Vicinity Funds RE Ltd v Commissioner of State Revenue (No 3)
[2023] VSC 278
•29 May 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S ECI 2021 00032
| VICINITY FUNDS RE LTD | First Appellant |
| RECO BOURKE PRIVATE LIMITED | Second Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
S ECI 2021 00033
| VICINITY FUNDS RE LTD | First Appellant |
| RECO BOURKE PRIVATE LIMITED | Second Appellant |
| THE TRUST COMPANY LIMITED | Third Appellant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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JUDGE: | Nichols J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 17 February 2021; 29 November 2022 |
DATE OF JUDGMENT: | 29 May 2023 |
CASE MAY BE CITED AS: | Vicinity Funds RE Ltd v Commissioner of State Revenue (No 3) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 278 |
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TAXATION – Statutory construction – Taxation Administration Act 1997 (Vic) – Appeals from determinations of Commissioner disallowing objections to assessments of dutiable value of land – Duties Act 2000 (Vic) s 22(3) – Nature of relevant state of satisfaction of Commissioner – Request for discovery and particulars – Refused – Whether applicants entitled to impugn state of non-satisfaction of Commissioner at earlier time of assessing liability to taxation as well as at later time of disallowing determination objections – Extent of entitlement – Power of court to order discovery and particulars – Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) r 7.06 – Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353– Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation (1976) 132 CLR 535 – Binetter v Commissioner of Taxation (2003) 130 FCR 135 – Jilani v Wilhelm (2005) 148 FCR 255 – WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 – East Melbourne Group Inc v Minister for Planning (2008) 23 VR 606 – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr D McInerney KC Ms K Chan | King & Wood Mallesons |
| For the Respondents | Mr R Merkel KC Mr E Nekvapil Ms R Amamoo | State Revenue Office |
HER HONOUR:
Background and Issues for Decision
These proceedings[1] concern the duty payable on the transfer in 2018 to the appellant Taxpayers of two parcels of land which comprise the site of what is now the Emporium shopping centre on Lonsdale Street, and the land on Bourke Street and Little Bourke Street occupied by the Myer shopping centre.[2]
[1]Proceedings S ECI 2021 00032 and S ECI 2021 00033 are being managed and will be heard together. The present applications are made in relevantly identical terms in each case.
[2]Each appeal concerns lands, held on several separate titles, which are each together “dutiable property” for the purposes of s 10 of the Duties Act 2000 (Vic) (Duties Act).
The Commissioner assessed each transfer as dutiable based on a valuation of one parcel of land in the sum of $1,020,000,000, on which the duty payable was $56,149,500, and on a valuation of the other in the sum of $480,000,000, on which the duty payable was $26,400,000. The Taxpayers, dissatisfied with the Commissioner’s assessments, lodged objections with the Commissioner. The objections were not determined within 90 days of their receipt and, as provided by s 106(1)(b) of the Taxation Administration Act 1977 (Vic) (the TAA), the Taxpayers requested the Commissioner to treat their objections as appeals in this Court and cause them to be set down for hearing. Shortly thereafter, the Commissioner determined the Taxpayers’ objections, disallowing them and providing written notice and reasons accordingly.[3] The Taxpayers contend that the dutiable value of each of the lands is $1.
[3]Section 101(2) of the Taxation Administration Act 1977 (Vic) (TAA) provides that the Commissioner may determine an objection that is subject to a right of review or appeal at any time before the hearing of the review or appeal proceeding commences.
The underlying dispute in each proceeding, then, concerns the dutiable value of the land. How that duty is to be assessed is relevant to the disposition of the present application, by which the Taxpayers seek discovery and particulars from the Commissioner.
Interests within the corporate group of the Taxpayers acquired each parcel of land in 2007 on 299 year leases, each for annual rents of $1. The leases were accompanied by call options in favour of the Taxpayers, each exercisable for $1 during the life of the leases. The lessees acquired the leases and call options on payment of premiums of $450,000,000 and $155,000,000 respectively. The Taxpayers exercised their call options and acquired the lands in March 2018, for a consideration of $1 each.
Under s 20 of the Duties Act 2000 (Vic), the dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of the consideration (if any) for the dutiable transaction and the unencumbered value of the dutiable property, and by s 22, the unencumbered value of dutiable property is the amount for which the property might have been sold on the open market, free from any encumbrance to which the property was subject at the relevant time. Subsections 22(2), (3) and (4) provide that:
(2)In determining the amount for which land or goods might reasonably have been sold free from encumbrances, there must be disregarded subject to subjection (3), any interest, agreement or arrangement (other than an encumbrance) granted or made in respect of the land or goods, that has the effect of reducing the value of the land or goods.
…
(3)An interest, agreement or arrangement referred to in subsection (2) is not to be disregarded if the Commissioner is satisfied that it was not granted or made as a part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the transfer of the land or goods.
(4)In considering whether or not he or she is satisfied for the purposes of subsection (3), the Commissioner may have regard to—
(a)the duration of the interest, agreement or arrangement before the transfer; and
(b)whether the interest, agreement or arrangement has been granted to or made with an associate, a related corporation or a trustee of the transferor or transferee; and
(c)whether there is any commercial efficacy to the granting of the interest or the making of the agreement or arrangement other than to reduce duty; and
(d) any other matters he or she considers relevant.
By their appeals the Taxpayers contend that the leases were not encumbrances and were not granted or made in respect of the relevant lands, but if they were so granted or made, they were not to be disregarded in determining the market value of the properties, because pursuant to s 22(3) of the Duties Act, the Commissioner should have been satisfied that the leases were not granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the transfers.[4] The Commissioner disallowed the objections, relevantly determining that the leases were granted or made in respect of the lands, and that he was not satisfied for the purposes of s 22(3) that the leases were not granted or made as part of an arrangement or scheme with the collateral purpose of reducing the duty otherwise payable on the transfers.
[4]Among other things, the Taxpayers also contend that the improvements to the land constitute “tenant’s fixtures” as defined in s 22A(3) of the Duties Act and accordingly, their value is not to be included in the unencumbered value of the land for the purposes of ss 20(1)(b) and 22(1) because, pursuant to s 22A(2), the Commissioner should have been satisfied that the improvements were not sold or transferred to the Taxpayers or a person associated with the Taxpayers.
It is accepted that the appeals are to proceed by way of judicial review.[5]
[5]The question formulated for separate determination was answered in this way: “Each appeal before the Court under s 106(1)(b) of the Taxation Administration Act 1997, insofar as it concerns the [Commissioner’s] state of satisfaction or non-satisfaction under s 22(3), or if and to the extent it arises, section 22A(2) of the Duties Act 2000, should proceed by way of judicial review”.
A central issue in the appeals then, is whether the Commissioner erred in performing the task required of him under s 22(3), by failing to be satisfied that the leases were not granted or made as part of a relevant arrangement or scheme.
In the present application the Taxpayers are seeking discovery and particulars directed to the Commissioner’s state of “non-satisfaction” under s 22(3) of the Duties Act, at the time of making the assessments, and also at the time of making the determinations of the Taxpayers’ objections. The application gives rise to a question whether the Taxpayers may seek to impugn the Commissioner’s assessments by seeking to find legal error in the reasoning process leading to the making of the assessments, as distinct from impugning (i.e. finding legal error in) the later determination decision. The Commissioner has, as required by s 103 of the TAA, given written reasons for disallowing the objections. The Commissioner has not given reasons for, and is not required to give reasons for, the assessments.
