Hutchins, Peter G. v Commissioner of Taxation

IN THE FEDEP.AL COURT OF AUSTRALIA	i NO. VG 71 of 1386
VICTORIA DISTRICT REGISTRY	i NO. VG117 of 1386
GENERAL DIVISION	i NO. VG174 of 1986

NO. VG212 of 1986

1 NO. VG213 of 1386

NO. VG239 of 1986

BETMEEN: FETER G. HUTCHINS

.(ELIGIBLE PROMOTER }

Appellant

m: THE COMMISSIONER OF

TAXATION

THE

COMMONWEALTH OF AUSTRALIA

Respondent

CORAM :	Jenkinson J.
PLACE :	Melbourne

DATE	:	22 August,	1986
RE3SONS FOR JUDGMENT

Applications for directions in several appeals under the

Taxation (Unpaid Company Tax) Assessment Act 1982, in each of which the same person is appellant.

By virtue of the operation of s.4(7)(j) of that Act and s.136A of the Income Tax Assessmsnt Act 1936, the High Court Rules

as in force on

18 June 1973

under the Judiciarv

A c t

1903-1969

apply, so far as practicable, to and in relation to these appeals

in like manner

as those Rules applied immediately before that date

to and in relation to the like proceeding in the

High Court.

Each party seeks in each appeal an order that the other furnish particulars, from the respondent Commissioner particulars

the facts justifying his assessment

the recoupment tax

payable by the appellant on a promoters taxable amount, from the appellant particulars of the grounds of objection to that assessment.

An order had been made

by me on 7 July 1986 for further

particulars to be furnished

by the Commissioner in the appeal VG71

1986.

But the appellant was not legally represented on that

day, and I may have misunderstood what he sought by way

of order

f o r particulars. Having heard counsel for both parties I propose to pronounce an order that on or before a certain date the respondent furnish the appellant ; j i L i l further particulars of the assessment of which notice is numbered 220099/001 and dated 11 July 1985 (and hereinafter called "the recoupment assessment") -

(a)

stating each material

f a c t relied upon

by the respondent as constituting the

liability	w h i c h	the	said	notice
specifies;

and in particular, but without qualification

or limitation of the

requirements specified in paragraph

(a) hereof,

(b)(i)

identifying by date, number

and

amount or amounts of tax notified

thereby each assessment

ordinary

company

t x

undistributed

profits

tax

relation to Jarlas

Pty.

Ltd.

(hereinafter called

"the company"

upon which

the respondent relies

in support of the

recoupment

assessment (any such assessment being hereinafter referred to a5 a

“relevant assessment”

) ;

iii)

stating

when, where

and in

what

manner each relevant assessment or

a copy thereof (specifying whether

the

same

was the

relevant

assessment or a copy in each case)

was served upon -

A )

the company ;

( B )

any

vendor

shareholder

relation to the company for

the purposes of the Taxation

(Unpaid

Companv

Tax

Assessment Act 1382;

appellant.;

iiii)

stating

precisely

what

amount

ordinary

company

tax

undistributed profits tax notified

relevant

any

assessment

remained unpaid -

( A )

at the date of making of the

recoupment assessment;

( B )

on the date of institution

of this appeal;

(iv) identifying each amount

paid

the

Commissioner

respect

ordinary

company

tax

undistributed

profits

tax

rel v nt

relation

any

assessment stating -

( A )

the amount of such payment;

(B) by whom such payment was

made ;

payment by the Commissioner;

(D) =hether such payment was in

the	Commissioner’s

contention

made

accordance wi t.h an arrangement of a description contained in s.20 of the

Taxation

(Unpaid

Company

Tax) Assessment Act 1982	or
5-21 of the said Act and stating which of the said

sections

and

whether

the

arrangement was wholly or

4 .

partly in writing or	wholly
or partly oral;

i c )

stating by reasan of what acts,

facts, matters, circumstances and

things the respondsnt.

cclntends

that the company

was unable at the

time

referred

to in

paragraph

7il)(g) or' the Taxation (Unpaid Company Tax) Assessment Act 1982

having regard to other debts

the

company

pay

Commissioner all company tax as defined for the purposes of the

said

paragraph

7(l)(g)

due

and

payable by the company at that

time;

stating the acts, facts,

matters,

circumstances and things by reason

whereof it is contended by the

Commissioner that the appellant is

a member of

constitutes the

eligible

promoters

class

relation

the

c mpany

relation to the year of income within tile meaning of sub-section

7 ( 8 ) of

the

Taxation

(Unpaid

Campany Tax) Assessment Act

1382

with which

this

appeal

concerned.

