Commissioner of Taxation v Macquarie Bank Limited; Commissioner of Taxation v Mongoose Pty Ltd

[2013] HCATrans 185

[2013] HCATrans 185

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S56 of 2013

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

MACQUARIE BANK LIMITED (ACN 008 583 542)

Respondent

Office of the Registry
  Sydney   No S57 of 2013

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

MONGOOSE PTY LTD (ACN 103 410 297)

Respondent

Applications for special leave to appeal

HAYNE J
CRENNAN J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 AUGUST 2013, AT 9.30 AM

Copyright in the High Court of Australia

____________________

MR S.H. STEWARD, SC:   If the Court pleases, I appear with my learned friends, MS L.A. HESPE and MR E.F. WHEELAHAN, for the applicant in each matter.  (instructed by Australian Government Solicitor)

MR A.H. SLATER, QC:   If the Court pleases, I appear with my friend, MR J.O. HMELNITSKY, for the respondents in each matter.  (instructed by Clayton Utz Lawyers)

HAYNE J:   Yes, Mr Steward.

MR STEWARD:   In this matter, the taxpayer known as Mongoose held shares in a listed Australian company called Minara.  It planned and negotiated to sell the shares through the agency of a subsidiary of Macquarie Bank and, had it done so, it would have made a capital gain of some 318 million and paid tax on that of some 95 million.  However, it changed its plan and instead entered into and carried out an arrangement whereby it sold the very same Minara shares, however, by reason of the arrangement, it did not include in its assessable income any part of the capital gain of 318 million.  The arrangement was entered into and carried out over the course of just two days.  The court below decided that this arrangement did not fall within the reach of Part IVA and it did so on the basis that, even if the dominant purpose of one of the parties to the impugned scheme had been to obtain the tax benefit, even then Part IVA did not apply.

CRENNAN J:   Where do you draw that out of the Full Court’s decision?

MR STEWARD:   It is drawn out on the basis, your Honour, that the majority decided that there was no tax benefit, so that, even if ‑ ‑ ‑

CRENNAN J:   But you are inferring a conclusion you want drawn, that is to say, the dominant purpose.

MR STEWARD:   I am not seeking to infer it, your Honour.  It is just a logical conclusion that, even if the majority had decided in favour of purpose, my client would still have lost.  That is all I wish to say.  How then ‑ ‑ ‑

CRENNAN J:   The majority in the Full Court generally reiterated several times that they saw no reason why Part IVA should not apply to schemes involving consolidated groups, so on one view your first special leave question insofar as it is presented as a matter of principle, there is no disagreement about the principle in the Full Court decisions.

MR STEWARD:   With respect, your Honour, there is.  I would like to be able to say we agree with it, but we do not, and the reason we do not is this.  What their Honours say there about the ongoing application of Part IVA to a consolidated group may be accepted, namely, that if an entity within a group enters into a Part IVA scheme, they say that Part IVA can apply to the head entity to include within its assessable income the tax benefit.  We are not looking at here an ongoing case.  We are looking at a situation where we are straddling between the bright world of independent exigibility and the shadowy world of coming into consolidation.  That is where the problem arises in this case, where the ‑ ‑ ‑

CRENNAN J:   Part 3‑90 does provide for consolidation.  If you make a complaint about consolidation per se, I must confess it looks more like a complaint or grievance about the policy of that part rather than a legal complaint.

MR STEWARD:   No, your Honour, it is not.  We do not cavil with the policies or the outcomes under Part 3‑90.  They are a given in any Part IVA case.  They are a given, and we will come to it in a minute.  That is where one of the errors has occurred in this case.

HAYNE J:   Where, most conveniently in the Full Court, do we find the central error of which you are presently complaining?

MR STEWARD:   It is really in two parts, your Honour.  The first part is probably at paragraph 139, application book page 104.  Here I am addressing the court on the issue of tax benefit, of course.  That is the conclusionary paragraph to the proposition, if the Court pleases, that the single entity rule in Part 3‑90 results in the conclusion that the appropriate taxpayer for Part IVA will be the head entity of a consolidated group.  Then, having decided that, at paragraph 164, application book 113, the necessary conclusion which follows from that, namely, look to Macquarie Bank here and ask the question did it get a tax benefit, is answered in the negative.  Why?  Because in both cases the single entity rule or the statutory fiction of single entity trumps Part IVA.

HAYNE J:   Sorry, I do not follow that.  Where do you get that out of 164?