The application for “particulars” might be better described as an application to deliver interrogatories, and was in substance in these terms:
(a)Did the Respondent reach a state of non-satisfaction under s 22(3) of the Duties Act 2002 (Vic) (the s 22(3) state of non-satisfaction) at the time of making the Assessment and/or the Determination and/or at any other time?[6]
[6]A similar question in respect of s 22A(2) of the Duties Act was posed.
…
(c) If yes:
(i)Please identify the person or persons who reached the state of non-satisfaction on behalf of the Respondent, the date(s) upon which that state was reached, and the authority pursuant to which that person or those persons purported to act;
(ii)Please provide a statement in writing setting out in relation to each state of non-satisfaction the findings on questions of material fact, and referring to the evidence or other material on which those findings were based; and
(iii) If those findings were recorded in writing, please provide a copy of the record and advise the date on which the record was created.
The Taxpayers seek orders requiring the Commissioner to make discovery of:
(a)each document referred to in the responses to the request for particulars;
(b)any other material that was before the decision maker(s) at the time of reaching the relevant states of non-satisfaction, including any advice, recommendations, reports or other communications received by the decision maker from other officers of the Respondent or from other advisers and any other material in the Respondent’s file on the matter;
(c)any other documents relevant to the Assessment and/or the Determination including any advice received in relation to the Assessment and/or the Determination; and
(d)any other documents that are, or have been, in the Respondent’s possession, custody or power and which are critical to the resolution of the dispute in this proceeding pursuant to s 26 of the Civil Procedure Act 2010 (Vic).
It will be seen that the proposed questions and requests roll up the state of satisfaction reached at the time of making the assessment, at the time of making the determination, and at “any other time”. However, it was clear from the Taxpayers’ submissions that they maintained an entitlement to separately impugn (and therefore to interrogate) the basis of the assessments, in particular the state of non-satisfaction formed at the time of making the assessments.
I will deal with the question of principle first, before turning to the proper exercise of discretion in respect of the applications for particulars and discovery.
Are the Taxpayers entitled to separately impugn the Commissioner’s state of mind at the time of making the assessments?
The Taxpayers’ principal proposition was that in an appeal commenced under s 106 of the TAA in respect of the assessment of the dutiable value of property under ss 20–22A of the Duties Act, they were entitled to impugn the formation or non-formation of a state of satisfaction by the Commissioner at the time of making an assessment of the Taxpayers’ liability, and not just at the time of disallowing the objection as set out in the determination. The argument was as follows:
(a) It is established that Part 10 of the TAA, which governs rights of objection, review and appeal, sets out each step in a linear pathway towards a review by VCAT or an appeal in this Court.[7] The Commissioner’s assessment is necessarily the first step in that process, and its issuance gave rise to an immediate and substantial adverse financial consequence for the appellants, in the form of duties levied. The correctness of the assessment is the ultimate issue the subject of the appeal, and notwithstanding the determination, it remains “an integer” in the appeal.
[7]Vicinity Funds RE Ltd v Commissioner of State Revenue [2022] VSCA 176, [77] (Kyrou, Sifris and Walker JJ) (Vicinity).
(b) In this case, that step was purportedly based on the Commissioner not reaching a relevant state of satisfaction in relation to the application of s 22 of the Duties Act.
(c) There is no provision in the TAA akin to s 169A(3) of the Income Tax Assessment Act 1936 (Cth) (the ITAA) which deems any opinion formed at the time of determining an objection to have been formed at the time of assessment. In the absence of such a deeming provision, an assessment must be supported by the requisite state of satisfaction, or it will have been issued without power and must necessarily be set aside. The question whether an assessment is made in excess of power is antecedent to the question of the validity of a determination made later in time. An assessment therefore made in excess of power cannot subsequently support a valid determination.
(d) Relatedly, that the Commissioner formed a state of satisfaction or non-satisfaction at the time of a determination does not cure the improper issuance of an assessment. That is not to derogate from the position that the Commissioner’s state of satisfaction must be properly maintained in his later determination; it simply requires that the original foundation of the Commissioner’s power to impose a liability on the taxpayer by the issue of an assessment be properly based in law.
(e) If the foregoing submission is correct, it follows that the Taxpayers will need to be appraised of the basis of the state of satisfaction of the Commissioner for each assessment. No record of the Commissioner’s state of non-satisfaction, or basis or reasons supporting the assessments, were provided at the time or subsequently. The facts on which the Commissioner has based his assessment are facts within the Commissioner’s knowledge. The Taxpayers are entitled to know the basis of the Commissioner’s assessment, and not to guess at it.
The argument commenced with the proposition that the assessment was the first (which I read as foundational) step in the objection, review and appeal process provided by Part 10 of the TAA, and that an appeal under s 106 is in essence concerned with the correctness of the assessment. The Taxpayers did not otherwise address the provisions of Part 10. They instead relied upon three decisions of the High Court – Avon Downs Pty Ltd v Federal Commissioner of Taxation;[8] McAndrew v Federal Commissioner of Taxation;[9] and (principally) Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation,[10] which they said was sufficient authority for their principal proposition.
[8]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 (Avon Downs).
[9]McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 (McAndrew).
[10] Kolotex Hosiery v Commissioner of Taxation (1975) 132 CLR 535 (Kolotex).
The Commissioner submitted that the nature and implications of the right of appeal provided by Part 10 of the TAA are to be ascertained by careful attention to that statute, and not by reference to decisions concerning different provisions, addressing different questions. The Commissioner said that the Taxpayers’ application rests on a false premise that the Court will, in the appeal, consider the basis and reasons for the assessments, separately and distinctly from the reasons provided in the determinations, and the basis on which the determinations were made. Such an inquiry would render the determinations redundant in a way that is contrary to authority and inconsistent with the statutory scheme.
For the reasons that follow, I reject the Taxpayers’ contention that they are entitled to challenge, on appeal, the basis and reasons for the assessments, separately and distinctly from their challenge to the determination of the objections.
Considered abstractly, there is some attraction in the Taxpayers’ proposition that assessing a taxpayer’s liability to taxation is an exercise or purported exercise of power by the Commissioner and if a pre-condition to the exercise of power has not been satisfied the purported exercise of power will have been invalid. However, that general proposition, and those that follow from it, do not found the entitlement the Taxpayers assert. An appeal is a creature of statute, and in ascertaining the scope of a right to an appeal, regard must be had to what the statute provides.[11] A statutory provision should be construed so that it is consistent with the language and purpose of all of the provisions of the statute; its meaning must be determined by reference to the language of the statute viewed as a whole.[12] The Taxpayers’ argument appeals to a conception of the requirements for a valid exercise of power, without sufficiently engaging with the statutory provisions. The taxpayer has such rights of objection, review and appeal as are granted by Part 10 of the TAA, which provides an exclusive regime by which the taxpayer may challenge an assessment.[13] When regard is had to those provisions it is evident that an assessment is reviewable by appeal to this Court (or on a referral to VCAT), but just not in the manner for which the Taxpayers contend.
[11]Walsh v Law Society of New South Wales (1999) 198 CLR 73, 90 (McHugh, Kirby and Callinan JJ). See, in a different context, Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146, 156–7 [22]–[23] (Gummow, Hayne, Heydon and Crennan JJ).
[12]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 381 [69] (McHugh, Gummow, Kirby and Hayne JJ); Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503, 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ) (Consolidated Media Holdings).
[13]Vicinity, [77].
