Bunting v Commissioner of Taxation

[1990] HCATrans 19

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl39 of 1989

B e t w e e n -

ROBERT J .· ·BUNTING

Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special

leave to appeal

MASON CJ
GAUDRON J

McHUGH J

Bunting

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 FEBRUARY 1990, AT 3.04 PM

Copyright in the High Court of Australia

SlT 13/1/RB 1 16/2/90

MR A.H. SLATER:  May it please the Court, I appear with my

learned friend, MR S.J. McMILLAN, for the applicant.

(instructed by J.W. Walker & D.K.L.Raphael)

MR G.K. DOWNES, QC:  If the Court pleases, I appear with my

learned friend, MR N.R. BURNS, for the respondent.

(instructed by the Australian Government Solicitor)

MASON CJ:	Mr Slater.
MR SLATER:	Your Honours, this is both an application for an

extension of time and an application for leave to

appeal.

MASON CJ:  Yes.

MR SLATER:  The application was two days_ late in being filed. I

understand from my friend that he does not oppose the

extension of time.

MASON CJ:	The grant of an extension of time.
MR SLATER:	Your Honours, in our submission there are two aspects

of this application that merit further examination by

this Court. Those aspects are, first, the role and

powers of the Federal Court in supervising, by a

process of judicial review court appeal, decisions of
the Administrative Appeals Tribunal, and second, the

operative scope of section 260 of the INCOME TAX

ASSESSMENT ACT when the relevant purpose referred

to in that section is found.

If I could deal with those separately,

Your Honours. Turning first to the question of the

appeal to the Federal Court from the Administrative

Appeals Tribunal, if I could take a moment of

Your Honours' time to just reiterate a couple of

background principles: first, that appeals from the

Tribunal pursuant to section 44 of the Act constituting it are in the original jurisdiction of the Federal

Court, and second, that such appeals are a process

of judicial review of a decision of an administrative

character.

McHUGH J: This point was not taken in the Full Court, was it?

No point was raised in the Full Court - - -

MR SLATER:	As to- - -
McHUGH J:	As to this point?
MR SLATER:	Your Honour, I do not take point about jurisdiction;

the point I take is about the decision-making process,

that is -

McHUGH J: But whose decision-making process?

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Bunting

MR SLATER:  The decision-making process, both of the court at first

instance, Mr Justice Lockhart, and the Full Court,

and the way in which, having found jurisdiction,

they dealt with the matter. Your Honour, that is

the point on which the court divided in the Full Court.

McHUGH J:	Was this point taken before the Full Court, concerning
Mr Justice Lockhart's findings of fact?
MR SLATER:	Your Honour, I was not in the Full Court so I am

not able to answer that from direct knowledge.

MASON CJ:	The judgments do not give any indication of consideration
of the section 44 point, do they?
MR SLATER:	Your Honour, as I said, it is the point on which

Mr Justice Hill dissented, because His Honour was of

the view that it was not appropriate for the Federal

Court to make findings on points of fact and that the appropriate course was to remit the proceedings to the

tribunal to have the relevant findings found. That is

the subject and the source of our complaint.

MASON CJ: It does not seem a very likely special leave point.

In other words, if you cannot make out the sufficiently

substantial case on the INCOME TAX ASSESSMENT ACT

point, it seems to me unlikely that you are going to

attract our interest on this point.

MR SLATER:  Your Honours, I would hope to do so because of the

general significance of the point. If I may, I will

endeavour to do so in fairly brief terms.

MASON CJ: Yes.

MR SLATER:  Could I hand up four bundles of materials. The first

page in each bundle is simple a copy of the relevant

provision of the Act for Your Honours' convenience

and the relevant provision, provision on which in this

respect we found, is section 44(1): 

A party to a proceeding before the Tribunal

may appeal to the Federal Court of Australia,

on a question of law, from any decision of

the Tribunal in that proceeding.

Your Honours, the scope of an appeal under that

section was considered in the Federal Court in a

matter of BRIXIUS V COMMISSIONER OF TAXATION,

16 FCR.	A copy is the second document in that bundle.
That was an appeal under section 44.	The matter in

issue there was a dispute under section 51 of the

INCOME TAX ASSESSMENT ACT, essentially the same

dispute as had troubled this Court in HANDLEY's case.

