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Hutchins v. Federal Commissioner of Taxation.

Judges:
Jenkinson J

Court:
Federal Court

Judgment date: Judgment handed down 22 August 1986.

Jenkinson J.

Applications for directions in several appeals under the Taxation (Unpaid Company Tax) Assessment Act 1982, in each of which the same person is appellant.

By virtue of the operation of sec. 4(7)(j) of that Act and sec. 196A of the Income Tax Assessment Act 1936, the High Court Rules as in force on 18 June 1973 under the Judiciary Act 1903-1969 apply, so far as practicable, to and in relation to these appeals in like manner as those Rules applied immediately before that date to and in relation to the like proceeding in the High Court.

Each party seeks in each appeal an order that the other furnish particulars, from the respondent Commissioner particulars of the facts justifying his assessment of the recoupment tax payable by the appellant on a promoters taxable amount, from the appellant particulars of the grounds of objection to that assessment.

An order had been made by me on 7 July 1986 for further particulars to be furnished by the Commissioner in the appeal VG71 of 1986. But the appellant was not legally represented on that day, and I may have misunderstood what he sought by way of order for particulars. Having heard counsel for both parties I propose to pronounce an order that on or before a certain date the respondent furnish the appellant with further particulars of the assessment of which notice is numbered 220099/001 and dated 11 July 1985 (and hereinafter called ``the recoupment assessment''):

  • (a) stating each material fact relied upon by the respondent as constituting the liability which the said notice specifies;

and in particular, but without qualification or limitation of the requirements specified in para. (a) hereof,

  • (b)(i) identifying by date, number and amount or amounts of tax notified thereby each assessment of ordinary company tax or undistributed profits tax in relation to Jarlas Pty. Ltd. (hereinafter called ``the company'') upon which the respondent relies in support of the recoupment assessment (any such assessment being hereinafter referred to as a ``relevant assessment'');
  • (ii) stating when, where and in what manner each relevant assessment or a copy thereof (specifying whether the same was the relevant assessment or a copy in each case) was served upon:
    • (A) the company;
    • (B) any vendor shareholder in relation to the company for the purposes of the Taxation (Unpaid Company Tax) Assessment Act 1982;
    • (C) the appellant;
  • (iii) stating precisely what amount of ordinary company tax or undistributed profits tax notified by any relevant assessment remained unpaid:
    • (A) at the date of making of the recoupment assessment;
    • (B) on the date of institution of this appeal;
  • (iv) identifying each amount paid to the Commissioner in respect of ordinary company tax or undistributed profits tax in relation to any relevant assessment stating:
    • (A) the amount of such payment;
    • (B) by whom such payment was made;
    • (C) the date of receipt of such payment by the Commissioner;
    • (D) whether such payment was in the Commissioner's contention made in accordance with an arrangement of a description contained in sec. 20 of the Taxation (Unpaid Company Tax) Assessment Act 1982 or sec. 21 of the said Act and stating which of the said sections and whether the arrangement was wholly or partly in writing or wholly or partly oral;

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  • (c) stating by reason of what acts, facts, matters, circumstances and things the respondent contends that the company was unable at the time referred to in paragraph 7(1)(g) of the Taxation (Unpaid Company Tax) Assessment Act 1982 having regard to other debts of the company to pay to the Commissioner all company tax as defined for the purposes of the said para. 7(1)(g) due and payable by the company at that time;
  • (d) stating the acts, facts, matters, circumstances and things by reason whereof it is contended by the Commissioner that the appellant is a member of or constitutes the eligible promoters class in relation to the company in relation to the year of income within the meaning of subsec. 7(8) of the Taxation (Unpaid Company Tax) Assessment Act 1982 with which this appeal is concerned.