Parts 3 and 10 of the Taxation Administration Act
The relevant parts of the TAA provide in substance as follows:
(a) The Commissioner has a general power to make an assessment of a tax liability of a taxpayer.[14] The Commissioner may make such assessment on the information the Commissioner has from any source at the time the assessment is made, and may make an assessment by way of estimate where there is insufficient information to make an exact assessment.[15]
[14]TAA s 8.
[15]TAA s 11.
(b) If an assessment is made, the Commissioner must serve a notice of assessment on the taxpayer. The notice must be expressed to be an assessment of liability to the tax and show the amount of tax assessed. There is no statutory requirement to give reasons in respect of the assessment.[16]
[16]TAA s 14.
(c) An amount of tax assessed in a notice of assessment is payable on or before the day specified by the Commissioner in the notice of assessment.[17]
[17]TAA s 14(3).
(d) Production of a notice of assessment or of a document signed by the Commissioner purporting to be a copy of a notice of assessment is conclusive evidence of the due making of the assessment and conclusive evidence that the amount and all particulars of the assessment are correct, except in objection, review or appeal proceedings (in which it is proof in the absence of evidence to the contrary).[18]
[18]TAA s 127.
(e) Part 10 of the TAA provides for objections, reviews and appeals in respect of assessment. Section 96(2) provides that no court or administrative review body has jurisdiction or power to consider any question concerning an assessment[19] except as provided by Part 10.
[19]As defined in s 3.
(f) A taxpayer is afforded the right to lodge a written objection with the Commissioner if the taxpayer is dissatisfied with an assessment.[20] The grounds for the objection must be stated fully and in detail, and must be in writing.[21] On an objection, the objector has the onus of proving the objector’s case.[22]
[20]TAA s 96(1).
[21]TAA s 97(1).
[22]TAA s 98.
(g) The Commissioner must consider an objection and either allow the objection in whole or in part or disallow the objection (and may do so at any time before the hearing of the review or appeal proceedings commences).[23]
[23]TAA s 101.
(h) The Commissioner must give notice of the determination of the objection and, in the notice, must give the reasons for disallowing an objection or for allowing an objection in part only.[24]
[24]TAA s 103.
(i) The fact that an objection, review or appeal is pending does not in the meantime affect the assessment or decision to which the objection, review or appeal relates and tax may be recovered as if no objection, review or appeal were pending.[25]
[25]TAA s 104(1).
(j) If a taxpayer is dissatisfied with the Commissioner’s determination of the taxpayer’s objection (or if 90 days have passed since the taxpayer’s objection was received by the Commissioner and it has not been determined), the taxpayer may request that the Commissioner refer the matter to the tribunal or treat the objection as an appeal and cause it to be set down for hearing in this Court. Subject to the right in the Commissioner to require the taxpayer to give further and better particulars of the objection, the Commissioner must, within 60 days after the request, refer the matter for review or cause the objection to be set down for hearing accordingly.[26]
[26]TAA s 106 (emphasis added).
(k) On the review or appeal, the taxpayer’s case is limited to the grounds of the objection and the Commissioner’s case is limited to the grounds on which the objection was disallowed unless the tribunal or Court otherwise orders.[27]
[27]TAA s 109.
(l) On a review or appeal, the taxpayer has the onus of proving the taxpayer’s case.[28]
[28]TAA s 110.
(m) On referral, the tribunal must review a matter referred to it and may confirm, reduce, increase or vary the assessment or decision.[29]
(n) On the hearing of an appeal the Court may make any order it thinks fit and may by order confirm, reduce, increase or vary the assessment.[30]
(o) If a taxpayer’s objection to an assessment is allowed in whole or part, or a taxpayer’s review or appeal in respect of an assessment is upheld, the Commissioner must refund any amount paid under the assessment that is in excess of a requirement for payment under the relevant taxation law.[31]
[29]TAA s 111(1).
[30]TAA s 112(1).
[31]TAA s 115.
Part 10 creates a “linear pathway” that leads, at the taxpayer’s instance, to an appeal in this Court or a review before the tribunal.[32] Its provisions take effect in the following way.
[32]Vicinity, [77].
First, the correctness of an assessment is proved conclusively by the notice of assessment, except in objection, review or appeal proceedings. Section 96(2) operates as a privative clause by which jurisdiction to consider any question concerning an assessment is excluded except as provided by Part 10. It is to the provisions of Part 10, which delimit the nature and scope of those proceedings, that one must look to see how the correctness of an assessment may be challenged.
Second, on the hearing of an appeal the Court may confirm, reduce, increase or vary the assessment. Accordingly, if a taxpayer’s appeal in respect of an assessment is upheld, the Commissioner must refund any amount paid under the assessment that is in excess of a requirement for payment under the relevant taxation law. It is in this sense that an appeal under s 106 is, in the language of s 115, “in respect of an assessment”.
Third, the latter point does not mean that the taxpayer is at liberty to challenge an assessment by attacking the reasoning supporting the assessment arrived at, at the time of making the assessment. The provisions for the making of an assessment, and a challenge to it, interact in this way:
(a) Under Part 3, the Commissioner is empowered to make an assessment on whatever material is available to him at the time of the assessment. The Commissioner is obliged to give notice of the assessment, but not to give reasons. If the taxpayer is not dissatisfied with the assessment and does not exercise the rights conferred by Part 10, the assessment is conclusive and the matter ends there.
(b) If the taxpayer is dissatisfied with the assessment, the taxpayer is entitled to lodge an objection with the Commissioner. Division 1 of Part 10 sets out at detailed procedure for objections. The taxpayer bears the onus of proving “the objector’s case” on an objection and must state the grounds of the objection fully. The Commissioner is obliged to consider an objection. Nothing in the manner of any contest in respect of an assessment occurs unless and until an objection is lodged, considered and determined. Having so considered the taxpayer’s objection, the Commissioner is obliged to determine it, giving not just notice, but reasons, for the determination.
(c) The obligation on the Commissioner to consider the objection, and to decide either to disallow it or allow it in part or in whole, entails by necessary implication the requirement to consider whether the assessment as first made was correct, and in so doing, to consider the grounds for the taxpayer’s case that the amount to which the taxpayer has been assessed is in excess of the taxpayer’s liability under the relevant taxation law. The objection and determination process requires the Commissioner to consider, on the material before him at the time of determining the objection, whether the assessment should be varied. The statutory process thus contemplates, at the determination stage, the consideration of the taxpayer’s liability to tax on potentially different or additional material to that which was before the Commissioner at the time of making the assessment. It follows that the process necessarily admits of a change of mind by the Commissioner where a state of mind was an element of the assessment and (in a case like the present) permits the formation of a state of satisfaction or non-satisfaction upon different or additional material or grounds than as present at the time of making the assessment.
(d) Division 2 of Part 10 sets out a detailed process for reviews and appeals. If the taxpayer is dissatisfied with the Commissioner’s determination of the objection the taxpayer may request that the Commissioner refer the matter to the tribunal or treat the objection as an appeal and cause it to be set down for hearing in this Court. That it is the objection that is set down as the appeal reflects the fact that it is the taxpayer, who has the onus of proving the taxpayer’s case on a review or appeal, who is the moving party. By s 109 of the TAA, absent an order to the contrary, the taxpayer’s case is limited to the grounds of the objection, and the Commissioner’s case is limited to the grounds on which the objection was disallowed.[33] That stipulation is a clear indication, in my view, that the legislature intended that right to appeal conferred by s 106 would be concerned with the correctness of the determination of the objection. As the Commissioner submitted, it is the determination, together with the taxpayer’s objection, that defines the issues to be determined or considered on an appeal, subject to the Court granting leave to either party to amend its grounds.
