Case: Arthur JS Hall &amp; Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615
Outcome: discussed
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. 31 Primary reliance was placed by the Commissioner, in support of the strike-out application, upon the broad basis of breach or abuse of process. I was referred to a number of well known authorities, in particular to what appears more recently from Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 , especially at [66]-[67], where French J discussed that broader doctrinal basis for obviating attempts to re-litigate in the following terms: '66 The doctrines of res judicata, issue estoppel and Anshun do not exhaust the circumstances in which a proceeding may be regarded as amounting to an abuse of process by way of attempted relitigation of a dispute already judicially determined. As another Full Court said in Coffey v Secretary, Department of Social Security [1999] FCA 375 ; (1999) 86 FCR 434 (at 443): "An attempt to litigate in the Court a dispute or issue which has been resolved in earlier litigation in another court or tribunal may constitute an abuse of process even though the earlier proceeding did not give rise to a res judicata or issue estoppel ..." 67 The considerations of public policy which underline res judicata and issue estoppel help to define the scope of abuse of process by relitigation generally. As Lord Hoffman said in Arthur JS Hall &amp; Co v Simons [2000] UKHL 38 ; [2000] 3 WLR 543 at 572, the underlying policies are that a defendant should not be troubled twice for the same reason and that there is "a general public interest in the same issue not being litigated over again". Lord Hoffman observed that the second rationale could be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule... ... 69 The public interest considerations underlying the power of courts to stay or dismiss the proceedings for abuse of process extend to preventing the waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes.' Earlier in Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378, the doctrine was outlined by Mason CJ, Deane and Dawson JJ at 393 as follows: '... proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.' Yet earlier still, French J in Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 at 279 said: 'Underlying the power that the courts have assumed to stay or dismiss proceedings for abuse of process is a policy of preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes.' 92 The taxpayer applicants drew further attention, in the present context of discussion, to the following opinions of Lord Hobhouse in Arthur S Hall &amp; Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 at 743 as to the operation of the principle of abuse of process: 'The "collateral attack" point is a species (or "sub-set ") of abuse of process. There is no general rule preventing a party inviting a court to arrive at a decision inconsistent with that arrived at in another case. The law of estoppel per rem judicatam (and issue estoppel ) define when a party is entitled to do this. Generally there must be an identification of the parties in the instant case with those in the previous case and there are exceptions. So far as questions of law are concerned, absent a decision specifically binding upon the relevant litigant, the doctrine of precedent governs when an earlier legal decision may be challenged in a later case. A party is not in general bound by a previous decision unless he has been a party or privy to it or has been expressly or implicitly covered by some order for the marshalling of litigation ( Ashmore v British Coal Corpn [1990] 2 QB 338 ). This overlaps with the concept of vexation where the same person is faced with successive actions making the same allegations which have already been fully investigated in a previous case in which the later claimant had an opportunity to take part. This reasoning does not apply to an action against a lawyer alleging that he has mishandled a previous case.' I have earlier made reference to dictum of Lord Hoffman appearing in Arthur S Hall, in the context of my earlier citation from Spalla of the public policy element which assists to define the scope of the doctrine of abuse of process, and I have of course already discussed the judicial notion of ' privy '. The taxpayer applicants contended that it could not be said that they had an ' opportunity to take part ' in what was described by them as '... a contest over the liability to tax in respect of other years and in respect of other taxpayers'. That contention was contextually related to the further proposition of the taxpayer applicants that '... the Commissioner's submission that the present taxpayers and Spassked are controlled by the same entity, is in the present circumstances, irrelevant to the question of abuse of process'. I have difficulty in understanding why that should be so. Control by the same corporate entity, for instance the control of a holding company over its wholly owned subsidiaries, may surely be a factor of potential relevance to the resolution of an issue as to abuse of process which focuses upon the conduct of the controlled entity and a relevantly related company, especially in circumstances of entire (ie wholly owned) shareholding control. As exemplified in passages I have earlier extracted from the judgments in Spassked at first instance and appeal, evidence was led as to the operations, activities and decision making of and in relation to IEL wholly owned and controlled subsidiaries comprising the taxpayer applicants in particular, in relation to periods of time both prior and subsequent to the 1992 fiscal years. A similar observation is seemingly apposite to the purported reliance by the taxpayer applicants upon the following dictum of Heydon JA (as he then was and with whom Spigelman CJ and Mason P agreed), in R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 at 342-344, in the course of which his Honour observed that '[t]he law prevents Mrs Fenwick relitigating in civil proceedings issues decided in earlier civil proceedings; it does not necessarily prevent a non-party, namely the director, litigating issues for the first time in criminal proceedings' . What of course is here relevantly involved are civil proceedings alone. 