Bennett Honda Pty. Limited v. Borg Warner Acceptance Corporation & Anor.

Judges:
Morling J

Court:
Federal Court

Judgment date: Judgment handed down 17 June 1985.

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Morling J.

This case is the second round in a continuing dispute in which Bennett Honda Pty. Limited (``Bennett Honda Retail'') seeks to challenge assessments of sales tax made by the Commissioner of Taxation on the value of motor cycles sold to it by Borg Warner Acceptance Corporation. The first round is reported in 85 ATC 4009; (1984) 58 A.L.R. 177.

Bennett Honda Retail is a member of the L.N.C. Industries group of companies. Borg Warner provides the group with a form of wholesale financing known as floor plan financing to facilitate the distribution by Bennett Honda Retail of motor cycles. Motor cycles are imported into Australia by Bennett Honda (Wholesale) Pty. Limited (``Bennett Honda Wholesale''). Bennett Honda Wholesale thereafter sells the cycles to Borg Warner which then bails them to Bennett Honda Retail under a bailment agreement. In turn, Bennett Honda Retail sub-bails the cycles to dealers. Immediately prior to the time at which a retail sale takes place, a sale takes place between Borg Warner and Bennett Honda Retail. In consequence the title in the motor cycle then passes to Bennett Honda Retail. The dealer then sells to the retail purchaser as Bennett Honda Retail's agent. The price at which the machines are sold by Borg Warner to Bennett Honda Retail includes sales tax. It is common ground that sales tax is payable by Borg Warner upon sale of the machines to Bennett Honda Retail.

Borg Warner has a substantial business in, inter alia, floor plan financing and it enters into similar arrangements with other importers and distributors of motor cycles. There is no common shareholding between Borg Warner and any of the companies in the L.N.C. Industries group. Borg Warner and Bennett Honda Retail claim that they deal at arm's length and that there is no connection between them, other than that which arises from their contractual arrangements. Those contractual arrangements include an indemnity clause in the bailment agreement which is in the following terms:

``10. The Bailee agrees:

• ...
• (c) To pay immediately all taxes, expenses, assessments and charges which may now or hereafter be levied or assessed against the Equipment or any item thereof.''

For several years prior to 1984 Borg Warner had submitted returns for sales tax purposes to the Australian Tax Office. In 1984 a question arose between Borg Warner and the Commissioner of Taxation as to the value of goods sold by Borg Warner to Bennett Honda

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Retail. On 17 May 1984 the Commissioner wrote a letter to Borg Warner which read, in part, as follows:

``Where goods, which have been the subject of conventional bailment/sub-bailment arrangements, are sold to retailer bailees/sub-bailees the taxable sale value would normally be the price charged by the bailor/finance company to that retailer. However, the sales tax legislation also contains provisions for a sale value to be altered where the goods in question have been sold for less than an arm's length price. Thus any concern that this office has in relation to the goods dealt with by sub-bailment arrangements is not with the arrangements as such but centres on whether goods dealt with under those arrangements, when they reach a taxing point, are being taxed on a sale value that is provided for in the sales tax law.

...

A number of bailment arrangements have recently been examined, in particular some involving wholesalers and retailers selling goods through unrelated finance companies. These arrangements usually involve a wholesaler importing goods free of tax and selling them at cost or virtual cost to the unrelated finance company. The finance company in turn sells the goods at the same price to the wholesaler's related retail company. In this situation, as explained earlier, the goods in question reach their taxing point when they are sold by wholesale by the finance company and it is that company upon which the sales tax law imposes a liability for sales tax. In cases where the value upon which tax is paid is less than that prescribed in the law it is the finance company that is liable, under the sales tax law, for the payment of any further tax.

The question of whether a sale value or landed cost or virtual landed cost is a sale value provided for in this law has been considered and the conclusion that has now been reached is that such a sale value does not meet the requirements of the law.

