Commissioner of Taxation v Linter Textiles Australia Ltd (In Liquidation)

[2004] HCATrans 495

[2004] HCATrans 495

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S606 of 2003

B e t w e e n -

COMMISSIONER OF TAXATION

Appellant

and

LINTER TEXTILES AUSTRALIA LTD (IN LIQUIDATION)

Respondent

GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 9 DECEMBER 2004, AT 10.07 AM

(Continued from 3/8/04)

Copyright in the High Court of Australia

MR A. ROBERTSON, SC:   May it please the Court, I appear with my learned friends, MR M.R. ALDRIDGE, SC and MR S.J. McMILLAN, for the appellant.  (instructed by Australian Government Solicitor)

MR D.H. BLOOM, QC:   May it please the Court, MS J. DAVIES, SC and I appear with MR S.H. STEWARD for the respondent.  (instructed by Phillips Fox)

GLEESON CJ:   Yes, Mr Robertson.

MR ROBERTSON:   Thank you, your Honour.  Your Honours, could I go to page 107 of the appeal book to remind your Honours briefly of what had happened in this part‑heard appeal.  An oral application to amend the notice of appeal was made at the close of argument on the last occasion, and what was sought to be done in paragraph 4 on page 107 was to add the words, in the second line, after the word “respondent”, “or Linter Group Ltd”.  That oral application can be seen from lines 2955 and following of the transcript of 3 August 2004.

Your Honour the Chief Justice indicated at that time that your Honours would consider that application in the course of considering the matter generally.  Subsequently, there was a letter forwarded by the Registry to the parties – that letter being 4 August 2004 – and that indicated, with reference to what I have just reminded your Honours of, that:

The Court wishes to receive full written submissions from both parties both on the question of whether leave should be granted and also on the substantive merits of the point the appellant seeks to argue should leave be granted.

The letter went on to say that in relation to the leave question -

the Court may need to take account of the course of proceedings in the Federal Court –

and in particular, agreements referred to by the primary judge, Justice Hely, at page 67, line 54 of the appeal book.

What happened after that, again by way of reminding your Honours, is that the appellant filed a document on 18 August 2004, called Appellant’s Further Written Submissions, dealing with both those issues, that is the leave question and the point of substance.  I should indicate perhaps, by way of history, that when the oral application for leave was made, and this perhaps was why your Honours took the view that you deal with the application as part of considering your Honours’ judgment, my learned friend, Mr Bloom, indicated what his understanding was for the way the case had proceeded below and, beyond that, he had nothing more to say.  That is at lines 2975 and following.

So the appellant filed those further written submissions on 18 August, I should say as well, unrelated perhaps to the Registrar’s letter, but on 23 August 2004 the appellant also filed, I think in answer to questions from your Honour Justice Kirby a note concerning provisions of the Companies (New South Wales) Code and the Corporations Law and that was a document that photocopied the relevant and annexed the pages of the two statutes.

Then the last bit of history, I think, the respondents filed further written submissions in answer to the appellant’s written submissions, both on the leave question and on the point of substance which is the consequence for 80A(3) of the 1936 Income Tax Assessment Act of the effect of the liquidation of Linter and the respondents opposed leave to amend being granted.  In the first 11 paragraphs of that document they set out their reasons for that opposition and then, in the subsequent paragraphs, 12 through to 15, our learned friends dealt with the substance of the argument.

Thereafter, the Registry indicted that the Court wished to list the matter for further oral argument, and that brings the history of the matter up to date.  I am assuming, your Honours, that I should rehearse briefly the leave question and then go to the matter of substance.  In terms of the leave question, again, I will not repeat what is in the written document, but one can see from the appeal book, in our respectful submission, that the liquidation of Linter Group and the effect that may have in terms of section 80A(3) of the Act was, in our submission, an issue throughout ‑ ‑ ‑

GLEESON CJ:   Mr Robertson, can I ask you a question that may be related to procedure or may be related to substance, I am not sure, concerning the relationship between subsections (1) and (3) of section 80A which, of course, involves subsection (2) as well.

MR ROBERTSON:   Yes.

GLEESON CJ:   Subsection (1) provides that:

a loss . . . shall not be taken into account . . . unless:

(a)      the company satisfies the Commissioner –

of something. 

MR ROBERTSON:   Yes.

GLEESON CJ:   We are not here concerned with a private company, are we?

MR ROBERTSON:   No.

GLEESON CJ:   Then subsection (2) states the circumstances in which subsection (3) applies in lieu of subsection (1), and the relevant circumstance is that the Commissioner considers it reasonable that the subsection should apply, right?

MR ROBERTSON:   Yes.

GLEESON CJ:   That is an alternative to the company itself requesting the Commissioner to apply.

MR ROBERTSON:   Yes.  Your Honour is looking at the last lines of paragraph (c).

GLEESON CJ:   Yes.  In other words, the scheme of the statute seems to be (1) applies, but then you can engage in, what I will call, the tracing exercise in subsection (3) if the taxpayer requests it in its return or if the Commissioner considers it reasonable that (3) should apply.  Is there some point of time by which the Commissioner has to make up his mind whether he considers it reasonable that (3) should apply?  Can the Commissioner, for example, fight and lose an argument about subsection (1), and then consider it reasonable that (3) should apply, or, alternatively, can the Commissioner, as it were, keep it open at all stages saying, “I will apply (1)”, or saying “(1) applies to disallow the loss, but if I am wrong about that, then I consider it reasonable that (3) should apply”.

MR ROBERTSON:   Yes.  Your Honour, I am not sure what the answer is to the first part of your Honour’s question, that is, how late in time the Commissioner can, as it were, address himself to subsection (3).

GLEESON CJ:   It seems to give the Commissioner an election, does it not?

MR ROBERTSON:   It certainly provides an alternative, which depends on his opinion or consideration.  What I was going to say, your Honour, was this, that what happened in this case, and why perhaps the timing question does not arise directly - although I accept that it may cast some light on the nature of the relationship between the subsections - but what happened here was that the relevant delegate considered subsection (1) then asked herself the question, “But if that’s not legally open, I’m now addressing subsection (3) and I consider it reasonable that subsection (3) should apply”.

GLEESON CJ:   That is what I am interested in.  At the point of assessment, can the Commissioner say, “I’m assessing alternatively on the basis of (1) or (3)” or does not the Commissioner, at the point of assessment, have to make a decision whether (1) or (3) applies?

MR ROBERTSON:   Well, we would submit not, your Honour.  Certainly, it is the case that in the result both cannot apply at once.

GLEESON CJ:   Another question might be could the Commissioner, in a case where one is satisfied, consider it reasonable to apply (3), or is (3) in aid of the taxpayer?