What the Federal Court found was that the tribunal

had specified the correct test under section 51 but,

at the end of its judgment the Full Court came to

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Bunting

the conclusion that the tribunal had reached - the

Full Court expressed the opinion that the tribunal

had reached the wrong conclusion, nevertheless

Their Honours said that because there was no error of law in the decision, the Full Court lacked

jurisdiction to deal with the matter. Your Honours

will see the passage at the third to sixth lines on

page 367:

we acknowledge that we are not empowered

to substitute our view for that of the

Tribunal, notwithstanding the fact that we

probably would not have been inclined to come

to the same conclusion.

Your Honours, we do not say here that the court

lacked jurisdiction but what·we do say is that two

of the authorities referred to in the decision of

the court in BRIXIUS are such as to indicate that the

way in which the court dealt with the matter, having

found jurisdiction in this case, was not a correct

or appropriate way of dealing with it. The two

authorities referred to Your Honours are some

observations of Mr Justice Brennan in WATERFORD's

case and the relevant passage is set out on page 364,

about two-thirds of the way down in the report of

BRIXIUS' case where His Honour said:

"A finding by the AAT on a matter of fact

cannot be reviewed on appeal unless the

finding is vitiated by an error of law ..... The

error of law which an appellant must rely on

to succeed must arise on the facts as the

AAT has found them to be or it must vitiate
the findings made or it must have led the

AAT to omit to make a finding it was legally

required to make ... "

Your Honours, the other authority referred to by the

Full Court in BRIXIUS' case was an earlier decision

also of the Full Court in a matter of BROWN V THE

MINISTER FOR IMMIGRATION. That case concerned not

section 44 but a provision in the REPATRIATION ACT
and the court in BRIXIUS' case equated the

provision in the REPATRIATION ACT with the

provision in the ADMINISTRATIVE APPEALS TRIBUNAL ACT.

In the earlier case, Your Honours, counsel for the appellant had sought to equate the provision in the

REPATRIATION ACT, section 107VZZH - and it is of

some com.fort to a revenue lawyer to know that there

are provisions even more bizarre in their terminology

in the REPATRIATION ACT than the INCOME TAX

ASSESSMENT ACT. Counsel sought to equate that to

section 196 of the INCOME TAX ASSESSMENT ACT and

that endeavour was rejected. Specifically it was said,

at about point 2 on page 304 of the report in 7 FCR -

that is the third document in the bundle I handed up:

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The existence of a question of law is

not merely a qualifying condition to ground

an appeal from a decision of the Tribunal;

rather, it and it alone is the subject matter

of the appeal, and the ambit of the appeal is
confined to it.

Where the court finds in a decision of the tribunal

an error of law, the course which it takes will
depend on the circumstances. If the factual findings

of the tribunal are such as to permit the Federal

Court to reach a conclusion which, by applying the

correct law to the facts as found by the tribunal

disposes of the dispute, then the court may make an

order accordingly. But, Your Honours, where the facts

found by the tribunal are insufficient to enable the

Federal Court to dispose of the matter by applying to

them the principles which it holds correct, then the

appropriate course is for the court to remit the
matter to the tribunal in order to make the relevant

findings and to apply the law stated by the court.

MASON CJ:	Now, what are the findings of fact in question here
that you say should have gone back to the tribunal?

MR SLATER: The findings here, Your Honour, are twofold: first,

there is a finding which is to some extent of a

composite nature. What Mr Justice Lockhart did, and what

the majority in the Full Court upheld him in doing,

was simply to dismiss the appeal but that necessarily

meant that His Honour accepted - I am sorry, I will

withdraw that - to allow the appeal from the tribunal

and to substitute for the tribunal's order an order
dismissing the taxpayer's appeal to the tribunal.