As a consequence of this, and because this incorrect sale value is not always adopted, each bailment arrangement needs to be considered on its own facts. The Deputy Commissioner of Taxation in Sydney has therefore been asked to institute enquiries into this aspect so that the question of the alteration of the sale value of particular previously sub-bailed goods can be determined. Officers from the Deputy Commissioner's Office will be in touch with you shortly in this regard.''

On 29 June 1984 the Commissioner wrote to Borg Warner advising it of a review which he had undertaken concerning bailment arrangements. The letter included the following:

``It has been noted that in some instances, imported goods have been sold by wholesale, by the importer, to an unrelated wholesale finance company at landed cost or virtual landed cost.

This office does not accept a sale value of landed cost or virtual landed cost as being in accordance with the sale values provided for in the sales tax legislation.

Based on a review of the pricing structure of your company you are advised that a sale value which is acceptable to this office should be no less than the landed cost of motor cycles plus 25% of that amount.

Landed cost is to be calculated by reference to the value for duty, duty, (sic) freight, insurance, wharfage and any other costs incurred in importing the motor cycles to Australia.

This sale value is effective from 2 July 1984 and cancels any sale value which may have been agreed to by this office.''

On 3 October 1984 the Commissioner wrote to Borg Warner as follows:

``Section 4(2) of the Sales Tax Assessment Act No. 7 provides that where imported goods are sold by a person other than the importer and the vendor and purchaser are not dealing with each other at arm's length in relation to the transaction, the Commissioner is empowered to alter the sales value of the relevant goods.

In consideration of the above provisions the sale value of motor cycles purchased by your company from importers and covered by bailment agreements with retailers associated with those importers and by sub-bailment agreements with their agents

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has been reviewed. The review has shown that the sale value currently adopted by your company is not satisfactory.

With effect from 8 October 1984 the sale value of motor cycles covered by the arrangements mentioned above should be an amount equal to Landed into Store Cost of the motor cycles plus 15% of that amount, except in circumstances where the motor cycles are sold by the importer to your company at a price exceeding Landed into Store Cost plus 15% when the sale value will be the actual selling price.

You are advised that Landed into Store Cost includes all charges incurred in bringing the motor cycles into store or warehouse such as purchase price, insurance and freight, wharfage, customs duty, storage on wharf, delivery to store, sorting and/or stacking and any other related charges.

It is our understanding that you purchase motor cycles from Kawasaki Motors Pty Limited, Norm Fraser Importers Pty Limited, Bennett Honda Pty Limited and L.N.C. Distribution Pty Limited for subsequent sale under bailment/sub-bailment agreements. These suppliers have been advised of this increased sale value.

It is also mentioned that other goods apart from motor cycles are subject to similar trading arrangements and the sale value of these goods is presently being reviewed. When the review has been completed you will be advised of the decision.''

The Commissioner again wrote to Borg Warner on 9 October 1984 confirming that he had adopted the sale value advised in the letter of 29 June 1984 and further confirming that such sale value was to have effect on and from 1 October 1984. The Commissioner further stated:

``Any motor cycles sold between 1 July 1984 and 30 September 1984 may be sold at the sale values previously applied. However where goods are placed on bailment prior to 1 October 1984 and the wholesale sale does not occur until after that date, sales tax must be charged on the sale value prescribed above.''

Contemporaneously with this correspondence Messrs Arthur Young & Co., the accountants for the L.N.C. Industries group were in correspondence with the Commissioner. It is plain from that correspondence that the group was aware of the letters which were passing between the Commissioner and Borg Warner and, of course, with the attitude being taken by the Commissioner on the question of sale value. The accountants pressed the Commissioner not to adopt the basis of valuation referred to in his correspondence with Borg Warner. However, the Commissioner declined to alter his position and Borg Warner, taking the view that if it did not pay sales tax to the Commissioner at the increased amount it would attract substantial penalties by way of additional tax, paid the sum of $52,031.69 to the Commissioner on 21 February 1985 for sales tax payable on motor cycles sold by it to Bennett Honda Retail. It thereupon sought payment of this sum from Bennett Honda Retail by letter dated 21 February 1985. Since the writing of this letter is the sole basis upon which injunctive relief is sought against Borg Warner it is desirable to set it out verbatim. The letter was in the following terms:

``We refer to the previous discussions which have been held in relation to this matter.