MR ROBERTSON:   No.  As to that last question, your Honour, our submission is that the closing words of 80A(2)(c) mean - given the preconditions, of course, in (2)(a) and (2)(b) – that either the loss company can ask the Commissioner to apply subsection (3), as your Honour points out, either at the time of furnishing the return or within such further time as the Commissioner allows, or without such a request the Commissioner can address the question, “Do I consider it reasonable that subsection (3) should apply?” and then the statute tells us that the consequence of that is that subsection (3) applies in lieu of subsection (1).

GLEESON CJ:   My memory may be playing tricks on me, but I thought this question of the relationship between subsections (1) and (3) has been around for years.  Has it never been decided?

MR ROBERTSON:   Not so far as I am aware, your Honour.  It may have been around for years but not the subject of any decision.  I am not aware of any decision which has described the nature of the alternatives that your Honour the Chief Justice puts to me.  But, it certainly goes - what your Honour has been asking me ‑ ‑ ‑

GUMMOW J:   It does look as if it is to aid the taxpayer though, does it not, because it is then subject to defeasance, if you like, under (3) itself.  The Commissioner has to be satisfied of various matters.

MR ROBERTSON:   Certainly as to the latter proposition, your Honour, that, if I could put it this way, just because the taxpayer, that is the loss company, thinks it would be better off under subsection (3) than under subsection (1), that does not mean to say that that is inevitably going to happen.  In answer to the first part of your Honour’s question, we would submit that because there is that alternative in subsection (2)(c), that is either the taxpayer can request it or, even where there is no request, the Commissioner thinks that the matter should be dealt with under subsection (3), then that latter alternative displaces the idea that in all cases, subsection (3) is meant to operate for the benefit of the taxpayer.

GUMMOW J:   What is the purpose in that collection of criteria in subsection (2)(b)?

MR ROBERTSON:   Of (b)?

GUMMOW J:   Yes.

MR ROBERTSON:   Subsection (b) asks the question whether, during the loss year, in any part of it, or in the year of income, was another company besides the loss company the beneficial owner of any shares in the loss company or any interests in shares in the loss company.  So, in other words, if I can put it colloquially, it is the gateway to looking at subsection (3) which is concerned with, again if I can use a shorthand, individuals rather than companies.  I am not sure whether that answers your Honour’s question.

GLEESON CJ:   If (1) is satisfied, what would make it reasonable to apply (3)?

MR ROBERTSON:   Because (1) is concerned with beneficial ownership of shares – I am trying to leave out the questions of the satisfaction of the Commissioner – but it may be that the Commissioner thinks that he should approach the matter on the basis, not of beneficial ownership of shares but in relation to the change, or lack of change, in the individuals who join the two alternate years, the income year and the loss year, control the company.  So, in other words, it entitles the Commissioner to consider the position of the individuals as opposed to the beneficial ownership of the shares, the position of the individuals in relation to the companies where, as we know from (2)(b), the gateway to (3) is that there are corporate holders of shares in the loss company.

GLEESON CJ:   Now, in making the assessment in this case, did the Commissioner consider it reasonable that (3) should apply, or did the Commissioner not consider it reasonable that (3) should apply?

MR ROBERTSON:   No, he did.

GLEESON CJ:   Why were people arguing about (1)?

MR ROBERTSON:   Because the way subsection (3) was approached was that the Commissioner considered (1), satisfied himself in relation to (1) – when I say, satisfied himself, considered, perhaps, would be a better expression – considered subsection (1) and then said, but in case I am wrong legally about the availability of subsection (1), I am also going to consider subsection (3), and that was before ‑ ‑ ‑

GUMMOW J:   Just taking up what you have said, the contention, which is all the documents we have, really, at page 6, by the Commissioner is somewhat equivocal, in a way:

the Applicant failed to meet the tests set out in section 80A –

That is section 80A as a whole?

MR ROBERTSON:   Yes.

GUMMOW J:   You say that encompasses what you have just put?

MR ROBERTSON:   I will answer that perhaps in two steps, your Honour.  It is hard now to perhaps see what it was that the people who wrote these documents had in mind, but if your Honours were to look at page 14, for example, which is the now respondent’s statement of fact, issues and contentions, your Honours will see there – certainly on the then applicant’s part – an alternative proposition in relation to:

the appointment of the liquidator to LGL –

and again dealing with – and I think this is your Honour’s point – 80A generally.  Then if one can go forward in history to the agreement that Justice Hely refers to ‑ ‑ ‑

HAYNE J:   Just before you leave that document, is there any significance to what appears at page 13, paragraph 5, line 5, the first printed line of the page?

MR ROBERTSON:   There is some significance, in the sense that I think it is fair to say that at this relatively early point in the proceedings, there may have been an issue between the parties as to the nature of the alternative determination of the Commissioner, that is, as between subsection (1) and subsection (3), but that was overtaken – if I can put it that way – by the agreement that Justice Hely refers to on page 48 ‑ if I could remind your Honours of that – where the issues, that is, all the various other possibilities that had been considered up to that point – page 48, line 31:

but for the winding up orders made with respect to –

the Group and the respondent –

the requirements of s 80A(1) or (3) . . . are met -

so that any, if I might put it this way, administrative law challenge to the basis upon which the Commissioner considered both section 80A(1) and (3) was, in my submission, put to one side, and what the parties agreed to address was what, if an amendment were made to the notice of appeal, is both the 80A(1) question that your Honours heard about on the last occasion with respect to the winding up of the respondent, and the 80A(3) question, not only in relation to the winding up of the respondent, but also in relation to the winding up of the parent company of the respondent.

GLEESON CJ:   A point of view that I think used to be around in some quarters, whether it was ever the subject of any decision I do not know, was that the scheme was that 80A(1) was there to apply, but a taxpayer could always say to the Commissioner, if I cannot satisfy (1) I want you to trace so that I can satisfy (3).

MR ROBERTSON:   No doubt if the taxpayer thought there was some possible advantage in ‑ ‑ ‑

GLEESON CJ:   Yes, and a competing point of view, I think, was that if you can trace, you must trace.  Now, I do not know quite what the foundation for that view was.

MR ROBERTSON:   In our respectful submission, your Honour, it does not appear from the face of 80A, if one looks at the nexus between subsection (1) and subsection (3), the nexus being subsection (2), so that it starts on the basis that where subsection (1) would, but for this subsection apply ‑ ‑ ‑

GUMMOW J:   This word “apply” is used rather ambiguously, too.  It may apply, but not be satisfied.

MR ROBERTSON:   That is so.

GUMMOW J:   That seems to be the idea.

MR ROBERTSON:   It is in a sense, a provisional application.

GUMMOW J:   Yes, so when it says at the bottom of (2), “subsection (3) applies”, that just means you get in the door.

MR ROBERTSON:   And look at it, in a sense.