It is a question, concerning which the parties have advanced submissions but I have reached no conclusion, whether the subject of each of the appeals under present consideration is, as the subject of an appeal such as this which had been heard and determined before the commencement of the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 would have been, the taxpayer's objection against the assessment or the decision of the Commissioner on the taxpayer's objection, which decision will be the subject of any appeal such as this which derives from an objection lodged on or after the commencement of that Act. These appeals all derive from objections lodged and forwarded to this Court before the commencement of that Act. Mr Batt Q.C. who appeared with Mrs Moshinsky for the respondent Commissioner in each appeal, submitted that any requirement of the kind specified in para. (a) of the order for particulars should relate, not to the assessment, but to the decision of the Commissioner on the taxpayer's objection, because it was in Mr Batt's submission that decision which is the subject of the appeal, not the assessment. I therefore make it clear that the terms in which para. (a) of the order is expressed reflect no conclusion about the application to this appeal of the amendments effected by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986, but were chosen as affording the best means of enabling the issues to be ascertained and the appeal conducted in an orderly and just manner, whether it be the Commissioner's decision on the objection or the objection which is the subject of the appeal.

The respondent Commissioner seeks an order in the appeal VG71 of 1986 for particulars of some of the grounds of objection. Mr Pagone of counsel, who appeared for the appellant in relation to that appeal (but not in relation to all of the appeals with which these reasons are concerned), submitted that the appellant should not be required to particularise grounds of objection, for those grounds had constituted the subject matter of the Commissioner's decision, unqualified by any particularisation, and it was that decision which now fell to be examined in the appeal. Alternatively, Mr Pagone submitted, the appellant should not be required to furnish particulars until after discovery of documents had been made by the respondent. In support of that submission Mr Pagone frankly admitted that one of the objectives which the appellant was pursuing in the appeal was exposure of all the processes which had led the Commissioner and his officers to the making of the assessment against which the appellant had objected, so that any circumstance of which the appellant is unaware and which might negative the appellant's liability to promoters recoupment tax may be disclosed. The objective was a legitimate one for the appellant to pursue, it was submitted, particularly in relation to a liability alleged to arise under provisions described in
MacCormick v. F.C. of T. 84 ATC 4230 at p. 4234 as ``a complex piece of legislation'', and a liability created by reference to a number of circumstances, of some of which a taxpayer is unlikely to gain knowledge, except by discovery and interrogation.

I think the disclosure of the issues between the parties is likely to be best achieved if the respondent's particulars of assessment be followed by particulars of the grounds of objection, before any other interlocutory proceeding. If after discovery by the respondent the appellant desires to amend his particulars, the Court can entertain an application to amend if the respondent will not consent.

The ground of objection numbered 2 in the notice of objection, and in the notice of objection in all the other appeals, is in these terms:

ATC 4552

``The Act is unconstitutional and accordingly the assessment is null and void and of no effect.''

The Act to which reference is there made is the Taxation (Unpaid Company Tax) Assessment Act 1982 and the assessment is that against which the objections are made. The respondent sought no particulars of that ground, but sec. 78B of the Judiciary Act 1903 requires me, I think, to put the appellant now to his election either to give to the Attorneys-General of the Commonwealth and of the States a notice of the kind which that section contemplates or to declare his decision not to rely upon that ground.

In the appeal VG71 of 1986 I propose to order that the appellant on or before a certain date give:

  • (a) particulars of any act, fact, matter or circumstance supporting or contributing to support any of the grounds numbered 1, 3, 4 and 5 of the grounds contained in the notice of objection against the assessment numbered 220099/001 which is not an act, fact, matter or circumstance supporting or contributing to support any of the said grounds other than the grounds numbered 1, 3, 4 and 5;
  • (b) particulars of the allegation contained in the first clause of the ground numbered 6, stating whether it is intended thereby to allege that none of the shares in the company was purchased after 1 January 1972 and whether it is intended thereby to allege that none of the shares in the company purchased after 1 January 1972 was purchased under a scheme of the description contained in the said clause and giving in respect of each allegation intended particulars of the material facts relied upon in relation to the allegation;
  • (c) particulars of the allegation contained in the ground numbered 8, stating in respect of:
    • (a) ordinary company tax; and
    • (b) undistributed profits tax;
      • (i) the amount due and payable by the company for the year of income ended 30 June 1980;
      • (ii) the amount, date and by whom the said amount or any part thereof was paid;
      • (iii) each material fact relied upon in relation to the allegation that the amount at no time remained unpaid;
  • (d) particulars of ``the year of income in which the last purchase time within the meaning of the Act occurred'' to which reference is made in the ground numbered 9, stating what that year is alleged to be, and particulars of the ``last purchase time'' aforesaid, stating when that time is alleged to have been;
  • (e) particulars of the objection to which reference is made in the ground numbered 11, stating when and by what person or persons the said objection was lodged and against what assessment;
  • (f) particulars of each error of computation comprehended by the allegation in the ground numbered 14 that if (which is denied) any promoters taxable amount exists in relation to the taxpayer in relation to the company then the Commissioner has not correctly computed the same under the provisions of the Act;
  • (g) particulars of each material fact relied upon as justifying the allegation contained in the ground numbered 15 that the appellant is not a member of an eligible promoters class in relation to the company within the meaning of sec. 7(8) of the Act;
  • (h) particulars of each material fact relied upon as justifying the allegation contained in the ground numbered 17 that there is no promoters recoupment tax payable by the appellant in relation to the company by reason of the provisions of sec. 9(6) of the Act;
  • (j) particulars of each material fact relied upon as justifying the allegation contained in the ground numbered 19 that the said notice of assessment has not been duly served upon the appellant.

The appellant seeks in the appeal VG71 of 1986 an order that the respondent give discovery of a number of classes of documents, the descriptions of which are contained in a draft order submitted for the consideration of the Court and of the respondent. Some of the classes of documents of which discovery is expressed to be ordered in that draft would almost certainly include documents containing information respecting the affairs of a person

ATC 4553

other than the appellant, namely Jarlas Pty. Ltd. or ``vendor shareholders'' of that company. That information, contained in those documents (and, perhaps, contained in any description which might be given, in an affidavit of discovery, of such a document), would have been acquired by the respondent's officers in the performance of their duties as officers. Mr Batt submitted that discovery of those classes of documents should not be ordered, having regard to sec. 16 of the Income Tax Assessment Act 1936. But he drew to my attention, among other authorities, the decision of Enderby J. in
Re Fortex Pty. Limited 86 ATC 4351, which as he frankly admitted, contradicts his submission.

Section 16(2) of the Income Tax Assessment Act 1936 expresses a prohibition, but the prohibition is probably not of communication to a court: see
Canadian Pacific Tobacco Co. Ltd. v. Stapleton (1952) 86 C.L.R. 1 at p. 6. Section 16(3) affords an officer a privilege to withhold communication to a court of ``any matter or thing coming under his notice in the performance of his duties as an officer, except when it is necessary'' to make the communication ``for the purpose of carrying into effect the provisions of [the Income Tax Assessment Act 1936]''. The prosecution of such a proceeding as each of these appeals is could not in my opinion be doubted to be carrying into effect those provisions, and compliance with an order of the Court, whether made at or before trial, to divulge to the Court information relevant to the subject of the proceeding is, in my opinion, necessary for the purpose of carrying those provisions into effect. Of course, compliance with orders of the kind commonly made for communication by a party of information to a court involves communication to other parties as well as to the Court. And so it will be if discovery is ordered in this appeal. But if such an order be made, compliance with that order by the respondent or by one of his officers at his direction will be in the performance of his duty as an ``officer'', within the meaning of that word in sec. 16, and therefore will not involve any contravention of the prohibition contained in sec. 16(2). So, too, if the expression ``any person'' in sec. 16(2) were, contrary to my opinion, held to comprehend this Court, the making of an order by the Court for discovery would in my opinion entail the consequence that compliance with the order would satisfy the requirements of the exception in sec. 16(2): ``except in the performance of any duty as an officer''.

