Case: Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441
Outcome: cited
Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) [ Home ] [ Databases ] [ WorldLII ] [ Search ] [ Feedback ] Federal Court of Australia You are here: &nbsp; AustLII &gt;&gt; Databases &gt;&gt; Federal Court of Australia &gt;&gt; 2006 &gt;&gt; [2006] FCA 267 [ Database Search ] [ Name Search ] [ Recent Decisions ] [ Noteup ] [ Download ] [ Help ] IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) Last Updated: 22 March 2006 FEDERAL COURT OF AUSTRALIA IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 INCOME TAX large corporate group inter-group transactions undertaken over six consecutive fiscal years transactions involving inter-group interest bearing borrowings principally by one group member and transfers of tax losses arising out of those borrowings to other group members prior primary and appellate claims by proceedings in Federal Court made by borrowing member against the Commissioner for interest deductibility in respect of one fiscal year decision at first instance and on appeal in relation to that fiscal year adverse to that single group member findings made in context of those proceedings as to assessability to tax of that group member in respect of some transactions for differing fiscal years after conclusion of single fiscal year further proceedings commenced by the same corporate group member together with other corporate group members in respect of transactions involving borrowings and transfers of tax losses in respect of antecedent as well as subsequent fiscal years to that resolved by Federal Court in favour of Commissioner whether issue estoppel, Anshun estoppel and/or abuse of process should operate in favour of Commissioner in respect of deductions for losses of antecedent and subsequent fiscal years meaning of privies authority in Australian Courts of earlier decisions of Privy Council and House of Lords summary judgment application of Commissioner granted Income Tax Assessment Act 1936 (Cth) ss 51(1), 79E and 80G and Part VII Tax Administration Act 1953 (Cth) Part IVC Federal Court Rules O 20 r 2 subrule 2(1)(b) and (c) and Order 52B Spassked Pty Ltd v Commissioner of Taxation (No. 5) (2003) 197 ALR 553 cited and applied Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 cited and applied General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 applied Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1948-1949) 78 CLR 62 applied Jackson v Goldsmith [1950] HCA 22 ; (1950) 81 CLR 446 referred to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 referred to Blair v Curran [1939] HCA 23 ; (1939) 62 CLR 464 applied Rogers v The Queen [1994] HCA 42 ; (1994) 181 CLR 251 referred to Trawl Industries of Australia Pty Ltd (in liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 referred to Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 applied Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378 applied Sea Culture International Pty Ltd v Scoles [1991] 32 FCR 275 referred to Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537 discussed Hoysted v Federal Commissioner of Taxation [1925] HCA 51 ; [1926] AC 155; (1925) 37 CLR 290 discussed Henderson v Henderson (1843) 3 Ha 100 discussed Murphy v Abi-Saab (1995) 37 NSWLR 280 applied Johnson v Gore Wood &amp; Co [2000] UKHL 65 ; [2002] 2 AC 1 cited Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 applied Taylor v Ansett Transport Industries Limited [1987] 18 FCR 342 cited Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax Colombo [1961] AC 584 discussed and distinguished Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 discussed and distinguished The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400 discussed and distinguished Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987-1988) 164 CLR 502 discussed Chamberlain v Commissioner of Taxation (1991) 21 FCR 21 cited Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 referred to Society of Medical Officer of Health v Hope [1960] AC 551 discussed and distinguished Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 referred to Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163 cited and discussed Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 referred to Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77 not followed Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131 applied Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436 referred to re Sharpe (1944) QSR 26 referred to Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 cited and discussed Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94 referred to Hawkins v Clayton (1986) 5 NSWLR 109 referred to Federal Commissioner of Taxation v Cappid Pty Ltd [1970] HCA 41 ; (1970) 127 CLR 140 distinguished Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578 discussed and distinguished Arthur JS Hall &amp; Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 discussed R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 discussed IEL FINANCE LIMITED, QUEENSLAND TRADING AND HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED v COMMISSIONER OF TAXATION NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 CONTI J 21 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING &amp; HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE OF ORDER: 21 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent Commissioner lodge with the Court and with the taxpayer applicants draft declarations and/or orders giving effect to the reasons for judgment within fourteen days, including orders as to costs. 