What that entailed was making a finding that the consequence of the application of section 260 was that

the income which had been in fact received by the

applicant's wife's company was income of the applicant

and the way in which His Honour did that was to hold

that there was a liability which was exposed by the

operation of section 260 and His Honour specified that

liability in the first paragraph commencing on page 28

of the appeal book.	Your Honours will see there that
His Honour said:

Looking at the arrangement as a whole

in this case it is plain that its purpose

and effect was to alter the incidence of

income tax and relieve Mr. Bunting from a

liability to pay the tax which would

otherwise have been imposed upon him.

What we say is that there is nothing in the findings of the tribunal which enables the Federal Court to

say what tax would otherwise have been imposed upon

Mr Bunting. That is our principal concern as to

findings of fact by His Honour - - -

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MASON CJ:	Is not the problem with that the problem that
Justice McHugh raised with you, that that does not
seem to have been taken as a ground of appeal to
the Full Court of the Federal Court?
MR SLATER:	Your Honour, as to that I can only say in this Court

that it was the point which was the dividing point

between the minority and the majority.

MASON CJ: It was certainly referred to by Mr Justice Hill in

his dissenting judgment but normally we do not grant

special leave to an applicant who has failed to raise

the point which he wishes to raise bn the appeal to

this Court.

MR SLATER:  Yes, I appreciate that, Your Honour. I cannot from my

own knowledge of the way the argument was conducted

say- - -

MASON CJ: After all, we are now faced with majority judgments

in the Full Court of the Federal Court that do not
deal with this question for the simple reason that the

question was not argued.

MR SLATER:  Your Honour, I am unable to assist the Court in that

respect. I am unable to make any meaningful response

on that point for which I apologize. All I can say, Your Honours, is that it would appear to me from the way in which Mr Justice Hill's judgment proceeds and

the comments that he makes about matters which were

dealt with in the Full Court appeal, that this issue

must have been raised, otherwise His Honour would not

have addressed the matter as he did. But I can take

the matter no further than that, Your Honour.

MASON CJ:	Mr Downes, do you know whether the point was raised
in the Full Court?
MR DOWNES:	Your Honour, the point was not raised in any sense

of raising it as a ground of appeal.	I have a
faint recollection that en passant there was some

reference to the question of what might happen, but

I equally have the feeling that that may be a

recollection of another appeal. It certainly was not
raised in one of the grounds we were proposing to

rely upon .... the fact that it was not raised as an

appellate point in the appeal to the Full Federal

Court, Your Honour.

MASON CJ: Thank you. Yes, Mr Slater.

MR SLATER:  Your Honour, I can take that point no further.

Except this, to say that in our submission the fact

that it may not have been dealt with at any length

in the argument below does not detract from the

circumstance that it is the significant point of
departure between the majority and the minority in

the court.

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Bunting

MASON CJ: True enough, but we consider it from the question should we grant special leave in the case, and it is a relevant factor for us to have regard to in

determining that question.

MR SLATER: It is a relevant factor, Your Honour, going perhaps

to the merits of the applicant in this specific case,

as to whether this specific applicant deserves

special leave in terms of that being a factor which

the Court takes into account in considering the

grant of special leave. But, Your Honours, we would

respectfully submit, that where there is a decision

of significance of a divided Full Court below, the

significance of that decision is also a factor which

is to be taken into account in the decision-making

process of this Court in relation to special leave and

it is a factor which, in our·respectful submission,

would overbear the personal circumstances of the

applicant in this case.

GAUDRON J:  Does it not also have this further problem: assuming

for the moment the correctness of your argument, that

is to say that there should have been no finding other than by the tribunal as to the matter implicit in that

paragraph to which you have directed our attention, it

then means, does it not, that this Court is in no

position to deal with the application of section 260

in the present case, which really is the matter of
special interest, I would have thought, in your case -
the application of section 260. It would simply leave

the matter at large.

MR SLATER:  Your Honour, it would be dealt with in this Court in

this way:  if Your Honours were of the view that the

approach adopted by the majority was correct, then

that would finally dispose of the applicant's case.

If Your Honours were of the view that the approach

adopted by the majority was incorrect, then Your Honours

would be in a position to direct the matter be remitted

to the tribunal with observations and directions as to

how the tribunal should approach that issue and what consequences should follow from a finding one way or the other on the factual issue.

