Dennis Wilcox Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia

[1988] FCA 244

Re: DENNIS WILLCOX PTY. LTD.
And: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
No. VG136 of 1987
Crown - Income Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1), Jenkinson(2) and Foster(3) JJ.

CATCHWORDS

Crown - Administrative appeals legislation (Cth.) - Administrative Appeals Tribunal - Failure to mention in the reasons for the Tribunal's decision a submission of a party - Error of law in some circumstances.

Income Tax - Income derived by taxpayer - Beneficial interest of taxpayer company in shares sold to taxpayer wholly owned and controlled by vendor - "Lifting of corporate veil" eschewed.

Income Tax Assessment Act 1936 - ss. 26(a), 26AAA(2)

Administrative Appeals Tribunal Act 1975 - ss. 43(2), 44(1)

Smith, Stone and Knight Ltd. v. City of Birmingham (1939) 4 All ER 116

DHN Food Distributors Ltd. v. London Borough of Tower Hamlets (1976) 3 All ER 462

Pioneer Concrete Services Ltd. v. Yelnah Pty. Ltd. (1986) 11 ACLR 108

Hotel Terrigal Pty. Ltd. (in liq.) v. Latec Investments Ltd. (No. 2) (1969) 1 NSWR 676

Salomon v. Salomon (1897) AC 22

Farrar v. Farrars Ltd. (1888) 40 ChD 395

HEARING

MELBOURNE

#DATE 21:4:1988

Counsel for the Appellant: Mr J. De Wijn

Solicitors for the Appellant: Barker Gosling

Counsel for the Respondent: Mr R. Kendall

Solicitors for the Respondent: Australian Government Solicitor

ORDER

The amended notice of appeal be further amended by adding after Ground D in paragraph 4 thereof the following grounds:

"E. The Tribunal erred in law in failing to consider whether in calculating any profit to be included in the Applicant's assessable income pursuant to either s.26(a) or s.26AAA of the Income Tax Assessment Act ('the Act') it should have taken into account the true value of the shares at the date of acquisition.

F. The Tribunal erred in law in failing to give reasons for its decision (if any) not to take into account the true value of the shares at the date of acquisition in calculating any profit to be included in the Applicant's assessable income pursuant to either s.26(a) or s.26AAA of the Act."

The appeal be allowed.

The decision of the Administrative Appeals Tribunal be set aside.

The case be remitted to the Administrative Appeals Tribunal to be further heard and determined by the said Tribunal according to law.

Each party abide its costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

I agree with the orders proposed by Jenkinson J and with his reasons for those orders.

JUDGE2

Appeal from a decision of the Administrative Appeals Tribunal affirming a decision of the respondent which wholly disallowed the applicant's objection against an income tax assessment in respect of the year ended 30 June 1978.

1. The respondent had in assessment treated as assessable income of the applicant an amount of $199,877 which he regarded as profit on the sale of 1900 shares in a company called Prestige Furniture Co. Pty. Ltd. (Prestige). It was common ground before the Administrative Appeals Tribunal and on the hearing of the appeal that the applicant and Jack Montague Eastgate had executed an agreement in writing for the sale of the shares by Mr. Eastgate to the applicant, and that thereafter a transfer of the shares in pursuance of that agreement had been executed and had been registered. It was common ground also that in July 1977 the applicant had sold the shares in an arm's length transaction to a company called Hookway Aviation Pty. Ltd. for $199,877 more than the aggregate of what it had agreed to pay Mr. Eastgate for them ($173,333) and stamp duty it had paid on the transfer to itself ($1040). But the respondent contended, and the Tribunal found, that the applicant had agreed to purchase the shares in February 1977, not on 29 April 1976, which is the date the written agreement bears, and which was the date on or near which the written agreement had, according to the case made for the applicant to the Tribunal, been executed. On the hearing of the appeal to this court Mr. de Wijn of counsel for the applicant abandoned the ground of appeal by which that finding was challenged. Nor did Mr. de Wijn support the ground of appeal which challenged the Tribunal's conclusion that profit derived upon the applicant's sale of the shares had arisen in circumstances described in s.26(a) of the Income Tax Assessment Act 1936, except by his submission that no assessable income had been derived by the applicant upon the sale of the shares because no interest in any of the shares except the legal interest of a bare trustee had been acquired by the applicant and because it was in that character of trustee for Mr. Eastgate that the applicant had sold the shares and received the purchase price on that sale.

