Chippendale Printing Co Pty Ltd v Commonwealth

[1995] FCA 298

CATCHWORDS

PRACTICE and PROCEDURE - "separate questions" - "special case" - whether desirable to isolate preliminary questions of law.

Federal Court of Australia Act 1976 sub-s 25 (6).
Federal Court Rules Orders 29 and 50.

Swift Australia Co (Pty) Ltd v South British Insurance Co Ltd [1970] VR 368.
Rocklea Spinning Mills Pty Ltd v The Anti-Dumping Authority (FCA/FC, unreported, 6 April 1995).

CHIPPENDALE PRINTING CO PTY LTD v THE COMMONWEALTH OF AUSTRALIA & ANOR

No NG 147 of 1995

Lindgren J
Sydney
5 May 1995

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )        No NG 147 of 1995
GENERAL DIVISION                 )

BETWEEN:

CHIPPENDALE PRINTING CO PTY LTD (ACN 001 265 372)
  Applicant

AND:

THE COMMONWEALTH OF AUSTRALIA
                   First Respondent

COMMISSIONER OF TAXATION
                  Second Respondent

CORAM:Lindgren J

PLACE:Sydney

DATE:5 May 1995

MINUTE OF ORDERS

THE COURT:

1. ORDERS that on the assumptions set out in paragraphs 1 to 5 of the document entitled "draft special case" annexed, the two questions set out therein be decided separately from any other question in the proceedings. 

1. ORDERS that the parties' costs of the applicant's motion be the parties' costs of the proceedings.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )        No NG 147 of 1995
GENERAL DIVISION                 )

BETWEEN:

CHIPPENDALE PRINTING CO PTY LTD (ACN 001 265 372)
  Applicant

AND:

THE COMMONWEALTH OF AUSTRALIA
                   First Respondent

COMMISSIONER OF TAXATION
                  Second Respondent

CORAM:Lindgren J

PLACE:Sydney

DATE:5 May 1995

REASONS FOR JUDGMENT

NATURE OF PROCEEDINGS

There is before the Court a motion by the applicant brought by notice of motion filed on 13 April 1995.  It seeks an order for the separate and preliminary determination of certain questions and either an order that those questions be determined by a Full Court or by myself. 

PROCEDURAL BACKGROUND

The applicant ("Chippendale") carries on a business of printer. The second respondent ("the Commissioner") on 21 July 1994 served on Chippendale a statutory demand bearing date 19 July 1994 under s 459E of the Corporations Law ("the Law") demanding payment of a sum of $194,472.68.  The demand was in respect of additional tax for late payment of sales tax and penalties and additional tax for late remission of income
tax instalment deductions.

By an application filed on 8 August 1994 in proceedings No NG 3388 of 1994 in this Court ("the statutory demand proceedings"), Chippendale sought an order under s 459H, alternatively s 459J, of the Law setting aside the statutory demand. I heard those proceedings on 1 December 1994 and published Reasons for Judgment on 3 February 1995 (see (1995) 13 ACLC 229). I will assume that those Reasons have been read. In summary, I held that but for the passing on provisions of the sales tax legislation, Chippendale would have had a "genuine claim" to a refund of sales tax allegedly overpaid, in the sense of a claim deserving of a hearing. I held in favour of the Commissioner on what was commercially the most significant issue in the case, namely whether Chippendale had an offsetting claim, namely a genuine claim for a refund of sales tax overpaid. The amount of the claim propounded was either $423,383 or $480,929 (according to which of two methods of calculation should be used). Clearly, this amount far exceeded the amount of the statutory demand. However, I held that there was a genuine dispute as to part of the Commissioner's claim to recover presently unpaid additional tax for late payment of sales tax. The evidence did not permit me to calculate at that stage the amount of the additional tax to which that genuine dispute extended.

At the time of publishing my Reasons I did not make orders disposing of the proceedings but stood them over to 13 February 1995 for the hearing of submissions as to costs and the form of the orders to be made.  On that occasion, Chippendale sought leave to make further submissions.  Counsel for Chippendale said that these would be based, inter alia, on a decision of the High Court given since the hearing before me (but prior to the publication of my Reasons) in Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd 94 ATC 4960. I directed that Chippendale serve a copy of the submissions which it would wish to make and that the parties exchange outlines of submissions on the question of the granting of leave. This was done.

In the event, on 16 February 1995 I granted Chippendale leave to make supplementary submissions limited to elaborating on the submissions made in its outline dated 15 February 1995 to be served on the Commissioner with a copy to my Associate by 27 February 1995, and I directed that the Commissioner serve its written submissions in reply with a copy to my Associate by 13 March 1995.  By the time of the hearing on 16 February 1995, the parties had agreed that the genuine dispute on which I had found in Chippendale's favour would have the effect that the amount of the statutory demand should be varied downwards to $185,992.93.

