Case: Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation [1971] HCA 17 ; (1971) 124 CLR 97 
Outcome: considered
In bankruptcy matters, Dagnall has been followed in Theophile v The Solicitor-General [1950] AC 186 at 201-203; In re Bird v Inland Revenue Commissioner [1962] 1 WLR 686 at 695-697 and In re a Debtor [1992] Ch 554. However, in Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation [1971] HCA 17 ; (1971) 124 CLR 97 at 102-103, Gibbs J (as his Honour then was) doubted the applicability of the decision in Dagnall 'beyond the field of bankruptcy and into that of taxation law' , referring to the decision of Tryka Ltd v Newall (1963) 41 TC 146 where Wilberforce J (as his Lordship then was) said: 'I do not think I can accept the application of the bankruptcy cases here. It seems to me that the two fields are quite different. When one is considering the question whether for purposes of bankruptcy laws a person is carrying on business, it may be necessary to hold that he does not cease to carry on business when trading activity has ceased, and for that reason, the Courts have been ready to extend the Section so as to cover a case where he has left debts unpaid. But to apply the same line of thought to Income Tax cases would lead to very great difficulties and, indeed, would mean that almost every case which one finds in the books on such questions as cessation of business would have been complicated by the introduction of this question and might, indeed, have been otherwise decided.' 41 For present purposes the applicant must show that until 31 December 2001, it continued to carry on the same business as that carried on before 25 March 1998, as explained by Gibbs J in Avondale Motors . It claims that its interests pursuant to the joint venture agreement, at all relevant times prior to 25 June 2001 were: '(a) ... rights, duties, obligations and liabilities which were several to those of other participants ...; (b) a beneficial interest in the property and assets of the (joint venture) as a tenant in common with the other participants, proportionate to its interest in the (joint venture) ...; (c) (several responsibility) for the expenditure and operational expenses incurred by the (joint venture); and (d) (ownership of) coal produced by the (joint venture) in proportion to its interests in the (joint venture) which was to be divided and sold separately. This was achieved by each participant appointing (the manager of the joint venture) to market and sell the coal produced by the (joint venture) on its behalf.' 42 The applicant submits that prior to 25 March 1998 and thereafter, until 25 June 2001, it carried on a business properly characterized as that of developing and exploiting deposits of coal at German Creek in Queensland through participation in the joint venture, conducting such business through an agent who was responsible for day-to-day management. In the 2002 tax year (ie 1 January-31 December 2001) the applicant conducted such business until 25 June 2001. Thereafter, as it asserts: '(It) was engaged in various activities arising out of its participation in (the joint venture), including the transfer of its rights and obligations under the Corporation User Agreement and the German Creek East Agreement which were both essential to the operation of the (joint venture).' 43 The respondent submits that from early 1998 until 25 March 1998 the only business activity of the applicant was its participation in the joint venture. It submits that on 25 June 2001, 'The applicant ceased to be a participant in the joint venture. It no longer conducted the activities' associated with that joint venture. The respondent submits that in so doing the applicant altered in a significant way the source of its earnings, divesting itself of its profit-making interest in the joint venture. To the extent that the activities identified by Mr Purkiss were performed after 25 June 2001, they: '... comprised ad hoc attendance to matters involving: (a) preparation of documents to finalize some remaining obligations of the parties under the Asset Purchase Agreement; (b) the receipt prior to 30 September 2001 of the amount of a tax adjustment payable to the applicant under the Asset Purchase Agreement; (c) taxation or accounting-related issues.'