2. The issued shares in Prestige had for some years before April 1976 been held as to one half by Mr. Eastgate and as to the other half by a Mr. Scharf. During the decade which preceded the events with which this appeal is concerned Prestige carried on a business of manufacturing timber cabinets for television sets and radios and gramophones. Both shareholders had acquired their substantial interests from close relatives, by whom the business of furniture manufacturing originally conducted by Prestige had been established. The secretarial and accounting services which Prestige required had been provided by one Doig and then by his son. Both father and son were accountants. The younger Doig had held a few shares in Prestige, by means of which he had established Mr. Scharf in managerial control of the company. Thereafter he transferred his shares to Mr. Eastgate so that there was equality of shareholding between the two members of the company.

3. In or about April 1976 Mr. Doig, who acted as Mr. Scharf's accountant as well as secretary of Prestige, asked Mr. Sellen, who was acting as Mr. Eastgate's accountant, whether Mr. Eastgate would object to the transfer to a company owned by Mr. Scharf of Mr. Scharf's shares in Prestige. Mr. Sellen thereupon reiterated to Mr. Eastgate advice previously given that Mr. Eastgate should also transfer to a company to be owned by himself his shares in Prestige. That advice was accepted, albeit reluctantly. A dormant company, the applicant, was procured by Mr. Sellen for the purpose. Mr. Eastgate became the holder of all but one of the shares in the applicant, the remaining share being taken by his wife, who held it on trust for him. Mr. Sellen drafted the document which, although dated 29 April 1976, the Tribunal found to have been executed in February 1977. That document was in these terms:
   
   

"THIS AGREEMENT dated the 29th day of April One thousand Nine hundred and Seventy-six between DENNIS WILLCOX PTY. LTD. a company incorporated in the State of Victoria, having its registered office at 23 Deauville Street, Beaumaris in the said State of the first part (hereafter called the purchaser) AND JACK MONTAGUE EASTGATE of Monegeetta North in the State of Victoria of the second part (hereafter called the seller).

WHEREAS the parties hereto have agreed upon the following terms and conditions and witness as follows :

1. The purchaser agrees to buy and the seller agrees to sell shares owned by the seller in The Prestige Furniture Co. Pty. Ltd. a company incorporated in the State of Victoria having its registered office at 49-53 Plateau Road, Reservoir in the said State totalling One thousand nine hundred ordinary shares of $2.00 each fully paid.

2. The consideration for the sale of the said 1900 shares shall amount to $173,333.39, One thousand (sic) and seventy-three thousand three hundred & thirty-three dollars and thirty-nine cents.

3. The purchaser hereby acknowledges the amount owing to the seller of $173,333.39 and agrees to the payment of such sum.

4. The seller hereby agrees to advance the purchaser from time to time such sums as may be mutually agreed upon between the parties hereto at call at interest the rate of which is to be mutually agreed upon between the parties.

5. The seller agrees to do all things necessary to protect the purchasers interest in the said shares purchased up to and including the date of registration of transfer of such shares with the company and act as nominee on behalf of the purchaser until registration of transfer is registered.

6. The said shares are purchased and sold subject to the right of the seller being entitled to all dividends declared by the Prestige Furniture Co. Pty. Ltd. up to and including the 30th April, 1976 from profits gained up to and including the 30th June, 1975.

7. Subject to paragraph 6 of this agreement all right title and interest in the said shares shall from the date of this agreement shall (sic) rest in the purchaser entirely.

THE parties hereto have this day attested their signature and seals."

1. Mr. Sellen had been informed by Mr. Doig that the latter had valued the shares in Prestige for the purpose of satisfying stamp duty requirements in respect of the transfer of Mr. Scharf's shares to a company owned by Mr. Scharf. Mr. Sellen adopted the same value in determining the purchase price to be paid by the applicant. He gave evidence that, because Mr. Eastgate would own the applicant and by that means would remain the owner of the shares, the price was not important to him, "other than for stamp duty purposes". Mr. de Wijn submitted, and there was evidence before the Tribunal to suggest, that the market value of the shares greatly exceeded that price. But the Tribunal expressed no finding about value.