GAUDRON J: But if you are correct on this point, this Court

would never get to the application of section 260

in the present case.

MR SLATER:  Only, Your Honour, by saying to the tribunal

ultimately - because that is ultimately where it goes

back to - "If you find affirmatively on the points of

fact which are remitted to you, then the conclusion is thus. But if you find negatively on those facts,

then the conclusion is the other." That is the

inevitable problem, Your Honour, with the very nature

of an appeal under section 44, that is confined to
questions of law, that when the tribunal errs in law

the matter has to go back.

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Bunting

But, Your Honour, that is why in a sense

we say that the point under section 44 is a point

of importance. It is not good enough for the

Federal Court to endeavour to cure the problems of

section 44 by treating it as if it were section 196

of the INCOME TAX ASSESSMENT ACT, that is as if the

Federal Court were rehearing the matter. And

although His Honour Mr Justice Lockhart expressly

adverted to section 44 and to the decision in

BRIXIUS's case, when Your Honours look at his

judgment and Your Honours look at what the majority

in the Full Court on appeal said about his judgment,

what His Honour did was in effect to rehear the case.

His Honour made findings on the issue of fact to which

I have already referred in responding to Your Honour

• •

the Chief Justice's question and on other issues of

fact as to purpose, as if he·were hearing the case
under section 196 resorting to the evidence.

With respect, Your Honours, that is a significant

point. It is not a matter confined to income tax
cases; it extends across the whole range of appeals

from the tribunal to the Federal Court. It merits

the attention of this Court to restate, for the

benefit of the lower court, that the function of the

lower court, of the Federal Court, is not to rehear

but simply to decide questions of law. Whether that

is a suitable and satisfactory solution to the

problem of appeals from administrative bodies is not

a matter for any of the courts.

The point on section 260 which this Court is in

a position to deal with is whether a decision in

relation to section 260 that particular steps taken

by a taxpayer are steps which attract the operation

of section 260 because they are taken with the

requisite purpose - and there was a concession below

that there was purpose in relation to the formation

of the family trust - whether those steps having that

purpose is sufficient to permit the court or the

Connnissioner to set aside not only the steps with the

requisite purpose but also other steps which are taken	contemporaneously as part of a wider arrangement which
wider arrangement does not have the requisite purpose
but is added to by the steps with the requisite
purpose can be set aside.

MASON CJ:  Now, does the finding as to purpose relate only to the
trust and not extent to the formation of the company?

MR SLATER:  We say yes, Your Honour. I put it that way rather

than giving Your Honour a completely definite answer

because the judgments do not make it completely

definite. But at page 20 of the appeal book His Honour

Mr Justice Lockhart notes what appears - and again I

say this from the judgment rather than from personal

knowledge - to have been connnon ground, but at about point 5:

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It is con:nnon in the computer industry for

the services of computer specialists to be

required only for the duration of particular

projects and for those services to be

provided through companies which may be

controlled by the computer specialists.

Your Honours, His Honour then on page - I am reminded, Your Honour, that that finding was made by the tribunal in paragraph 2 of its reasons on

page 1 of the appeal book. His Honour

Mr Justice Lockhart then, at the foot of page 27,

observed that, in the sentence beginning	five
lines from the bottom:

However, the structure which was created was more than was necessary to provide those

benefits.

The benefits being those referred to in the preceding

paragraph of superannuation and limited liability.

His Honour then went on to say:

No business or family purpose can be

found for the creation of the family trust.

The trust is a discretionary trust from which Mr. Bunting is expressly excluded -

Then, going on to the next page:

This provides a strong indication that

the primary purpose of the transaction was to

split Mr. Bunting's income between himself

and members of his family.

Your Honours, part of the difficulty, perhaps, was

that it was not until my friend was pressed in the Full Court that the transaction was in any respect particularized.

MASON CJ: Just a moment. What about the next paragraph? Looking at the arrangement as a whole in

this case it is plain that its purpose and

effect was to alter the incidence of income

tax and relieve Mr. Bunting from a liability

to pay the tax which would otherwise have

been imposed upon him.