GUMMOW J:   Yes, yes, that seems to ‑ ‑ ‑

MR ROBERTSON:   No, I would accept that, your Honour.  We would accept that.  It certainly does not mean that rolled up in that proposition is that the subsequent addressing of the substance of the limbs of satisfaction or considering that it is reasonable to assume which are the words in subsection (3), which leaving out a lot of them says “where, by virtue of subsection (2) this subsection applies” and then to pick up your Honour Justice Gummow’s point:

for the purpose of the determining whether a loss incurred –

et cetera, and then it talks about the –

loss shall not be taken into account . . . unless the Commissioner is satisfied, or considers that it is reasonable to assume –

GUMMOW J:   That would rather suggest that the taxpayer has to, as it were, make the choice at the beginning of the process.

MR ROBERTSON:   We would put it this way, that the taxpayer can make the choice.  The taxpayer may ‑ ‑ ‑

GUMMOW J:   In other words, if the taxpayer goes under (1), but it does not make out under (1), (1) is applied but it just has not done the work that the taxpayer wants it to do.

MR ROBERTSON:   Yes.  I think going back to the Chief Justice’s question, what would happen if ‑ ‑ ‑

GUMMOW J:   There is a temporal element in all of this that is obscure.

MR ROBERTSON:   Yes, but I was about to say something about that, your Honour.  What would happen if, although in theory subsection (2) applied, but say no – I am looking for the word, whether it is “request”, yes, “request” in 2(c) - if there were no request at the time of furnishing the return, and if the Commissioner in looking at subsection (1) said, “I have looked at subsection (1) and I am not satisfied whether then the taxpayer could say, well, ‘I am allowed to apply for further time and I want you to give me further time because I can get to the gateway’” - if I can use that expression of 2(b), “Please give me further time”, that would be perhaps an interesting exercise of a different discretion by the Commissioner.

HAYNE J:   Can I go back a stage for this reason.  As I understand what you have described about the assessment process it was, in effect, either Commissioner and not satisfied, (1) was engaged.  If I looked to (3), I would be not satisfied that (3) would be engaged.  Therefore, I assess on the basis that neither is engaged.

MR ROBERTSON:   Yes. 

HAYNE J:   One way of approaching 2(c), it may be open, it may not, would be to understand 2(c) as permitting the taxpayer at its choice to invoke (3).  Presumably it will do so where the invocation would work to its advantage, but permitting the Commissioner to invoke (3) where that would be to the revenue’s advantage, and that is a case where one would be satisfied, but it would be to the revenue’s advantage if the tests in (3) were applied, thus leading to no allowance for the loss.

MR ROBERTSON:   Yes.

HAYNE J:   Now, that is a question, which as I understand your description of the assessment process, has never been confronted because the Commissioner’s view that was formed was neither (1) nor (3) applies.

MR ROBERTSON:   Yes.

HAYNE J:   There has been no consideration of whether, although (1) is engaged, it is nonetheless reasonable that (3) should be applied, and that may provoke a whole raft of reasoning about how, when and why you might possibly come to that kind of conclusion.  Now, there are several questions wrapped up in that obviously, Mr Robertson:  one, whether that is an available view of the Act; whether it is a view for which the Commissioner contends or does not contend, and then thirdly, what the consequence of it would be.  I simply advance it for your consideration.

MR ROBERTSON:   In relation to one of the matters, that is the element of choice as between the taxpayer, on the one hand, and the Commissioner on the other, and perhaps merely to adopt it as possible circumstances that might arise, could I take your Honours to the volume that my learned friends handed up on the last occasion, which was a volume of taxation legislation referred to as a silver volume, and if your Honours go to tab 10, and your Honours, that is a reprint from the Butterworth’s extrinsic materials, and I think the point, or a closely related point to the one which is being debated is considered on page 264, which is about the number down the bottom left‑hand corner, it is about the fifth page in, I think.  Do your Honours see at about point 8 of the page a paragraph that begins “Sub‑section (2)” and in the second sentence it says:

This could be of advantage to a “loss” company where -

and it gives an instance and then the next paragraph gives an example of where the Commissioner may invoke subsection (3), perhaps that just indicates that.  Perhaps it goes more to the question your Honour the Chief Justice was asking as to whether subsection (3) was always intended perhaps to benefit the taxpayer.

I do not think the appeal book – and I will have to look at the status of this as evidence – but there was, I think, before the primary judge, and I am not sure about the Full Court, a written document called “Reasons for Decision of the Commissioner”.

KIRBY J:   Is this required under administrative law, or is this just a practice that is observed?

MR ROBERTSON:   I think probably practice because tax assessments are outside the Judicial Review Act, statement of reasons section 13 requirements.  So I think it is probably practice, your Honour.

KIRBY J:   They are not within the Administrative Appeals Tribunal legislation?

MR ROBERTSON:   Well, that could be so actually, but that would be in a sense maybe after the event, and I think this was a document of the time.  I wonder whether I may - perhaps, if my learned friend does not object, but it may bring perhaps to a factual level what it was that the Commissioner actually thought.  It is only a paragraph, if I might read it.  We can make copies available.  The Commissioner said “I am not satisfied that during the income year shares in the taxpayer carried the following rights beneficially owned by” - so address subsection (1), and then said –

Further, on the assumption that the requirements of subsection 80A(1) ITAA 1936 are met by the taxpayer for the income year ended 30 June 1992 in respect of the whole or part of a loss . . . the Commissioner considers it reasonable, within the meaning of paragraph (c) of subsection 80A(2) ITAA 1936, that subsection 80A(3) should apply for the purpose of determining whether the loss incurred by the taxpayer in the income year . . . is to be taken into account for the purposes of section 79E for the year ended 30 June 1992.

On the assumption that subsection 80A(3) . . . so applies, the Commissioner is not satisfied –

for various reasons.  So that was the reasoning process of why it was that both 80A(1) and 80A(3) were addressed.

GUMMOW J:   And are wrapped up just in the single reference to 80A in the notice of contention.

MR ROBERTSON:   Well, subject to the page that his Honour Justice Hayne pointed out.

GUMMOW J:   Indeed.

MR ROBERTSON:   Certainly, if your Honour is saying in the Commissioner’s notice, I think that is right.  In the ‑ ‑ ‑

GUMMOW J:   But that depended upon a view being taken by the Commissioner of the interrelation between (1) and (3).

MR ROBERTSON:   Yes.

GUMMOW J:   In other words, he could say to a taxpayer, “Okay, even if you would satisfy (1), I think it reasonable to apply (3).  You fail (3) and you’re out”.

MR ROBERTSON:   Yes, and then the parties litigated, perhaps initially with a view to saying that was impermissible, I do not know, but certainly latterly on the basis that the appointment of the liquidators issue was the only live issue either in relation to subsection (1) or in relation to subsection (3).