It is

a question, concerning which the parties have

advanced submissions

but I have reached no conclusion, whether the

subject of each of the appeals under present consideration is, as

the subject of

an appeal such as this which had been heard and

determined before the commencement

the Taxation Boards

Review (Transfer of

Jurisdiction) Act 1986

would have been, the

taxpayer's objection against the assessment or the decision of the Commissioner on the taxpayer's objection, which decision will be the subject of any appeal such as this which derives from an

objection lodged on or after the commencement of that Act.

These

appeals all derive

from objections lodged and forwarded to this

court before the commencement of that Act.

Mr. Batt, Q.C. who

appeared with Mrs.

Moshinsky for

the respondent Commissioner in

each appeal, submitted that any requirement

of the kind specified

in paragraph (a) of

the order for particulars should relate, not

to the assessment, but

to the decision of the Commissioner on the

taxpayer's objection, because

it gas in Mr. Batt's submission that

decision which is the subject of the appeal, not the assessment. I therefore make it clear that the terms in which paragraph (a) of the order is expressed reflect no conclusion about the application tu this appeal af the amendments effected by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1386, but Were chosen as affording the best means of enabling the issues to be ascertained

and the appeal conducted in

orderly and just manner, whether it

be the Commissioner's decision on the objection or the objection

which is the subject

of the appeal..

The respondent Commissioner

seeks an order in the appeal

VG71 of 1986 for particulars of some of the grounds of objection.

Mr. Pagone of counsel, who appeared for the appellant in relation

to that appeal

(but not in relation to all

of the appeals

with

which these reasons are

concerned), submitted that the appellant

should not be required

to particularise grounds of objection,

f o r

those

grounds

had

constituted

the

subject

matter

the

Commissioner's decision, unqualified by any particularisation, and it was that decision which now fell to be examined in the appeal. Alternatively, Mr. Pagone submitted, the appellant should not be required to furnish particulars until after discovery of documents

had been made by the respondent.

In support of that submission

Mr. Pagone frankly admitted that one of the objectives which

the

appellant was pursuing in the appeal

was

exposure of

all the

processes which had led the Commissioner and his officers to the making of the assessment against which the appellant had objected,

so that any circumstance

which the appellant

is unaware and

which might

negative

the

appellant’s liability

promoters

recoupment tax may be disclosed. The objective was a legitimate

one for the appellant to pursue, it was submitted, particularly in

relation to a liability

alleged to arise

under

provisions

described in MacCormick v. Federal Commissioner of Taxation (1984) 84 A . T . C . 4230 at 4234 as “a complex piece of legislation”, and a

liability created by

reference to a number of circumstances, of

some of which a taxpayer is unlikely to	gain knowledge, except by
discovery and interrogation.

I think the disclosure

of the issues between the parcies

is likely to be best, achieved if the respondent”s particulars

assessment be followed by particulars

of the grounds of objection,

before any other interlocutory proceeding. If after discovery by

the respondent the appellant desires to amend his particulars, the

court can entertain an application to amend

if the respondent will

not consent.

The ground of objection numbered 2 in the notice

objection, and in the notice	of objection in all the	other
appeals, is in these terms:

”The Act is

unconstitutional and accordingly

the assessment is null and vclid and of no

effect.”

The Act to which reference

is there made is the Taxation

(Unpaid

7 .

Company Tax) Assessment Act

1982 and the assessment

is that

against which the objections are made.

The respondent sought

particulars of that ground, but

s.78B

of the Judiciarv Act 1903

requires me, I

think, to put the appellant

now to his

election

either to give

to the Attorneys-General

of the Commonwealth and

the States

a notice of the kind which that section contemplates

to declare his decision not to rely upon that ground.