What does His Honour mean by "the arrangement as a

whole 11 ? The company as well as the trust.

MR SLATER: That is what I was about to come to, Your Honour.

There is an elision in the reasoning process.

His Honour has said it is all right to have a company.

That is a con:nnon thing to happen. The company

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Bunting

provides commercial benefits, limited liability and

superannuation. It is not all right to add the

trust. The primary purpose of the transaction,

reading back to the previous sentence, must mean, in

our submission, the trust was to split income. Then

there is an elision in the next paragraph toward

finding that Mr Bunting would otherwise have been

liable to pay tax. And that winds up, in the

conclusion at the top of page 33, the first line on

page 33 of the appeal book:

Section 260 annihilates Manting and the

trust.

Your Honours, that discloses two things: first,

that as His Honour Mr Justice Hill observed on the
appeal it was not until the appeal that the

arrangement was particularized by the respondent

and that, no doubt, is as much the applicant's fault

as any because it appears also that a suitable request

was not made. Nevertheless it was a source of

confusion. It was not a source of confusion perhaps
in the tribunal because the tribunal decided the
matter on a different point altogether, on a question

of law which the Full Court held to be incorrectly

decided.

By moving,without expressly acknowledging it,

from saying that the trust was the tainted step

to saying that the trust and the company are struck

down, His Honour is, in our submission, both making

a finding as to purpose which was beyond the province

of the court on appeal and relying upon a conclusion
as to what would have been disclosed if either the

trust or both the trust and the company had been set

aside. And we say that the court ought not to be

allowed to take those steps without check.

MASON CJ: What is the point of principle in relation to the

taxation argument?

MR SLATER: The point of principle is this: if there is

interpolated into a course of action - in this case

the formation of a company and an engagement by

that company of Mr Bunting and the provision by

the company of others, two others, of his services -

if there is interpolated into that course of action

an additional step - in this case the formation of
the family trust and the distribution of the net income
generated by the company's activities to Mr Bunting's

family, which interpolated step has the tainted

purpose which attracts section 260, does the

interpolation of that step enable the Commissioner

to set aside not merely it but the entire arrangement

when the entire arrangement is- - -

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GAUDRON J:  Do you know if that point was argued in the Full

Federal Court, because it seems very much as though

the matter went forward in the Federal Court, at

least, on an all or nothing basis; either section 260
annihilated the whole transaction or none of it, and

in a sense that is right. When I say in a sense that

is right, in the context of the applicant's

assessment, that is right, but if it went forward

totally on a black and white basis like that, as it
seems to have done, it would follow that this

argument was not taken; it was implicitly abandoned.

MR SLATER: Again, Your Honour, I suffer from the impediment

of not having been there, but it is clear - this much

is clear, Your Honour, that the black and white point

was argued, that is it was argued for the applicant

that the circumstance that the taxpayer had been

employed outside Australia beforehand was not a

sufficient pre-existing situation and if one takes

that as the black and white question, then that

clearly was argued. The Full Court majority,

Justices Beaumont and Gummow, were content to decide

the case on that point without addressing the issue

which was dealt with by Mr Justice Hill. And we say

they were in error in doing that. But so far as it

appears from their judgment about the point that I

have endeavoured to put was not addressed, we would

submit that that consequence followed from their having

adopted the findings of fact made by

Mr Justice Lockhart as to what the effect of setting

aside the arrangement was.

GAUDRON J: But that all seems fairly explicable if you did not

take your first point before the Full Federal Court

as a ground of appeal.

MR SLATER: It would be explicable, Your Honour, yes. That is

one possible explanation.	The explanation I have
endeavoured to put is another.	I am not in a

position to assist the Court on which way the matter

did go in the court below.

MASON CJ: But it now emerges - and this is a substantial

difficulty as it seems to me - that the two major

submissions you want to make either appear not to have

been put to the Full Court of the Federal Court or,

if put at all, to have been put in such a way as not

really to attract substantial attention from the court.

MR SLATER:  Yes, I would certainly have to accept the second

limb of what Your Honour says to me.