As you are aware, the Commissioner of Taxation has taken the view that the commercial operation existing between Borg-Warner Acceptance Corporation (Australia) Limited and Bennett Honda Pty. Limited are such as to entitle him to bring into operation the provisions of Section 4(2) of Sales Tax Assessment Act (No. 7) 1930. In other words, the Commissioner is of the opinion that he is empowered to adjust upwards the sale values of all motor cycles sold by Borg-Warner Acceptance Corporation (Australia) Limited to Bennett Honda Pty. Limited. Such an adjustment necessarily increases the amount of sales tax which Borg-Warner Acceptance Corporation (Australia) Limited is liable to pay the Commissioner.

We enclose, for your information, a photocopy of a letter dated 4 December, 1984 which has been written by the Commissioner to our accountants, Messrs. Peat Marwick Mitchell & Co. As will be seen, the letter contains a method of calculating the sale values of motor cycles which the Commissioner indicates will be acceptable to him and which we have been advised may be adopted as an alternative to

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the method previously notified to us by the Deputy Commissioner of Taxation, Sydney Office, in a letter dated 3 October, 1984, copy of which has previously been supplied to you.

As you are aware, by telex dated 9 January, 1985 sent to Messrs. Peat Marwick Mitchell & Co., the Commissioner indicated that provided sales tax in respect of sales of motor cycles made in the months of October, November and December 1984 was paid by Borg-Warner Acceptance Corporation (Australia) Limited on or before 21 February, 1985, no additional tax would be imposed by way of penalty. It was a condition of the Commissioner's concession in this regard that the sales tax so paid be calculated on the basis of the adjusted sale valued as previously notified by the Commissioner.

In the circumstances, Borg-Warner Acceptance Corporation (Australia) Limited had no alternative but to pay the increased amount of sales tax to the Commissioner on 21 February, 1985, in accordance with his telex request. A failure to pay may well have attracted substantial penalties by way of additional tax.

In addition an amount of sales tax in respect of sales made during the month of January 1985 was also paid to the Commissioner on 21 February, 1985. The amount of sales tax payable for this month was also calculated based on the sale values as notified by the Commissioner.

In the Bailment Agreement dated 27 October, 1985 entered into between Borg-Warner Acceptance Corporation (Australia) Limited and Bennett Honda Pty. Limited, Bennett Honda Pty. Limited agreed pursuant to Clause 10(c) to pay immediately all taxes which may become due in relation to the sale of goods made between the two companies. As a result of the payment made to the Commissioner of Taxation on 21 February, 1985, the sum of $52,031.69 is now owing by Bennett Honda Pty. Limited to Borg-Warner Acceptance Corporation (Australia) Limited pursuant to the provisions of this clause. Accordingly, we hereby request immediate payment by Bennett Honda Pty. Limited of the amount of $52,031.69 and look forward to receiving your cheque as soon as possible.''

The method of collection of sales tax differs significantly from the assessment and collection of income tax. The relevant sales tax legislation is found in the Sales Tax Assessment Act (No. 7) 1930. Section 3 provides that sales tax imposed by the Act shall be levied and paid upon the sale value of goods imported into Australia and sold by a taxpayer not being the importer of the goods. Subsection 4(1) provides that for the purposes of the Act the sale value of goods which are sold on or after 1 August 1930 shall be the amount for which those goods are sold by a registered person, not being the importer of the goods, to a registered person. By subsec. 4(2) where the Commissioner is satisfied of the matters referred to in the subsection, he is required to alter the sale value of the relevant goods. Where the Commissioner alters the sale value of the goods pursuant to subsec. 4(2), the sale value so altered is to be the sale value of the goods for the purposes of the Act (subsec. 4(3)).

