Thorpe Nominees Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia

[1989] HCATrans 104

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl91 of 1988

B e t w e e n -

THORPE NOMINEES PTY LIMITED

Applicant

and

THE COMMISSIONER OF TAXATION

OF THE COMMONWEALTH OF

AUSTRALIA

Respondent

Application for special leave
to appeal

MASON CJ DAWSON J GAUDRON J

Thorpe

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 MAY 1989, AT 11.42 AM

Copyright in the High Court of Australia

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MR B.R. PAPE:	May it please Your Honours, I appear for the applicant in this matter. (instructed by
John Webb Symons and Co)
MR A.H. SLATER:	Your Honours, I appear for the respondent.

(instructed by the Australian Government Solicitor)

MASON CJ:	Yes, Mr Pape.
MR PAPE:	Your Honours, might I hand up to Your Honours an outline of submissions and some material which I may refer to. Your Honours, the applicant
seeks leave to appeal in this matter for the reason that since NATHAN's case the question of source which is a critical, crucial element
in the determination of an assessment has become a meaningless phrase. It is referred to in every case cited on source and this Court has said in FREEMAN's case that it is, indeed, meaningless.
Yet, it is a phrase which nearly takes the
situation of being chanted by each judge when
he cites his reasons for determining whether
the source of the income is in Australia or overseas.

It is for that reason that the applicant

seeks leave to appeal. In fact, the difficulty

was adverted to by Mr Justice Lockhart at appeal

book page 35, line 12, where he referred to the

fact that the issue of:

"practical, hard matter of fact" -

as cited in NATHAN's case was opaque. At line 10:

The use of the word "hard" renders the meaning

of the phrase a little opaque, a difficulty

adverted to in some of the cases including

COMMISSIONER OF TAXATION (NSW) V FREEMAN -

and the court then said the phrase was meaningless.

Yet it is on that meaningless phrase that - - -

MASON CJ:	The court did not actually say that the expression was meaningless; it said, "whatever that expression
may mean".
MR PAPE:	Yes, I am indebted to Your Honour, but the essence
of it is "whatever that expression may mean". And then Mr Justice Sheppard, at appeal book
page 42, line 32, said, in relation to this
aphorism:

if analyzed too closely, may raise a

question in some minds about what it really

means.

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And the Court is being requested, or asked, to

decided a question of source. The guidance which

they seek is not there and it is for that reason
that the applicant seeks leave to appeal to this

Court to, as it were, correct or provide some

guidance to the courts and tribunals below as

to what, in fact, are the criteria to be taken

into account in determining source.

MASON CJ. But the difficulty is this, is it not, that

the situations vary so widely, almost to the point of infinity, that it is impossible for the Court to enunciate a principle in terms that

can identify all the criteria or factors that

may be relevant in the variety of cases?

MR PAPE:	Your Honour, in my submission, there must be
some limitation on it and that was -
MASON CJ:	What is the principle that you contend for that
is going to give guidance in the great run

of cases?

MR PAPE:	What is the immediate source or the proximate source which was referred to by Mr Justice Stephen in ESQUIRE NOMINEES and what Chief Justice Latham
said in the UNITED AIRCRAFT case, where the acts are done or where the property is located.
Now what has happened in the present case, the source is supposed to be where the underlying value of the land is.: which is in Australia. That is only where the value of the land - the
act which was done, which created the income,
was in Switzerland.  The right was the assignment
or sale of the option. That right existed in
Switzerland. Its value may be reflected in Australia
and the act of sale was done in Switzerland.

For example, a non-resident share trader,

on the Tokyo Stock Exchange has invested in shares

in companies situated there which has its principal

activity here in Australia, invested in land,

invested in pastoral properties, is his sale

of his shares, being part of his trading operations,

whilst reflected by the value in Australia, in

my submission, that would not be the source of

his profit; the source of his profit is the act

done in making the sale. It confuses what is

a static concept and a dynamic concept. And the

dynamic concept is one of flow which is income.

DAWSON J:  Really, what it reflects :is che fact that there

can a proximate source or an intermediate source

or an ultimate source and it may be appropriate
according to the circumstances of particular
cases to adopt one or the other - and in this

case it was held to be appropriate to adopt the

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ultimate source because the transactions in

Switzerland had no meaning and no value apart

from what you found in Australia.

MR PAPE:	The question is, it is the source of income,
it is not the source of value, in my submission,
that is the test.  The source of the value is
surely Australian.  What the Act, in section 25,
talks about is the source of the income. And
my submission is the distinction to be drawn
to the source of where the asset, which may have
the potential - - -
DAWSON J:	Source only means origin, after all.
MR PAPE:	But it also, in this context, refers to income
and it is not talking about the source of an
asset or where the asset is located. It cannot
become income until some act is done and that is what the UNITED AIRCRAFT CORPORATION says,
there must be an act done, a dynamic situation,
for income to be created.  And to that extent,
if the ultimate source confuses the - - -

DAWSON J: If that is so, the dynamism certainly started

in Australia, here.

MR PAPE: It is a short point, Your Honour, and those are

the submissions of the applicant in relation

to - - -

MASON CJ:  Thank you, Mr Pape. The Court need not trouble

you, Mr Slater. In the view of the Court, the

decision of the Full Court of the Federal Court

is not attended with sufficient doubt to justify

the grant of special leave to appeal.	The
applicaiton is therefore refused.

MR SLATER:  We ask for cost, if Your Honours please.

MASON CJ:  You cannot resist that, Mr Pape?

MASON CJ:  Yes, the application is refused with costs.

ATD.51 AM THE MATTER WAS ADJOURNED SINE DIE

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