2. There was uncontradicted evidence that the directors of the applicant who attested the sealing of the agreement for purchase of the shares by the applicant had at that time no interest in the applicant or its affairs, all their shares being then owned by Mr. Eastgate. There was evidence that Mr. Eastgate took little interest in the making of the agreement for sale of his shares in Prestige to the applicant. He assured himself by enquiry of Mr. Sellen that he would have sole control and ownership of the applicant and upon that assurance he left the formulation of the terms of the agreement (including the term specifying the price) to Sellen. He paid no regard to those articles of association of the applicant which contemplated its management and control by its directors. His wife, who became with him a director of the applicant, played no part in directing its affairs. He treated the moneys of the applicant, when after sale of the Prestige shares it had moneys, as though they were his own, drawing on the company's bank account, which he alone operated, cheques in payment of his personal expenses. The applicant had no assets but the shares, for which it paid nothing until after the shares had been sold. The stamp duty paid on the purchase of the shares was paid by Mr. Eastgate on the applicant's behalf. Mr. Sellen dealt with the accounting of these transactions in the applicant's books of account by debiting and crediting Mr. Eastgate's loan account. Mr. Eastgate left it to Sellen's discretion to make such records as Sellen thought appropriate.

3. It was submitted on the applicant's behalf that all of the circumstances compelled a conclusion that no beneficial interest in the shares had ever passed from Mr. Eastgate to the applicant, that the provisions of the written agreement were not intended by Mr. Eastgate to have the legal effects which their verbiage is apt to produce, and that the agreement for sale of the shares by the applicant to Hookway Aviation Pty. Ltd. was made by the applicant as agent for a principal, Mr. Eastgate, whose existence as principal was not disclosed to the buyer.

4. One of the several formulations of the argument that the applicant had never enjoyed a beneficial interest in the shares involved characterisation of the written agreement for purchase of the shares by the applicant as "a sham". No such a characterisation could reasonably have been made on the material before the Tribunal, in my opinion. That material is consistent only with the conclusion that Mr. Eastgate at all times intended that the acts in the law concerning the shares which Mr. Sellen arranged that he should perform - the agreement for purchase by the applicant, the transfer to the applicant in performance of that agreement, the submission of the transfer for registration to the directors of Prestige, of whom Mr. Eastgate was one, and the grant of that registration - should have the effects which the law would ordinarily accord to them. All his acts outside the Tribunal either betokened or were at least consistent with such an intention, and he gave no evidence to the Tribunal in denial of it.

5. In support of his submission that circumstances may - and in this case did - justify treatment of a corporate personality as merely a manifestation of another person by which it is wholly owned and controlled, or as an agent of that other person to perform particular acts in the law, Mr. de Wijn cited authorities culled from several fields of law. In Smith, Stone and Knight Ltd. v. City of Birmingham (1939) 4 All ER 116 and in DHN Food Distributors Ltd. v. London Borough of Tower Hamlets (1976) 3 All ER 462 a holding company and its wholly owned subsidiary were concerned in claims for statutory compensation in respect of compulsory acquisition of land on which a business had been carried on. In the former case the subsidiary had carried on the business while holding the land from its parent on so insecure a tenure that the statute did not prescribe any compensation to it for disturbance of the business. Atkinson J. concluded that the high degree of control of the subsidiary by the parent and the treatment of the profits of the business as profits of the parent demonstrated that the business was the business of the parent, in the conduct of which business the subsidiary acted as the agent of the parent. As the freehold owner of the land the parent was therefore entitled to compensation for disturbance of the business. In the latter case the same question of compensation for disturbance arose, but it was the parent which conducted the business on land which it held on an insecure tenure from one of its subsidiaries. Another related business on the land was carried on by another subsidiary. The members of the Court of Appeal gave several grounds for the conclusion that compensation for disturbance of the businesses was payable. One ground was expressed by Lord Denning thus ((1976) 3 All ER at 467):
   
   

"Third, lifting the corporate veil. A further very interesting point was raised by counsel for the claimants on company law. We all know that in many repects a group of companies are treated together for the purpose of general accounts, balance sheet and profit and loss account. They are treated as one concern. Professor Gower in his book on company law Principles of Modern Company Law (3rd Edn, 1969), p.216) says: 'there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group'. This is especially the case when a parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says. A striking instance is the decision of the House of Lords in Harold Holdworth & Co. (Wakefield) Ltd. v. Caddies.