MASON CJ: In those circumstances, the question arises very

clearly: is it the sort of case that should attract

the grant of special leave to appeal? Normally as

a matter of policy we take the view that unless

points are clearly raised for the attention of

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Bunting

intermediate courts of appeal, and dealt with by

the intermediate Court of Appeal, it is not an

appropriate vehicle for us to grant special leave.

MR SLATER:  I appreciate that, Your Honour. I can say no

more to Your Honour than I have said already.

Your Honour, in our submission, the result of

the court's decision below is of a sufficiently
significant nature and it is, in our submission,

sufficiently incorrect in the respects which I

have endeavoured to draw to the Court's attention

that it does merit the grant of special leave,

notwithstanding any defaults that may have been

present in the argument presented to the lower

courts. Those are our submissions, if the Court pleases.

MASON CJ:  Thank you, Mr Slater. Mr Downes, what do you say

about this case, looked at from the perspective of

the questions that actually arose for determination

before the Full Court of the Federal Court?

MR DOWNES:  Your Honour, there was one issue which was debated

both before His Honour Mr Justice Lockhart and in

the Full Court and that was the antecedent situation

argument that Your Honour sees that the bulk of the

judgments are concerned with.

MASON CJ: Which might well give rise to a point of general

principle.

MR DOWNES:	We would submit not, Your Honour.
M.ASON CJ:	I know you would submit not, but I can - - -
MR DOWNES:	I accept that that, we anticipated, would possibly

be the basis of the application before Your Honours

today, but the second point, we would respectfully

submit, was less - well, one could hardly say less -

but it certainly was not agitated before the Full

Court. The way it arose - and it appears slightly

from the judgment of Mr Justice Hill at page 69 -

it was not-this question of the identification of

the arrangement was not raised below, was not raised

by the appeal and was not raised by the appellant,

but when I rose, one of the first things that I faced

was a question from Mr Justice Hill as to what it was

that the Commissioner identified and that is what

T14 His Honour refers to at page 69. As Your Honour sees,

although he indicates that he thinks there is some

difficulty with the identification and that I perhaps

hesitated slightly before I identified the company,

the fact is the case went forward on the basis that

this was an all or nothing situation, as we would see

it. Nothing turned upon the distinction between the incorporation of the company and the settling of the

trust.

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And if Your Honour look at the facts,

Your Honours will see that that is exactly the way

in which the findings of fact proceed, without any
identification of the two, and if Your Honours went

further and looked back at the evidence, not that it
is here for Your Honours to look at, we would

respectfully submit that that is also what Your Honours

would find.

One gets perhaps a slight flavour of it from

His Honour Mr Justice Gununow at page 50 where he refers compendiously to "these steps" and the

taxpayer's concession - I am quoting from the bottom

of page 50 - that:

another, he said in evidence, was the payment

of less income tax. ·

That was one of the taxpayer's purposes. But as we

would see it, the way the case has been conducted

and, in truth, the way the facts came out, the purpose

of the taxpayer incorporating the company was the one

purpose - the purpose that was associated with the

settling of the trust. So we would respectfully

submit there were other grounds upon which we would

seek to resist the application for special leave,
but we would respectfully submit that neither of these

points were agitated before the Court below and

Your Honours would not grant leave without the benefit

of the views of the court below on the matter and

without the applicant before Your Honours having

raised the matter below.

Do Your Honours wish to hear me on the other

matters?

MASON CJ:	No, we need not trouble you on any other aspect of
the case, Mr Downes.  Mr Slater.
MR SLATER:	Your Honours, I have an apology to make to the

Court. I lost the thread of my submissions in

the course of responding to the Court and I did not

draw to the Court's attention that we would wish to

regard as a significant point the antecedent

situation point, that is the - - -

MASON CJ: I am not following now what you are saying.

MR SLATER:  We would wish to put to the Court, as a significant

point, the issue as to whether activities outside

Australia before any derivation of assessable income

constitute an antecedent situation.

MASON CJ:	That is not strictly a matter in reply at all.	You
are now raising a third ground for the grant of
special leave.
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Bunting

MR SLATER:  I do appreciate that, Your Honours.

MASON CJ: What do you want to say in support of that ground?