MR STEWARD:   Where they say:

Step (d) represents the entry of Mongoose into the MBL consolidated group . . . As the primary judge found, if the scheme had not been entered into or carried out, Mongoose would have sold the Minara shares –

not as a member of the Macquarie Bank group, but independently of it.  So you could never fix Macquarie Bank with that liability because of the counterfactual that was put up.  Now, we say ‑ ‑ ‑

HAYNE J:   Just before you go on, Mr Steward, can I put this to you?  If you go to your draft notice of appeal, see for example, 202, and all the draft notice of appeal says really is, “We should win”.  It does not tell us what is wrong.

MR STEWARD:   Your Honour, I would re‑plead this notice of appeal.

HAYNE J:   Maybe, but can you articulate now ‑ ‑ ‑

MR STEWARD:   Yes, I can.

HAYNE J:   ‑ ‑ ‑ precisely what the error is of which you complain?

MR STEWARD:   Yes.  Could I ask the Court to go to paragraph 96, AB 89?  What that paragraph does is it sets out conveniently the relevant provision which we say was not given proper and full effect to.  This is 701‑85.  It appears in Subdivision 701 of the consolidation rules.  These are the core rules.  What 701‑85 does is it establishes the necessary hierarchy between Part IVA and Part 3‑90.

HAYNE J:   The Full Court repeatedly says, does it not, that Part IVA is the leading provision?

MR STEWARD:   Yes, it does, it does say that, but it does not take that necessary conclusion to its logical consequence.  If one looks at the provision, 701‑85, it says:

The operation of each provision of this Division –

Pause there for one moment.  One of the provisions is the single entity rule.  So, read it, the operation of the single entity rule:

is subject to any provision of this Act that so requires, either expressly or impliedly.

We submit that the necessary consequence arising from the paramount force of Part IVA is that that overcomes the single entity rule here to permit a determination to be issued to Mongoose.

CRENNAN J:   Why is that, because Mongoose had a single asset, or is it some other reason?

MR STEWARD:   Because it is Mongoose which would have sold the shares outside of the Macquarie Bank consolidated group if it had not changed its plan.  In other words, the counterfactual put forward is Mongoose, not a member of the Macquarie Bank group, still a wholly owned subsidiary of the Americans, selling the Minara shares and making a capital gain.  We say that the proper way of resolving the tension between the single entity rule and the needs of Part IVA is that here this provision gives you a command or permission to set aside more than what the Full Court wanted to set aside.  The more is here the single entity rule in and of itself, and that is what we say is the error.  They did not go far enough in dealing with that provision.  Indeed, it is quite odd.  The first instance judgment does not refer to this provision at all; not even mentioned.

CRENNAN J:   Well, there is a concentration on the aspect of the case which is the cost base resetting, if I can put it that way, which is an inevitable part of Part 3‑90.

MR STEWARD:   It is, your Honour, and none of that is disputed.  But, your Honour, when we get to Part IVA, saying things like, “Well, this is an inevitable consequence of Part 3‑90”, is no answer to Part IVA, any more than when you do a deduction case and you say, “Well, the Parliament has intended me to get a deduction under 8‑1; so be it.  But then Part IVA comes in over the top with paramount force and, if satisfied by its integers, take away that deduction.  So here too let it be said Part 3‑90 does all these things.  We do not cavil with that.  But that is no answer to the way Part IVA is intended to apply if its elements are otherwise satisfied.

CRENNAN J:   But it is the cost base resetting, if I can put it that way again, which leads to the difference in our taxation to be paid by the head entity versus what might have been paid by the new subsidiary.

MR STEWARD:   I would suggest it is more than that.  It is two things.  It is the two things that consolidation gives you, the two fictions, one being the single entity rule and that enabled the court below to decide there was no tax benefit and could not be any tax benefit from Macquarie Bank.  The other one to make the thing work is the other fiction which enables someone who buys an entity to push down, to use that perhaps inapt expression, the acquisition cost of the shares down to all the underlying assets.  Here the only assets are the Minara shares.

Now, those two things which were achieved by this arrangement and which were carefully sought and achieved, which we say gives rise here to a tax benefit, namely, avoidance of $318 million of capital gain, and that the Full Court should have decided that the provision 701‑85 gave the Commissioner a power to attack that gain, or alternatively we would adopt the approach of Justice Emmett who dissented, and Justice Emmett said that determinations could be issued to either of Mongoose or Macquarie Bank and Macquarie Bank could then be assessed.