Section 5 provides that where goods imported into Australia are sold by a person other than the importer of the goods (being a registered person) to an unregistered person sales tax shall be paid by the vendor of the goods. By sec. 7, every person who during any month makes any of the sales specified in the section shall, within 21 days after the close of that month, furnish to the Commissioner a return of those sales in the prescribed form. The Commissioner may require any person to furnish him with an additional return within a specified time - vide sec. 8. Every person liable to pay tax under sec. 5 upon the sale value of any goods sold by him during any month shall, within 21 days after the close of that month, pay sales tax upon that sale value (sec. 9). Where the Commissioner finds in any case that tax or further tax is payable by any person, he may assess the sale value upon which tax should be or should have been paid and calculate the tax or further tax which is payable - sec. 10. Where, under subsec. (1) or (2) of sec. 4 the sale value of any goods has been altered, the Commissioner is required to calculate the further tax (if any) payable in consequence of that alteration - subsec. 10(2). It will thus be seen that the Act provides for a system of self-assessment of tax by the taxpayer with the right reserved to the

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Commissioner to assess the taxpayer to additional tax in the circumstances referred to in the Act.

I turn now to consider the relief sought by Bennett Honda Retail. In its amended application it claims the following relief:

• 1. A declaration that the abovementioned sum of $52,031.69 is not payable pursuant to cl. 10(c) of the bailment agreement.
• 2. A declaration that in relation to the sales of the motor cycles by Borg Warner to Bennett Honda Retail the parties were dealing with each other at arm's length.
• 3. A declaration that in relation to the sales of such motor cycles the amount for which they were sold was not less than the amount for which they could reasonably have been expected to have been sold if Bennett Honda Retail and Borg Warner had been dealing with each other in an arm's length transaction.
• 4. An injunction to restrain Borg Warner from continuing to demand that Bennett Honda Retail pay it the said sum of $52,031.69.
• 5. An injunction to restrain the Commissioner from continuing to demand sales tax from Borg Warner upon the basis that he is entitled to apply the provisions of subsec. 4(2) of the Sales Tax Assessment Act (No. 7) 1930.
• Paragraph 3 was not pressed at the hearing.

Bennett Honda Retail relies upon sec. 39B of the Judiciary Act to found the Court's jurisdiction to entertain the claim for injunctive relief made against the Commissioner. Subsection 39B(1) provides that the original jurisdiction of the Federal Court includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.

Reliance is placed upon sec. 52 and 80 of the Trade Practices Act to found the Court's jurisdiction to entertain the claim for injunctive relief against Borg Warner, it being asserted that when Borg Warner sent the letter of 21 February 1985 to the applicant it engaged in conduct which was misleading or deceptive or likely to mislead or deceive. Jurisdiction to grant the declaratory relief sought in para. 1, 2 and 3 is claimed to be within the Court's pendent jurisdiction but it is convenient to defer consideration of this claim until later in these reasons.

It is convenient to deal first with the claims for relief in para. 4 and 5. It is not in question that the Court has jurisdiction to entertain these claims. The grant of relief in terms of para. 4 depends upon the establishment of the applicant's claim that Borg Warner engaged in misleading or deceptive conduct by making the claim referred to in the last paragraph of the letter of 21 February 1985. If that conduct was proscribed by subsec. 52(1), there is jurisdiction to grant the relief sought in para. 4. Further, subsec. 39B(1) of the Judiciary Act gives the Court jurisdiction to consider the claim for relief in para. 5, since what is sought by the applicant is an injunction against an officer of the Commonwealth.