MR SLATER: Just briefly, Your Honour, that the question whether

that is to be regarded as an antecedent situation,

that is circumstances which involve no derivation

of assessable income whatsoever, is a matter of

significance in the appraisal of section 260 and

notwithstanding that section 260 is legislation

which does not apply to transactions cormnenced after

a date now nearly nine years ago, as Mark Twain said,

reports of its demise are somewhat exaggerated. I

put it no higher than that, Your Honours, in view of

the late point at which I raise it.

MASON CJ:  Yes. Now, Mr Downes, what do.you want to say in

response to that?

MR DOWNES:  Your Honours, apart from noting that my learned

friend at the very outset opened that there were

two aspects, and then - - -

MASON CJ: He has thought better of it, obviously. The first two

aspects did not quite attract the welcome that he

thought they might.

MR DOWNES:  We would respectfully submit that there are now five

judges who have considered this matter in the Federal

Court, all of them unfavourably to my learned friend,

and I add to the majority and Mr Justice Lockhart the

judgment of Mr Justice Hill because, in truth,

Mr Justice Hill only ultimately concluded that the

matter ought to go back for some findings of fact

which we would respectfully submit need not - was not

a requirement in any event because the findings of

fact that had been made by all of the tribunals who

had considered this matter were plain and led to one

conclusion but His Honour - - -

MASON CJ: Is that right? I thought that Mr Justice Hill foundered

on the absence of an antecedent transaction, in

particular that there was no income derived in

Australia.

MR DOWNES:  Yes, but he went on to say that one could have an

antecedent transaction which amounted to, perhaps,

a state of mind, the person who was about to be

subject to the fall of a liability to tax, and then

took a step to avoid it. He had never received

income in Australia, had never been employed in
Australia, but was at the point where he was about
to be subject to that liability and Mr Justice Hill

used that illustration to explain away the capricious

result, perhaps, that the other construction would

lead to, namely that if a graduate in computing science

at Sydney University was fast enough into his lawyer's

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chambers before he engaged in employment, he would

for the rest of his life, if section 260 had ruled

for the rest of his life, have been safe from the

effects of that section.

So what His Honour said on this issue, that is Mr Justice Hill, was that there was not any finding sufficient on this point and the matter ought to go back to the tribunal for a finding to be made as to,

so to speak, what was the circumstance immediately

prior to the events which were said by the Commissioner

to give rise to avoidance in terms of the statute.

But what His Honour ignored, with respect, is that

Mr Bunting went in to get a job from an employer and the judgments are replete with reference to "he" and

"him" in terms of the employment. He was in every

respect in the same category, -on the findings of fact

that were made by the tribunal, by the Administrative

Appeals Tribunal, in exactly the position, we would

respectfully submit, that Mr Justice Hill recognized

would give rise to a liability.

So that is why we would respectfully submit that

four judges have concluded the point against the

applicant in the Federal Court in this case. There is

added to that the judgment of Mr Justice Sweeney in

DANIEL's case which raised a similar issue and in which,

although His Honour Mr Justice Sweeney could have

decided the matter on a different point, His Honour took

the course of deciding it on the same basis as

His Honour Mr Justice Lockhart, and indeed followed

Mr Justice Lockhart.

Now, Your Honours, we respectfully submit that

those five judges were correct in the conclusions that

they came to and correct for any of the following

reasons: either the foreign employment provided a

sufficient antecedent situation, and that is the basis

of findings of Mr Justice Lockhart, Mr Justice Beaumont

and Mr Justice Gummow at pages 31, 46 and 55.

Alternatively, the seeking of the employment in a

personal capacity by the taxpayer, the nature of the

employment being the earning of income from personal

exertion provided the antecedent sitaution and that,
with respect, is the finding of Mr Justice Gumm.ow who

found in favour of the Cormnissioner on both grounds

at page 54, and the finding of Mr Justice Hill with

the qualification that I have referred to, namely
that he said there was a defect in the evidence at

pages 93 to 94.