Now, it will be the case that Macquarie Bank economically will be left with a liability and it is a liability that truly economically might have been shot home to the Americans, if I could use that expression.  That is a risk that you take when you buy an entity pregnant with a liability.  Macquarie Bank sought tax indemnities.  They were not given.  It took the risk.

So we say that the error made by the Full Court is one that not only merits special leave but, with respect, is of some importance to my client in relation to any straddle case.  Whenever a joining entity, as we call it, joins another entity and enters into an arrangement like this, we have a problem.  We have a problem.

HAYNE J:   Part IVA has been amended?

MR STEWARD:   The amendments do not touch upon this issue at all.  In fact, the amendments were written before the decision of the Full Court.  They do not address this.

HAYNE J:   They may have been written before, but you say they are not relevant?

MR STEWARD:   They are not relevant, no, because the question of who is the taxpayer is not touched upon or addressed by the recent amendments made to Part IVA.  Now, of course, that creates an issue for tax benefit.  The court below did reach another conclusion, namely, that the dominant purpose of each of the parties to the impugned scheme was not to get that benefit.  In our summary of argument we put up a number of issues about that.  Could I simply address the Court about two today that I think, or we think, are of some importance to the ongoing administration of Part IVA?  There are two that I wish to talk about.

The first error, and we think the more important one, is that the court below decided that the dominant purpose of MatlinPatterson and inferentially its subsidiaries - and they dealt with the Americans all as one group for this purpose – was to make a profit.  I will take you to the passages in one moment.  But to say that the dominant purpose was to make a profit causes enormous trouble because the court does not identify what the profit is.  Is it pre‑tax?  Is it post‑tax?  If post‑tax, did the avoidance of the capital gain contribute to the amount of cash that the Americans got to their profit?

CRENNAN J:   Why can they not just be referring to the difference between the acquisition costs and the sale costs?

MR STEWARD:   It may be, your Honour, but tax is always an integer, in this country, of profit, and they do not identify whether it is pre or post.  I will come to the numbers in a moment to show how that can be important.  But could I ask the Court - to show you the errors where this takes place to firstly go to paragraph 21, application book 64.  This is in the dissenting judgment of Justice Emmett who agreed on the issue of purpose.  It is in the final sentence:

The dominant purpose of the Vendors was purely commercial, namely, to sell the Minara shares in a manner that was satisfactory to them, albeit a manner that was satisfactory as regards matters relating to tax, and to realise the profit from the investment that they had made in Minara –

Now could I ask the Court to go to paragraph 297, application book 160?  This is the conclusion of the majority:

Accordingly, the Commissioner has not demonstrated that either MPGOPB or MPGOP had the dominant purpose . . . Rather, their dominant purpose was purely commercial – to sell the Minara shares in a manner that was satisfactory to them –

Now, the problem is that what has been put against the tax purpose is the ultimate profit without telling you what it is, and that is an error that this Court recognised in Hart’s Case where Justices Gummow and Hayne said at paragraph 64:

Pointing to the “commercial end” of the scheme reveals the adoption of the same, or at least a substantially similar, false dichotomy.  The presence of a discernible commercial end does not determine the answer to the question posed by s 177D.

What you must do is identify with precision the non‑commercial benefits and compare and contrast and weigh them against the tax benefit, here $95 million.  They never did that.  At no point did the court below undertake that exercise to determine which was the prevailing predominant purpose - the 95 million or something else.  All that is put against the 95 million was that MatlinPatterson wanted the certainty of the cash, but no evidence was led about that and it was never identified or valued or compared against the tax benefit.

HAYNE J:   So what exactly is it that you would have this Court do?  Yes, examine the facts and get to a different answer; I understand it at that level.  What exactly would you have the Court say?

MR STEWARD:   The Court needs to say that in analysing Part IVA, pointing to the ultimate profit or commercial end is no answer to Part IVA and does not correctly address the question of purpose.  That is the forensic point we seek to invoke.  It was invoked and established in Hart and we have slipped.

HAYNE J:   That proposition is I think – correct me if I am wrong – no more than, “Well, the Full Court’s expression of reasoning is wrong, therefore we win”.

MR STEWARD:   No, no, no.  That might be the result, but no, it is worse than that.  The Full Court has put ultimate profit up as an answer to purpose.  That can be put up in every case where Part IVA is debated because in every commercial transaction one wants the ultimate profit and if I can put that up as my answer to tax, 177D(b) will never be satisfied.  Looking at this case, your Honour Justice Crennan for one moment, going back to what I said before, prior to the change in the scheme, the Americans were going to make a pre‑tax profit of 277 million.  By reason of the scheme they make a pre‑tax profit which is smaller ‑ ‑ ‑

CRENNAN J:   Larger.

