Case: Bailey &amp; Ors v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214
Outcome: discussed
In my view, however, the Court has implied power to order particulars (cf the reference to "inherent" power to order particulars in Master Butchers Ltd v Commissioner of Taxation [1974] 1 NSWLR 350 at 356 (Mahoney J) (" Master Butchers "); Bailey and Ors v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214 at 221 (Jacobs J), 227, 231 (Aickin J)) (" Bailey "). 82 A question of the Commissioner's liability to supply particulars arose in Bailey . The Commissioner had relied on the then general anti-avoidance rule in s 260 of the ITAA. The Court ordered him to provide particulars of the arrangement he alleged was rendered void against him by s 260. 86 A little confusingly at times, the judgments in Bailey contain references to both particulars of the assessment, and particulars of the Commissioner's case to be raised on the hearing. The adjustment sheet which accompanied the notice of assessment showed that the Commissioner had included the taxpayer's proportion ($77,235) of a distribution of $411,920 by Bailey Holdings Pty Ltd. In the course of correspondence, the Commissioner informed the taxpayer that he was relying on s 260 in including that amount. The particulars ordered to be provided were further particulars of the distribution and particulars of the arrangement said to be within s 260. Thus, the order was for further particulars of matters that the Commissioner had already positively asserted as having formed part of his assessment. 87 There is no suggestion that the Commissioner would not have been permitted to identify the arrangement concerned in alternative ways, or to amend later the particulars given of the arrangement, subject to any special order as to costs. 88 Bailey was neither a state of mind nor a Commissioner's determination class of case. I understand Bailey , like Master Butchers , as a case concerned with the practical running of a trial. It does not determine the question whether the Commissioner should be ordered to provide particulars, not of positive assertions made by him, but of his thought processes antecedent to a positive statutorily required step that he does assert the making of a determination. 89 The judgments in Bailey do not refer to s 177(1), and make only passing reference to s 190(b). 105 His Honour observed: (1) (at 469-470) that s 177F fell into "that category where an opinion formed by the Commissioner or a determination by him or his state of mind, is made a crucial element in the process of assessment", citing Bailey at 225 (Aickin J); (2) (at 470) that the assessment would be "excessive" if some step in the Commissioner's process of ascertainment of the amount of tax lacked the authority of the ITAA, citing Bailey at 217 (Barwick CJ); and (3) (at 470) that a determination by the Commissioner under s 177F would lack the authority of the ITAA if, inter alia , the Commissioner had regard to irrelevant considerations or omitted to have regard to relevant ones, citing Avon Downs at 360 (Dixon J). It will be noted that Gummow J did not distinguish between state of mind cases and Commissioner's determination cases: both belonged to the same "category" (at 469). Consistently, his Honour considered that a determination would lack the authority of the ITAA, just as a state of mind would do, if defective on judicial review grounds. 112 The primary Judge held that, in the absence of an affirmative statement by the Commissioner, the taxpayer was not entitled to particulars. However, the Full Court (Pincus, Gummow, Lee JJ) disagreed. Their Honours thought that Bailey , which they described as "the leading case on this subject", was "inconsistent with the general proposition that if the Commissioner intimates that he will not call any evidence about a matter necessary to the validity of his assessment, but will simply argue at the trial that the taxpayer had not displaced the assessment, particulars of its basis would ordinarily not be ordered" (at 191). They said: "[n]o trace of such a doctrine can be found in the reasons [in Bailey ]". 113 Their Honours conceded, as the primary Judge had implied, that if the particulars sought were ordered, that might enable the taxpayer to win an otherwise unwinnable case. However, they thought that particulars should have been ordered, having regard to the fact that the holding of the opinion was itself made a condition of the validity of the assessment and that the covering letter had made further examination of that opinion a legitimate subject of inquiry. 114 The case can be distinguished from the present one on the ground that the ITAA does not make the Commissioner's state of mind on any matter a condition of the power to make either the par (d) determinations or the subs (4) determination, and, therefore, a condition of liability to tax. Whether that is a satisfactory ground of distinction is another matter (see [155] below). 120 Following the passage noted above, their Honours continued by noting that the Commissioner may be required to supply particulars of the scheme relied on (they cited Bailey ), but was entitled to put his case in alternative ways (I suggest by identifying different schemes in the alternative), provided no undue embarrassment or surprise was caused to the taxpayer. Even after a scheme had been particularised, they noted (at 382-383), the position might be cured by amendment, provided the interests of justice allowed such a course (citing Bailey at 219). 121 Their Honours did not refer to the question of defects in the process of the making of the discretionary determination under s 177F (except in the one respect mentioned in the passage quoted above).