3. The respondent Commissioner lodge with the Court submissions in reply within a further seven days. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules . IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING &amp; HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE: 21 MARCH 2006 PLACE: SYDNEY REASONS FOR SUMMARY JUDGMENT Outline of the context to the principal proceedings and to the Commissioner's application for summary judgment 1 There is pending before the Court in its original jurisdiction four principal proceedings brought variously by the taxpayer applicants pursuant to Part IVC of the Taxation Administration Act 1953 (Cth) ('the Administration Act'), whereby there is sought to be set aside determinations by the respondent Commissioner of Taxation ('the Commissioner') of objections lodged by the taxpayer applicants against assessments to income tax for the years of income ended 30 June 1991, 1993 and 1994, being questions said by the taxpayer applicants as 'never previously... in issue'. The taxpayer applicants are respectively identified in these reasons as 'IEF' (for IEL Finance Limited), 'QTH' (for Queensland Trading &amp; Holding Company Limited) and 'Spassked' (for Spassked Pty Limited). What was described by the taxpayer applicants as 'the underlying issue now in contest' was the deductibility of the interest expense incurred by Spassked under s 51(1) of the Income Tax Assessment Act 1936 (as amended) ('the Tax Act') in respect of the 1991, 1993 and 1994 fiscal years, being issues which they said 'could not previously have been decided'. I have referred to QTH, IEF and Spassked in these reasons together as 'taxpayer applicants' to avoid confusion, given that the Commissioner is the applicant in the present interlocutory proceedings for summary judgment. Each of QTH, IEF and Spassked was at all material times a wholly owned subsidiary of Industrial Equity Limited ('IEL'), a public company, and IEL in turn traced upwards corporately to the well known Adsteam, David Jones and Tooth &amp; Co public companies. 2 The context to that so-called underlying issue was that between 1 December 1987 and 28 June 1990, Spassked borrowed funds from IEF at interest, and claimed that as a result of the interest incurred on those loans during the 1988 to 1994 years of income inclusively, it made losses for income tax purposes during those years of income. The losses so claimed were progressively transferred by Spassked under s 80G of the Tax Act to other members of the IEL group up to and including the 1998 fiscal year. The Commissioner issued assessments against Spassked and the transferees of the tax losses which disallowed the deductions for the interest originally claimed to have been incurred by it on those borrowings, and consequently reduced the amount of those losses to nil. A critical factor, from the Commissioner's perspective, was that the Federal Court, both at first instance ( Spassked Pty Ltd v Commissioner of Taxation (2003) 197 ALR 553) and on appeal ((2003) [2003] FCAFC 282 ; 136 FCR 441), has already determined the unavailability of those losses or outgoings sustained or undertaken for income tax purposes in the context of Spassked's challenge related to the fiscal year ended 30 June 1992. I will refer to those earlier proceedings at first instance and on appeal as the 'earlier concluded Spassked proceedings'. The presiding judge at first instance was Lindgren J, and those presiding judges on the Full Court appeal were Hill, Gyles and Lander JJ. The present proceedings were not commenced until after the conclusion of the appellate proceedings in favour of the Commissioner. The taxpayer applicants described that taxation issue thus resolved at the instance of Spassked in relation to the 1992 fiscal year as having involved 'a similar but essentially different question' to those raised by the present proceedings, and not having given rise to an estoppel, and not involving an abuse of process, contrary to the Commissioner's contentions. 3 In the context of each of the present four principal proceedings, framed by the applicant taxpayers by reference to the fiscal years 1991, 1993, 1994 and 1996 (see [5] below), the Commissioner seeks by amended notice of motion filed on 25 July 2005 in the present proceedings the following relief in summary: (i) orders that each of the four present proceedings be summarily dismissed by reason of, or (ii) orders that each of the proceedings be stayed generally in relation to, and (iii) in any event declarations that the applicant taxpayers are estopped from advancing or relying on, the facts and matters asserted and the contentions advanced in specified paragraphs of the taxpayer applicants' amended statements of facts, issues and contentions filed in the present proceedings pursuant to Order 52B of the Federal Court Rules . Relief by way of the orders and declarations now sought by the Commissioner is purportedly based upon either one or both of Order 20 rule 2 and Order 29 of the Federal Court Rules , and/or the inherent jurisdiction of the Court. As to Order 20 rule 2, the Commissioner indicated reliance solely on sub-rules 2(1)(b) and (c), upon the footing that the proceedings are an abuse of the processes of the Court or are otherwise frivolous or vexatious. The Commissioner acknowledged that the present application for summary dismissal of the proceedings now brought by IEF, QTH and Spassked is not intended to preclude the taxpayer applicants from contesting the quantum of additional or penalty tax imposed by the disputed notices of assessment. So much is said to involve very substantial issues for later determination.