MR STEWARD:   No, which is larger, sorry, 318.  But by reason of the scheme, post‑tax their profit under the original arrangement is 222 million.  Post‑tax their profit under the scheme as implemented is 277, a difference

of 55 million post‑tax.  In other words, just like Spotless, this thing does not make sense pre‑tax.  It only makes sense post‑tax.  Then the question becomes what drives the $55 million?  What drove that?  One answer is $95 million of tax avoided.  Another answer is they took a discount on the shares reducing their pre‑tax profit.  The discount was worth 41 million; the tax benefit was worth 95.

What was the ruling prevailing or predominant purpose objectively ascertained of a party to this scheme?  We say undeniably and clearly the tax benefit.  If you do not take this case up and correct it, not only will there be ongoing problems relating to C for straddle occasions, but there will also be problems relating to purpose because just as the Full Court did in Spotless, just as it did in Hart, the false dichotomy has been brought back and resuscitated from what we thought was its position back following the Court’s decision in Hart where we thought it was dead and buried.  If the Court pleases.

HAYNE J:   Thank you, Mr Steward.  Yes, Mr Slater.

MR SLATER:   Your Honours, we advance three principal reasons why special leave should not be granted.  In summary they are, first, no identified error other than that the court below got the answer wrong is ascribed to the Full Court.  Second, the arguments advanced by the applicant going to the operation of the Act in relation to tax benefit are not dispositive of the appeal since finding a tax benefit is not of itself enough to support a determination.

There must also be the dominant purpose required by section 177D and the courts below unanimously found on the facts their purpose to be absent.  That finding would have to be reversed by the Court before the tax benefit issue became material.  Third, despite the unanimous opinion expressed by all the judges below, the applicant specifies no error other than ultimate error in the findings below on purpose, with the exception of what my friend has attempted to advance orally this morning, and I will come back to that in a moment if I may. 

What is complained of in the written submissions is irrelevant.  The complaint about the absence of witnesses goes only to the actual purpose and not to the inferred or objective purpose.  Can I take these points in reverse order, if the Court please.  First, concerning the findings on purpose, there was extensive evidence and argument both at first instance and in the Full Court where there was two days’ argument on the basis of 10 sets of written submissions as to the resolution of the question of dominant purpose. 

The court itself considered the matter over 140 paragraphs and 50 pages of the appeal book.  The court was unanimous that there was no section 177D purpose.  In the written submissions, our friends identify no error of principle in relation to that.  Orally this morning our friends sought to assert that there was some error of principle, being the error which was identified in Hart’s Case and in the course of my friend’s submissions he in effect said that error was established in Hart’s Case, “We ask the Court to reiterate it”.  That, in our respectful submission, is not a special leave point.  But more to the point ‑ ‑ ‑

HAYNE J:   It may be a visitation case.

MR SLATER:   It may be, your Honour, but not in this case because the passages which my friend read to the Court were, to say the least, selective.  If your Honours go to application book 64, paragraph 21, my friend read to your Honours from the last sentence of paragraph 21.  He did not read to your Honours from the first sentence:

The Vendors had a choice of two commercial transactions, with different financial consequences.

My friend’s written submissions imply without actually saying that there was no difference in the financial consequences.  But the court found that there was a difference:

They chose to take an immediate and certain payment of the full proceeds of a sale, at a lower price than might otherwise been obtained, as against the uncertain prospect of disposing of the Minara shares in a volatile market.

There was extensive evidence to support that finding.  When one goes to the joint judgment, my friend read to your Honours from page 159 of the application book, paragraph 295, but did not read to your Honours from paragraph 294:

We consider that the conclusion to be drawn from consideration of all of the s 177D(b) matters is that the vendors ultimately had a choice of two commercial transactions with different financial consequences.  Effectively they chose to take an immediate and certain payment of full proceeds of a sale (albeit at a lower price than might have been the case) over the uncertain prospect of a float of the Mongoose holding in a volatile market.

If, as my friend’s submissions implied, there was no doubt as to how much money they were going to make, then there would be some substance in the argument that a tax purpose should be inferred.  But my friend’s contention, repeated, that they were going to make the large profit that was ultimately made by Minara is one which finds no support in the evidence.  They might have made it or they might not, and the vendors, objectively considered, chose to take the less risky course, albeit at a financial penalty. 