[33] Where an objection has not been determined within 90 days the taxpayer may take that same course, but the Commissioner is required to determine the objection before the hearing of the review or appeal proceeding commences. The effect of s 101(2) of the TAA is that whether the determination of the objection occurs before or after the matter is referred to VCAT or set down as an appeal in this Court, both the objection and the determination will be before the Court or the Tribunal.
It appears from the structure of Part 10 that Division 1 provides the procedure for dealing with objections to an assessment, where no challenge is permitted except by objection; whereas Division 2 sets out the procedure for challenging a determination, and permits the taxpayer to come to this Court or the tribunal.
The scheme embodied in Part 10 contemplates that an assessment may be reconsidered and varied as a consequence of the Commissioner complying with his statutory obligation to consider an objection. That must extend to a case in which the Commissioner has reached a different state of satisfaction or non-satisfaction under the relevant taxing law on new and different material that comprises at least the matters raised in the taxpayer’s objection, and any further material or particulars requested by the Commissioner under s 107. The scheme would be lacking coherence if, on the one hand, it permitted that course (assessment, objection, consideration, determination and variation); and on the other, conferred upon the taxpayer a right to review the assessment for legal error found in the reasoning process as reached at the time of the assessment, which must necessarily be reached without any material or grounds the subject of a later objection, and which the scheme provides may be reached on whatever material is available to the Commissioner at the time.
On the Taxpayers’ reading of Part 10[34] an assessment may be impugned (in a case like the present) on the grounds that the state of satisfaction or non-satisfaction reached at the time of the assessment might be found wanting, irrespective of whether the Commissioner’s determination of the objection is infected with legal error. On the same reading, a taxpayer may impugn the formation of a state of mind by different delegates of the Commissioner in respect of the assessment,[35] where the assessment and determination are made by different delegates, and on different factual bases. In the present case, it is not in contest that substantial material was provided by the Taxpayers at the request of the Commissioner, after the making of the assessments and before the date of the determinations. In this case the Taxpayers wish to have the opportunity to challenge two separate processes of reasoning at the one time. As they put it in submissions:
It may be that the reasons or the things that the Commissioner was satisfied about or not satisfied about [at the time of the assessment] may well be juxtaposed with what he is now satisfied and not satisfied about to reveal failure to take into account his own considerations or make them irrelevant.
[34]The Taxpayers did not advance a construction of Part 10, other than referring to the assessment as the first step in the process and the ultimate subject of an appeal. What is set out here is the implication of the Taxpayers’ central proposition.
[35]Where the Commissioner has, under s 69 of the TAA, delegated a function, the performance of which is dependent upon the opinion, belief or state of mind of the Commissioner in relation to a matter, the delegate may perform that function upon the delegate’s own opinion, belief or state of mind in relation to that matter: Interpretation of Legislation Act 1984 (Vic) s 42(1).
It is doubtful that the legislature intended that result, having provided for the assessment-objection-determination- appeal process within Part 10 of the TAA. Given that the taxpayer must first make an objection, which must be determined before an appeal can be heard, no clear purpose would be served by permitting a challenge to the assessment by reference to the process of reasoning at both points along the pathway towards an appeal.
That the legislature did not intend such a result is further supported by the requirement in s 103(2) that the Commissioner give reasons in the notice of determination of the objection, but is not otherwise required to give reasons in support of an assessment. A substantial reason for requiring a decision maker to give reasons is to provide the basis for the decision, so as to allow the affected person to determine whether there are grounds for review or appeal; viz. to provide an effective means of detecting the kind of error that would entitle a court to intervene.[36] That is obviously not to say that a decision that is not subject to a statutory requirement to give reasons is taken to be unreviewable. Rather, it is to say that the stipulation that the Commissioner must give reasons for an objection determination is a contextual indicator that the legislature intended that it is the basis for that decision (the decision to disallow an objection) which may be examined for legal error.
[36]See East Melbourne Group Inc v Minister for Planning (2008) 23 VR 606, 661 [225]–[226], 677 [310] (Ashley and Redlich JJA) (East Melbourne Group) and the authorities there cited.
In my view, reading Part 10 as permitting a separate and distinct challenge to the reasoning process underpinning an assessment formed at the time of the assessment, by way of appeal, is incompatible with the scheme embodied in Parts 3 and 10 of the TAA.
Reading the statute as excluding such an entitlement does not result in an incontestable tax.[37] Beyond an entitlement to lodge an objection with the Commissioner, the taxpayer is not left without effective remedy. An appeal under s 106 is one in which the correctness of the assessment, as it stands after the objection determination, is put in issue by a challenge to the lawfulness of the determination decision. What is at stake in an appeal, by that challenge, is the amount of tax payable. It should be recalled that where a taxpayer elects to have the matter referred to the tribunal, the nature of the review is not so confined but proceeds de novo.[38]
[37]See, in the context of state legislation, Commissioner of State Revenue (Vic) v ACN 005 057 349 Pty Ltd (2017) 261 CLR 509, 530–1 [58] (Bell and Gordon JJ, Kiefel, Keane and Gageler JJ agreeing).
[38]See Nationwide Towing and Transport Pty Ltd v Commissioner of State Revenue (2018) 108 ATR 1, 11 [20], 24 [47], 25–6 [51] (Croft J) (Nationwide); Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120, 123 [3]–[4] (Pagone J) (Conte).
To return to the elements of the Taxpayers’ arguments set out earlier, it is not to the point that Part 10 does not contain a provision (akin to that found in the ITAA) deeming any opinion formed at the time of determining an objection to have been formed at the time of assessment. The fact that an assessment is made at one point in time, and a determination of an objection to that assessment is made at a later point in time, does not have the necessary consequence that the taxpayer’s right to appeal must attach to the basis for the assessment as made at the first point in time. Whether or not it has that consequence depends on a proper construction of the statutory provisions in issue. As the Commissioner submits, the correct approach is to construe the legislative provision in issue without reasoning backwards from a different statute.
The Taxpayers emphasise the practical effect of the assessment, meaning their liability to duty, which must be paid (and was paid) as specified in the notice of assessment. As the provisions of the TAA set out above make clear, an assessment made under Part 3 is not interim or preliminary. It takes effect upon issue, but subject to any challenge brought under Part 10. That caveat is significant. When challenged as permitted under Part 10, and a taxpayer succeeds, the taxpayer’s liability is adjusted. An assessment is challengeable, but in the manner discussed, and only once the assessment has been considered by the Commissioner upon the making of an objection and the objection has been disallowed.
For the reasons discussed below, the authorities on which the Taxpayers relied do not require a contrary conclusion.
The Commissioner submitted that the Taxpayers’ construction is in fact contrary to authority. In both Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue[39] and Nationwide Towing and Transport Pty Ltd v Commissioner of State Revenue[40] this Court determined appeals under s 106 of the TAA, in which the taxpayers, in order to succeed, had to demonstrate error by the Commissioner in reaching or not reaching a state of satisfaction.[41] In both cases the Court expressly applied the principles established in Avon Downs, in which Dixon J determined the nature of an appeal under then-Division 2 of Part V of the ITAA.[42] Avon Downs is considered below.
[39]Conte.
[40]Nationwide.
[41]Conte, 123–4 [5]; Nationwide, [8].
[42]Conte, 123–4 [4], [5]; Nationwide, 17–19 [34]–[36]; Nationwide Towing & Transport Pty Ltd v Commissioner of State Revenue(2018) 108 ATR 842 (Nationwide No. 2), [12], [13]. Division 2 of Part V of the Income Tax Assessment Act 1936 (Cth) (ITAA) has subsequently been repealed.