In the appeal VG71 of

1386 I propose to order that the

appellant on or before a certain date give -

(a)

particulars of any act, fact, matter or circumstance supporting or contributing to support any of the grounds numbered 1,

3 , 4 and

5 of

the grounds contained in

the

notice of objection

against

thz

assessment numbered

220099/001 which is

not an act, fact, matter or circumstance supporting or contributing to support any of the said grounds other than the grounds numbered 1, 3, 4 and 5;

(b) particulars of

the allegation contained

the

first

clause

the

ground

numbered 6, stating

whether

it is

intended thereby to allege that none

the shares in the company

w a s

purchased

after 1 January 1572 and whether it is

intended thereby to allege that none of

the shares in the company purchased after

1 January 1972 w a s purchased under

scheme of the description contained	in
the said clause and giving in respect	of
each allegation intended particulars	of

the

material

facts relied upon in

relation to the

allegation;

(c)

particulars of the allegation contained

in the

ground

numbered

8, stating in

respect of -

(a) ordinary company tax; and

(b) undistributed profits tax;

(i) the amount due and payable by the company for the year of

income ended 30 t .h June, 1380;

(ii) the amount, date and by whom

the said amount

or any part

thereof was paid;

(iii) each material

fact

relied

upon

relation

the

allegation that the amount	at
no time remained unpaid;

(d)

particulars of "the year of income

in which the

last

purchase

time

within

the

meaning

the

Act

occurred" to

which reference is made

in the ground numbered 3 , stating what that year is alleged to be, and particulars of the "last purchase time" aforesaid, stating when that

time is alleged to

have been;

( e )

particulars

the

objection

which

reference is made

the

ground numbered 11, stating when and

by what person

or persons the said

objection was lodged

and

against

what assessment3

(f) particulars

each error of

computation

comprehended

the

allegation in the ground numbered

that if (which is denied) any

promoters taxable amount exists in

relation to the taxpayer in relation

to the company then the Commissioner

has not correctly computed the same

under the provisions of the Act;

(g) particulars of

each material fact

relied upon as justifying

the

allegation contained in the ground

numbered 15

that the appellant is

not a member of an eligible promoters class in relation to the

company within the meaning

s . 7 ( 8 )

of the Act

;

(h) particulars of

each material fact

relied

upon

justifying

the

allegation contained in ths ground

numbered 17 that

there

promoters recoupment tax payable

the appellant in relation to the

company by reason of the provisions

of s . 9 ( 6 ) of the Act;

Cj) particulars of each

material fact

relied upon as justifying the

3 .

allegation contained

in the ground

numbered 13 that the said notice of assessment has not been duly served upon the appellant.

The appellant seeks in the appeal

VG71 of 1986 an order

that the respondent give discovery

of a number of classes of

documents, the descriptions of which are contained

in a draft

order submitted

f o r the consideration of the court and

of the

respondent. Some of the classes

of documents of which discovery

is expressed to be ordered in that draft would almost certainly

include documents containing information respecting the affairs

a person other than the appellant, namely

Jarlas Pty. Ltd.

"vendor

shareholders"

that

company.

That information,

contained in those documents (and, perhaps, contained in any description which might be given, in an affidavit of discovery, of

such a

document), would have been acquired by the respondent's

officers in the performance

of their duties as officers. Mr. Batt

submitted that discovery

of those classes of documents should not

be ordered, having regard

to s.16 of the Income Tax Assessment Act

1936. But he drew to my attention, among other authorities, the decision of Enderby J. in Re Fortex P t v .

Ltd. (1986) 86 A.T.C.

4351, which, as he frankly admitted, contradicts

his submission.

Section 16(2) of the Income

Tax Assessment Act 1936

expresses a prohibition, but the prohibition is probably not

communication to a court

: see Canadian Pacific Tobacco Co.

Ltd.

v. Stapleton (1952) 36 C.L.R. 1 at 6.

Section 16(3) affords an

officer a privilege to withold communication to

a court of

"any

matter or thing coming under

his notice in the performance of

his

duties as an

officer except

when it is

necessary" to make the

communication

" f o r

the

purpose

carrying

into

effect

the

provisions of the

Income

Tax Assessment

Act

1936".

The

prosecution of such a proceeding as each of these appeals

is could

not in my opinion be doubted to be carrying into effect those

provisions, and compliance with an order of the court, whether

made at

or before trial, to divulge to

the court information

relevant to the subject

of the proceeding is, in my opinion,

necessary

for

the

purpose of carrying

those

provisions

into

effect. Of course, compliance with orders of the kind commonly

made f o r communication by

a party of information to a court

involves communication to other parties as well as to the

court.

And so it will be if discovery is ordered in this appeal. But

such an order be made,

compliance with that

order

the

respondent or by one of his

officers at his direction will be in

the performance of

his duty as an "officer", within the meaning

that

word

s.16, and

therefore

will

not

involve

any

contravention of the prohibition contained in

s . 1 6 ( 2 ) .