(1955) 1 All ER 725, (1955) 1 All ER 352. So here. This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point. They should not be deprived of the compensation which should justly be payable for disturbance. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one. So that DHN are entitled to claim compensation accordingly."

1. Without questioning the reasoning of those cases, one may observe that neither Mr. Eastgate nor the applicant was carrying on a business in connection with the transactions now in question. According to an assertion contained in the applicant's income tax return for the year ended 30 June 1978 the applicant acquired the shares "for Investment Purposes only". No evidence in contradiction of that assertion was adduced on behalf of the applicant. If the Tribunal's conclusion that the profit on the sale of the shares was assessable under s.26(a) must be regarded as contradicting the assertion, the conclusion does not necessarily involve - nor was there in fact - a finding that any business activity was carried on by the applicant, and the evidence could not in my opinion support such a finding.

2. In Pioneer Concrete Services Ltd. v. Yelnah Pty. Ltd. (1986) 11 ACLR 108 a submission was advanced that a contractual promise by a subsidiary company should be treated, for the purposes of a claim by the promisee that there had been breach of that contractual term, as a promise also by the parent company. One ground of the submission was the reasoning of Lord Denning M.R. in the DHN Case, supra, which I have quoted. Young J. observed that the separate legal personality of a company is to be disregarded only if the court can see that there is in fact or in law a partnership between companies in a group, or that there is a mere sham or facade in which that company is playing a role, or that the creation or use of the company was designed to enable a legal or fiduciary obligation to be evaded or a fraud to be perpetrated : 11 ACLR at 119-120. None of those circumstances could reasonably be discerned in the material before the Tribunal in this case, in my opinion.

3. Reliance was placed by Mr. de Wijn on the reasoning of Else-Mitchell J. in Hotel Terrigal Pty. Ltd. (in liq.) v. Latec Investments Ltd. (No. 2) (1969) 1 NSWR 676. A purported sale and transfer of land by a mortgagee company, in purported exercise of its power of sale as mortgagee, to a wholly owned subsidiary whose directors were the directors of the parent also was held to be "not an exercise of the power at all but was, in substance, merely a transfer to the (mortgagee) or its agent." The ground of that conclusion was that the purchasing company was not free to form a contract with its parent but was compelled by the directors of both companies to do the will of the parent. Those circumstances were said by Else-Mitchell J.
   
   

"also to rebut the independent corporate personality rule laid down in Salomon v. Salomon & Co., (1897) AC 22, because they show the subsidiary company to have been in fact an agent, and not a true independent corporation (cf. Smith, Stone & Knight Ltd. v. Birmingham Corp.. (1939) 4 All ER 116; Gower, Modern Company Law, 2nd ed., ch.10). In these circumstances, and regardless of the question of the price of the proposed sale, it would stultify the jurisdiction of the Equity Court to say that the transfer had any effect at all, and in my opinion the plaintiff's equity of redemption can be asserted against Latec Investments Ltd. and Southern Hotels Pty. Ltd. in the same manner and to the same extent as though there had been no transfer (cf. Parkinson v. Hanbury (1860), 1 Drew. & Sm. 143)."