The case for injunctive relief against Borg Warner can be briefly disposed of. There is no basis for this claim because in my opinion the letter of 21 February 1985 did not contain any misleading or deceptive statements. That letter accurately stated the position taken by the Commissioner, i.e. that he was entitled to rely upon subsec. 4(2) of the Sales Tax Assessment Act. The letter referred to the payment by Borg Warner of the increased amount of sales tax and requested reimbursement of the amount paid to the Commissioner. It was argued that it was misleading or deceptive for Borg Warner to make a claim for payment of sales tax which, so it was argued, it was not liable to pay to the Commissioner. I think this argument lacks substance. What Borg Warner said in the letter was that the Commissioner had required payment of the increased amount of sales tax and that it had paid it to avoid penalties by way of additional tax. In no sense did the letter lead, or tend to lead, Bennett Honda Retail into error (cf.
Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) ATPR ¶40-307 at p. 43,783; (1982) 1 T.P.R. 282 at p. 286 per Gibbs C.J.). Bennett Honda Retail knew exactly what the position was vis-a-vis the Commissioner and the claim that he was making. I do not think Bennett Honda Retail was misled by the letter or that it was likely that it may have been misled by it. No evidence, beyond the mere tender of the letter, was led to support this part of the applicant's case. I think it is entirely lacking in substance.

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I am further of the opinion that in the circumstances which arose Borg Warner was entitled to rely upon the provisions of cl. 10(c) of its bailment agreement with Bennett Honda Retail. The action taken by the Commissioner can fairly be described as an assessment of taxes levied or assessed against the goods which are the subject of the bailment agreement. I agree with the submission by counsel for Borg Warner that until a determination binding upon the Commissioner is made that the sales tax so assessed was wrongly assessed, the assessment answers the description of an assessment of taxes within the meaning of cl. 10(c). (Cf.
F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280; (1981) 147 C.L.R. 360.) That being so, there is no basis for restraining Borg Warner from demanding that Bennett Honda Retail pay to it the amount of taxes which it has already paid to the Commission and which cl. 10(c) of the bailment agreement obliges Bennett Honda Retail to pay. The claim for injunctive relief against Borg Warner therefore fails.

The claim for injunctive relief against the Commissioner is beset by different, but equally formidable, difficulties. The applicant seeks to restrain the Commissioner from demanding sales tax at the higher rate from Borg Warner. I am unable to perceive the basis upon which such an injunction could properly be granted. The applicant claims that it is adversely affected, albeit indirectly, by the demand made upon Borg Warner by the Commissioner. But in law, the assessment was made against Borg Warner alone. I have not been referred to any authority which would support the proposition that, in these circumstances, Bennett Honda Retail has any entitlement in its own right to injunctive relief. This is not a case of the type, of which
Onus v. Alcoa of Australia Ltd. (1981) 149 C.L.R. 27 is an example, where a member of the public sues to prevent the violation of a public right or to enforce the performance of a public duty. In such a case a plaintiff has standing to bring an action if he has an interest in the subject matter beyond that of any other member of the public -
Australian Conservation Foundation v. The Commonwealth (1979) 146 C.L.R. 493 at pp. 530-531, 537, 547-548 and Onus (supra) at pp. 35-36 per Gibbs C.J. The present case is one in which there is no violation of a public right and in which no private right of Bennett Honda Retail is interfered with. This being so, and no standing being conferred upon it by the sales tax legislation, it has no standing to obtain injunctive relief against the Commissioner. Only a taxpayer who is dissatisfied with an assessment made by the Commissioner is given the right to object to the assessment - vide subsec. 41(1) of the Sales Tax Assessment Act (No. 1) 1930. The applicant is not, for relevant purposes, a taxpayer.

