Case: Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131
Outcome: applied
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. 74 More recently in Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77, Merkel J, as a Federal Court judge at first instance, said as follows (at 87), in the context of a capital gains tax dispute, upon which the taxpayer applicants sought to place additional reliance in support of the same major theme of their present case: 'Issue estoppel has been held not to apply to a taxpayer where the previous decision relied upon as founding the issue estoppel related to a different year of income. Although there was some support for the contrary view in [Hoysted] , that decision was not followed in [Caffoor] . In Caffoor the Privy Council determined that a taxpayer is not estopped from contending it was entitled to an exemption in respect of a year of income by a decision in respect of a different year of income. More recently, in [Chamberlain] Deane, Toohey and Gaudron JJ cited Caffoor as authority for the proposition that "the Commissioner is not bound by a determination made in respect of an assessment for one year, so far as other years are concerned". It must follow that the Commissioner's issue estoppel argument also fails.' The estoppel issue raised in Orica was in the nature of an alternative contention, and arose in the context of the 'relation back' provisions of s 160U of the capital gains tax provisions of the Tax Act and did not occupy the principal focus of attention of those proceedings. It appears that Merkel J was not provided with the substantial scope of juridical references to and analysis of authority that has been presently afforded to the Court by the parties in contest, including that analysis and debate referrable to the High Court's later decision in Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131, which I will shortly next discuss, or for that matter to Falk . The decision in Orica did not survive appeal (see Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436), though the issues of the scope here arising did not feature in the reasons for judgment on that appeal. I will later return to Orica . 75 The Commissioner submitted that Queensland Trustees was indeed 'directly in point'. The case involved an initial assessment of stamp duty made under the Stamp Acts 1884-1940 (Qld) by the Commissioner of Stamp Duties on a transfer of real property from a company controlled by a deceased person as transferor to the trustees of a trust estate as transferees, being an assessment later upheld by the High Court (in re Sharpe (1944) QSR 26). Subsequently the trustees transferred the land to the surviving beneficiary of the trust in accordance with terms directed by testamentary provision, and the Commissioner of Stamp Duties assessed that subsequent transfer to succession duty under the The Succession and Probate Duties Acts 1892-1952 (Qld). The High Court held by majority that the claim by the Commissioner of Stamp Duties should fail on the ground of issue estoppel. It was asserted by the Commissioner of Stamp Duties that it was fundamental to the High Court's decision, which upheld the assessment of stamp duty, that the transferee beneficiary's title derived from the terms of the settlement and not from the will of the testator, the High Court having accepted the Commissioner of Stamp Duties' contention 'that the testator at his death had no interest in the land and no power to compel its transfer to his trustees.' 76 The taxpayer applicants submitted conversely that Queensland Trustees was of no assistance, being '... simply not a tax of one year... and tax under the same Act in another year', but was instead 'tax under two different statutes', one relating to stamp duty in relation to a settlement and the other in relation to death duty, albeit statutes involving the same revenue commissioner; I do not think that so much is of any decisive significance. The taxpayer applicants contended further that Queensland Trustees stands outside the 'directly relevant authorities', being authorities to which I have referred earlier in these reasons and which dealt with annual assessments of income tax, land tax and other duties. Rather Queensland Trustees was said by the taxpayer applicants to have been decided upon the basis that the existence of an issue estoppel had been determined by the Privy Council decision in Hoysted , without reference to the 'contrary decision in Broken Hill ', and further that after the decision in Queensland Trustees , 'Caffoor decisively rejected Hoysted and adopted Broken Hill' . It was acknowledged by the taxpayer applicants that Queensland Trustees was not referred to in Caffoor or Hope, though neither case had of course originated in Australia. The taxpayer applicants further argued on that footing that the decision in Queensland Trustees was not directly in point, and could only 'stand with the line of authority running from Broken Hill to Chamberlain ' on the basis that, unlike those cases, it was not concerned with annual assessments of tax, and further that '[i]n the light of the other decisions, ... including the adoption of Caffoor by the High Court in Chamberlain ', Queensland Trustees should not be regarded as persuasive in the context of a Part IVC appeal on annual income tax assessment. I have of course emphasised the context involved in relation to Chamberlain and the relative briefness of reference made therein to Queensland Trustees. 77 The Commissioner rejoined that although neither Dixon CJ nor McTiernan J made reference in Queensland Trustees for instance either to Hoysted or to Broken Hill in particular , Webb J held that '... the Crown is estopped from questioning the decision in these proceedings between the same parties' , citing at 144 in that regard Hoysted generally. Moreover in the remaining judgment, being that of Kitto and Taylor JJ jointly, the Commissioner asserted that a similar finding was made at 151 as to the operation of estoppel, in the following terms: 'The principle of law which is relied upon is that for which [Hoysted] is the leading authority in the Privy Council. If the Crown is so estopped, the assessment of succession duty cannot stand, for the nomination and schedule was an instrument which operated inter vivos , and the trusts which it stated in favour of the sons were expressed without reference to the death of any person . The case therefore turns upon a question of issue-estoppel.' The conclusion of Kitto and Taylor JJ at 152 was as follows: 'For this reason it must be held that the Crown is estopped by the judgment it obtained in the former proceedings from asserting that the absolute vesting... was the taking effect of a succession conferred by the testator's will. The claim for succession duly must therefore fail.' The Commissioner submitted that the principles of estoppel apply not only to the administration by the Crown of one species of taxation, but to the administration by the Crown generally of all taxes imposed by it. The Commissioner further submitted that the doctrine 'can certainly apply to attempts to re-litigate issues arising under one species of taxation, and in particular, a revenue enactment concerned with annual assessments of tax', and emphasised in that latter context that the Crown in Queensland Trustees was held estopped, in respect of its administration of both the Queensland stamp duty legislation and the Queensland probate legislation. 78 The taxpayer applicants responded by pointing principally to what may be described as the distinction between the single or confined revenue circumstances involved in Queensland Trustees , being revenue in the form of ad valorem stamp duty or instruments or transactions, from those of successive annual (or other periodic) revenue circumstances involving the incidence of income tax or analogous revenues addressed for instance in Broken Hill , Caffoor and Hope . The critical issue presented by the taxpayer applicants consequently was whether or not taxing or rating systems of annual (or other periodic) assessments or exactions allowed room for the operation of issue or similar estoppels in the determination of successive years of income tax. 106 Moreover it is further appropriate to point out that the context and circumstances of the present proceedings are I think significantly distant and removed from those of the authorities relied upon by the taxpayer applicants, being principally of course Broken Hill, Caffoor and Hope , such as to render those authorities of no sufficient assistance here to the taxpayer applicants as judicial precedents. I have drawn attention to those contexts and circumstances in the course of my review of those cases. Moreover as I have earlier discussed in the context of the reasons in the joint judgment I have extracted from the High Court's decision in Falk, there is at least something plausible to be said for the view that Broken Hill and Hoysted are susceptible to reconciliation and thus distinction in operation, and in any event, that Hoysted should be preferred to the extent of any inconsistency. So much would be in line with the observations of the three members of the High Court in Queensland Trustees who reviewed the United Kingdom authorities. Moreover I do not think that the taxpayer applicants gain assistance of sufficient significance here from the relatively brief citation of Caffoor appearing in the joint judgment of three members of the High Court in Chamberlain , for the reasons I have earlier mentioned, which included reference to the proposition that ' the Commissioner is not bound by a determination...' , and thus not contextually to a process of reasoning leading to a substantive determination by a superior court of record. In none of those English authorities moreover was the doctrine of abuse of process, additionally to estoppel, apparently invoked. 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.