IOOF Holdings Limited and Commissioner of Taxation
[2012] AATA 378
•22 June 2012
[2012] AATA 378
| Division | TAXATION APPEALS DIVISION | |
| File Number(s) | 2012/0578 | |
| Re | IOOF Holdings Limited | |
| APPLICANT | ||
| And | Commissioner of Taxation | |
| RESPONDENT | ||
DECISION
| Tribunal | Senior Member O'Loughlin |
| Date | 22 June 2012 |
| Place | Melbourne |
The application for a direction that the Respondent produce particular documents to the Applicant is refused.
.........................[sgd]...............................................
Senior Member O'Loughlin
Catchwords
Production of documents: whether appropriate, whether direction sought premature.
Announced legislation as yet un-enacted: whether Tribunal can have regard to the announcement
Legislation
Administrative Appeals Tribunal Act 1975, s 37(2), 43(6)
Income Tax Assessment Act 1997, s 716-405
Other
Tax Laws Amendment (2010 Measures No 1) Act 2010
Tax Laws Amendment (2012 Measures No 2) Bill 2012
Cases
Cosco Holdings Pty Ltd v FCT (1997) 37 ATR 432
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566
McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423
Re Thiagarajan and Secretary, Department of Employment and Workplace Relations [2007] AATA 2065
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Telstra Corporation Ltd v Minister for Communications, Information Technology and the Arts [2007] FCA 1398
Trade Practices Commission v Arnotts (1989) 88 ALR 90
Vandenberg and Minister for Immigration and Ethnic Affairs [1979] AATA 159
REASONS FOR DECISION
Senior Member O'Loughlin
In the substantive proceedings the Applicant seeks a review of a deemed decision to disallow an objection to another deemed decision to deny a private ruling. In addition to a decision in effect allowing the private ruling it sought in its application, the Applicant also wants that decision to take effect retrospectively pursuant to s 43(6) of the Administrative Appeals Tribunal Act 1975 (C'th) (the AAT Act) to counter the effect of anticipated, but as yet un-enacted, legislation that will also have retrospective effect.
To assist its claims for a decision of the Tribunal to have retrospective effect in the substantive proceedings, the Applicant seeks a direction from the Tribunal pursuant to s 37(2) of the AAT Act that the Respondent provide to it, and to the Tribunal, three categories of documents. The Respondent resists this request.
The subject matter of the private ruling application at the heart of the substantive proceeding is the applicability of s 716-405 of the Income Tax Assessment Act 1997 (C'th) to the circumstances surrounding the Applicant’s purchase of shares in Australian Wealth Management Limited (AWM). More specifically the underlying taxation issue concerns whether or not rights pursuant to a variety of contracts to which the newly acquired subsidiary members of the Applicant's consolidated group, namely AWM and its wholly owned subsidiary companies, were parties are rights to future income in respect of which deductions are presently allowable over time.
On 25 November 2011 the Assistant Treasurer and Minister for Financial Services and Superannuation announced that the legislation creating the deduction entitlement in respect of rights to future income would be amended with retrospective effect from 31 March 2011. Taxpayers who have the benefit of private rulings issued before 31 March 2011 are not to be affected by the changed legislation. On 24 May 2012 the Government introduced Tax Laws Amendment (2012 Measures No 2) Bill 2012 (the bill) to give effect to this proposal but the bill has not been passed by both houses of the Parliament.
The Applicant does not have the benefit of a private ruling issued before 31 March 2011 and contends that it should have because:
(1)it applied for a private ruling on 30 December 2010 (a request that the Respondent only accepts was received by the Australian Taxation Office (ATO) on 10 January 2011);
(2)the request was a routine or straight forward application of the example given in the explanatory memorandum to the bill that, when enacted, introduced s 716-405 and the private ruling ought to have been given;
(3)the Respondent indicated to the Applicant that the private ruling would be processed within 28 days; and
(4)the private ruling ought to have been processed within 28 days but was not.
To get to the point of being able to make the substantive application the Applicant activated the procedures to create a deemed negative private ruling that allowed an objection to be lodged. The Respondent did not determine the objection and the Applicant activated the processes by which a deemed disallowance of the objection arose allowing a review in this Tribunal.
Because of the timing of events the Applicant contends that it is entitled to both the private ruling it sought and an order from the Tribunal pursuant to s 43(6) that that private ruling take effect from a date prior to 31 March 2011.