GUMMOW J:   That is the last step.

MR ROBERTSON:   Well, certainly ‑ ‑ ‑

GUMMOW J:   The only live issue in relation to (1) or (3).  It is the “or (3)” that gives me ‑ ‑ ‑

HAYNE J:   In that respect account has to be taken of page 12, paragraph 4.  We are still in the taxpayer’s statement, I think, are we not, there – the taxpayer’s statement of facts, issues, contentions.

MR ROBERTSON:   Yes.

HAYNE J:   But the taxpayer at page 12, paragraph 4 is contending in terms that – correct me if I am wrong ‑ ‑ ‑

MR ROBERTSON:   It is a subsection (1) proposition.

HAYNE J:   It is a (1) point, yes.

MR ROBERTSON:   And over the page which your Honour Justice Hayne referred to before, page 13, there is a subsection (3) proposition and then I have referred your Honours to the agreement that Justice Hely was recording or noting on 48, line 30:

but for the winding up orders –

The point I wanted to make is that it is the winding up orders, plural, in relation to both the Group and the respondent and it says “80A(1) or (3)”.  Perhaps this is the last reference I should give because I am not really sure whether the respondent says or clearly identifies, perhaps, either its prejudice or what the prejudice is in relation to the application to amend.  There is a reference in the letter that I have taken your Honours to to an election by the Commissioner but, in my respectful submission, there has not been any relevant election.

GUMMOW J:   Where is that reference to election?

MR ROBERTSON:   I am sorry, your Honour.  If one goes back to the respondent’s document filed 17 September which is the six‑page document with an annexure, there is a reference ‑ ‑ ‑

GUMMOW J:   Paragraph 8.

MR ROBERTSON:   Yes.

GUMMOW J:  

Given his election to rely ‑ ‑ ‑

MR ROBERTSON:   Yes.  We would submit that there was not an election in any relevant sense and if your Honours were to go to ‑ ‑ ‑

KIRBY J:   Just let me ask you, from the point of view of administrative law, is that provision in the Act that says:

unless the Commissioner is satisfied, or considers that it is reasonable to assume –

does that import an election, that is to say that there has to be a genuine satisfaction and a genuine consideration that it is reasonable to assume as distinct from a hypothetical or contingent or provisional or alternative satisfaction and reasonableness to assume? 

MR ROBERTSON:   Could I answer your Honour’s question ‑ ‑ ‑

KIRBY J:   I mean, I can understand that it seems a sensible thing for the Commissioner to say, “Well, A, but if I am wrong on A, B” so that you do not go up the ladder and then have to start again, but ‑ ‑ ‑

MR ROBERTSON:   Could I answer your Honour’s question or attempt to answer it in this way.  In relation to that alternative, that is the one that your Honour was expressly referring to, which is an alternative within subsection (3), in my submission, it is really addressing two potentially different states of mind of the Commissioner.  Either he is satisfied or if he has not quite reached the state of satisfaction, perhaps because he does not know, he then is entitled to make an assumption.

But that is, as it were, I think, your Honour, an internal choice, a choice internal to subsection (3) and not the choice or the alternative – to use a less loaded word, perhaps – not the alternative that I think the Chief Justice and Justice Gummow and Justice Hayne were asking about which is the alternative in the last lines of (2)(c).  That is as I understand it, anyway.

HAYNE J:   Now, the question of the Commissioner’s obligations and power in this connection may perhaps have to take into account what the Court said in Richard Walter 183 CLR 168. True it is Richard Walter concerns alternative assessments issued about the same receipt to different taxpayers but the stream of authority that lies behind Richard Walter may, it may not, be thought relevant to whether the Commissioner must plump once for all about the asserted legal characterisation or basis for bringing sums to assessment.

MR ROBERTSON:   And if I might say so, your Honour, which goes back to Justice Gummow’s point, as at what time?  Because it is certainly clear ‑ ‑ ‑

HAYNE J:   No, I do not think you get answered except to say, “Oh well, this was within it”.  I understand why you might say that.

MR ROBERTSON:   I will see if I can do better, your Honour.  Certainly, it would be true to say that – and I think this picks up, as well, what was implicit or explicit in what Justice Kirby was putting to me – certainly, you cannot have a tentative assessment.  Whether you can have a tentative decision in terms of 80A rather than something more directly concerned in the assessment such as was considered in Richard Walter might be another thing.  Here, in my respectful submission, the Commissioner did not form any tentative view, it was really a view in the alternative.  Perhaps that does not answer the question ‑ ‑ ‑

HAYNE J:   But the assessment was, “You owe me, the Commissioner, X dollars”.

MR ROBERTSON:   Quite, but on either of two bases.

HAYNE J:   Yes.

MR ROBERTSON:   I do not have it here, but Richard Walter, from recollection, permitted the Commissioner to – your Honour will correct me if I am wrong about this ‑ ‑ ‑

GUMMOW J:   Different taxpayers, same income.

MR ROBERTSON:   Yes, alternative assessments in terms of 177F and so on.  It perhaps does not directly relate to this question under 80A, I will have to ‑ ‑ ‑

HAYNE J:   I understand that.

MR ROBERTSON:   I will have to, perhaps if I may, look at that passage in due course, but it is certainly permitted for determinations under the anti‑avoidance provisions, some degree of alternative consideration, that is, you could have validly two parallel thought processes, two parallel decision‑making processes ‑ ‑ ‑

HAYNE J:   It is common enough in Part IVA determinations to have large scheme, little scheme, intermediate scheme or some or all of them, et cetera.

MR ROBERTSON:   Your Honours, before I forget, I wanted to take your Honours to the submissions in this Court on the appeal, if I may, before leaving this point about how the matter first arose.  I am leaving out perhaps intermediate steps, subject to this, that I should ask your Honours to cross out, because we were told this morning that it was inaccurate – could I take your Honours back to 18 August, further written submissions of the appellant in response to the Registry’s letter of 4 August.  Your Honours will see that after the text which is after the fourth page of the document, there is then a document called: 

Questions posed for the assistance of the Court and concessions made by the parties –

That was a document before Justice Hely, and your Honours will see on the third page, “Concessions” – I do not think this document was ever signed: 

The Respondent accepts that but for the orders made by the court with respect to Linter Textiles Australia Ltd and/or Linter Group Ltd the requirements of subsections 80A(1) or (3) . . . are met on the facts –

Then if your Honours turn over three pages your Honours will see a letter from Justice Hely to counsel – I have not got to the bit yet that I want your Honours to cross out.  The very next page, and the two pages that follow that, your Honours should cross out because we were told this morning that that correspondence was never, in fact, forwarded to the judge.  So, if your Honours would cross out the fax transmission sheet of 19 August and the letter to Justice Hely, the next two pages.  The last document, 22 August, was sent.