Financial penalty was ameliorated by the tax consequences.  We do not dispute that the tax consequences were something taken into account, but the Full Court, having considered at great length all of the evidence, came to the conclusion that although they were present, they were not the dominant factor, and unless this Court spends two to three days going through all of the evidence, there is no basis ‑ ‑ ‑

HAYNE J:   Appeals to judicial indolence are not especially persuasive, Mr Slater.

MR SLATER:   Yes, I accept that, your Honour.

KEANE J:   But your point, Mr Slater, is that we do not get to consider the proposition Mr Steward advances which is that, as I understand it, there is no distinction between a transaction commercially driven to obtain a profit, albeit with an eye to the tax consequences, and a transaction which is driven by the desire to avoid tax?  You say we do not get to that question because, on the view of the facts which all the judges below took, this was a case that on the facts can be seen to have been driven by a commercial profit‑making motive or purpose, bearing in mind the commercial objectives and the different commercial consequences of the structures that might be used?

MR SLATER:   Yes, your Honour, we say that on the findings made by the courts below there is no conflict with what was said in Hart’s Case or in Spotless and indeed the courts referred to what had been said as part of the principles which governed their decision.  Your Honours, if I could turn to the second point, the tax benefit point.  So far as the basis of the complaint is that Part 3‑90 cannot be used to avoid Part IVA, the Full Court below, as your Honours have pointed out, was unanimous and emphatic in saying that Part IVA prevails.

The essence of our friend’s complaint is that in consequence of consolidation a taxpayer who absent consolidation would have been assessable on a gain is by reason of being a subsidiary member of a group not so assessable.  We say that is the case.  He complains that when a taxpayer joins a consolidated group it ceases to be amenable to assessment on its income and gains made in consolidation and that that somehow puts him in an invidious position and confronts him with a conundrum. 

In our submission, if the Commissioner is disadvantaged by entry of a taxpayer into a consolidated group – and we do not accept that premise – the conundrum is the product of the legislation, not of the decision below.  Essentially our friend’s complaint about the distinction between the bright light of assessment and the dim twilight of not being assessed is that Part 3‑90 allows a taxpayer to disappear in terms of section 701‑1 to become part of the head company rather than a separate entity.  In our submission, that is not a mischief.  It is simply the structural design of the Act.  It is how tax consolidated groups are to be taxed. 

I should point out to your Honours that it can work in reverse.  This was a case where the cost of acquiring the subsidiary was greater than the cost to it of its assets, but there can be cases where the cost of acquiring a subsidiary is less than the cost of its assets and cost base is lost.

If it is a mischief, then the answer is to do what has been done with other perceived mischiefs:  to amend the definition of “tax benefit” to allow the Commissioner to make a determination where the requisite purpose is present.  That is what was done in a whole range of other matters since Part IVA was first enacted.  It was done in relation to withholding tax which did not give rise to a tax benefit under the original Part IVA.  It was done in relation to capital losses which did not give rise to a tax benefit under Part IVA as first introduced. 

It was done when we went from exemption of foreign income to foreign tax credits and a tax benefit of obtaining foreign tax credits with the wrongful purpose was introduced.  It was done in relation to dividend stripping in the original drafting.  It was done in relation to franked dividends in section 177EA, and your Honours have been vexed by that more recently, both in streaming of franking credits and franking credit trading.

Most notably, it was done in relation to schemes by which the head company of a consolidated group acquires franking credits by causing a company with such credits to become a member of the consolidated group, and that falls precisely within the type of mischief that our friends complain of. 

The legislature chose to deal with that in section 177EB, and that was done by the Act which introduced the consolidation provisions but in that Act, although they dealt elsewhere with other consequences of consolidation as the primary judge pointed out in section 73BAA and following and in section 165‑212E – those are referred to at page 33 of the application book but I will not take your Honours to them – by the amending Act those consequences were dealt with, but Parliament expressly chose not to deal with the tax uplift, and perhaps that is because, as I put to your Honours a moment ago, the tax uplift point can run two ways.

If this case reveals a problem – and we do not concede that it does – the answer is one for the legislature to attend to.  It is not a problem to be solved by this Court distorting the language of the Act to resolve what our friends call a tension, nor to construe the Act in such a way as to create logical inconsistencies in its operation, as the Commissioner would seek to do. 

In our respectful submission, the majority in the Full Court was right.  The solution to the Commissioner’s embarrassment or conundrum lies with the legislature and not, with respect, in this Court.  In any event, the question does not need to be decided because the Commissioner cannot succeed in this appeal without successfully appealing the factual conclusions below and he advances no basis other than the tenuous basis advanced orally this morning for doing so.