Mr Batt advanced other submissions against adoption of particular provisions of the draft order, that the provision was fishing or too wide or comprehended irrelevant documents. But again Mr Batt was punctilious to assist the Court, citing among other authorities
Mulley v. Manifold (1959) 103 C.L.R. 341, wherein Menzies J. observed (at p. 345): ``Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary.'' Where, as here, a very wide range of issues arise upon the notice of objection, the scope of discovery is necessarily wide.

I propose to order that within a certain period after particulars have been furnished on both sides the respondent make and file and serve on the appellant a copy of an affidavit discovering:

  • (i) any documents constituting or evidencing any sale of shares in Jarlas Pty. Ltd. (``the company'') to Allied Technical Services Pty. Ltd.;
  • (ii) any notice or copy of any notice of assessment of ordinary company tax or undistributed profits tax in relation to the company relied upon by the respondent to support the recoupment assessment;
  • (iii) any balance sheets, profit and loss accounts, books of account or other documents whatsoever showing or tending to show that at the time referred to in para. (d) of the particulars supplied the company was unable, having regard to the other debts of the company, to pay to the respondent all the undistributed profits tax of $2,594 referred to in the said particulars;
  • (iv) any document evidencing service of the relevant assessment mentioned in para. (c)(i) of the said particulars;
  • (v) any document constituting or evidencing the agreement referred to in para. (4) of the further particulars supplied or any term thereof;
  • (vi) any note, memorandum or other writing whatsoever of or evidencing the conversation referred to in para. (4) of the

    ATC 4554

    further particulars supplied or any of the content of the said conversation;
  • (vii) any correspondence or copies thereof between:
    • (A) The respondent and the vendor shareholders or any of them or any person on behalf of the vendor shareholders or any of them;
    • (B) The respondent and the company or any person on behalf of the company

    regarding payment of the said undistributed profits tax;

  • (viii) any notes, memoranda or other writing whatsoever of or evidencing any conversation between:
    • (A) The respondent or any person on behalf of the respondent and the vendor shareholders or any of them or any person on behalf of the vendor shareholders or any of them;
    • (B) The respondent or any person on behalf of the respondent to any person on behalf of the company

    regarding payment of the said undistributed profits tax;

  • (ix) any receipt or copy receipt issued by the respondent for payment of the said undistributed profits tax or any part thereof;
  • (x) any notes, memoranda, records or other writing whatsoever in relation to:
    • (A) Service of the relevant assessment and any copies thereof referred to in para. (c)(i) of the particulars supplied;
    • (B) The arrangement referred to in para. (4) of the further particulars supplied;
  • (xi) return of income of the company for:
    • (A) The year of income ended 30 June 1980;
    • (B) The year of income ended 30 June 1981;
    • (C) The year of income ended 30 June 1982;
    • (D) The year of income ended 30 June 1983;
    • (E) The year of income ended 30 June 1984;
    • (F) The year of income ended 30 June 1985;
  • (xii) any letter or other written communication or copy thereof passing between a liquidator of the company and the respondent any part of the contents of which document relates to a question raised in relation to the company by any of the provisions of para. (a) to (h) (inclusive) of sec. 7(1) of the Taxation (Unpaid Company Tax) Assessment Act 1982.

The respondent seeks an order that he serve on the appellant a notice for discovery with an annexed schedule specifying the documents and the classes and kinds of documents of which discovery is sought. That order was made in another appeal in which the parties are the same, VG8 of 1986, and the appellant does not oppose the making of such an order in this appeal, VG71 of 1986. I shall pronounce such an order, specifying a time for service shortly after particulars have been delivered on both sides.

In the appeal VG117 of 1986, which concerns Plymouth Investments Pty. Ltd., orders will be made for particulars in the terms, mutatis mutandis, of the orders in VG71 of 1986. Similar orders for particulars will be made in each of the appeals VG174, VG212, VG213 and VG239 and 1986.