108 An area of further complexity entered however the resolution of the issues arising as to the Commissioner's reliance upon estoppels, as well as upon abuse of process, once more by reference to the issues (including evidentiary issues) resolved by and in the context of the earlier concluded Spassked proceedings. That area of complexity related to the scope of operation of the doctrine as to privies, in so far as the same may apply in relation at least to the general law of estoppel, the taxpayer applicants asserting that IEF and QTH were not privies of Spassked according to the established precepts of that doctrine. Of course Spassked is one of the three taxpayer applicants, along with IEF and QTH, and Spassked was the applicant in relation to the earlier concluded Spassked proceedings, the findings and contextual implications whereof are sought by the Commissioner to be imputed to each of the three taxpayer applicants in relation to in the present context of fiscal years. The issue raised by the taxpayer applicants concerning privies would not relate to the issues arising in respect of the 1994 fiscal year, neither IEF and QTH having apparently taken any assignment of losses incurred by Spassked in relation to that year. I am unable to accept the contention of the applicant taxpayers that the operation of abuse of process and estoppel doctrines, as postulated here by the Commissioner, should be denied in relation to what was found and determined in the earlier concluded Spassked proceedings in any explicit or implicit context involving any issue as to the qualification of IEL and QTH as privies. Each of IEF and QTH, as well of course as Spassked, are wholly owned and controlled by the same parent company, and thus by the same corporate mind, being most proximately of course IEL in the first instance. It may be readily inferred or also imputed objectively that each of the three applicant companies Spassked IEF and QTH held the same corporate purpose and intention, as a matter of commercial reality and otherwise of corporate control and governance, at least in relation to the circumstantial scope of the issues here falling for resolution. I see no good reason why the doctrine as to privity, variously articulated for instance in Rogers, Effem and Arthur JS Hall , should not respond in principle to the Commissioner's present invocation, bearing in mind the substance and reality of the subject commercial context, and the factor of corporate governance within what is here involved by way of primarily an IEL wholly owned corporate group. That conclusion alone would operate in principle adversely to IEF and QTH in relation to any issue by way of denial of privity, given at least the implications of their status as wholly owned subsidiaries equally with Spassked, stemming from the same wholly owning parent IEL. Of course the critical estoppel arising in any event is in favour of Spassked, and I am unable to perceive therefore a sufficiently viable basis for any subsequent imputation by way of reliance upon the doctrine of privity, in circumstances where IEF and QTH derived their title by transfer from Spassked in the first place. 109 The conclusion should in my opinion to be drawn, in the context of the events which have happened, that the mutual intention to be rightly attributable, inferentially as an objective finding in relation to the corporately related taxpayer applicants, is that each was subject at all material times to the same controlling and decision-making corporate mind. For one matter, the earlier concluded Spassked proceedings concerning the 1992 fiscal year were undertaken implicitly to resolve, as I have already foreshadowed, the subject fiscal issues arising between Spassked as taxpayer, and also as between Spassked and the other wholly owned subsidiaries of IEL (being IEF and QTH) on the one hand, and the Commissioner on the other, not merely concerning that fiscal year in relation to Spassked, but also in relation to the remaining fiscal years which fell within the scope of the circumstances the subject of the evidence adduced in those earlier concluded Spassked proceedings. Moreover the taxpayer applicants have been unable to demonstrate in any event a viable footing for distinguishing the fiscal circumstances of Spassked concerning the 1992 fiscal year from those of Spassked concerning any one or more of the 1991, 1993 and 1994 fiscal years, and as a consequence also those of IEF and QTH respectively in relation to those fiscal years. To that conclusion I would add reference to the 1996 fiscal year, so far as the same might be relevant to the estoppel issue arising, which would not in any event seem to be the case, since the losses transferred during the 1996 fiscal year appear to have been incurred by Spassked originally in the context of the critically relevant six year period from fiscal years 1988 to 1994. 113 To the extent that it is necessary or appropriate to characterise the juridical basis for the conclusions which I have reached, I would primarily invoke the operation of the overreaching doctrine of abuse of process illustrated from the dictum I have cited from Spalla . The Commissioner acknowledged that the taxpayer applicants did not commit at least to any explicit agreement to the effect that the outcome of the earlier Spassked proceedings, relating as those proceedings did of course to the 1992 fiscal year, would govern the resolution of the income tax issues arising in relation to the fiscal years presently in issue. If I may be repetitive in the light of the complexity of the circumstances the subject of the proceedings, those fiscal years were as to Spassked as taxpayer, the fiscal year 1994, and as to each of IEF and QTH the fiscal years 1991, 1993 and 1996. In relation to those three latter fiscal years, for what it may matter, it is unclear whether Spassked transferred to IEF and QTH respectively, pursuant of course to the tax loss provisions in favour of wholly owned subsidiaries pursuant to Subdivision A of Division 3 of Part III to the Tax Act, the whole or part only of the tax losses for the time being prevailing in respect of those three fiscal years. In any event, there is much to be said for the view that although the issue arising in the earlier Spassked proceedings concerned in a jurisdictional sense the 1992 fiscal year, the resolution of that issue by the finding of the Federal Court at first instance and on appeal occurred in the context of the Federal Court's findings in relation to the critical six fiscal year period from 1988 to 1992. Moreover as I have also already indicated, and for what it may ultimately matter, there is something to be said to the effect, again from the context of the reasons for judgment of that earlier 1992 fiscal year litigation, that the outcome thereof would implicitly govern the resolution of the issues arising in relation to the five remaining fiscal years as were by then also in dispute with the Commissioner at the instance of Spassked, IEF and QTH. Be that last observation as it may, any such wider implication is not essential to the Commissioner's present case for summary judgment. What the taxpayer applicants presently seek to do, by their pursuit of the present proceedings, is to litigate issues of a dimension that have been resolved, in substance and reality, in and by the earlier concluded Spassked proceedings, with the consequence that the Commissioner would be therefore ' troubled twice for the same reason ', to adopt Lord Hoffman's description in Arthur JS Hall , should the present summary judgment application brought at the instance of the Commissioner not be upheld. So much attracts the adverse operation of the doctrine of abuse of process.