So,

too,

if the expression "any person" in

s.16(2) were, contrary to my

opinion, held to comprehend this

court, the making of an order

the court for discovery would in my opinion entail the consequence

that compliance with the order would satisfy the requirements

the exception in s.16C2) : "except in the performance

of any duty

as an

officer".

Mr.	Batt advanced other submissions against adoption of

particular provisions of the draft

order, that the provision was

fishing or

too wide or

comprehended irrelevant documents. But

again Mr. Batt was

punctilious to assist the court, citing among

other

authorities

Mullev

Manifold

i 1 9 5 9 )

103

C.L.R.

341,

wherein Menzies J. observed (at 345) : "Only a document which

relates in some way

to a

matter in issue is discoverable, but it

is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary". Where, as here, a very wide range of issues arise

upon

the

notice

objection,

the

scope

of discovery

necessarily wide.

I propose to order that within

a certain period after

particulars have been furnished on both sides the respondent make

and file and serve	on the appellant	a copy of an affidavit
discovering -

(i)

documents

any

constituting

evidencing

any sale of shares

Jarlas Fty. Ltd. ("the company") to

Allied Technical

Services Pty. Ltd;

(ii) any notice or copy of any notice of assessment of ordinary company tax or undistributed profits tax in relation

to the company relied upon by the respondent to support the recoupment assessment;

( iii

any balance sheets, profit and loss accounts, books of account or other documents whatsoever showing or tending to show that at the time

referred to in paragraph (d) of the particulars supplied the company was unable, having regard to the other

debts of the

company, to pay to the

respondent, all the

undistributed

profits tax of $2,534 referred to in

the said particulars;

(iv) any the relevant assessment mentioned in

document

evidencing

service

paragraph (c)	( i) of the	said
particulars;

document

any

co stituting

12.

evidencing the agreement referred to

paragraph (4

1 of

the

further

particulars	upplied	or	any	term
thereof;

(vi) any note, memorandum or other writing

whatsoever of or evidencing

the

conversation referred to in paragraph

(4) of

the

further

particulars

supplied or any of the content of the

said conversation;

(vii) any

correspondence or copies

thereof

between -

( A )

The respondent and the vendor

shareholders or any of them or

any person on behalf of the

vendor shareholders or any of

them;

(B)

The respondent and the company

or any person on behalf of

the

company

regarding

payment

the

said

undistributed profits tax;

(viii) any notes, memoranda or other writing whatsoever of or evidencing any

conversation between

( A )

The respondent or any person on

behalf of

the respondent and

the vendor shareholders or

any

of them or any person on behalf

of the vendor shareholders	or
any of them;

(B)	The respondent or any person on behalf of the respondent to any person on behalf of the company

regarding

payment

the

said

undistributed profits tax;

(ix) any receipt or copy receipt issued by the respondent for payment of the said undistributed profits tax or any part thereof;

( X )

any

notes,

memoranda,

records

other writing whatsoever in relation

to -

( A ) service of the relevant

assessment

and

any

copies

thereof

referred

13.

paragraph c)

( i )

the

particulars supplied;

(B) the arrangement referred to in

paragraph ( 4 ) of

the

further

particulars supplied;

(xi) return of income of the company for -

( A )

The year of income

ended 30

June, 1380;

( B )	The year of income	ended 30
June, 1981;

ended 30

June, 1382;

(D) The year of income

ended 30

June, 1383

( E )	The year of income	ended 30
June, 1984;

(F) The year of income

ended 30

June, 1385;

(xii)

letter

any

other

written

communication or copy thereof passing

between a liquidator of the company

and the respondent any part of the

contents of which document relates to

a question raised in relation to the

company by any of the provisions of

paragraphs (a) to (h) (inclusive) of s.7( 1) of the Taxation (Unpaid

Companv Tax) Assessment Act 1982.

The respondent seeks

an order that

he serve on the

appellant a notice for discovery with an annexed

schedule

specifying the documents and the classes and kinds of ocuments of which discovery is sought. That order was made in another appeal in which the parties are the same, VG8 of 1986, and the appellant

does not oppose the making

such an order in this appeal, VG71

of 1386.

I shall pronounce such an order, specifying a time

f o r

service shortly after particulars	have been delivered on both
sides.

14.

In the appeal

VG117 of 1986, which concerns Plymouth

Investments Pty. Ltd., orders will be made for particulars in the

terms, mutatis mutandis, of the

orders in VG71 of 1986.

Similar

orders for particulars will be made in	each of the appeals VG174,
VG212, VG213 and VG239 of 1986.

