Case: Henderson v Henderson (1843) 3 Ha 100
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. 44 It is appropriate to record for completeness, in relation at least to the operation of the principle of res judicata, that the Privy Council subsequently observed in Hoysted (at 303) that '... if in any Court of competent jurisdiction a decision is reached, a party is estopped from questioning it in a new legal proceeding' , and added that '... the principle also extends to any point, whether of assumption or admission, which was in substance the ratio of and fundamental to the decision ...' . Translating to annual revenue assessments where an evidentiary finding is made in relation to conduct or events antecedent to a fiscal year the subject of an assessment in dispute, it may be asked when that finding would be considered fundamental to decision-making in relation to that fiscal year. The Privy Council described at 303 as 'settled law' the following rule concerning res judicata described in the leading case of Henderson v Henderson (1843) 3 Ha 100 at 114-115 by Wigram VC as follows: 'I believe I state the rule of the Court correctly, when I say that where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.' 45 Those principles are conceivably open to be applied to the wider circumstances of the operation of the assessment scheme of the Tax Act, albeit in the context of the earlier concluded Spassked proceedings having fallen for decision-making in relation to the 1992 fiscal year alone. The difficulty is in defining in any particular case the notion of a ' whole case ', and in identification of ' every point which properly belonged to the subject of litigation'. Henderson did not of course involve a fiscal issue arising in the administrative context of annual assessment. Furthermore the principle enunciated in Henderson was expressed in terms of res judicata , upon which doctrine the Commissioner has however withheld from reliance in the context of the present strike-out proceedings, though in that regard, the doctrine of res judicata is more broadly conceived and has received a broader application in United Kingdom contexts. Moreover in income tax contexts, traditional pleadings are not usually implemented; in that regard in Murphy v Abi-Saab (1995) 37 NSWLR 280 at 287, it was observed by Gleeson CJ (with whose reasons for judgment Kirby P and Rolfe AJA agreed) that '... an issue of fact or law may be easier to decide where there are pleadings than where... there was simply a summons' . In any event, I think that in substance and in reality, IEL as the intermediate and in the present context the effectively controlling parent company did cause its subsidiary Spassked to bring forward the 'whole case' of IEL's relevant subsidiaries (ie Spassked, IEF and QTH). 46 More recently in Johnson v Gore Wood &amp; Co [2000] UKHL 65 ; [2002] 2 AC 1 at 31, Lord Bingham described in Henderson v Henderson abuse of process as having 'much in common' with cause of action estoppel and issue estoppel situations as follows: 'The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all... It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.' 63 The Commissioner's submission in relation to Chamberlain was to point out that in the earlier concluded Spassked proceedings, Spassked had sought and obtained a determination of facts and issues which necessarily resolved the liability of the taxpayer applicants to pay the primary tax assessed to them, and that the Federal Court's jurisdiction to prevent a re-litigation of those issues was confirmed by the Full Federal Court in its decision upon the initial appeal ( Chamberlain v Commissioner of Taxation (1991) 28 FCR 21), where Davies, Ryan and Foster JJ at [26] purportedly applied the doctrine of estoppel as exemplified in Hoysted , and thereby prevented the Commissioner of Taxation from seeking to re-litigate in the Federal Court upon the basis of a mistaken assumption upon which a consent judgment had been entered earlier in the Supreme Court. Incidentally, in the course of the reasons for judgment of Deane, Toohey and Gaudron in Chamberlain at 509, there was reproduced the first sentence of the dictum in Henderson I have earlier extracted, it being explained that ' Henderson was not concerned with res judicata in its strict sense but rather with its implications when an issue is sought to be raised which could and should have been litigated in the earlier proceedings ', referring thereby to what was established by the High Court's decision in Anshun. I would add for completeness that the success of the taxpayer in the High Court in Chamberlain was seemingly treated in any event as based on res judicata : see the joint reasons for judgment of Deane, Toohey and Gaudron at 507, and also the reasons of Brennan J at 504 and of Dawson J at 512. However the subsequent proceedings brought by the Commissioner in the Federal Court, also resolved as above indicated in favour of the taxpayer, turned on Anshun estoppel, by reason of the omission of the Commissioner to raise the issue of mistake in the earlier High Court proceedings. In the result I do not think that Chamberlain provides the assistance, at any rate decisively, for which the taxpayer applicants' case for denial of the operation of an estoppel in the present circumstances was propounded. On the other hand and for what it may matter, I think that the taxpayer applicants were correct in their rejection of the characterisation of Chamberlain as 'revenue proceedings', in the sense of involving an issue as to liability to tax and/or as to the assessable quantification of that liability as such. 117 The Commissioner's case for summary judgment is required in principle to be ' clearly demonstrated ', and ' very clear indeed ', and is inhibited by the need for ' exceptional caution ' by the Court ( General Steel and Dey ). As I have earlier recorded, the Commissioner's case is not sought to be established on the footing of the doctrine of res judicata as applied in the common law of Australia, and which normally involves the merger of causes of action into judgments (compare Henderson at 114-115). Apart from abuse of process, the Commissioner's case is founded upon the doctrine of issue estoppel as well as Anshun estoppel, as those doctrines have been formulated and applied in Australia by judicial dicta . In the case of issue estoppel, I have earlier cited the well known dictum of Dixon J in Blair v Curran to the effect that it is necessary to expose ' a state of fact or law... alleged or denied the existence of which is a matter necessarily decided by the prior judgment', being a matter ' fundamental to the decision arrived at' , and not merely matters of fact or law which are ' subsidiary or collateral ', or 'concern only evidentiary facts and not ultimate facts... '. 118 Further as to the operation in Australia of both issue and Anshun estoppels, the latter having been described by Gleeson CJ in Murphy at 286 as ' a wider form of estoppel' , the Commissioner contended that the critical findings of the earlier concluded Spassked proceedings I have extracted also related to or involved 'ultimate facts which form ingredients in the cause of action' ( Blair v Curran at 532), and which were so closely connected with the subject matter of the earlier concluded Spassked proceedings that it was to be expected that the same would be subsequently relied on by the Commissioner in relation to fiscal years additional to 1992 (see again the full context of the dicta I have earlier cited from Anshun and Henderson ). I further bear in mind that issue estoppel operates in relation not just to the prior litigating parties but also to their respective privies ( Rogers ), and hence persons or entities claiming under or through or by virtue of the legal rights of such parties ( Effem ). I think that it should be concluded that each of the taxpayer applicants qualify as privies of each other, and of their common wholly owning parent IEL, for the purposes of the operation of doctrines as to issue estoppel and Anshun estoppel, being a qualification in any event not seemingly required to be fulfilled in the case of the wider and more comprehensive notion of abuse of process. Each of IEL and its wholly owned subsidiaries here involved, being of course each of the taxpayer applicants, was subjected to the evident decision-making corporate mind of IEL as parent company.