Glencore Investment Pty Ltd v Commissioner of Taxation
[2018] FCA 1544
•12 October 2018
FEDERAL COURT OF AUSTRALIA
Glencore Investment Pty Ltd v Commissioner of Taxation [2018] FCA 1544
File numbers: NSD 1679 of 2017
NSD 1900 of 2017
NSD 1956 of 2017Judge: THAWLEY J Date of judgment: 12 October 2018 Legislation: Federal Court of Australia Act 1976 (Cth) s 37M
Income Tax Assessment Act 1936 (Cth) Div 13
Income Tax Assessment Act 1997 (Cth) Div 815-A
Cases cited: BrisConnections Finance Pty Ltd v Arup Pty Ltd (2017) 252 FCR 450 Date of hearing: 12 October 2018 Registry: New South Wales Division: General Division National Practice Area: Taxation Category: No Catchwords Number of paragraphs: 11 Counsel for the Applicant: Ms T Phillips Solicitor for the Applicant: King & Wood Mallesons Solicitor for the Respondent: Ms J Lye of the Australian Government Solicitor ORDERS
NSD 1679 of 2017
NSD 1900 of 2017
NSD 1956 of 2017BETWEEN: GLENCORE INVESTMENT PTY LTD ABN 67 076 513 034
Applicant
AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Respondent
JUDGE:
THAWLEY J
DATE OF ORDER:
12 OCTOBER 2018
THE COURT ORDERS THAT:
1.Compliance with orders 7 to 10 of the orders made on 2 August 2018 is not required in relation to the industry experts.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from Transcript)THAWLEY J:
On 2 August 2018, Davies J, the docket judge for this matter, made various orders including:
7. The expert witnesses for each of the parties meet in conference/s before a Registrar of this Court on a date on or before 19 October 2018 for the purpose of identifying matters and addressing the issues in dispute between the respective expert reports.
8. The expert witnesses for each of the parties submit to the Court by 7 November 2018 a joint report/s of the outcome of the conference/s referred to at paragraph 7 above setting out the matters where they are agreed and where they are not and their respective reasons for that disagreement.
9. The conference/s of experts and the preparation of the joint experts’ report/s is to be private and confidential to the experts and is to be held without the attendance, or involvement of, the parties to the proceeding and the legal practitioners of the parties.
10. Save as contained in the joint report/s, and unless otherwise ordered by the Court, no evidence may be admitted of anything said or done by any person at the conference/s of experts.
The applicant contends that there is no utility in a conference (currently scheduled to occur next week) proceeding so far as concerns industry experts. The respondent disagrees. The parties are agreed that a conference should proceed as between the accounting experts.
The applicant says that the conference is likely to result in each industry expert simply restating their position and their disagreement with the opinions of the experts of the other party. The applicant says that, having regard to s 37M of the Federal Court of Australia Act 1976 (Cth), the orders for the expert conference should be vacated so far as concerns the industry experts. The applicant refers to the observation of Lee J in BrisConnections Finance Pty Ltd v Arup Pty Ltd (2017) 252 FCR 450 at [16] where his Honour said:
… Consistently with the Court’s obligation under s 37M(3) of the Federal Court of Australia Act 1976 (Cth), any directions power on 20 April 2017 was to be exercised in a way that best facilitated the just resolution of this dispute as quickly, inexpensively and efficiently as possible. I have no doubt whatsoever that if I had been apprised in April 2017 of the fact that Arup would argue that the principal expert evidence relied upon by BrisConnections was wholly inadmissible, I would not have ordered an expensive and time consuming conclave; rather, I would have ordered a preliminary hearing to allow a ruling to be made with celerity as to the admissibility of the Veitch Report, in accordance with s 192A of the [Evidence Act 1995 (Cth)]. Of course, as is to be expected, in April, a date for the exchange of objections was set close to the commencement of the hearing, but this is beside the point — this was not some “run of the mill” objection.
The applicant’s position is that all of the evidence of Mr Kelly should be put to the experts of both parties as informing, or potentially informing, the actual characteristics of the relevant hypothetical transaction to be considered for the purposes of answering the legal issues raised by Div 815-A of the Income Tax Assessment Act 1997 (Cth), Article 9 of the Agreement between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income, and Protocol, signed 28 February 1980, [1981] ATS 5 (entered into force on 13 February 1981), and/or Div 13 of the Income Tax Assessment Act 1936 (Cth).
The respondent’s experts have prepared their reports without regard to the evidence of Mr Kelly. The Commissioner objects, or at least proposes to object, to substantial parts of the evidence of Mr Kelly. For its part, the applicant objects, or at least proposes to object, to the whole of the reports of the Commissioner’s industry experts, Mr Kowal and Mr Ingelbinck, on the basis, inter alia, that they do not address the correct legal question. It is said that their reports are irrelevant and inadmissible, not being based on the specific factual assumptions which the statutory hypothesis requires.
The applicant acknowledged that it bears the onus of proof in the proceedings and that it bears the risk of the Court finding that its approach was misdirected.
The applicant and respondent also take different views on other matters. The applicant’s expert focuses on 2 February 2007 as the relevant time for a consideration of the terms that might be expected to have been agreed between independent parties dealing at arm’s length. The terms actually agreed covered a three-year period. The evidence of the respondent’s experts addresses the question by reference to each of the three years of income in dispute.
The applicant and respondent disagree as to whether the experts should consider the position of the applicant on the alternative bases:
(1)first, that the hypothetical independent producer/seller of copper concentrate operated as a “stand-alone entity”; and
(2)secondly, that it operated as part of a multinational global resources company, such as Glencore International AG.
Those three areas of dispute were the principal areas, although it appears there are others.
The correct legal question to be answered by the industry experts is not a matter which is appropriately determined by me, as duty judge, in circumstances such as the present.
Having regard to:
(1)the respective positions of the parties outlined above;
(2)the cost of holding the expert conference, noting that the experts are proposing to travel to Australia from overseas;
(3)the real prospect that little is likely to be achieved in the circumstances apart from a restatement of each party’s position;
(4)the fact that the parties have been unable to reach agreement as to the appropriate facts or assumptions or the questions to be put to the experts;
(5)the applicant’s foreshadowed objection to the whole of the evidence of the respondent’s industry experts; and
(6)the fact that the proceedings are listed for a case management hearing before the docket judge on 2 November 2018 and might well be able to be re-listed earlier, at which time the parties could, if they saw fit, re-agitate whether there is sufficient utility in an industry expert conference before the hearing, and on what basis such a conference should be held,
the Court orders that compliance with orders 7 to 10 of the orders made on 2 August 2018 is not required in relation to the industry experts. Those orders continue to apply with respect to the accounting experts.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley. Associate:
Dated: 12 October 2018
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