In the appeal VG117 of 1986 the order for discovery by the respondent will require an affidavit discovering:

  • (i) any documents constituting or evidencing any sale of shares in Plymouth Investments Pty. Ltd. (``the company'') to Levart (Vic.) Pty. Ltd.;
  • (ii) any notice or copy of any notice of assessment of ordinary company tax or undistributed profits tax in relation to the company relied upon by the respondent to support the recoupment assessment;
  • (iii) any balance sheets, profit and loss accounts, books of account or other documents whatsoever showing or tending to show that at the time referred to in para. (e) of the particulars supplied the company was unable, having regard to the other debts of the company, to pay to the respondent all the undistributed profits tax of $2,051.50 and the sum of $143.88 additional tax referred to in the said particulars;

    ATC 4555

  • (iv) any document evidencing service of the relevant assessment mentioned in para. (c)(i) of the said particulars;
  • (v) any notes, memoranda, records or other writing whatsoever in relation to the service of the relevant assessment and any copies thereof referred to in para. (c)(i) of the particulars supplied;
  • (vi) a copy of the purported objection dated 21 November 1984 referred to in the further particulars of assessment;
  • (vii) any letter or other written communication or copy thereof passing between a liquidator of the company and the respondent any part of the contents of which document relates to a question raised in relation to the company by any of the provisions of para. (a) to (h) (inclusive) of sec. 7(1) of the Taxation (Unpaid Company Tax) Assessment Act 1982;
  • (viii) return of income of the company for:
    • (A) The year of income ended 30 June 1977;
    • (B) The year of income ended 30 June 1978;
    • (C) The year of income ended 30 June 1979;
    • (D) The year of income ended 30 June 1980;
    • (E) The year of income ended 30 June 1981;
    • (F) The year of income ended 30 June 1982;
    • (G) The year of income ended 30 June 1983;
    • (H) The year of income ended 30 June 1984;
    • (I) The year of income ended 30 June 1985.

In the appeal VG174 of 1986 the order will comprehend the following:

  • (i) any documents constituting or evidencing any sale of shares in Jatem Holdings Pty. Ltd. (``the company'') to Levart Pty. Ltd.;
  • (ii) any notice or copy of any notice of assessment of ordinary company tax or undistributed profits tax in relation to the company relied upon by the respondent to support the recoupment assessment;
  • (iii) any balance sheets, profit and loss accounts, books of account or other documents whatsoever showing or tending to show that at the time referred to in para. (d) of the particulars supplied the company was unable, having regard to the other debts of the company, to pay to the respondent all the undistributed profits tax of $2,594 referred to in the said particulars;
  • (iv) any document evidencing service of the relevant assessment mentioned in para. (c)(i) of the said particulars;
  • (v) any correspondence or copies thereof between the respondent and the vendor shareholders or any of them, or any person on behalf of the vendor shareholders, regarding a request or the granting of a request in accordance with sec. 16 of the Taxation (Unpaid Company Tax) Assessment Act 1982;
  • (vi) any note, memoranda or other writing whatsoever of or evidencing any conversation between the respondent or any person on behalf of the respondent and the vendor shareholders or any of them, or any person on behalf of the vendor shareholders regarding a request in accordance with sec. 16 of the Taxation (Unpaid Company Tax) Assessment Act 1982;
  • (vii) any letter or other written communication or copy thereof passing between a liquidator of the company and the respondent any part of the contents of which document relates to a question raised in relation to the company by any of the provisions of para. (a) to (h) (inclusive) of sec. 7(1) of the Taxation (Unpaid Company Tax) Assessment Act 1982;
  • (viii) Return of income of the company for:
    • (A) The year of income ended 30 June 1979;
    • (B) The year of income ended 30 June 1980;
    • (C) The year of income ended 30 June 1981;
    • (D) The year of income ended 30 June 1982;
    • (E) The year of income ended 30 June 1983.

    ATC 4556

In the appeals VG212, VG213 and VG239 the order with respect to discovery by the respondent will be of the kind made, in respect of discovery by the appellant, in the appeals VG8 and VG71. So too in all the appeals other than the latter two the order for discovery by the appellant will be in the same terms as in those two.

I will hear the parties, as they requested that I should, concerning the times within which the interlocutory steps discussed in these reasons are to be taken.


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