1. In my opinion these observations are not susceptible of application to transactions of sale other than those by a mortgagee in exercise of the mortgagee's power of sale. The reference to Salomon v. Salomon (1897) AC 22 in the passage I have quoted is to be understood, I think, as a response to the reasoning of the Court of Appeal in Farrar v. Farrars Ltd. (1888) 40 Ch D 395. In a passage preceding those which I have quoted Else-Mitchell J. observed ((1969) 1 NSWR at 679:
   
   

"It is clear on the authorities that although a mortgagee's power of sale is not a fiduciary power, it must be exercised for the purpose for which it was created and, unless exercised bona fide, will not be effective to extinguish or foreclose a mortgagor's equity of redemption (Farrar v. Farrars Ltd. (1888), 40 Ch D 395; Hodson v. Deans, (1903) 2 Ch 647; Martinson v. Clowes (1882), 21 Ch D 857; Barnes v. Queensland National Bank Ltd.

(1906), 12 ALR 238; 3 CLR 925; Pendlebury v. Colonial Mutual Life Assurance Society Ltd. (1912), 18 ALR 324; 13 CLR 676; Hanbury's Modern Equity, 5th ed., 419). Many of these authorities are merely illustrations of the application of the general principle which I think is best stated in the words of Chitty, J., in Farrar v. Farrars Ltd., supra, at p.404. His Lordship said: 'A mortgagee cannot sell to himself, nor can two mortgagees sell to one of themselves, nor to one of themselves and another. The reasons for this are obvious, and are not merely formal but substantial. A man cannot contract with himself, and in the cases supposed there cannot be any independent bargaining as between opposite parties. For similar reasons a mortgagee cannot sell to a trustee for himself; he cannot buy in the name of another. But when mortgagees sell to a corporation there are, prima facie, two independent contracting parties and a valid contract, and if the bargaining is real and honest, and conducted independently by the mortgagees on the one hand, and by the directors or officers of the corporation on the other, and it is satisfactorily shewn that in concluding the terms of the sale the parties were in no way affected by the circumstances that one of the mortgagees had some interest as a shareholder in the corporation, I see no sufficient reason that the sale ought not to stand.'"

Although Else-Mitchell J. does not otherwise refer to Farrars' Case, his reference to Salomon's Case was, as I think, a commentary on the reasons of the Court of Appeal which affirmed the judgment of Chitty J. in Farrars' Case. The Court of Appeal observed (40 ChD at 409-410):

"It was alleged by the Plaintiffs in their statement of claim that the sale was fraudulent and collusive and at an undervalue. Mr. Justice Chitty decided that this allegation was not proved, and he gave judgment for the Defendants. The Plaintiffs on appeal did not question the view of the Judge that there was no fraudulent sale at an undervalue, but they contended that fraud or no fraud, undervalue or no undervalue, the sale could not stand, inasmuch as it was in substance a sale by a mortgagee to himself and others under the guise of a sale to a limited company.

If this proposition were true the sale could not stand as against the mortgagor. It is perfectly well settled that a mortgagee with a power of sale cannot sell to himself either alone or with others, nor to a trustee for himself: Downes v. Grazebrook 3 Mer 200; Robertson v. Norris 1 Giff. 421; nor to any one employed by him to conduct the sale: Whitcomb v. Minchin 5 Madd 91; Martinson v. Clowes 21 Ch D 857. A sale by a person to himself is no sale at all, and a power of sale does not authorize the donee of the power to take the property subject to it at a price fixed by himself, even although such price be the full value of the property. Such a transaction is not an exercise of the power, and the interposition of a trustee, although it gets over the difficulty so far as form is concerned, does not affect the substance of the transaction.

A sale by a person to a corporation of which he is a member is not, either in form or in substance, a sale by a person to himself. To hold that it is, would be to ignore the principle which lies at the root of the legal idea of a corporate body, and that idea is that the corporate body is distinct from the persons composing it. A sale by a member of a corporation to the corporation itself is in every sense a sale valid in equity as well as at law. There is no authority for saying that such a sale is not warranted by an ordinary power of sale, and in our opinion, such a sale is warranted by such a power, and does not fall within the rule to which we have at present referred."

In my opinion the observations of Else-Mitchell J. should be understood as limited in their application to exposition of equitable principles regulating the exercise of a mortgagee's power of sale.