Documents the Applicant seeks
In support of the retrospective aspect of the contention above, the Applicant contends that the delay within the ATO and the failure to make the private ruling that should have been made was the result of decisions made within the ATO not to issue private rulings in the knowledge that the topic of deductions for rights to future income was under review and that retrospective legislation was a possible outcome. With a view to making good that contention the Applicant has sought a direction from the Tribunal pursuant to s 37(2) of the AAT Act that the Respondent produce three categories of documents, namely:
1The Commissioner of Taxation's (the Commissioner) policy or policies on providing private rulings to Taxpayer's (sic) in relation to the application of the rights to future income provisions from the time that the Tax Laws Amendment (2010 Measures No 1) Act 2010 (Cth) (Amendment Act) (that is, 3 June 2010) was enacted until the present, including but not limited to directives, policy documents, internal email or any other documents.
2Correspondence and/or any other document recording such correspondence, including but not limited to records (written or electronic) of phone calls, between the Commissioner and the Commonwealth Department of the Treasury and Finance and between the Commissioner and Board of Taxation about:
(a)private rulings made in relation to the rights to future income provisions pursuant to the Amendment Act; and
(b)the private ruling application made by IOOF Holdings Limited 30 December 2010 (the Private Ruling Application).
3Notes, correspondence and/or any other document in relation to the Private Ruling Application, including but not limited to records of phone calls or consideration relevant to of technical aspects of the application.
Basis advanced for the entitlement to the documents sought
The Applicant puts its entitlement to the documents it seeks on the footing, largely lifted from the transcript of its oral submissions, that there has been a form of bad faith on the part of the Respondent particularised as follows:
The ruling that was sought was not complex and fell clearly within the example given in the explanatory memorandum. That leads to the conclusion or rather to the submission that the ruling was not complex and could and should have been made and determined within the 28 day period.
The next integer is this: conduct after the event, relevantly March, is relevant, … to throw light on earlier matters. That is an [un]exceptional proposition. You look at post conduct to throw light on and explain and make clear earlier matters.
… the delay, inordinate delay, of nine months, as it happens throws light on why it was … that no decision was made by March. And the reason is that the Australian Taxation Office took the view that because of the possibility of amending legislation excluding the right [to a deduction] in the circumstances sought in the ruling it should, therefore, go slow and not determine it until there was some clarity about the possibility of legislation.
… under section 2A [of the AAT Act] …First, … [the Applicant is] entitled to a ruling and, secondly, on the date of the ruling … that a fair and just outcome is to backdate the ruling to when it otherwise ought to have occurred which is prior to March.
…… And … the public policy underlying subsection (6) is to cure delays; cure the mischief caused by a delay. It is certainly open under subsection (6) to backdate and that the Tribunal is not confined to being in the shoes of the Commissioner. …
The Applicant expressly acknowledges that there has not been any dishonesty on the part of the ATO and that it may ultimately transpire that not issuing private rulings in anticipation of changes to be made to legislation is permissible.
The Applicant contends that the issues in the substantive proceeding set the context for the present discovery application. The Applicant frames those issues as:
(a)Whether the Tribunal will uphold IOOF's application for review of the deemed refusal by the Commissioner of IOOF's Amended Objection. …. ; and
(b)Whether, if the Tribunal does grant a favourable taxation ruling to IOOF in relation to its review of the Amended Objection, the Tribunal will order, pursuant to s.43(6) of the AAT Act, that the Tribunal's ruling will operate from a date prior to 31 March 2011. This issue may be regarded as the retrospectivity issue.
To an extent this manner of framing the retrospectivity issue either misconceives or inaccurately describes the function of the Tribunal in a review of a private ruling objection decision. This Tribunal does not issue private rulings. Rather, on a review the Tribunal may exercise all the powers and discretions that are conferred on the person who made the decision under review and it can affirm, vary or set aside the decision under review and make a substitute decision or remit the decision to the original decision maker for reconsideration.[1] An objection decision concerning a private ruling alters the effect of an earlier private ruling.[2] The process in the Tribunal therefore does not entail issuing any private ruling. Against this backdrop, in the substantive proceeding it will be necessary to embrace whether or not the Tribunal can make a decision, invoking the aid of s 43(6), that takes effect from a date earlier than the date of the decision (in this case a deemed decision) under review.
[1] See AAT Act, s 43(1).
[2] See Taxation Administration Act, Schedule 1, s 359-70.