Now, if your Honours have the appellant’s submissions on the appeal dated 19 July 2004 – and I am here going back to the question which is, I think ‑ ‑ ‑

KIRBY J:   The last document is from Mr McMillan?

MR ROBERTSON:   That is so, your Honour.

KIRBY J:   So that is in the appellant’s camp?

MR ROBERTSON:   Yes.

KIRBY J:   Was there a response in the respondent’s camp?

MR ROBERTSON:   No, but Mr McMillan, you will see, your Honour ‑ ‑ ‑

KIRBY J:   Yes, in the last paragraph.

MR ROBERTSON:   Says he has discussed it with Mr Bloom and I do not think there is any dispute, then or now is there, no.

GUMMOW J:   Where does 22 August leave it?  What is the judge being told?

MR ROBERTSON:   It is perhaps only a footnote, your Honours, but there were competing submissions about a matter that is no longer in issue.  It need not detain your Honours.  It does not go to the agreement which his Honour noted and which stems from ‑ ‑ ‑

GUMMOW J:   It is really the last sentence of the long paragraph:

the Commissioner accepts that subject to the effect of the winding up orders he would be “satisfied”.

MR ROBERTSON:   Yes, which was, as I understand it, an answer to a proposition that he either would not be or could not be and that was a live point.  My learned friend ‑ ‑ ‑

GUMMOW J:   But satisfied what?  Satisfied under subsection (2) and, I think, also under (3)?

MR ROBERTSON:   No, I think (1) and (3).  Then what I wanted to take your Honours to were the submissions on the appeal to this Court in July which your Honours may have and, really, to make the point that 80A(3) was there as was the liquidation of Linter Group.  If your Honours were to read paragraph 2 – this is the document filed on 19 July, your Honours ‑ ‑ ‑

KIRBY J:   This is whose document, though?

MR ROBERTSON:   This is the appellant’s submissions on appeal.

GLEESON CJ:   Filed on 20 July, actually, dated 19 July, filed 20 July.

MR ROBERTSON:   I have a different, for some reason, a different stamp, but do your Honours have a paragraph 2, “The first issue”?

GLEESON CJ:   Yes.

MR ROBERTSON:    ‑ ‑ ‑is whether after the making of the winding up orders in respect of the Group and the respondent the persons referred to in 80A(3) ceased to control or be capable of controlling.  Now, certainly at that stage, and even now, the notice of appeal did not have “and the winding up of Linter Group” in it, but that proposition was put.  Then if your Honours were to turn to 14 through to 17 of those submissions that point is developed.  I am only, as it were, showing your Honours where it is rather than anything else at the moment.  If your Honours look at 17, it is submitted that 80A(3) is fatal to the respondent.  An application of 80A(1) leads to the same result.

Then the respondent’s written submissions, if I can touch briefly on them.  That was filed – I hope the date is right – 22 July 2004, the respondent’s written submissions on appeal.

GLEESON CJ:   Yes.

MR ROBERTSON:   The paragraphs there – my learned friend, Mr Bloom, will correct me if I am wrong, but he refers in paragraph 3, just by way of background, to subsection (3).  Paragraph 4 then makes the submission that the case does not concern 80A(3) per se.

GUMMOW J:   Per se?

GLEESON CJ:   That is presumably related to the fact that it was being argued somewhere that section 80A(3) threw light on the meaning of 80A(1).

MR ROBERTSON:   I think that is right, your Honour, I think that is right.  But no doubt there was a dispute as to precisely what the significance was or difference perhaps, and there is a difference now perhaps as to exactly what the significance was of 80A(3).  In a sense the point is, was the liquidation of Linter Group still live as an issue?  We would submit it clearly was.  Certainly, the way in which 80A(3) was being put or sought to be put now is not precisely how it was developed in perhaps the Full Court or the Federal Court, but it is certainly the subject of the submission to this Court on appeal and, indeed, the subject of the submissions, that is, the operation and application of 80A(3) was the subject of submissions on the special leave applications as well. 

GLEESON CJ:   Now, that paragraph 5 in the respondent’s submissions is related to the concession noted by Justice Hely, is it not, that the only problem about 80A(3), if there is a problem, relates to the winding up.

MR ROBERTSON:   Yes.

GLEESON CJ:   Which, of course, puts to one side another large potential problem about the operation of 80A(3) in a case like this, and that is the discretionary trusts.

MR ROBERTSON:   I think that is right, yes, your Honour.

GLEESON CJ:   Which I think has been the subject of a public ruling that became effective later.

MR ROBERTSON:   That is right.

GLEESON CJ:   The point of getting an agreement between the parties that it was only the winding up that was the obstacle to the allowance of the loss was to put to one side what was potentially a rather difficult issue, and that is how these sections apply or how the tracing section in 80A(3) operates where, at the end of it, you have a trust.

MR ROBERTSON:   I think that is fair, your Honour. 

GUMMOW J:   I think that is what is wrapped up in the concession that you took us to on the last page of that document. 

MR ROBERTSON:   I think the effect of the concession or, as it turned out to be, an agreement was that this is the only point that we collectively wish to litigate.

GUMMOW J:   It says, “The Applicant will not rely upon section 80E”.

MR ROBERTSON:   Yes.  Certainly, the respondent in these submissions parted company with the way in which it was being put by the appellant in the passage that I have taken your Honours to.  Then there was issue joined on that, if your Honours have the appellant’s written submission in reply, which is a document filed on 30 July.  I am not putting these matters forward as containing, as it were, the answer, I am just putting them forward to show that these issues have been live issues.

So the appellant’s written submissions in reply recite the agreement and then take issue with the respondent asserting in paragraphs 4, 6 and 40 that this case does not concern 80A(3) per se and that the appellant calls in aid 80A(3), though purely to provide insight, misstates the position.  That point is made or a slightly different point or related point is made in paragraph 3.  80A(2) makes it clear the appellant may apply either (1) or (3).  The appellant contends the making of the winding up orders, plural, has the consequence the requirements of neither 80A(1) nor 80A(3) could be satisfied. 

GLEESON CJ:   It would have been open to somebody to argue, would it not, that because of the discretionary trusts at the end of this tracing, there was no beneficial owner of the shares.

MR ROBERTSON:   I think that is so, yes, your Honour.

GLEESON CJ:   Regardless of the winding up.

MR ROBERTSON:   Yes, and that matter is, I think, referred to by my learned friends, although we would submit not entirely accurately in the submission which I have taken your Honours to, 17 September 2004.

GLEESON CJ:   If that point had ever come into play, it would have had a major bearing on the question of reasonableness, would it not?  Presumably, one of the points ‑ ‑ ‑

MR ROBERTSON:   In terms.