In the meanwhile on 30 January 1995, Chippendale had commenced proceedings No S 13 of 1995 in the High Court of Australia, Sydney Office of the Registry, to recover the amount of sales tax which it claimed it had overpaid.  By its statement of claim filed at that time, it asserted that it had overpaid as sales tax an amount of either $423,383 or $480,929 (according to which of the two methods of calculation should be used).  On 13 March 1995, by consent, the High Court ordered that the proceedings be remitted to this Court.  Thus, in these present proceedings the claim of entitlement to a refund asserted in the statutory demand proceedings arises for final determination (in the statutory demand proceedings the issue was only whether that was a "genuine" claim).

Directions hearings were held in this Court in these proceedings on 7, 13 and 28 April.

BACKGROUND FACTS

Chippendale passed on the sales tax which it paid to the Commissioner, to purchasers from it.  It has never refunded to the purchaser the amounts of sales tax which it says it overpaid to the Commissioner.  However, it gave, on the hearing of the statutory demand proceedings in the form of para 35 of an affidavit sworn 30 November 1994 of Edwin Murrell Gardiner, an undertaking that once the Commissioner determined whether Chippendale was entitled to a refund and the period over which that entitlement arose and the exact amount of it, Chippendale would pass the refund on to its customers.  Apparently thinking that this might not have sufficed, those advising Chippendale sought to re-open the statutory demand proceedings to the extent of reading an affidavit of Mr Gardiner sworn 1 March 1995 which, omitting formal parts, was as follows:

"1.If either the Deputy Commissioner of Taxation or the Court finds that Chippendale Printing Co Pty Limited ('Chippendale') has over paid sales tax for some or all of the 1992, 1993 and 1994 income years and determines the amount, but a pre-condition of Chippendale receiving a refund is that it has first refunded the amounts which it has passed on to its customers, Chippendale undertakes to refund such amounts to its customers before it receives the refund from the Commissioner.

2.My intention at all times has been to cause Chippendale to refund the amount of tax overpaid to its customers.  In giving the undertaking in paragraph 35. of my affidavit of 30 November 1994, I had sought to make this intention clear. I have been advised by counsel that the undertaking may be narrowly construed and not cover the circumstances in paragraph 1. above. That was not my intention."

Chippendale accepts that if the provisions of the sales tax legislation deny to it any entitlement which it may otherwise have to a refund, it must fail in these proceedings and, subject to the variation downwards in the amount of statutory demand referred to earlier, in the statutory demand proceedings.  If those provisions do not deny to it that right, it is not conceded by the Commissioner that Chippendale is entitled to a refund.  In that case, (a) these proceedings would continue to a hearing, and (b) having regard to my reasons in the statutory demand proceedings, the statutory demand would be set aside.

What I have said is not inconsistent with my remaining of the view, after studying the further submissions made, that the passing on provisions so clearly defeat Chippendale that it cannot be said to have even a "genuine claim" to a refund.  For this reason, it would be wrong to set aside the statutory demand at this stage.

From what counsel have told me, it seems clear that regardless of how a single judge might determine these present proceedings, there will probably be an appeal by the disappointed party to a Full Court.  They also inform me that there is general interest in revenue law circles in the issue of law sought to be agitated.  That issue is whether, where sales tax has been overpaid but "passed on" by the taxpayer, any entitlement to a refund which would otherwise arise under general law principles survives the passing on provisions of the sales tax legislation.

The parties prepared a draft special case on the form of which they agreed.  That document and its two annexures are annexed to this judgment.

LEGISLATIVE PROVISIONS

Relevant provisions of the Federal Court of Australia Act 1976 ("the Federal Court Act") (Cth) and the Federal Court Rules are as follows:

Federal Court Act

Sub-section 25 (6):

"(6)The Court constituted by a single Judge sitting in either Division may state any case or reserve any question concerning a matter with respect to which an appeal would lie from a judgment of the Judge to a Full Court of the Court for the consideration of a Full Court of the Court in that Division and the Full Court has jurisdiction to hear and determine the case or question."

Federal Court Rules

Order 29 r 2:

1. The Court may make orders for--

(a)the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and

(b)the statement of a case and the question for decision."

Order 50 r 1 (1) (a), (2), (3)

"1(1)A case stated, or a question reserved or referred for the consideration of the Court--

(a)under sub-section 25(6) or section 26 or 30A of the Act; ...;

shall be in the form of a special case.