With the foregoing in mind, it is clear that the appropriate date of effect of any positive decision of the Tribunal is squarely in issue.
Section 43(6)
At the heart of the Applicant's request for an effective date of a private ruling prior to 31 March 2011 is s 43(6) which provides:
(6) A decision of a person as varied by the Tribunal, or a decision made by the Tribunal in substitution for the decision of a person, shall, for all purposes (other than the purposes of applications to the Tribunal for a review or of appeals in accordance with section 44), be deemed to be a decision of that person and, upon the coming into operation of the decision of the Tribunal, unless the Tribunal otherwise orders, has effect, or shall be deemed to have had effect, on and from the day on which the decision under review has or had effect. [Emphasis added.]
That section contemplates that the usual course would be that a decision of the Tribunal takes effect from the date of the decision that is under review. Retroactivity is also contemplated by the power to order otherwise.[3] For there to be a departure from the usual course, and for additional retroactivity to be conferred, there would need to be a reason. In terms of the duty of the Tribunal,[4] the departure would need to be because it is required to cause the decision to be the correct or preferable decision.
[3] See Re Thiagarajan and Secretary, Department of Employment and Workplace Relations [2007] AATA 2065 at [61] and the caution there noted.
[4] A duty or responsibility to make the correct or preferable decision - see Shi v Migration Agents Registration Authority (2008) 235 CLR 286 and the endorsement of Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589 per Bowen CJ and Deane J and the explanation of these terms in McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423 at 427 per Gleeson CJ and Kirby J.
To redress a prejudice caused by an orchestrated or intended delay is a reason that might be legitimately advanced in support of an application for the effective date of a decision to be earlier than it would otherwise be presumed to take. That is what the Applicant proposes to do in the substantive proceeding. Whether that is a sufficient foundation for such a decision is a matter for the future.
The Respondent’s opposition to production
The Respondent resists production of the documents sought and contends that:
(1)the Applicant's request for the documents relying on an order under subsection 43(6) of the AAT Act being required is premature in that there is no accrued right to a departure from the ordinary operation of s 43(6) and that it is hypothetical in that it anticipates legislation as yet not enacted;
(2)the documents sought by the Applicant are irrelevant and, to the extent that the Applicant seeks the documents in support of its allegation that the Respondent acted in bad faith in refusing to rule on its private ruling application and objection, the request is speculative and should be rejected on the basis it amounts to 'fishing'; and
(3)even if the Tribunal has a power to backdate the date on which the private ruling was issued, this is not a case where it is appropriate to exercise the discretion in subsection 43(6) of the AAT Act to backdate the date of effect to 30 March 2011 or earlier having regard to the statutory context, such that the Applicant's request for the documents is futile and should be denied.
Unsurprisingly the Applicant contends to the contrary in respect of each issue.
The premature contention
In relation to the Respondent's premature contention the Applicant contends that:
(1)… the amending legislation is now before Parliament and will most likely be law before the Tribunal makes its decision. It is therefore not only possible, but likely that IOOF will request that the order be effective from before 31 March 2011. Evidence of delay in anticipation of amending legislation therefore "may be" relevant for the purposes of s 37(2) [of the AAT Act];
(2)the decision in Vandenberg and Minister for Immigration and Ethnic Affairs[5] is not relevant because the rationale for the wait and see approach was a potential that the facts supporting a decision might change which can be contrasted with the present case, in which the underlying facts will not change, regardless, of whether the tax laws change. IOOF is not asking the Tribunal to make an anticipatory decision in the sense outlined in Vandenberg; and
(3)… the exercise of the Tribunal's discretion under s.43(6) is more than a mere procedural matter to be determined at the end of proceedings. Rather, in these proceedings, it is a substantive matter to be decided by the Tribunal. Indeed, IOOF specifically included the date at which a ruling is to take effect in its application to the Tribunal as a matter to be determined by the Tribunal. In order to deal efficiently with the litigation it makes obvious sense for all the evidence that may be relevant to the Tribunal's determination to be before the Tribunal at the hearing, rather than waiting on the Tribunal to decide whether IOOF is entitled to a favourable ruling before, presumably, holding a second hearing to determine whether to make the ruling effective from before 31 March 2011; and
(4)whether there are accrued rights is a matter for the substantive proceeding to determine.
[5] [1979] AATA 159.