In the appeal VG117 of 1986 the order for discovery

the respondent will require

an affidavit discovering

(i)

documents

any

co stituting

evidencing any sale

Plymouth Investments Pty. Ltd.

("the

company") to Levart IVic.) Pty. Ltd;

(ii) any notice or copy of any notice of assessment of ordinary company tax or

undistributed profits tax

in relation

to the company relied upon by the

respondent to support the recoupment

assessment;

(iii)

any balance

sheets,

profit

and

loss

accounts, books of account or other documents whatsoever showing or

tending to show that

the

time

referred to in paragraph (e) of the particulars supplied the company was unable, having regard to the other

debts of the company, to pay to

the

respondent all the

undistributed

profits tax of $2,051.50 and the sum

of $143.88 additional tax referred

in the said particulars;

(iv) any

document

evidencing

service

the relevant assessment mentioned in paragraph (c) (i) of the said particulars;

any notes, memoranda, records or other writing whatsoever in relation

to the service of the

relevant

assessment

and

any

copies

thereof

referred to in paragraph (c)(i) of

the particulars supplied;

(vi) a copy of the

purportsd

objection

15.

dated 21st November, 1984 referred to

the

further

particulars

assessment;

(vii) any

communication or copy thereof passing

between a liquidator of the company

and the respondent any part of the

contents of which document relates to

letter

other

written

a question raised in relation to the

company by any of the provisions of paragraphs (a) to (h) (inclusive) of s.7( 1) of the Taxation (Unpaid Company Tax) Assessment Act 1982;

(viii) return of income of the company f o r -

( A )

The year of income

ended 30

June,

1377;

(B) The year of income

ended 30

June, 1973;

income

ended

June, 1973;

(D) The year of

income

ended

June, 1980;

(E) The year of income

ended 30

June, 1981;

(F) The year of income

ended 30

June, 1982;

(G) The year of income

ended 30

June, 1983;

(H) The year of income

ended 30

June, 1984;

(I) The year of

income

ended

June, 1985.

In the appeal VG174

1986 the order will comprehend

the following

documents

any

constituting

evidencing any sale of shares

Jatem

Holdings

Pty.

Ltd.

("the

company") to Levart Pty. Ltd;

(ii)

any notice or copy of any notice

assessment of ordinary company tax or undistributed profits tax in relation to the company relied upon by the

respondent to support the recoupment

assessment;

(iii) any

balance

sheets,

profit

and

loss

accounts, books of account or other documents whatsoever showing or tending to show that at the time

referred to in paragraph (d) of the particulars supplied the company was unable, having regard to the other

debts of the company, to pay to the

respondent

all

the

undistributed

profits tax of $2,594 referred to	in
the said particulars;

(iv) any the relevant assessment mentioned in

document

evidencing

service

paragraph	( c ) (i)	of	the	said
particulars.

(V)

any correspondence or copies

thereof

between the Respondent and the vendor

shareholders or any of them, or any

person on behalf of the ;7sncior

shareholders, regarding a request or

the

granting

of a request

accordance with sectian 16 of the Taxation (Unpaid Company Tax ) Assessment Act 1982;

(vi)

any note,

memoranda or other

writing

whatsoever of or evidencing any

conversation between the Respondent

or any person on behalf of the Respondent and the

vendor

shareholders or any of them, or any person on behalf of the vendor

shareholders regarding

a request in

accordance with section 16 of the Taxation (Unpaid Company Tax ) Assessment Act 1982;

(vii)

letter

any

other

written

communication or copy thereof passing between a liquidator of the company

and the respondent any part

of the

contents of which document relates to

a question raised in relation to the

company by any of the provisions of

paragraphs (a) to (h1 (inclusive) of

~ . 7 ( 1 )

of the

Taxation

(Unpaid

Company Tax) Assessment .Act 1982;

(viii) Return of income of the Company for -

17.

< A )	The year of	income	ended	30
June, 1979;

(B) The year of

income

ended

June, 1980;

( C )

The

year of

incame

ended

June, 1381;

(D) The year of

income

ended

June, 1982;

(E) The year of

income

ended

June ,

1983.

In the

appeals VGZ12, VG213

and VG239 the

order

with

respect to discovery by the respondent will

be of the kind made,

in respect of discovery by

the appellant, in the appeals VG8 and

VG71.

too in all

the appeals other

than the latter two the

order for discovery by the appellant will be in the same terms	a
in those two.

that I

E	steps
c

[1986] FCA 675

22 Aug 1986