1. Neither the circumstance that a company is completely subject to the ownership and the direction of another person nor the circumstance that that other person exercises directorial control of the activities of the company in ways which minimise the manifestations of the company's separate legal identity will justify, in my opinion, a conclusion that acts in the law formally done by the company are to be regarded, for purposes of the kind here in question in relation to Australian income tax law, as acts in the law done by that other person. And in my opinion those are the only circumstances to which Mr. de Wijn was able to point in support of his submission that acts in the law formally done by the applicant were to be treated for those purposes as done by Mr. Eastgate.

2. The contention that the shares which Mr. Eastgate held in Prestige before he acquired ownership of the applicant remained in his beneficial ownership until they passed to Hookway Aviation Pty. Ltd. was advanced before the Tribunal, but was not mentioned in the Tribunal's reasons for decision. During the hearing of the appeal application was made for leave to add a ground of appeal in these terms:
   
   

"The Tribunal erred in law in failing to consider -

(a) whether the Applicant acquired the shares from Eastgate as his nominee or trustee; or

(b) whether the purported sale of shares to the Applicant was a nullity."

The application was opposed by Mr. Kendall of counsel for the respondent Commissioner. It was not submitted by Mr. Kendall that the adding of that ground would prejudice or embarrass the respondent's opposition to the appeal, but he pointed to the substantial time the applicant's advisers had had for consideration of the grounds to be advanced. I would grant the leave sought. The submissions sought to be raised under the ground which the applicant applies for leave to add are indicated in that part of the notice of appeal which specifies the applicant's contentions as to the questions of law which the appeal raises.

1. If the ground be added, yet I doubt whether the failure of the Tribunal to discuss the contentions specified therein can justify an inference that the Tribunal failed to consider those contentions. Those reasons include a careful and detailed discussion of the evidence concerning the making of the agreement for sale of the shares by Mr. Eastgage to the applicant. That discussion and the conclusions stated in the reasons might, as I think, have been regarded by the Tribunal as a clear, if implied rather than express, contradiction of each of the contentions specified in that ground.

2. Even if the added ground were considered to have been sustained, I would not allow the appeal on that ground. For the reasons I have given, I am of the opinion that, on the material before the Tribunal, it was not open to the Tribunal to accept either contention.

3. There were two other grounds of appeal which Mr. de Wijn sought leave to add. They were:
   
   

"E. The Tribunal erred in law in failing to consider whether in calculating any profit to be included in the Applicant's assessable income pursuant to either s.26(a) or s.26AAA of the Income Tax Assessment Act ('the Act') it should have taken into account the true value of the shares at the date of acquisition.

F. The Tribunal erred in law in failing to give reasons for its decision (if any) not to take into account the true value of the shares at the date of acquisition in calculating any profit to be included in the Applicant's assessable income pursuant to either s.26(a) or s.26AAA of the Act."

It was common ground that the submission was made to the Tribunal that, in ascertaining whether the applicant had gained a "profit", within the meaning of that word in either s.26(a) or s.26AAA(2), on the sale of the shares to Hookway Aviation Pty. Ltd., and in ascertaining the amount of that profit, there should be deducted from the proceeds of the sale not only the price agreed by the applicant to be paid to Mr. Eastgate for the shares but also the amount by which the value of the shares, at the time the applicant purchased them, exceeded that price. The submission was grounded on contentions that the value in fact exceeded that price by a very substantial amount and that, because Mr. Eastgate owned beneficially all the shares in the applicant, any price which might have been agreed, whether $1 or $1 million, would have been - as the price in fact agreed was, according to the submission - lacking in economic reality. When the submission was advanced to this court on the hearing of the appeal, a number of authorities were cited in support of it: Australian Machinery & Investment Co. Ltd. v. Murphy 30 TC; Steel Barrel Co. Ltd. v. Osborne 24 TC 293; Skinner v. Berry Head Lands Ltd. 46 TC 377; (1971) 1 All ER 222; Petrotim Securities Ltd. v. Ayres 41 TC 389; (1964) 1 All ER 269; Commissioner of Taxation v. Becker (1952) 87 CLR 456; Comptroller of Stamps v. Joe White Maltings Pty. Ltd. (1956) VLR 253.

The reasons of the Tribunal for its decision are devoid of reference to the submission, and devoid of reference to the question of fact as to the value of the shares.