That brings me to the last point in our submissions and that is the absence of any grounds of appeal.  Your Honour the presiding Judge has already taken my friend to the absence of such grounds.  The difficulty which the notice of appeal and the application for special leave presents is that the Court and the opposing party are left in the dark as to what the real complaint is.  It is apparently mutable.  One version of the complaint was advanced in the first written submissions; another version was advanced in the reply and another version again today.  There have been several changes of counsel and no doubt my friend is not to be personally visited with the consequences of the acts of his predecessors.  But the absence of any identification of any special ground and the absence of any indication as to where the appeal might lead is, in our respectful submission, not remotely in compliance with the text, object, purpose or spirit of the rules. 

This is an application for special leave.  It is not an occasion on which the applicant should be given leave in vacuo to amend the grounds of appeal as he chooses.  In our respectful submission, quite apart from the matters which I have already addressed, this application is not one which qualifies for a grant of special leave or merits the attention of the Court.  If your Honours please.

HAYNE J:   Thank you, Mr Slater.  Yes, Mr Steward.

MR STEWARD:   Two matters arise for reply.  Firstly, my learned friend’s appeal to recourse to Parliament is not required if we are right about 701‑85.  That is a complete solution to the dilemma that my client faces as administrator of this Act.  Secondly, in relation to purpose, in this Court’s decision in CPH, the Court said, from memory, that where you have a commercial transaction and there are tax purposes and commercial purposes there, the only way in which you can identify which is the prevailing purpose is to look and compare them, weigh them against each other.       In CPH the two purposes were interest deductions and the other was a structure that would be advantageous for preserving foreign tax credits. 

The Court decided that the prevailing purpose was to get the interest deduction because they said you got it immediately.  They weighed them one against the other.  If one goes back to the paragraph invoked by my friend at paragraph 295 of the joint judgment below, you will see no weighing, no comparison, between ‑ ‑ ‑

HAYNE J:   I thought he tended to rely on 294 rather than 295.

MR STEWARD:   Paragraphs 294 and 295, your Honour, both.  We see in 295 put up the commercial purpose certainty, but we do not find thereafter certainty v tax benefit, nor do we see how does one value or put a number on certainty.

HAYNE J:   What is the contrariety that your ‑ ‑ ‑

MR STEWARD:   It is certainty of getting the cash up front, a non‑tax purpose, versus the capital gain tax benefit; no comparison of the two to determine which is the ruling, prevailing, predominant purpose.  The problem we face, if the Court pleases, is made all the more acute by a finding relevantly made here by the judge at first instance.  Could I invite the Court very briefly to look at application book 39, paragraph 74?  This is not a finding that was disturbed in the Full Court, but we nonetheless find disturbing.  The final sentence of paragraph 74 where his Honour, the learned primary judge, is dealing with the purpose of MPGOP and MPGOPB, he says:

To the contrary, I would conclude that step (d) –

That is the sale of the shares –

was entered into or carried out by MPGOP and MPGOPB for the dominant purpose of selling their respective economic interests in the Minara shares, and to do so without suffering Australian income tax –

And to do so without suffering any Australian income tax.  No attempt has been made by the Full Court to determine, of those two purposes, which prevails.  I have attempted just looking at the objective numbers this morning to show you that as best as we can see the tax benefits are $95 million and as best as we can see, the price of obtaining certainty was $41 million, being the discount.  That is what the commercial parties valued it at, at the time. 

So which was the prevailing purpose?  That is the question that was never answered below and, for the reasons already expressed this morning, the invocation of overall profit – and it does not just happen on two occasions; there are seven further occasions in the majority judgment – as an answer to that conundrum is insufficient and productive of error.  For those reasons, we respectfully submit that leave should be granted.  If the Court pleases.

HAYNE J:   Thank you, Mr Steward.  The Court will adjourn to consider the course it will take in this matter.

AT 10.07 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.10 AM:

HAYNE J:   Having regard to the unanimous conclusion reached in the Full Court about the dominant purpose of the impugned transaction, this is not a suitable vehicle in which to explore any question of principle about the intersection between Part IVA of the Income Tax Assessment Act 1936 (Cth) and Part 3‑90 of the Income Tax Assessment Act 1997 (Cth).  An appeal to this Court would enjoy insufficient prospects of success to warrant a grant of special leave.  Special leave to appeal is refused, in each application, with costs.

The Court will adjourn to reconstitute.

AT 10.10 AM THE MATTERS WERE CONCLUDED