Nor is the applicant in any better position to seek declaratory (as distinct from injunctive) relief against the Commissioner. As Gibbs C.J. pointed out in the Australian Conservation case at p. 526, the rules as to standing are the same whether the plaintiff seeks a declaration or an injunction. It is true, of course, that there are cases in which the courts, at the suits of appropriate applicants, have made declarations as to the meaning and effect of the sales tax legislation - see, for example,
Jax Tyres Pty. Ltd. v. F.C. of T. 84 ATC 4768; (1984) 55 A.L.R. 723 - affirmed on appeal 21 December 1984;
Downland Publications Ltd. v. D.F.C. of T. 82 ATC 4093 and on appeal, 83 ATC 4137; and
Nomad Industries of Australia Pty. Ltd. v. F.C. of T. 83 ATC 4480. But these were all cases in which the party seeking to invoke the Court's jurisdiction was the taxpayer. This was also the case in
Automatic Totalisators Ltd. v. F.C. of T. (1920) 27 C.L.R. 513. Counsel for the applicant pointed out that in this last-mentioned case one of the plaintiffs was not the taxpayer. However, no question arose or was decided as to his locus standi. I do not think the case can be taken as authority for the proposition that when one person is assessed to sales tax, another person may seek a declaration that the assessment is erroneous. It should also be pointed out that the Federal Court does not have a general jurisdiction to make declarations of the kind sought against the Commissioner. The Court's jurisdiction in Jax Tyres (supra) was founded upon an order made by the High Court pursuant to subsec. 44(2A) of the Judiciary Act remitting the matter for determination to this Court. In the absence of such an order of remission, I do not think the Court would have had jurisdiction to entertain the claim made in that case. In the present case, even if I had been persuaded that the applicant had locus standi to seek declaratory relief, such relief could only have been granted in the

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exercise of any pendent jurisdiction which the Court might have.

In any event, it follows from what I have already said as to Borg Warner's rights under cl. 10(c) of the bailment agreement that, apart from all questions of locus standi and jurisdiction, the declaration sought in para. 1 should not be made because Borg Warner is entitled to be paid by Bennett Honda Retail the amount of the sales tax which has been paid to the Commissioner. Accordingly the claim in para. 1 fails.

Counsel for the applicant did not press for the declaration referred to in para. 3 and therefore there remains to be considered only the relief sought in para. 2, i.e. a declaration that in relation to the sale of the motor cycles by Borg Warner to Bennett Honda Retail the parties were dealing with each other at arm's length. To understand the claim for this relief it is necessary to refer to the terms of subsec. 4(2) of the Sales Tax Assessment Act (No. 7) 1930. The subsection provides, in part, as follows:

``4 (2) Where -

• (a) goods (in this sub-section referred to as the `relevant goods') imported into Australia have been sold after 20 September 1978 by a person other than the importer of the goods (being a person who is a registered person or a person required to be registered) to an unregistered person or to a registered person who has not quoted his certificate in respect of the purchase of the goods;
• (b) the Commissioner is satisfied that, having regard to any connection between the vendor and the purchaser of the relevant goods or to any other relevant circumstances (including circumstances arising out of any agreement entered into between the vendor and the purchaser, or out of any other agreement, that was related, directly or indirectly, to the sale of the goods), the vendor and the purchaser were not dealing with each other at arm's length in relation to the transaction; and
• (c)...

the Commissioner shall alter the sale value of the relevant goods to the amount ascertained in accordance with the following paragraphs:

• ...''

It is plain that the Commissioner claims not to be satisfied that Bennett Honda Retail and Borg Warner deal with each other at arm's length. It should be observed (as was pointed out by senior counsel for Borg Warner) that the true question which will ultimately arise for consideration under subsec. 4(2)(b) is not whether Borg Warner and Bennett Honda Retail deal with each other at arm's length, but whether there is any basis upon which the Commissioner could be satisfied that they do not deal with each other at arm's length. It is obviously of importance to Bennett Honda Retail that a finding, binding upon the Commissioner, be made that there is no basis upon which he could fail to be satisfied that it deals at arm's length with Borg Warner. Until such a finding is made the Commissioner will no doubt continue to assess sales tax upon the higher value of the goods and, in consequence, Borg Warner will call upon Bennett Honda Retail to reimburse it for the additional amounts of sales tax which it will be called upon to pay.