The third basis on which the judgments below are to be supported, in our respectful submission, is

that the antecedent situation proposition, in any

event, applies only to choice principle cases. This

case, we would respectfully submit, is not a choice

principle and once one then concludes that there was

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a relevant purpose, even though one cannot identify

a relevant antecedent situation, nevertheless

section 260 would apply. But, of course, I only

come to that proposition if I fail in both of the

previous alternatives. And it is really only, I think,

Mr Justice Gurmnow who really seeks to address the

proposition that I have just referred to. But in

expanding the argument that I have just put, we

would be taking Your Honours to the passages from

MULLENS' case, in the judgment of Sir Garfield Barwick

that is set out at page 78 of the appeal book, and the

passage in the judgment of the former Chief Justice

Sir Harry Gibbs in GULLENt:s case with which

Your Honours are no doubt familiar and which is set out

at page 87 and which, in effect, says, we would

respectfully submit, that the Act does not offer a

choice to a taxpayer whose income comes from personal

exertion of the kind that gives rise to the choice

principle cases and it is only, we respectfully submit,

the choice principle cases that give rise to the
antecedent question or antecedent situation question.

We would also draw attention on this matter to the fact that certainly if His Honour Mr Justice Hill

is correct, that in any event if Your Honours were to
grant leave and hear the appeal, Your Honours would
not with certainty, particularly if my learned friend

agitated on the appeal the first of the two questions

that he relied upon today, be able to determine the

matter finally; the matter would go back to the court

below - I am sorry, would go back to the tribunal.

Your Honours, we would respectfully submit, too,

that this is really just another - that the issue

that is now sought to be agitated really was dealt

with in TUPICOFF's case, or at any event TUPICOFF's

case gave sufficient guidance on the matter and

Your Honours rejected or refused to grant special

leave in that case.	So Your Honours, we would
respectfully submit that this is not a case in which

Your Honours should grant special leave on the third

ground now advanced by my learned friend.

MASON CJ: Thank you, Mr Downes. Now, do you wish to say

anything in reply, Mr Slater?

MR SLATER:  Yes, Your Honour. My friend put five points; if I

could deal with those five.	The first of those was
employment abroad.	We would say that is the issue

of principle and the fact that a majority of judges

below held in the Cormnissioner's favour does not

make it any less the issue of principle. So far as

DANIEL's case is concerned, it amounts to no more than

an application of the first instance decision in this

case. On the matter of there having been a personal

approach to respective employers by the applicant, we

say that merely going to speak to prospective employers

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is not sufficient in itself to be an antecedent

situation. And that is all the evidence discloses.

On the choice principle, which is the third of my

friend's points, the choice principle goes to whether

section 260 applies, not to its effect. The concession

made below that there was a relevant purpose determines

the question whether the section applies but it does
not determine whether there is a pre-existing

situation or what the consequence of the section applying

may be; it is simply a red herring.

On the question of it being a final determination,

Your Honours, if this Court determines that activities

which do not produce the derivation of assessable

income do not constitute a relevant antecedent

situation, that does finally·determine the matter.

Finally, Your Honours, on the TUPICOFF point,

TUPICOFF was a case so different from this that it

provides no solution to the resolution of the issue
in this case. It concerned a clear antecedent

situation of deriving assessable income for many

years from the same ultimate source of income as was

the source of income to the interposed company. Those are our submissions, if the Court pleases.

MASON CJ:  Yes, thank you, Mr Slater. The Court will take a

short adjournment in order to consider the course it

will take.

AT 3.50 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.52 PM:

MASON CJ: It may be that in appropriate circumstances the

application of section 260 of the INCOME TAX

ASSESSMENT ACT in a case such as the present would

raise a question of sufficient importance to warrant

the grant of special leave. However, in the present
case, when regard is had to the absence of clear

findings of fact made by the tribunal and to the

fact that two of the grounds now sought to be raised

were not argued by the applicant in the Full Court of the Federal Court, we do not consider that this

case is a suitable vehicle for the determination of

a question of general principle. The application is

therefore refused.

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Bunting

MR DOWNES:	We ask for costs, Your Honour.
MASON CJ:	You cannot resist that, can you, Mr Slater?
MR SLATER:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 3.52 PM THE MATTER WAS ADJOURNED SINE DIE

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