am satisfied that this is a proper case for the granting of leave to appeal. On the question of costs, as the basis for the granting of leave is that the appeal involves questions of general importance I think it proper that a condition be imposed

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on the granting of leave that the Commissioner pay the taxpayer's costs of this application whatever the outcome of the appeal to this Court may be. I do not think it proper to go beyond that and impose a further condition that the taxpayer's costs of the appeal to this Court be paid by the Commissioner in any event.

Accordingly I grant leave to the Commissioner of Taxation to appeal on condition that the Commissioner pays the taxpayer's costs of this application for leave to appeal in any event. If there is any other matter arising from my reasons which requires directions, either party is at liberty to apply within fourteen days.

ORDER:

1. Leave be granted to the Commissioner of Taxation to appeal from a decision of the Supreme Court of New South Wales allowing the taxpayer's appeal from a decision of the Taxation Board of Review confirming the Commissioner's amended assessment of income tax in respect of the year of income ended 30 June 1970 ON CONDITION that the Commissioner pay the taxpayer's costs of this application in any event.