Because the announced changes to the 1997 Assessment Act are not yet law, if the contractual rights the subject of the Applicant’s private ruling application are in fact rights to future income, there is no need to have any departure from the usual course s 43(6) takes. The foundation for a departure is a hypothetical proposition that the law will change and will change in the way that has been announced. Any proposal for legislation can change in the course of the legislative process. Proposed retrospective legislation, particularly retrospective legislation that would place greater financial burdens on the community or parts of it, might have greater prospect of change through the process from announcement to enactment. There are more ways in which the announcement might change. For example, there could be changes to the scope of the reform, the date from which it might take effect or the circumstances in which otherwise affected people are excluded from the scope of the change: i.e. the exclusion might change from a private ruling having been issued to a private ruling having been applied for. It is not the role of the Tribunal to anticipate what might happen. The Tribunal's role is to make the correct or preferable decision having regard to the legislation operative at the time of the decision.
Accordingly the Tribunal refuses to make a direction that the documents sought by the Applicant be provided.
If the legislation were to change before a decision of the Tribunal were made it would then be necessary to consider whether it is possible for the Tribunal to make a decision in relation to the private ruling objection having regard to the changed legislation. That is not a matter that has been argued as yet and is not for present decision. Accordingly it is not appropriate to anticipate that a Tribunal decision in the substantive proceeding could be made with respect to repealed legislation that by the terms of the repealing legislation is no longer operative for the Applicant and make a direction for production of documents that could or would become operative upon a change in the underlying legislation.
The current circumstance may well present a form of catch 22 difficulty for the Applicant. Without a change to the legislation the Applicant has no need for the documents sought. The Applicant requires the legislation to change to set up the need for retrospectivity and therefore the perceived need for the documents it seeks. However if the legislation does change as foreshadowed, and if the Applicant is no longer entitled to any private ruling as a consequence, then production of the documents sought serves no purpose. The latter potential is one that awaits further argument and analysis; however the difficulty presented by the foregoing conclusion not to direct production of the documents sought in this context has been considered and is acknowledged.
The Respondent’s other contentions
Because there is the potential that this application for a direction that documents be produced may have another airing, it is appropriate that the Tribunal's observations concerning the other bases on which the Respondent resists producing the documents be dealt with, even if briefly.
The irrelevant/speculative fishing contention
The Respondent contends that the documents sought are irrelevant, that the Applicant is conducting a fishing expedition and has not laid a proper foundation for the documents sought to be produced and that the request ought be denied and, further, in these circumstances it is not necessary to address the question of whether or not the documents sought actually exist. In support of this contention the Respondent says:
(1)… the tests for relevance in respect of a summons is described by Spender J in Cosco Holdings Pty Ltd v FCT (1997) 37 ATR 432 at 439-440, quoting Beaumont J in Trade Practices Commission v Arnotts (1989) 88 ALR 90.
His Honour concluded, at 103, as follows:
The test of adjectival relevance is satisfied if the material has apparent relevance. In my opinion, the documentation called for here could possibly throw light on the issues in the main case. In my opinion, adjectival relevance is established.
Notwithstanding the use of the word "possibly" in this paragraph, in my opinion, that word is not used in any speculative sense. I take his Honour's conclusion expressed in that paragraph as an acquiescence to the correctness of the submission that the material sought could reasonably be expected to throw light on some of the issues in the principal proceedings. It is not a question of looking at the documents to see if the documents might permit a case to be made. [Emphasis added by the Respondent.]
(2)… the Full Federal Court stated in Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566, 574:
27 In the present case, Mr Kennedy's allegation that the assessments were made in bad faith is made without any evidentiary basis or any pleadings to substantiate the claim in relation to specific documents. In substance, Mr Kennedy is seeking the additional documents in order to explore whether there is any possible foundation for raising such an allegation. The present application seeks to cast a wide net, without any foundation in the evidence, for the purpose of ascertaining if any basis exists on which to challenge the Commissioner's assessment, and for this reason the request for documents should be refused: see Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (1997) 37 ATR 432 …
28 The Presidential Member was correct to hold that no process of reasoning had been forthcoming which supported the claim as to the relevance of the additional documents sought, and on the face of their description no such relevance is apparent. The submission by Mr Kennedy that his Honour failed to consider whether the documents may be relevant lacks cogency because, to substantiate such an assertion of error, Mr Kennedy must show how a particular document or category of documents may be relevant to specific issues of fact relating to the excessiveness of the assessments issued to him. That has not been shown. The intent of s.14ZZF of the TAA was clearly to narrow the class of documents which the Commissioner must produce to the Tribunal, and in the absence of a demonstration by Mr Kennedy of the relevance of any additional documents, it is not appropriate to widen the class of documents which the Commissioner has already provided in this case. [Emphasis added by the Respondent.]