However the question remains whether it is appropriate, in these proceedings, to grant declaratory relief. I do not think it is. The applicant has no better locus standi to seek such relief than to seek injunctive relief. As I have already observed, the rules as to standing are the same whether the applicant seeks declaratory or injunctive relief. If, as I think is the case, the applicant has no standing to seek injunctive relief against the Commissioner, it has no standing to seek a declaration which would be binding upon him.

I should observe that after the evidence had closed counsel for Borg Warner sought leave to file a cross-claim against the Commissioner seeking, inter alia, a declaration in terms similar to the declaration sought in para. 2. The application to file a cross-claim was opposed by counsel for the Commissioner. He argued that he had not come to Court to meet such a claim and, if it were permitted to be made, would seek to have the proceedings adjourned to enable him to meet it. He indicated that he might wish to call evidence in answer to the cross-claim. It was inherent in Borg Warner's submission that I should permit the cross-claim to be filed that the Court had jurisdiction to entertain it. The only foundation for such jurisdiction would appear to me to be in the Court's pendent jurisdiction. I declined to

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permit the cross-claim to be filed at such a late stage of the proceedings because I was of the view that to do otherwise would lead to an adjournment of the proceedings with consequent delay and additional cost. I was also doubtful of the Court's jurisdiction to grant the relief sought in the cross-claim. During the course of the proceedings I expressed the view that the more appropriate way to resolve the real issue between the parties was to utilize the procedure in the sales tax legislation for objections to sales tax assessments and for reference to a Board of Review of an objection disallowed by the Commissioner. Such a procedure has always been open to Borg Warner and it is not attended by the jurisdictional problems of obtaining relief in this Court. An alternative may be for Borg Warner to resist in the Supreme Court a claim by the Commissioner for any additional tax alleged to be payable - see
D.F.C. of T. v. Hankin (1959) 100 C.L.R. 566 at p. 578.

Because I hold the view that the applicant has no standing to seek the relief which it claims, it is unnecessary for me to determine whether the Court could grant the relief in the exercise of any pendent jurisdiction which it might have. However, I should say that I have the gravest doubt whether the Court's pendent jurisdiction would extend to authorising it to make the declaration sought in para. 2. It seems to me that the claim for declaratory relief is severable from the claims for injunctive relief against Borg Warner and the Commissioner. I do not think that it can be said that the resolution of the claim for declaratory relief is essential to a determination of the claim made against Borg Warner under the Trade Practices Act. That claim can be resolved, for the reasons I have given, by reference only to the terms of the letter of 21 February 1985 when considered in the context of the correspondence which preceded it. It is true that the claim for declaratory relief depends upon the assertion that Borg Warner's dealings with Bennett Honda Retail were at arm's length, and that the claim under the Trade Practices Act would not have been made if the Commissioner had been satisfied that their dealings were at arm's length. But I do not think this amounts to such a common substratum of facts as is referred to by Mason J. in
Philip Morris Inc. v. Adam P. Brown Male Fashions Pty. Ltd. (1981) ATPR ¶40-197 at p. 42,703; (1981) 148 C.L.R. 457 at p. 512. Moreover, I am driven to the conclusion in this case that the claim under the Trade Practices Act is not substantial. It seems to me that the claim was brought solely for the purpose of seeking to enlarge the Court's jurisdiction by attaching to it another claim which would not otherwise be within the Court's jurisdiction. This view of the matter is supported by the evidence of the solicitor for Borg Warner, that even if a declaration or injunction were granted against Borg Warner, this would not affect an agreement made between the applicant and Borg Warner that the applicant would ensure that Borg Warner was not out-of-pocket for any sales tax paid by it to the Commissioner. In
Fencott & Ors v. Muller & Anor (1983) ATPR ¶40-350 at p. 44,223; (1983) 46 A.L.R. 41 at p. 69, Mason, Murphy, Brennan and Deane JJ. said:

``However, federal judicial power is attracted to the whole of a controversy only if the federal claim is a substantial aspect of that controversy. A federal claim which is a trivial or insubstantial aspect of the controversy must, of course, itself be resolved in federal jurisdiction, but it would be neither appropriate nor convenient in such a case to translate to federal jurisdiction the determination of the substantial aspects of the controversy from the jurisdiction to which they are subject in order to determine the trivial or insubstantial federal aspect. Again, impression and practical judgment must determine whether it is appropriate and convenient that the whole controversy be determined by the exercise of federal judicial power.''

Moreover, since I am of the view that the applicant has no locus standi to seek injunctive relief against the Commissioner, I am also unable to regard that claim as being substantial.

I was pressed by counsel for the applicant to make findings of fact which might be of assistance to the parties either on appeal or elsewhere. I have some doubt as to the utility of making such findings, but in deference to counsel's request I express the following views on the evidence. I am satisfied that there is no common shareholding between Borg Warner and Bennett Honda Wholesale or Bennett Honda Retail, or any other company in the L.N.C. Industries group. Nor are any of the directors of Borg-Warner directors of any company in the L.N.C. Industries group. I am

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further satisfied there is no relationship between Borg Warner and any companies in the L.N.C. Industries group other than the floor plan financing arrangements to which I have referred. I am also satisfied that a number of financiers other than Borg Warner, offer to their customers the same financial arrangements as Borg Warner offers to companies in the L.N.C. Industries group. I am further satisfied that the reason that Bennett Honda Wholesale, Bennett Honda Retail and Borg Warner enter into their contractual arrangements (including the floor plan arrangements) is to further their own commercial interests, and I am satisfied that such arrangements have commercial advantages to each of the contracting parties. I also accept the evidence of Mr Goodey, Borg Warner's managing director, that his company regards the acquisition of motor cycles from Bennett Honda Wholesale as an essential part of the bailment transactions in respect of the same cycles. I also accept Mr Goodey's evidence that he regards Borg Warner's purchase of the motor cycles in the same way as his company buys motor vehicles for the purpose of leasing them to customers.

I also accept the evidence of Mr Evrington, the group management accountant of the L.N.C. Industries group that when cycles are sold by Bennett Honda Wholesale to Borg Warner the sale price reflects a mark-up over the cost to Bennett Honda Wholesale of the cycles. Mr Evrington gave evidence as to the manner in which motor cycles were invoiced from one company to another, and as to the manner in which profit margins were fixed, and as to the general pattern of trading between the companies. I accept Mr Evrington's evidence on these matters. Obviously all these matters would need to be taken into account by the Commissioner in deciding whether he is satisfied, pursuant to subsec. 4(2) of the Sales Tax Assessment Act, that Bennett Honda Retail and Borg Warner deal with each other at arm's length. I did not understand counsel for the Commissioner to argue the contrary. However, he argued that the Commissioner is also required to consider any circumstances arising out of all agreements (whether between the vendor and purchaser of the goods or not) which are indirectly related to the sale of the goods. He submitted that the commercial arrangements between Borg Warner and the companies in the L.N.C. Industries group were such as to leave it open to the Commissioner not to be satisfied that Borg Warner dealt at arm's length with Bennett Honda Retail. I do not think it is appropriate that I should make a finding on whether the Commissioner is entitled not to be so satisfied. The applicant urges that I should do so, the Commissioner opposes me taking that course, and Borg Warner, in its final submissions, adopted an ambivalent attitude. It is unfortunate that the decision in this case will not determine what is the real dispute between the parties. But considerations of convenience do not justify the Court making findings, against the wish of one of the parties, in proceedings in which the applicant is not entitled to any relief.

The application must be dismissed. At the request of the parties, I will hear them on the question of costs.

THE COURT ORDERS AS FOLLOWS:

1. Application dismissed.

2. Costs reserved.