In Conte, Pagone J considered the reasons of the Commissioner for disallowing the taxpayer’s objections, observing that unlike in Avon Downs, the Commissioner had supplied reasons which the taxpayer contended demonstrated error. Reasons having been given, his Honour said that “it is to the reasons that one must look to see whether there has been a legal defect in the discharge of statutory duty.”[43] The reasons to which his Honour was referring, were the reasons given for the disallowance of the objection.[44] In Nationwide, Croft J found the reasoning of Pagone J in Conte indistinguishable from the Avon Downs line of authority.[45] In Nationwide Towing & Transport Pty Ltd v Commissioner of State Revenue (Nationwide No. 2),[46] Croft J, having determined the nature of the appeal under s 106 (in his earlier decision in Nationwide), formulated the issue for decision as whether the failure of the Commissioner’s delegate to be satisfied was affected by a legal error of the kind identified in Avon Downs.[47] His Honour then said:
On this basis, it is necessary to consider the reasons given by the Delegate for disallowing the Objection in order to determine whether there has been legal error of the Avon Downs kind.[48]
[43]Conte, 128 [15] (emphasis added).
[44]Conte, 125 [9], 126–7 [11], 128 [15].
[45]Nationwide, 17–18 [34], 18–19 [35].
[46]Nationwide No. 2.
[47]Nationwide No. 2, 846 [12].
[48]Nationwide No. 2, 846 [13].
The Commissioner correctly submits, then, that in both Conte and Nationwide, this Court held that in an appeal under s 106 conducted by judicial review, when the issue was whether the Commissioner erred in reaching or failing to reach a state of satisfaction, the question was whether the Commissioner had erred in disallowing the taxpayer’s objection, and that for that purpose the Court must look to reasons for that disallowance.
The Taxpayers did not challenge the correctness of Conte or Nationwide and said only that the issue raised in this case was not considered in those cases.
Proceeding on the basis that an appeal under s 106 concerned whether or not there was legal error in the disallowance of the objections was an essential step in the Court’s reasoning in each of Conte and Nationwide (and Nationwide No. 2). It follows from what is set out above, that I accept the correctness of Conte and Nationwide, and as I have said, no submission was made to the contrary. The result reached in this case is consistent with the approach in Conte and Nationwide. However, I accept the Taxpayers’ submission that in neither case was there in issue the question whether the taxpayer could challenge the basis for an assessment separately and as distinct from reviewing the disallowance of an objection. Accordingly, I have proceeded to analyse the relevant statutory provisions to determine the issue arising in this case.
It will be recalled that the Taxpayers relied upon three decisions of the High Court – Avon Downs, McAndrew and Kolotex. Each decision concerned the ITAA.
The passages from those authorities on which the Taxpayers rely, when extracted without context, might appear to lend support to their argument. However, even assuming that there were no relevant substantive differences between the provisions of the TAA and the ITAA, each case was addressed to an issue different from the one arising here, and does not in fact support the Taxpayers’ case.
The ITAA is a significant antecedent of Part 10 of the TAA.[49] However, the resolution of the present application does not turn on the drawing of inferences from a constructed comparison between the TAA and the ITAA. The Taxpayers did not attempt that exercise. It must of course be recalled that the history of a statutory provision is a necessary part of its context, but cannot displace the meaning of a statutory text.[50]
[49]See Nationwide, 14 [26], [27].
[50]Consolidated Media Holdings, 519 [39].
It is nonetheless informative, in addressing the authorities relied upon, to appreciate the broad relationship between the provisions on the TTA and ITAA.
The relevant parts of the ITAA were, at the time each decision cited was decided, substantially similar although not identical to the corresponding parts of the TAA. Sections 185–7 of the ITAA provided:
185A taxpayer dissatisfied with any assessment under this Act may … lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies …
186The Commissioner shall consider the objection, and may either disallow it, or allow it either wholly or in part, and shall serve the taxpayer by post or otherwise with written notice of his decision.
187 A taxpayer dissatisfied with the decision may … in writing request the Commissioner either―
(a) to refer the decision to a Board of Review for review; or
(b) to treat his objection as an appeal and to forward it either to the High Court or to the Supreme Court of a State.[51]
[51]Section 187 was amended in 1973 to amend omit reference to an appeal to the High Court. For the purposes of the decision in Kolotex, ss 185–7 were otherwise in the form enacted in 1936.
As set out earlier, that same structure is also found in Part 10 of the TAA.
At the relevant points in time the ITAA contained s 191, which provided:
If the assessment has been reduced by the Commissioner after considering the objection, the reduced assessment shall be the assessment to be dealt with on the reference or appeal. [52]
[52]Section 191 was enacted upon the promulgation of the ITAA in 1936 and remained in the Act, unamended, until 1986.
What s 191 makes clear is that an assessment considered on an appeal under s 187 was the assessment as it stood after the Commissioner had considered the objection. A reduction of the assessment which became the assessment “dealt with” on the appeal would occur where the Commissioner allowed an objection in part, and the taxpayer appealed the partial disallowance.[53]
[53]None of the handful of authorities making reference to s 191 add anything of substance.
By section 103(2) of the TAA, the Commissioner must, in the notice of determination of the taxpayer’s objection, give the reasons for disallowing an objection or for allowing it in part only. The ITAA contained no such provision.
More generally, I note the observations of Pagone J in Conte that care must be taken in relying on dicta from older cases concerning the ITAA because of substantial changes that have occurred in the nature of the jurisdiction to hear tax appeals over time.[54] In Conte, the passage to which that observation was directed, was extracted from the reasoning of Gibbs J in Kolotex.
[54]Conte, 129–30 [17]–[18].
McAndrew concerned the question whether, when the Commissioner has amended an assessment in purported pursuance of the authority conferred on him by s 170(2) of the ITAA, it rests upon the Commissioner or the taxpayer, on the hearing of an appeal by the taxpayer, to establish the fulfilment of the conditions precedent to the Commissioner’s exercise of power to amend an assessment. For that purpose it was necessary for the Court to consider the effect of s 177(1) of the ITAA which provided that the production of a notice of assessment shall be conclusive evidence of the due making of the assessment and, except in proceedings against the assessment, that the amount and all the particulars of the assessment are correct; and s 190(b), which provided that upon every reference or appeal the burden of proving that the assessment is excessive shall lie on the taxpayer. In that context, Dixon CJ, McTiernan and Webb JJ said that the fulfilment of the conditions to the exercise of the power to amend an assessment concerned the substantive liability of the taxpayer and fell within the matters that may be challenged on appeal.[55] As I discern it, the point the Taxpayers sought to draw from McAndrew was that an assessment made without power will be invalid. McAndrew did not establish and was not concerned with the question whether a taxpayer may challenge an assessment in the manner for which the Taxpayers contend.
[55]McAndrew, 271.
In Avon Downs the issue in contention was the claimed deduction of losses in previous income years. Allowance of the deductions required the Commissioner to be satisfied of specified facts. The Commissioner disallowed the deductions. The taxpayer objected to the assessment, the Commissioner disallowed the objection, and the taxpayer appealed to the High Court. As Dixon J said, “the Commissioner disallowed the objections. He gave no reasons and it does not appear what view of the facts he took or whether he took any other view of the law than that upon which the objections rested.”[56] In that context his Honour went on to say, in a now oft-cited passage:
But it is for the Commissioner, not for me, to be satisfied of the state of the voting power at the end of the year of income. His decision, it is true, is not unexaminable. If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception. … It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law.[57]
[56]Avon Downs, 359.