1(2)The special case shall be divided into paragraphs numbered consecutively and shall state concisely such facts and shall annex such documents as are necessary to enable the Court to decide the questions raised by the
special case.

1(3)The Court may draw from the facts stated and the documents annexed in the special case any inference, whether of fact or law, which might have been drawn from them if proved at a trial."

REASONING

The only facts which are agreed upon are that Chippendale has paid certain amounts as sales tax in respect of the periods 1 July 1991 to 31 December 1992 and the period 1 January 1993 to 30 June 1994, that it has requested a refund, that the Commissioner has denied its entitlement to a refund and that Chippendale has tendered to the Court the undertakings referred to earlier.  It is not agreed that Chippendale made a mistake.  It is not agreed that if it did, this would entitle it, even apart from the "passing on" provisions, to a refund.  Accordingly, as noted earlier, although Chippendale accepts that if the questions formulated in the draft special case were answered positively, that would have the result that it would fail in these proceedings, it is not agreed that if those questions should be answered negatively, Chippendale's claim for a refund must succeed.

There are well known dangers in attempting to hive off one or more issues in a case and in deciding them otherwise than as part of a final determination of all issues after all the evidence is in.  The caution was sounded in the following terms in Swift Australian Co (Pty) Ltd v South British Insurance Co Ltd [1970] VR 368 at 369:

"It is established by a long line of authority that the courts will not advise parties to actions upon their rights under a hypothetical state of facts, or give them advisory opinions, or hypothetical decisions the effectiveness of which depends on varied states of facts which remain to be determined in the future: see Glasgow Navigation Co v Iron Ore Co [1910] AC 293; Sumner v William Henderson & Sons [1963] 2 All ER 712, and Hole v Insurance Commissioner [1962] VR 394".

In Rocklea Spinning Mills Pty Ltd v The Anti-Dumping Authority, unreported, 6 April 1995, a delegate of the Comptroller-General of Customs reported that there were not sufficient grounds for the publication of a "countervailing duty notice" under s 269TJ of the Customs Act 1901 (Cth). The Anti-Dumping Authority ("the ADA") constituted under the Anti-Dumping Authority Act 1988 (Cth) reviewed this decision and affirmed it. There was an application for judicial review of this decision of the ADA. At the outset of the application for judicial review, the respondents raised the question whether there was a "subsidy, bounty, reduction or remission of freight or other financial assistance" within the meaning of sub-s 269TJ (1). If not, the challenge to the ADA's decision must fail since the only decision open to the ADA, it was argued, was to make a negative preliminary finding. The trial judge ordered that the construction of s 269TJ in the respect mentioned be decided as a preliminary question, and he decided it in favour of the respondents.
There was an appeal.  The Full Court dismissed the appeal.  The result was that both before the trial judge and the Full Court, the case had been disposed of on a single issue of law.  I presume that this involved a substantial saving in time, inconvenience and expense.  Yet the Full Court said this of the procedure which had been adopted by the trial judge:

"Because the present hearing involved the preliminary question of law being decided without the benefit of the factual situation having been finally resolved or fully agreed, it is appropriate to make some observations on the general undesirability of isolating preliminary questions of law when the factual foundation for the determination of such a question is not resolved.

It is generally appropriate and desirable to deal completely with a case such as the present on facts fully and finally found, so that all issues can be resolved once and for all.  It is important that the Court should not be asked to decide questions of law which may turn out to be hypothetical or merely advisory, in the event that the resolution of the other review grounds requires remission of the matter back to the decision maker for further consideration on the facts.  In the present case, although the matter did proceed on a preliminary question, there was a reservation by the applicant in relation to whether it would finally dispose of the whole matter, or whether it may be necessary for the matter to be remitted for reconsideration to the ADA.  Preliminary questions generally should only be isolated for separate decisions in circumstances where the factual position is such as to preclude the necessity for the matter having to go back before the body whose decision is the subject of the review application whichever way the decision on the point of law is decided: Cf Tilling v Whiteman [1980] AC 1 at 17-18, and 25; and Nissan v Attorney General [1970] AC 179 at 242.

In the present matter, as it has turned out, the decision on the preliminary question of law raised has disposed of the whole matter because, in the final analysis, there was sufficient material before the trial judge to enable him to make his determination on the point of law.  However, we think that caution ought to be exercised in cases of this kind before deciding to proceed with a preliminary question."

(ibid, at 33-34)

This is a strong note of caution, given emphasis by the fact that, as events transpired, the trial judge's setting aside of the separate question in that case proved to have had beneficial results. 