GLEESON CJ:    ‑ ‑ ‑ of the concession is that the Commissioner’s view of reasonableness does not turn upon the existence of discretionary trusts.

MR ROBERTSON:   Yes.  Your Honour is there talking about reasonableness in subsection (3)?

GLEESON CJ:   No, reasonableness in subsection (2).

MR ROBERTSON:   In 2(c).  I think that must be so.

GLEESON CJ:   Consistently with the later public ruling.

MR ROBERTSON:   Yes, and the effect of the public ruling was to take that issue, which your Honour the Chief Justice has just identified, out of contention, so that the only live issues were subsection (1), subsection (3) and the two winding‑up orders.  So, your Honours, I have not perhaps been through all the references, of which there are many, to the two winding ups, including the winding up of the Group company, and to subsection (3) but, in my respectful submission, I have taken your Honours to enough to show that it was never abandoned, or there was never an election, and that there is no difficulty, we would respectfully submit, from the respondent’s point of view, in dealing with the 80A(3) argument on the basis as well of the winding up of the Group company.

So if it is convenient to the Court, I will move from that topic to the 80A(3) topic.  Your Honours, the comparison required by subsection (3) in each of its three limbs, if I can use that expression, each limb of which has to be satisfied, of course, because of the word “and” at the end of paragraph (b), the comparison is between broadly two years, the loss year and the income year, but also in relation to each of those years, your Honours will see in paragraphs (a), (b) and (c), the words “at all times”, in relation to the year of income.

Here the liquidator of Linter Group was appointed on 12 April 1991, the loss year was the year ending 30 June 1990 and the income year was the year ending 30 June 1992.  So the appointment of the liquidator to LGL occurred before the beginning of the tax year.  Now, there are, of course, two statutes to be considered:  One, the provisions of the Companies Code, the relevant parts of which we sought to annex to the note of the file of 23 August 2004, and obviously section 80A(3).

GUMMOW J:   Well, we have gone from ownership to control.

MR ROBERTSON:   Yes.  And we have gone from – well, if I can put it broadly, we have gone from companies to persons not being companies.  One can see that from subsection (3)(a).  So we would submit that one way of approaching subsection (3)(a) is to look at the second half of it first and ask this question, “What individuals had control, or were capable of controlling, the voting power in the loss company before the appointment of the liquidator to the group company, Linter Group?”, that is, during the loss year because, as I have said, the appointment of the liquidator to Linter Group was after the loss year.  We would submit the answer to that question is, if I can use again shorthand, the Goldbergs, who were the non‑companies who indirectly, during the loss year, had that control or capability.

GLEESON CJ:   We do not need to be too precise about that because of the concession.

MR ROBERTSON:   Yes.

GLEESON CJ:   That concession, reflected later in the public ruling, produces the result that you would not want to be too precise about – or more precise than “the Goldbergs” because you could get into a minefield.

MR ROBERTSON:   If it is permissible, I will refer to it as the “Goldbergs”.  I will call them “the individuals” if it is ‑ ‑ ‑

GLEESON CJ:   I thought ‑ ‑ ‑

MR ROBERTSON:   But they are non‑companies anyway.

GLEESON CJ:   I thought the way the public ruling worked, but I may have misunderstood it, is that you treat the trustees as the individuals, the trustees of the Goldberg trust.

MR ROBERTSON:   I think that is right, yes.  I think that is right, your Honour.

GLEESON CJ:   I do not think they ‑ ‑ ‑

MR ROBERTSON:   We can provide copies of that if ‑ ‑ ‑

GLEESON CJ:   We would like to have a look at that, thank you.  Anyway, when we come to consider your reference to “the Goldbergs” we can assume that whatever you are saying is consistent with the public ruling.

MR ROBERTSON:   Is consistent with it, yes.

GLEESON CJ:   Yes.

MR ROBERTSON:   And on the basis of the agreement, perhaps more importantly.

GLEESON CJ:   Yes.

MR ROBERTSON:   I am not wishing to diminish the relationship between the agreement between the parties and the ruling, but one led in part to the other, I think it is fair to say.  So if one asks the question then, which I posed without repeating, the answer is “The Goldbergs, the non‑companies, individuals”, because that is what subsection (3) is about.  We will get photocopies made, but what your Honour the Chief Justice has been referring to is Taxation Determination 2000‑27 dated 21 June 2000, so after these events but stated to apply to years commencing both before and after its date of issue.  We will have copies circulated.

KIRBY J:   Do we have that in the respondent’s filed legislation, or is it somewhere before us?

MR ROBERTSON:   I do not think it is in anything that we have so copied.  Your Honours will be glad to hear it is only a four‑page document.

KIRBY J:   I am not familiar with it.  If I should be, I would like to see it.  If I should not be, I do not want to see it.

MR ROBERTSON:   We will give it to your Honour.

KIRBY J:   The Chief Justice seems to be in on the mystery so perhaps we should all be.

GLEESON CJ:   These public rulings are legally binding, are they not?

MR ROBERTSON:   I think in the sense that the taxpayer can rely on them to avoid prejudice.

GLEESON CJ:   Yes, I think we had a case about this a couple of years ago.

MR ROBERTSON:   The Taxation Administration Act makes that clear that that is so.  Going back to subsection (3)(a), if one asks what the position was at all times during the year in which the loss was incurred and then asks the next part of the question which is – I am now looking at the opening lines of paragraph (a):

at all times during the year of income -

and asks the question, what individuals, what non‑companies had control of ‑

the voting power in the loss company –

after the appointment of the liquidator to Linter Group, that is during the year of income because of the history that I have taken your Honours to, the answer would be, in our respectful submission, not the Goldbergs, but the liquidator of LGL Group.

GLEESON CJ:   What is imported by that expression, “capable of being controlled”?

MR ROBERTSON:   Your Honours, in our submission, one approaches that by reference to the consideration given to that in Keighery’s Case and in particular, perhaps, the difference between Justice Williams at first instance and the Full Court.

GLEESON CJ:   Does that mean you have to hypothesise a meeting?

MR ROBERTSON:   Our learned friends contend that it does.  In our submission, it may involve that, but the statutory question is, is the voting power controlled or capable of being controlled, so that it is not essential, we would submit.  It is certainly a step that could be taken to say, “Well, how might that work?” and the most obvious way it might work is if there were a meeting, but ‑ ‑ ‑

GUMMOW J:   What they talked about in Kieghery 100 CLR 87 was:

enforceable and immediately exercisable rights enable him to control ‑ ‑ ‑

MR ROBERTSON:   Yes.  I was about to go to that, your Honours.  The difference was Justice Williams at page 79 of 100 CLR concluded at about point 8 of the page:

The appellant company was, in my opinion, a company which on 30^th June 1952 ‑

that being what the statute then required, the last day of the year –

was capable of being controlled by Mr. and Mrs. Keighery by these means.