[57]Avon Downs, 360.
His Honour went on to say that he “[did] not know why it should be assumed that the commissioner disallowed the objections because of some misconception of the issue or some error of law”.[58]
[58]Avon Downs, 361.
The context makes clear that the Court was concerned with whether there was an error of the kind described, affecting the Commissioner’s disallowance of the objections. As Croft J decided in Nationwide, the reasoning in Avon Downs (as expressed in the passage extracted above) sets out the approach a court is to take on judicial review of a decision of the kind in question in this case, on an appeal under s 106 of the TAA.[59]
[59]Nationwide, 12–19 [23]–[36].
Kolotex also concerned the deductions by the taxpayer of losses incurred in previous income years, entitlement to which would not arise unless the Commissioner was satisfied of certain matters.[60] The Taxpayers in the present case relied upon statements of Stephen J and Barwick CJ to the effect that attainment by the Commissioner of a state of satisfaction or non-satisfaction of mind must, if it is to have statutory significance, occur before the notice of assessment issues to the taxpayer, and any state of mind existing after that time is irrelevant to the correctness of the assessment.
[60]Pursuant to ss 80, 80A and 80C of the ITAA.
In that case, the Commissioner had disallowed a deduction and assessed the company for income tax. The appeal before Mason J at first instance was, as the ITAA provided, an appeal from the disallowance of the taxpayer’s objection. As Stephen J summarised the first instance appeal decision, Mason had J found that the course of reasoning which the Commissioner followed in reaching the conclusion that he was not satisfied of the existence of the facts upon which the taxpayer might claim deductions, involved errors of law. Mason J further found that had the Commissioner not been misled by those errors, he would have concluded that he was in fact satisfied of the existence of those states of fact.[61]
[61]Kolotex, 575.
The basis on which the Commissioner had disallowed the objections was not communicated to the taxpayers (a course criticised by the High Court), but had to be discerned from the contents of the Commissioner’s official file which was put in evidence at the first instance appeal. For this purpose the Court drew inferences from the material before the Commissioner as to the Commissioner’s state of mind.[62] After the assessment had been made and before the appeal at first instance was heard, the Commissioner discovered and then sought to rely upon different and additional grounds for his failure to be satisfied, while maintaining the propriety of his original course of reasoning.[63] The Commissioner had not issued an amended notice, or addressed new grounds as such, in disallowing the taxpayer’s objection. The new grounds were grounds raised on the appeal. An issue arose on the appeal as to the proper use to be made of the new grounds, and whether, where the Commissioner’s failure to be satisfied in accordance with the Act was shown to have been based on erroneous grounds, the court should reach its own conclusion as to whether the Commissioner ought to have been satisfied. The majority decided that the court should go on to reach its own conclusion (Barwick CJ dissenting). In that context, Stephen J said:
No doubt, attainment by the Commissioner of a state of satisfaction or his failure to attain that state of mind must, if it is to have any statutory significance, occur before notice of assessment issues to the taxpayer; I would regard as irrelevant to the correctness of the original assessment any state of mind existing after that time. But the present is, in any event, not such a case. Both before and after issue of the notice of assessment the Commissioner has remained unsatisfied. All that has happened is that he has discovered, as time has passed, what he regards as additional and alternative grounds for his failure to be satisfied and the significance of those new grounds is only this: before the court may review the Commissioner’s failure to be satisfied it must detect some error of law affecting that conclusion or some other of the grounds for interference referred to by Dixon J. in Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation. Here such grounds exist, they are provided by the errors affecting the Commissioner’s course of reasoning which led him to his conclusion. But having entered upon a review of the Commissioner’s conclusion the court must form its own opinion of what should have been the Commissioner’s conclusion and must do so unaffected not only by those errors which led the Commissioner to his original conclusion unfavourable to the taxpayer but also unaffected by any other errors or oversights, whether or not favourable to the taxpayer, which may have affected the Commissioner’s original conclusion. The court will therefore necessarily have to consider any new grounds urged by the Commissioner as justifying the assessment, not because they may support the Commissioner’s already vitiated state of dissatisfaction of mind, but rather because they may assist the court in determining whether either a contrary conclusion should be substituted for the Commissioner’s original failure to be satisfied …[64]
and that:
Consideration is, in the first instance, to be confined to material which was before the Commissioner when he made his assessment … but once it is established that the Commissioner has, in this case through error of law, failed properly to perform his statutory function the court will then determine what state of mind … will amount to a discharge of that function and will do so having regard to the facts then before it, viewed in light of what the court regards at the true effect of the legislation.[65]
[62]Kolotex, 541 (Barwick CJ), 566 (Gibbs J).
[63]Kolotex, 576 (Stephen J).
[64]Kolotex, 576–7.
[65]Kolotex, 578–9.
Gibbs J said similarly, that a court in deciding whether some ground has appeared to justify a review of the Commissioner’s conclusion that he is not satisfied, should consider the question on the basis of the material which was before the Commissioner even though further material is before the court; but once it is decided that the conclusion of the Commissioner should be disturbed, it is right for the court to reach its final conclusion as to whether or not the Commissioner ought to be satisfied by reference to all the material before the court.[66] Barwick CJ said that:
The Commissioner’s satisfaction or lack of it in relation to a situation of mixed fact and law is made a critical element in the process of assessment in connexion with this group of sections. … where the legislature takes such a course it will be the Commissioner’s relevant state of mind at the point of assessment which will be determinative. ... I include in that connexion the time up to the date of the issue of the assessment, a period during which the Commissioner may reconsider his assessment. Once the assessment is issued, however, it is the Commissioner’s state of mind which then exists as to the relevant matters which is the critical element in the process of assessment: for it is the Commissioner’s state of mind which is the warrant for his action in the process of assessment of allowing or not allowing a deduction for which s. 80 provides[67]
and that:
The Commissioner could not in my opinion become dissatisfied after the issue of the assessment and seek to defend the assessment upon a new basis of fact or legal construction leaving it to the taxpayer to establish that the assessment was excessive. In the case of a statutory provision which makes the satisfaction or lack of satisfaction on the part of the Commissioner of a fact or situation an element in the process of assessment, the Commissioner when he has issued his assessment is, in my opinion, bound by his own subjective conclusions held by him at the time of the assessment. … Nor as it seems to me can the Commissioner defend the assessment … by attempting to establish a different state of mind formed after making of the assessment and perhaps upon material not before him at the time of the assessment. Facts supervening upon the making of an assessment or which though then existing were subsequently ascertained may possibly give rise to grounds for amendment of the assessment: but in my opinion they cannot justify a state of mind not present at the time of the assessment. … Further, where the satisfaction of the Commissioner is an integral part of the process of assessment by the Commissioner by his failure to record and inform the taxpayer of his relevant state of mind at the time of making the assessment cannot throw upon the taxpayer the burden of establishing what was his state of mind at the relevant time.[68]
[66]Kolotex, 568.
[67]Kolotex 541.
[68]Kolotex, 542–3.
In circumstances where it was necessary for the Court to infer from the result, and the material on the Commissioner’s file, what state of mind the Commissioner had reached and on what basis, the Court was not concerned to distinguish between any state of mind reached at the point in time at which the assessment was made and the point in time at which the objections had been disallowed. Indeed, no such distinction was in issue or arose on the material before the Court. Furthermore, the new grounds with which the Court was concerned were not said to form part of the Commissioner’s decision making process in respect of the assessment, whether at the time of the assessment, or on a consideration of the objection and disallowance of the objection. The new grounds arose on the appeal, as a further justification by the Commissioner for the course he had taken.