Although Order 50 r 1 (2) provides that a special case shall "state concisely such facts and shall annex such documents as are necessary to enable the Court to decide the questions raised by the special case" and Order 29 r 2 does not contain such a provision, there is much in common between the considerations which govern the making of an Order for separate decision of a question under Order 29 r 2 and those which govern the stating of a case or reservation of a question pursuant to sub-s 25 (6) of the Federal Court Act.  Indeed, in the Rocklea Spinning Mills case, the Full Court's caution occurred in the context of a separate decision of a question by the trial judge.  In any event, the requirement under Order 50 r 1 (2) of a statement of facts and annexing of documents seems to make no difference of substance, since the facts required to be stated and the documents required to be annexed are only such "as are necessary to enable the Court to decide the questions raised by the special case".  The nature and specificity of the questions raised may be such as to require that very few facts or documents be before the Full Court.
Ultimately, the test under either procedure must surely be the practical one of utility, efficiency and convenience in the administration of justice.  I think that these tests are satisfied here, and the question is whether to make an order under Order 29 r 2 or sub-s 25 (6) of the Federal Court Act.

In the present case, in the statutory demand proceedings, the submissions which Chippendale made on the hearing did not, in my view, substantially address the issue raised by the passing on provisions.  I think that it is desirable that I decide the issue of law now expressed in the proposed questions so that a Full Court will have the benefit of my consideration of the more ample submissions now made.  The parties are agreed that I am to treat those more ample submissions, although made in the statutory demand proceedings, as having also been made in these proceedings, and that I should determine the separate questions on the basis of those submissions.

In the light of the foregoing, it seems to me desirable that I make an order under Order 29 r 2 and proceed to determine the issue of law myself.

CONCLUSION

I will make an order that on the assumptions set out in paras 1 to 5 of the document entitled "draft special case" annexed, the two questions set out therein be decided separately from
any other question in the present proceedings.  The parties' costs of Chippendale's motion will be the parties' costs of the proceedings.

I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated:5 May 1995

Heard:        13, 28 April 1995

Place:        Sydney

Decision:     5 May 1995

Appearances:   Mr J T Svehla of counsel instructed by Cowley Hearne appeared for the applicant.

Mr A H Slater QC with Ms R M Henderson of counsel instructed by the Australian Government Solicitor, appeared for the respondents.

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )        No NG 147 of 1995
GENERAL DIVISION                 )

BETWEEN:

CHIPPENDALE PRINTING CO PTY LTD (ACN 001 265 372)
  Applicant

AND:

THE COMMONWEALTH OF AUSTRALIA
                   First Respondent

COMMISSIONER OF TAXATION
                  Second Respondent

DRAFT SPECIAL CASE

The Applicant alleges that:

1. It was during the period 1 July 1991 to 31 December 1992 ("the first period") and during the period 1 January 1993 to 30 June 1994 ("the second period") a manufacturer of goods ("the subject goods") which it sold by retail.

1. In respect of the sales of the subject goods made during each of the first period and the second period the Applicant paid sales tax to the Second Respondent.

1. By reason of a mistake on its part the Applicant paid to the Second Respondent in each of the first period and the second period an amount of sales tax which by a lesser amount ("the overpaid sales tax") was in excess of the amount which under applicable sales tax legislation it was required to pay in respect of its sales of the subject goods.

1. The sales tax so paid by the Applicant to the Second Respondent (including the overpaid sales tax) was passed on by the Applicant to the purchasers of the subject goods and has not been refunded by the Applicant to the purchasers to whom it was passed on.

1. The basis upon which the applicant calculated its sales tax liability in respect of the subject goods was not at the time of payment disclosed or known to the Second Respondent.

1. The Applicant has made an application to the Second Respondent under the Sales Tax Legislation applicable during each of the first period and the second period for a refund of the overpaid sales tax.

1. The Applicant has tendered to the Court the undertaking comprised in the Affidavit of 1 March 1995 of Edwin Murrell Gardiner and in paragraph 35 of his affidavit of 30 November 1994, copies of which are attached.

The following questions are stated for the consideration of the Full Court:

1. On the facts alleged do the provisions of the sales tax legislation applicable to sales of the subject goods during the first period deny to the Applicant any entitlement it may have to a refund or to recovery from the Respondents or either of them of the overpaid sales tax paid in respect of the subject goods sold by the Applicant in the first period.

1. On the facts alleged do the provisions of the sales tax legislation applicable to sales of the subject goods during the second period deny to the Applicant any entitlement it may have to a refund or to recovery from the Respondents or either of them of the overpaid sales tax paid in respect of the subject goods sold by the Applicant in the second period.