It was that which their Honours in the Full Court disagreed with in the manner which your Honour adverted to.  Could I perhaps spend five minutes on this case.  The statutory question, your Honours, is at page 83, section 105 and the relevant question – if your Honours look at the second full paragraph, the last lines of the second full paragraph, was the company:

(f):  “a company which is capable of being controlled by any means whatever by one person or by persons not more than seven in number”.

KIRBY J:   What was the policy behind that?  To apply it only to smaller companies?

MR ROBERTSON:   That must be so.  That was concerned with private companies, as your Honour can see from four or five lines further up, the sentence beginning: 

Then the sub‑section provides that for the purposes of the Division . . . a company is a private company if, on the last day of the year of income, it is a company of any one or more of six descriptions –

and (f) was the relevant description.  I cannot tell your Honour what the other descriptions were, they might enlarge the matter beyond small companies.  Then, if I can give your Honours brief references, page 84, their Honours at line 3 and 4 and so on talk about the “controlling authority of a company”.  This, of course, concerned whether a company was capable of being controlled, not the precise question raised by paragraph (3)(a) of the present section 80A.

HAYNE J:   But the relevant factual background was that the Keigherys had the ordinary capital, 20 individuals held redeemable preference shares.  Because the Keigherys owned the ordinary share capital, they could have brought about a redemption.  Was the capacity to bring about a redemption of the redeemable prefs enough to give only the Keigherys the control of the voting power?

MR ROBERTSON:   And that, I think, was what was described as an eventuality.  Two other references, your Honours, 85 – and I am really answering your Honour the Chief Justice’s question about where this expression was considered – four or five lines up from the foot of 85, their Honours say: 

The person must be able to dictate the decisions of the general meeting, through a preponderance of voting power which either is vested in him or is subject to his command. 

And then, more directly, at 86, line 2:

The expression “capable of being controlled”, it is said, is satisfied by a possibility or a potentiality of being controlled –

So that was the argument.  Then four or five lines below that, their Honours say:

But to describe a company as capable of being controlled by a person or group of persons is to attribute to that person or group a presently existing power of control.  “Capable of being controlled” in this context cannot be interpreted so widely as to be satisfied whenever a possibility of obtaining control over the company exists by reason of something in its constitution or its special circumstances.  The natural sense of the expression is that of possessing, as a present attribute, a liability to be controlled.  And a liability to be controlled by one person . . . involves either that there is one person who holds, or has a right to command, the major portion of the existing voting power, or that there are several persons . . . who between them –

can do so.  I think your Honour Justice Gummow referred to page 87, about the middle of the page, where their Honours say at the end of the first full paragraph on that page:

The truth is that “capable of being controlled” connotes the existence of either one person who enforceable and immediately exercisable rights enable him to control, or a number of persons whose enforceable and immediately exercisable rights enable them, if they act in concert, to control.

GUMMOW J:   Then they apply that to the particular facts at the bottom of 88.

MR ROBERTSON:   Thank you, your Honour.

GUMMOW J:   What the Keigherys would have to have done would be - the best they could have done was to have given notice to redeem.

MR ROBERTSON:   Yes, and that is what I think was the matter that Justice Hayne was putting to me.

GUMMOW J:   Yes.

CALLINAN J:   Would their financial capacity to redeem the shares be relevant to the question of capacity to control?

MR ROBERTSON:   As I would understand it, your Honour, that would be an eventuality as well.

GLEESON CJ:   But these were only $1 shares, were they not?  I think they would have only needed about $20.  The real problem was the time, was it not?

GUMMOW J:   The legislation fixed on this last day.

MR ROBERTSON:   The real problem was the time, yes, but the point I was ‑ ‑ ‑

CALLINAN J:   There might be cases in which financial capacity might be lacking.  It may or may not therefore be relevant.

MR ROBERTSON:   Yes.  Certainly it is significant.  The time question is significant in Keighery’s Case, but 80A(3)(a), of course, talks about at all times during the year.

CALLINAN J:   Yes.

MR ROBERTSON:   So that is, as well, a significant difference between the present Act and Keighery’s Case, but that, in answer to your Honour the Chief Justice’s question, that is the fullest discussion of that expression. 

Now, if one then asks a similar question about the individuals, the Goldberg’s control or capability of controlling the respondent company, once the liquidator of the Group company is appointed then, in our respectful submission, there is no longer relevantly any power in a general meeting, even if one hypothesises that one was called to control the liquidator or remove the liquidator, and that flows, in our respectful submission, from the sections of the Companies Code.

Perhaps I do not need to take your Honours to them, but they are section 368 - perhaps I will just list them if that is convenient, 368, which is void dispositions if not made by the liquidator; s 374(1), liquidator taking into its custody or under its control all the property.  The property of the Group would include the shares in the loss company.  Section 379(1), and then 438, proof of debts, and they are the same sections which the House of Lords in the case your Honours were taken to on the last occasion, but on the beneficial ownership point - but if I can give your Honours a reference to it - they are the same sections as Lord Diplock set out in Ayerst’s Case [1976] AC 167 at 177, between lines A through to D.

The priority rules, which I do not think I have mentioned in the Code were 437 to 441, but substituting the provisions of the Code for the provisions of the Companies Act 1948, which Lord Diplock was there considering, we would say the position is the same under the Code.

If one moves from there, going back to paragraph (b) of section 80A(3) and, as I said, all of the paragraphs, all three of them, need to be satisfied – I am not using that expression in the statutory sense – in subsection (3).  If one then says in relation to paragraph (b), which individuals or non‑companies had the right to receive a dividend in the loss year if the loss company had paid a dividend during the loss year – and I am looking at the second part of paragraph (b) – the answer would be, “The Goldbergs”.  Then if you ask the question posed by the first part of paragraph (b), what individuals had at all times during the year of income a right to receive any dividend that might be paid by the loss company in the year of income, that is, after the appointment of the liquidator to LGL, our submission is, again, “Not the Goldbergs, but, as at the relevant date, the liquidator”. 

GLEESON CJ:   For his own benefit?

MR ROBERTSON:   For the benefit of the company.

GLEESON CJ:   I am not quite sure how you would answer (b), “The liquidator”.  He has to have the right to receive, for his or her own benefit, the dividends.

MR ROBERTSON:   Perhaps I should have answered it, “At best the liquidator”, not ‑ ‑ ‑

GLEESON CJ:   I do not see how it could possibly be the liquidator.  I can understand how you can say, “Not the Goldbergs”.

MR ROBERTSON:   Well, I do not need to say any more than “Not the Goldbergs”.

GLEESON CJ:   So your answer is, “There is no person”.

MR ROBERTSON:   That is a better answer, yes, your Honour.