Discretionary considerations
Particulars
The Taxpayers submitted that they were entitled to be appraised of the basis for the Commissioner’s decisions and to have access to any material relevant to the issues in dispute. In respect of the assessments, they had not been provided with such material. Although the substantial purpose of the application was to interrogate the basis for the assessments, the application in respect of the assessments and determinations were rolled up in the form of the proposed orders, and in argument.
It follows from the above that the Taxpayers are not entitled to interrogate the state of mind of the Commissioner at the time of making the assessments. The requests for “particulars” in respect of the assessments fall away.
In respect of the determinations, as the Commissioner submits, the written notice of determination in each case (given by letters dated 2 March 2021) includes the name of the relevant delegate who made the determination and the date on which the determination was made. The notices in each case set out a statement as to why the Commissioner was not satisfied for the purposes of s 22(3) of the Duties Act that the interests or arrangements were not granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the transfer of the land or goods. The notices describe the approach that the Commissioner took to the question arising in under s 22A of the Duties Act.
That being so, I accept that the proposed questions addressed to whether the Commissioner formed a state of non-satisfaction in respect of the determinations, which persons reached such a state, and when such a state was reached, fall away.
The Commissioner submitted that the Taxpayers already have the relevant particulars by way of full written reasons given in accordance with the statutory scheme.
No submission was made in support of the proposition that, notwithstanding what is set out in the notices of determination, the Taxpayers are entitled to receive answers to their proposed questions, which have not been answered. The content of the notices of determination was not addressed in the Taxpayers’ submission.
The Taxpayers emphasised the broad proposition set out Bailey v Commissioner of Taxation that, in the exercise of discretion (in that case, to order discovery), the court will give paramountcy to the principle that the taxpayer should have the fullest particulars necessary to appraise him of the case he has to disprove, and should have access to documents necessary for the proof by him of his case.[69] In Bailey, the taxpayers had sought information as to the basis of the Commissioner’s assessment and were told only that the Commissioner was relying on s 260 of the ITAA; that it was considered there was an arrangement of the type against which s 260 operated; and that the Commissioner was not obliged to furnish a precise statement setting out the form of that arrangement.[70] In that context, the High Court held that when a case comes before the court on an appeal from a disallowance of an objection, under the court’s inherent powers a taxpayer should be given such particulars as is necessary to ensure the issues are defined. Aickin J said that there was nothing in the policy of the ITAA nor in general considerations of policy to require that the Commissioner not inform the taxpayer prior to the commencement of the hearing of those details so that the case might proceed in an orderly and comprehensible manner, and to allow the taxpayer to effectively exercise his right of appeal. It was not in the interests of justice that the taxpayer should have to speculate in order to make their case.[71] Whether it is appropriate to order particulars at all and if so, about what matters, will depend in every case on the nature of the substantive issues in play and the function they are said to fulfill in the instant case.[72]
[69]Bailey v Commissioner of Taxation (1977) 136 CLR 214, 230 (Aickin J, Barwick CJ, Gibbs, Mason and Jacobs JJ agreeing) (Bailey).
[70]Bailey, 224.
[71]Bailey, 227, 232.
[72]See the comprehensive analysis of Lindgren J on the question of particulars in WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (2006) 234 ALR 451, upheld in WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (2007) 241 ALR 636 and WR Carpenter Holdings Pty Ltd v Federal Commissioner of Taxation (2008) 237 CLR 198. The analysis in the cases considered by Lindgren J (see 459–80 [36]–[152]) is directed to the basis on which a court, on an appeal from an objection determination, might order or refuse particulars of the Commissioner’s decision making process on the determining of objections.
Beyond the contention that they were entitled to interrogate the basis for the assessments, no submissions were made that the reasons given in respect of the basis for the determinations were inadequate to allow the Taxpayers to properly exercise their rights of appeal. Nor did the Taxpayers address the question whether and on what basis, where written reasons are given, it would be appropriate to order particulars of the kind sought. The application did not address the substantive issues in the proceeding. Accordingly, the Taxpayers have not made out a basis for the exercise of discretion to order that the Commissioner provide further particulars of the basis for the determinations.
I will refuse the relief sought in respect of particulars.
Discovery
It also follows from the above that the Taxpayers are not entitled to obtain discovery relevant to the Commissioner’s state of mind at the time of his making the assessments, as distinct from those documents relevant to the determination decisions.
Apart from sub-paragraph (a) of the proposed orders in respect of discovery (which cross-refers to the anticipated answers to the requests for particulars), in substance the Taxpayers seek discovery of all material before the decision maker at the time of making the determinations. The language of paragraphs (b) and (c) of the proposed orders is duplicative. No submissions were addressed to the language proposed. I will leave the precise form of the orders to one side for the purposes of considering the substantive issue.
The Taxpayers submitted that:
(a) They are entitled to have access to any material relevant to an issue in the proceedings. Material before the decision maker at the time of determination is, as a general rule, relevant for the purposes of judicial review. This is particularly so where the Taxpayers are challenging a decision of the Commissioner on Avon Downs grounds.
(b) The requirement for the Commissioner to file documents in accordance with rule 7.06 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) (the Rules) performs a different function from discovery. Compliance with that rule requires only that the Commissioner file documents that the Commissioner considers necessary for the hearing and determination of the appeal. The Court may take a different view of relevance.
(c) Insofar as the Commissioner contends that discovery should be refused because reasons have been given for the decision, the authorities on which the Commissioner relies do not constrain the right of an applicant for judicial review to have access to relevant material.
(d) There are no discretionary reasons why discovery should be refused.
In resisting discovery, the Commissioner said that:
(a) Both determinations state that they were based on the documents that had, as at 2 March 2021, been filed in the proceedings and accordingly, the Taxpayers already have all documents relevant to each appeal. In that context, the Taxpayers have not sought to address why particular documents they seek are relevant to an issue between the parties in this proceeding. They have not established or even attempted to establish in any real sense, how any such documents would advance a live issue in the proceedings.
(b) In a proceeding in the nature of judicial review directed to the decision maker’s state of mind, an application for discovery on the basis of a bare assertion that the state of mind was not formed in accordance with the statutory requirements, would ordinarily constitute an impermissible fishing expedition. The Taxpayers’ grounds meet that description. They are so generally expressed that they are not of assistance in facilitating the identification of the issues in dispute. They cannot therefore assist in determining whether there is any discovery that ought be given, that has not been given.
(c) The legality of the determinations should stand or fall on the legality of the decision making process as evidenced by the reasons given.
As noted earlier, the determinations are each supported by reasons that were given pursuant to s 103(2) of the TAA. In each notice of determination the Commissioner’s delegate stated that the determinations “are based upon the documents that have now been filed in [these proceedings]”. The determinations themselves make reference to a number of documents provided to the Commissioner by the Taxpayers for the purposes of the Commissioner considering the objections.[73] Pursuant to rule 7.06 of the Rules, the Commissioner has filed, in the proceedings, bundles of documents comprising some 113 documents.
[73]See, e.g., the Commissioner’s Notice of Determination on the Taxpayers’ Objection to Notice of Assessment (the Emporium Assessment) dated 21 March 2021, [4], [5], [9], [10], [13]–[19], [24]–[28], [29]-[31], [34], [38]–[45], [67].
