Case: Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578
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. 90 Thereafter I was referred to the ratio decidendi of the Full Federal Court in Saffron v Commissioner of Taxation (1991) 30 FCR 578, and what was said in the joint judgment of Hill and Lander JJ in the Full Federal Court in the Spassked proceedings, those decisions being said by the taxpayer applicants to indicate that '... a different outcome in respect of a different year is not to be regarded as a matter which would bring the administration of justice into disrepute'. It is unnecessary to refer in detail to the ratio in Saffron, which is somewhat removed from the issues presently arising. The issue there arising related to whether evidence of the conviction of a taxpayer of conspiracy to defraud the Commonwealth carried the consequence that the convicted taxpayer was estopped from challenging the Commissioner's decisions on objections to that person's income tax assessments. No such principle was acknowledged by the Full Federal Court, it being held in effect that a conviction is conclusive evidence merely of that which it established, being the fact of conviction for the offence, but not of the facts lying behind the conviction. Consequently the orders of the Full Court including the following: 'The applicant may conduct his case in the income tax appeal presently before this Court for the purpose of enabling the court to determine the true liability of the applicant to income tax in each of the relevant years of income involved in the appeal; and for this purpose the applicant may present a case denying that he and James McCartney Anderson agreed that not all the cash received from the conduct of businesses in which they were involved, including the nightclub businesses known as the Venus Room and the Carousel, would be declared for income tax purposes. But the applicant shall not conduct his case for the purpose of challenging the propriety of his conviction for the criminal offence of conspiring with Mr Anderson to defraud the Commissioner or the fairness of the trial.' 91 I think that there is something to be said for the view that in the present context to the present proceedings, for the taxpayer applicants to be permitted to contest the issues the subject of the critical findings of the primary judge and the members of the Full Court, to which I have earlier referred as to Spassked's circumstances relevantly from 1988 to 1994, would bring the administration of justice into dispute, given the nature and extent of those findings which the Commissioner would presently invoke as the basis for the Commissioner's contention as to abuse of process, as well as for issue estoppel and Anshun estoppel. The particular context involved in Saffron was of course distant to that involved in the earlier concluded Spassked proceedings and presently involved, but nevertheless not to the extent of entirely excluding a useful illustration as to the operation of the doctrine of abuse of process here invoked by the Commissioner. 112 The taxpayer applicants contended of course for the operation of a per se entitlement to litigate, discretely or cumulatively, in relation to each of the 1991, 1993 and 1994, and apparently also the 1996, fiscal year revenue objections, and the consequential disputes the subject of disallowed objections, in line with those English decisions of high authority. Bearing in mind those distinguishing jurisdictional features, and as the Commissioner moreover rightly observed, if the taxpayer applicants were to be permitted to raise for redetermination each and all of the same substantive issues, or virtually so, that were raised, considered and determined in the earlier Spassked proceedings, albeit that the latter proceedings were geared and related to a different fiscal year (ie 1992), being issues principally as to the purpose of relevant borrowings, and as to the use or otherwise of borrowed funds in activities carried on for the purpose, or otherwise in the course of gaining or producing assessable income, and if the taxpayer applicants were to be successful in any such further proceedings against the Commissioner, there would be on record, as I have already mentioned, what would be inconsistent or substantially inconsistent reasons for judgment of the Federal Court. All that would constitute situations well removed, conceptually as well as contextually, from that involved for instance in Saffron . Moreover there was reversed by the Privy Council's decision in Broken Hill what had been an earlier decision of a Full Bench (by majority) of the High Court of Australia, and there was inconsistency between that decision of the Privy Council and the almost contemporaneous Privy Council decision in Hoysted , involving an appeal which also emanated from Australia . Moreover as has been further mentioned, Hoysted was applied by the Full Court in Chamberlain (though the principal judgment of the High Court in Chamberlain cited Caffoor though briefly and not in any controversial context), and Caffoor and Hope did not involve appeals from Australia. Furthermore Dixon J (as he then was) in Blair v Curran cited Hoysted , not irrelevantly in terms of the scope of principle here the subject of scrutiny. The High Court in Falk , without expressing any preference, pointed to the dilemma in reconciling Broken Hill with Hoysted. More directly of assistance to the Commissioner's case moreover was the favourable approach taken to Hoysted adopted by those three members of the High Court in Queensland Trustees who made reference to Hoysted. In all those circumstances, the emphatic approach adopted by the taxpayer applicants in the present proceedings as to the operation authoritatively of the Privy Council decisions in Broken Hill , Caffoor and Hope might be thought to have at best debateable viability, particularly if account be also taken of the nature and extent of the jurisdiction and functions exercised by the tribunals etc from where at least the litigation in Caffoor and Hope originated.