1. Section 43(2) of the Administrative Appeals Tribunal Act 1975 required that, subject to certain restrictions not presently relevant, the Tribunal should give reasons in writing for its decision, and that the reasons should include its findings on material questions of fact.

2. In the particular circumstances of this case the evidence probably could support either a finding that the value of the shares at the time the applicant bought them did not substantially exceed the price the applicant agreed to pay for them or a finding that Mr. Eastgate and Mr. Sellen believed at that time that the value did not substantially exceed the price. If the Tribunal made either of those findings, or if the Tribunal was unable to find the contrary of one or the other of those findings, it may be that it decided no question of law contrary to the submission advanced to it on the applicant's behalf, or at any rate contrary to so much of the submission as this court might be prepared to accept. Therefore, if the applicant's submission, or a modification of that submission, were held by this court to be correct in point of law, the failure of the Tribunal to mention either the submission or the questions of fact about value to which I have referred would leave this court and the parties unable to determine whether, on the one hand, error of law had vitiated the Tribunal's consideration of the submission or, on the other hand, the submission had availed the applicant nothing because the factual basis on which it rested had not found acceptance by the Tribunal.

3. There is also the further possibility that the Tribunal's failure to mention either the submission or the questions of fact which it raises was the result of a failure, by inadvertence, to consider the submission when the Tribunal was engaged in deciding the reference. Not every failure by the Administrative Appeals Tribunal to mention a contention advanced on behalf of a party will amount to a failure to comply with the requirements of s.43(2) of the Administrative Appeals Tribunal Act 1975, or demonstrate that the contention was not considered in deciding the matter before the Tribunal. But this submission concerning the ascertainment of profit was worthy of serious consideration and was seriously advanced to the Tribunal. It ought therefore to be inferred that the submission was inadvertently overlooked by the Tribunal either when the reference was being decided or when the reasons for the decision were being committed to writing. (Cf. Sullivan v. Department of Transport (1978) 20 ALR 323 at 353.) In either event there has been in my opinion an error of law by the Tribunal, so that the power of this court which s.44(1) of the Administrative Appeals Tribunal Act 1975 confers to decide the appeal "on a question of law" is available. The failure of the Tribunal to carry out the duty to consider and determine each question of law and fact relevant to the determination of the reference to it of the respondent's decision, or the failure to carry out the duty imposed by s.43(2) of that Act, as the case may be, has brought about a miscarriage of justice by preventing this court from affording the parties a determination whether the Tribunal's decision was vitiated by error of law : see Pettitt v. Dunkley (1971) 1 NSWLR 376.

4. The two grounds of appeal which the applicant seeks leave to add in respect of the ascertainment of the applicant's profit on the sale of the shares were foreshadowed in one of the questions of law asserted in the notice of appeal to be raised on the appeal. Although he opposed the grant of leave, Mr. Kendall did not suggest that the respondent would suffer prejudice or embarrassment by the grant of leave. I would grant leave to add the two grounds. And for the reasons I have stated I would allow the appeal on the second of those two grounds. The decision of the Tribunal should be set aside and it should be ordered that the case be remitted to the Tribunal to be further heard and determined according to law. I would include reference to further hearing against the possibility that the Tribunal may wish further to hear submissions on the question of the ascertainment of profit or that one or both parties may wish to apply for leave to advance further submissions. The circumstances do not call for the reception of further evidence and neither party sought an order that the Tribunal be authorised to hear further evidence.

5. In the particular circumstances it is in my opinion preferable that the court refrain from expressing any views it may have tentatively formed on the submissions advanced concerning the legal principles governing the ascertainment of profit. Until the Tribunal's findings of fact are known, any expression of views on those matters of law cannot be certainly known to be applicable to the resolution of the matter of the reference.

6. I would make no order as to the costs of the appeal. The notice of appeal did not, until amended in consequence of an application made during the hearing of the appeal, give clear expression to the only contention of the appellant which this court has upheld. On the other hand neither party contributed by its conduct to the making by the Tribunal of the error which has resulted in the allowance of the appeal.

JUDGE3

I concur in the orders proposed by Jenkinson J. I am fully in agreement with his reasons. There is nothing I can usefully add.