The Taxpayers’ grounds are expressed in very broad terms. In substance, they set out the conclusions that the Commissioner should have reached (adopting the language of the Duties Act), with the necessary implication that the Commissioner reached the wrong conclusion in respect of the relevant inputs to the assessments. They do so, however, without stating why the Commissioner ought to have reached different conclusions or where the error lies by reference to the relevant judicial review grounds. For example, the ground in respect of s 22(3) of the Duties Act is relevantly expressed in these terms:
[I]f[74] … pursuant to section 22(2) of the Duties Act the Ground Lease … must be disregarded in the determination of the amount for which the land might reasonably have been sold free from any encumbrance, then pursuant to section 22(3) of the Duties Act the Ground Lease … should not be so disregarded, as the Commissioner should have been satisfied that, having regard to the matters listed in section 22(4) of the Duties Act, the Ground Lease … [was] not granted or made as part of an arrangement or scheme with a collateral purpose of reducing the duty otherwise payable on the transfer of the land by the Transferor to the Taxpayers.
[74]This ground is put in the alternative to an earlier ground.
It is well established by a series of cases in the federal context that the principles concerning discovery in general administrative law cases are applicable to tax cases.
The Taxpayers relied upon the broad proposition that materials before a decision maker are generally understood to be relevant on judicial review of an administrative decision.[75] They cited Binetter v Commissioner of Taxation[76] for the contention that, because they are seeking to challenge the Commissioner on Avon Downs grounds, they should have whatever was before the decision maker. In Binetter, Hill J observed that ordinarily, material in the possession of the Commissioner will not be relevant on the question whether an assessment is excessive, but there will be circumstances where the calculation of the tax turns upon the exercise of some discretion on the part of the Commissioner.[77] Referring to Avon Downs, Hill J said that in such a case the court has a discretion to order that there be produced to the court, subject to matters of privilege, the material that was before the decision maker at the time the determination was made.[78]
[75]Citing, e.g., Minister for Immigration and Border Protection v CQZ15 (2017) 253 FCR 1.
[76]Binetter v Commissioner of Taxation (2003) 130 FCR 135 (Binetter).
[77]Binetter, 138 [13]–[14].
[78]Binetter, 138–9 [15].
More fundamentally, Hill J said that the question whether discovery will be granted will depend upon whether the material which a taxpayer seeks to have discovered by the Commissioner is relevant to an issue in the proceeding.[79] As the Full Court of the Federal Court said in Jilani v Wilhelm, the Court has a discretionary power to order discovery, and the proper exercise of the power depends upon the nature of the case and the stage at which discovery is sought.[80] Moreover, there must be sufficient definition of the issues to enable the Court to see that the documents sought on discovery will assist proof of a live issue between the parties.[81]
[79]Binetter, 138 [13].
[80]Jilani v Wilhelm (2005) 148 FCR 255, 273 [108] (Dowsett, Jacobson and Greenwood JJ) (Jilani), citing Carmody v MacKellar (1996) 68 FCR 265, 280.
[81]Jilani, 273–4 [112].
The short point in this case is that while it is conceivable that material before the Commissioner and not already produced might be relevant to an issue between the parties, the Taxpayers have not shown how that might be so by reference to an issue actually in dispute, which in this context must concern not the merit of the Commissioner’s determination decisions, but their legal correctness. There might be a proper basis for the exercise of discretion to order discovery, but on this application the Taxpayers have not descended to any of the issues actually in dispute in order to demonstrate that that is so. All that they have said is that they are reviewing the Commissioner on Avon Downs grounds. It may be that by reference to the reasons given by the Commissioner the question of relevance can be developed and a focused application advanced, but that was not attempted. Apart from reference to Avon Downs and Binetter, the only submission directed to relevance was that “[a]ll materials requested by the [Taxpayers] relate to an issue in the proceeding”.
The Commissioner relied upon WA Pines v Bannerman[82] for the proposition that if a proceeding is essentially speculative in nature (meaning a bare allegation that a decision was made unlawfully), the Court will not assist the applicant in a fishing exercise.[83] That proposition has been expressed in some cases as a threshold test that inquires whether the applicant has a “good, or at least an arguable case, proof of which would be assisted by discovery, subject to any countervailing authority or discretionary factors”.[84] Insofar as the “good or at least arguable case” test is to be understood as directed to an examination of the underlying merit of the proceeding,[85] I doubt that it has ready application to an appeal under Part 10 of the TAA. I say that because by s 106 a taxpayer is entitled to an appeal if dissatisfied with the Commissioner’s determination of the taxpayer’s objection. That entitlement, however, does not excuse the Taxpayers from sufficiently defining the issues to enable the Court to see that the documents sought on discovery will assist proof of a live issue between the parties. That has not occurred on this application.
[82]WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 (Bannerman).
[83]See, eg, Jilani, 273–4 [108]–[112] and the authorities there cited.
[84]See, eg, Moreland City Council v Minister for Planning (2014) 203 LGERA 152, 159 [14] (Daly AsJ) (Moreland); Australian Society for Kangaroos Inc v Secretary, Department of Environment, Land, Water and Planning [2018] VSC 88, [21]–[25] (Ginnane J).
[85]See Australian Securities Commission v Somerville (1994) 51 FCR 38, 49–50, 53–5 (Black CJ, Ryan and Olney JJ) for an early view that the reasoning in Bannerman ought be regarded as reflecting the facts of that case. It is unnecessary for present purposes to further consider the subsequent development of the line of cases following Bannerman.
The Commissioner cited East Melbourne Group v Minister for Planning[86] for the proposition that the legality of the determinations should stand or fall on the decision making process as evidenced by the reasons given. The submission was not developed. In East Melbourne Group, the Court was concerned with an attempt by a decision maker to rely upon “other material” in justifying a decision for which reasons had been given. In that context, Ashley and Redlich JJ said that a decision maker will ordinarily be treated as bound by and confined to the reasons which the decision maker gives for the decision in question; and that a court, when considering the lawfulness of a decision, may admit evidence in quite limited circumstances so as to elucidate, but not fundamentally collide with, the reasons stated.[87] The Court was concerned in that case with the admissibility of documents in that context, and not with a question of discovery.[88] The fact that reasons have been given by the decision maker might mean that in a particular case, discovery is unnecessary, but whether or not that is so will depend upon the facts in question.[89] It is unnecessary to consider this point further.
[86]East Melbourne Group.
[87]East Melbourne Group, 675–6 [308], [309].
[88]See the analysis in Moreland, 162–6 [24]–[36] and the authorities there cited.
[89]See, eg, Moreland, 162–3 [24] and the authorities there cited.
Also for completeness, I accept the Taxpayers’ submission that the existence of the obligation in rule 7.06 is not by itself a reason to refuse discovery in an appeal under Part 10 of the TAA. Rule 7.06 stipulates that within seven days after an appeal is set down, the Commissioner must file a request to treat the objection as an appeal, a copy of various nominated documents, and any other documents in the Commissioner’s possession or control which are necessary for the hearing and determination of the appeal. Having regard to the terms of rule 7.06, the fact that the Commissioner has filed materials pursuant to that rule should not preclude the Court ordering discovery, if it is otherwise warranted. In a particular case, a taxpayer might be able to show that, despite the filing of documents by the Commissioner in accordance with that rule, there are other documents that ought be discovered. However, on this application the Taxpayers did not seek to do that.
Finally, I note that no submissions were directed to that paragraph of the Taxpayers’ summons invoking s 26 of the Civil Procedure Act 2010 (Vic). It was not submitted that there was any basis on which to conclude that the Commissioner had not complied with his statutory obligation to disclose the existence of documents that the Commissioner considered, or ought consider, critical to the resolution of the dispute.
Conclusion
I will dismiss the application.
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