GLEESON CJ:   Yes.

MR ROBERTSON:   No individual – sorry, no person not being a company.

GLEESON CJ:   What are those words “received directly or indirectly” mean?

MR ROBERTSON:   “Directly” perhaps is simple, that is, the right is a right to receive without any, perhaps, payment to others.  “Indirectly” would encompass ‑ ‑ ‑

GUMMOW J:   There could have been an equitable assignment of future rights to receive, or something of that sort.

MR ROBERTSON:   That would be indirectly, one would think, your Honour.

GUMMOW J:   Yes.  Justice Hayne mentioned shareholders’ agreements too.

MR ROBERTSON:   Yes, I will come back because it really seems to be the central issue.  I will deal with (c) briefly, but I will come back to how much it is – and this really seems to be the issue between the parties – how much it is that you can hypothesise, how much can you assume, when you are looking at the expressions “capable of being controlled” in paragraph (a) or “might be paid” in paragraph (b) or any “distribution of capital” in paragraph (c)?  I will come back to that because that is the point that is developed in paragraph 15 of my learned friend’s written submissions on this point, and that seems to be the central issue.

In other words, where you have a liquidator appointed to the group, can you nevertheless say that the voting power is capable of being controlled because you can assume that the liquidator had not been appointed?  That is as we see the issue that is raised.

So before I get to that, if your Honours then look lastly at section 80A(3)(c) again, asking the question in relation, first of all, to the loss year, which individuals in the loss year would have had a right to receive the distribution of capital by the loss company if the loss company had made a distribution during the loss year?  Answer again, the Goldbergs.  Then coming back to the first part of paragraph (c), which individuals in the year of income “at all times during the year of income” had a right to receive any distribution of capital of the loss company?  Answer, again, not the Goldbergs, and it would not be – in light of what your Honour the Chief Justice put to me in relation to paragraph (b), it would not be a satisfactory answer either to say, perhaps the liquidator of LGL either.

Before coming to this question of the hypothesis, in our submission, on the winding up of LGL and looking only at the winding up of LGL in relation to subsection (3) the appointment of the liquidator to LGL had the consequence that the Goldbergs ceased to control, or be capable of controlling, the voting power in LGL and, therefore, an effect of that was losing the indirect control or capacity to control the respondent company through LGL, because they ceased to be able to control the directors of LGL who made the decisions on behalf of LGL in exercising its, LGL’s, voting control of the respondent company.

Now, coming back to what I have called the hypothesis question, this is raised in the respondent’s further written submissions requested by the Court, the document I have taken your Honours to, the 17 September document, and it is really summarised, in our respectful submission, in paragraph 15 on page 5.  First of all, if I could ‑ ‑ ‑

GUMMOW J:   You have to read that with 14, I think?

MR ROBERTSON:   Yes.

GUMMOW J:   It is said against you that you confused the:

capacity to control the voting power with a present ability to exercise the voting rights.

MR ROBERTSON:   As we read it, your Honour, - perhaps this is not reading it correctly, but it comes to the same point ‑ ‑ ‑

GUMMOW J:   Yes, namely, that you just look at the articles and you do not have any regard to their present operability, if you like, given the intervention of the liquidation.

MR ROBERTSON:   That is so, but I think that is comprehended, your Honour, in what I have been calling loosely, the hypothesis question, that is, do you treat the words – what I put as the question – who at all times controlled or was capable of controlling the voting power, as not so much a question of going to control but a different question, that is, who would on a particular assumption or a hypothesis, have control, and that is why I have said that that is really the issue between the parties.

GUMMOW J:   The question is which construction fits best with the subject, scope and purpose of section 80A(3).

MR ROBERTSON:   I accept that, your Honour.  Starting, of course, with the words that we used, and looking at the context, as your Honours have said one must do.

GUMMOW J:   Well, you start with a right under other sections to take losses into account.  That is then taken away and qualified, as it were, by these 80A sections.

MR ROBERTSON:   Well, I am probably saying the same thing, your Honour, to say that the statutory rights have always been the subject of qualifications, and one needs to see what the qualifications are.  Just to put it out of the way, if we could correct what we submit is an error in terms of just the language in paragraph 15 of my learned friend’s submission.  If your Honours look at the words that follow paragraph (c), six lines up or so from the foot of the page, the question is there said:

par (c) – had a “right to receive . . . any distribution of capital . . . ” for their own benefit “if the loss company had made a distribution of capital . . . ” –

Now, in our submission, that is running together the separate parts of paragraph (c), “if the loss company had made a distribution” is referable to the loss year and not to the income year.  It is not the easiest provision to read, but the word “would” appears before the words “if the loss company had made a distribution of capital at any time during the year in which the loss was incurred”.  So the “if” is not a hypothesis one brings into the tax year.  It is a hypothesis in relation to the loss year.

Now, that does not answer the question, but it is a point that what one is looking at, as I earlier indicated, is in paragraph (a) “controlled, or capable of being controlled”, in paragraph (b) one is looking at “dividends that might be paid” and in paragraph (c) one is looking at “any distribution of capital”.

In our submission, one cannot hypothesise, as our learned friends do in paragraph 15, so as to assume away the appointment of a liquidator.  If one approaches it as in Keighery’s Case and asks, what eventualities, if any, stand between the shareholder and the relevant exercise of the control?  Here, we say Keighery’s Case asks to be assumed presently existing control or capacity to control ‑ ‑ ‑

it were, fill the gap with a meeting or a dividend and, indeed, the dividend itself is of a different quality to the dividend that you might have been talking about in the earlier period, in the deeming provision in section 47.  In our respectful submission, it does not get one there.

GUMMOW J:   Mr Robertson, can you just go back to “reasonable” again for 80A(2), I wanted to put this to you.  I think this comes out when you read the transcript of Ms Long’s evidence.  It may have been reasonable for the Commissioner to take the view that “Well, on its face A applies” – and we have looked at that word “apply” – “but I can’t be confident as to how it will work out because there’s this legal conundrum about Ayerst, and it would be wrong if I’m shut out because of the chance how that will fall out, and if I’ve also got the view that what is driving all this is de facto control”.

MR ROBERTSON:   I think what your Honour puts to me follows from the question and answers at the top of page 96 of the transcript.

GUMMOW J:   Yes.

MR ROBERTSON:   Indeed, the word “reasonable” was not being used.  The decision‑maker said, “No, I thought it was necessary to take that approach”, and we submit permissibly so.  Those are the submissions in reply, if your Honours please.

GLEESON CJ:   Thank you, Mr Robertson.  We will reserve our decision in this matter, and the Court will adjourn until 9.15 tomorrow morning in Sydney and 9.30 tomorrow morning in Melbourne. 

AT 2.45 PM THE MATTER WAS ADJOURNED