To this end, the Respondent points to evidence that suggests that any delay in processing the private ruling request was the result of unresolved technical issues that had been elevated within the ATO. This evidence however, is limited to the activities and actions of personnel at the interface with the Applicant who had front line responsibility for the Applicant’s private ruling application. It does not tell anything of the thinking and activities of those within the ATO to whom the technical issues had been elevated.
To the contrary the Applicant contends that documents are relevant if they could possibly throw light on the issues in the main case or if there is a real possibility that they may assist in the resolution of issues in the proceedings and that the documents sought could reasonably be expected to throw light on, and assist in resolving, the issue of whether the Respondent delayed the private ruling for reasons extraneous to the merits of the private ruling application.
In support of this contention the Applicant noted the decision of Graham J in Telstra Corporation Ltd v Minister for Communications, Information Technology and the Arts[6] to the effect that:
A subpoena or notice to produce will not necessarily be objectionable because it is labelled a 'fishing exercise'. Because a party who issues a subpoena or notice to produce is unaware of the precise description of a particular document or whether a particular document or documents are in the possession of the party subpoenaed or subject to the notice to produce, or even whether such a document or documents exist or is unaware of the contents of such document or documents, does not mean that a subpoena or notice to produce will be taken to have been improperly issued and amenable to being set aside …
Where a subpoena or notice to produce is addressed to a party, it is still necessary that it should state with reasonable particularity the documents which are to be produced. (Emphasis added by the Respondent)
[6][2007] FCA 1398 at [52-53]
In the present circumstances the Applicant contends that consistent with these principles it has sufficiently identified the documents it seeks, has demonstrated the connection between the documents and the case it proposes to advance and has demonstrated that it possible that the documents it seeks exist. It relies on an affidavit of an adviser who was involved in making the private ruling application and in taking the steps required to activate the deemed private ruling and deemed objection decision which have been activated to lay the foundation for the substantive proceeding. Apart from pointing to some material already filed pursuant to s 37 of the AAT Act that suggests that the reason for the delay was difficulty dealing with technical issues as noted above, that affidavit is not substantively challenged.
While possibly stretching what can be inferred from some of the supporting evidence to the limit of its elasticity (paragraph 27) the affidavit lays a foundation for a conclusion that the documents might exist. Further, it adds some weight to the facts as known which together might allow a conclusion that the explanation for the Respondent not having issued the private ruling sought is as alleged by the Applicant. The existence, or otherwise of the documents sought could throw decisive weight, either way, in the process of determining whether the Applicant's contentions can be accepted. More specifically, the existence, or otherwise, of category one and two documents could support a conclusion that the reason for the absence of a private ruling is as contended by the Applicant or could show that contention to be false. Similarly, the existence of documents in category three might throw light on whether or not the absence of a private ruling is explained by technical difficulty. The facts as known to which the affidavit adds some weight are the absence of a private ruling, the absence of an objection decision and delay coinciding with a review within government circles that led to retrospective legislation without apparent complete explanation. Absent other reasons why the direction sought should be denied, in these circumstances the Applicant ought be able to test its assertion.
But for the maturity difficulties dealt with above, the direction sought by the Applicant would not be refused for these reasons advanced by the Respondent.
The futile contention
In relation to the futile contention the Respondent outlines the time periods contemplated by the private ruling system and asserts that they are such that a Tribunal decision in review of a private ruling objection decision cannot be given a date earlier than the date of the original decision.
This contention goes to the substantive issue in the proceeding not to the question of whether the documents that may inform a Tribunal decision whether or not to exercise a discretion to alter the usual date of effect of Tribunal decisions should be provided.
Decision
The application for a direction that the Respondent produce particular documents to the Applicant is refused.
| I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of |
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Associate
Dated 22 June 2012
| Date(s) of hearing | 2 May 2012; 14 June 2012 |
| Counsel for the Applicant | Mr Les Glick SC with Mr Michael Flynn |
| Solicitor for the Applicant | Mr Aldrin De Zilva – Deloitte Lawyers Pty Ltd |
| Counsel for the Respondent | Mr Mark Moshinsky SC with Ms Melanie Baker |
| Solicitor for the Respondent | Ms Suzanne Singh – ATO Legal Services Branch |
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