Wanless Enviro Holdings Pty Ltd v Commissioner of Taxation
[2019] FCA 2046
•20 November 2019
FEDERAL COURT OF AUSTRALIA
Wanless Enviro Holdings Pty Ltd v Commissioner of Taxation [2019] FCA 2046
File number: QUD 763 of 2018 Judge: LOGAN J Date of judgment: 20 November 2019 Catchwords: PRACTICE AND PROCEDURE – application to vacate and re-list the trial – where the trial had been set down for nearly a year – where both parties intend to rely heavily on expert evidence – where the applicants did not disclose certain spreadsheets briefed to their expert witnesses to the Commissioner until after the Commissioner’s expert reports were due – where the applicants submit that the existence of the spreadsheets was or ought to have been apparent to the Commissioner from significantly before his expert reports were due – where the Commissioner’s experts required more time to review the spreadsheets – whether it is in the interests of justice to vacate the existing hearing dates
COSTS – where the applicants did not disclose certain spreadsheets to the Commissioner until after the Commissioner’s expert reports were due – where the belated disclosure of the spreadsheets led to the existing hearing dates being vacated – whether the applicants should bear the costs of the case management hearing, the costs thrown away by the adjournment of the trial or of further expert reports
Legislation: Federal Court of Australia Act 1976 (Cth) ss 37M, 37N Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
UBS AG v Tyne (2018) 92 ALJR 968
Date of hearing: 20 November 2019 Registry: Queensland Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 11 Counsel for the Applicant: Mr A Anderson Solicitor for the Applicant: Hopgood Ganim Lawyers Counsel for the Respondent: Ms M Brennan QC with Mr D Fuller Solicitor for the Respondent: Australian Government Solicitor ORDERS
QUD 763 of 2018 BETWEEN: WANLESS ENVIRO HOLDINGS PTY LTD
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE:
LOGAN J
DATE OF ORDER:
20 NOVEMBER 2019
THE COURT ORDERS THAT:
1.The Orders dated 21 December 2018, as varied on 18 September 2019, be further varied as follows:
1.1.Order 1.2 made on 22 October 2019 is varied so the Applicant must file and serve any lay evidence and expert evidence in reply on or before 13 December 2019.
1.2.The Respondent have leave to file any expert evidence in reply to the Applicants’ expert evidence on or before 31 January 2020.
1.3.Order 1.4 made on 22 October 2019 is varied so that any expert witnesses hold a conference/s of experts, to be conducted by the Court on or before 7 February 2020, with a view to preparing a joint experts’ report/s.
1.4.Order 1.5 made on 22 October 2019 is varied so that the join report/s are to be provided to the parties and the Applicant is to file the joint report/s with the Court on or before 14 February 2020.
1.5.Order 1.6 made on 22 October 2019 is varied so that the parties are to exchange and, if possible, agree on a draft protocol for the hearing of the concurrent expert evidence by the Court and the Applicant is to submit within four weeks of the hearing date any agreed draft agenda and protocol to Justice Logan in chambers for consideration and settling.
1.6.Order 1.8 made on 22 October 2019 is varied so that the parties are to exchange lists identifying any objections to the affidavits or parts of the affidavits relied on by the other party and setting out the basis for any such objections, not later than five days prior to the date set for the hearing.
1.7.Order 1.9 made on 22 October 2019 is varied so that the parties are to give notice in writing of any intention to cross-examine the deponent of any affidavit filed in the proceedings, no later than twenty-one days prior to the date set for the hearing.
1.8.Order 1.14 made on 22 October 2019 is vacated.
2.The proceedings be listed for hearing for 10 day commencing 9 March 2019.
3.The parties have liberty to apply on the giving of two (2) days’ notice in writing.
4.The Applicant pay the Respondent’s costs, to be taxed if not agreed, of and incidental to:
(a)The case management hearing today;
(b)Costs thrown away by the Respondent as a result of the adjournment of the trial; and
(c)The further supplementary report of Kelly-Anne Trenfield dated 14 November 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)LOGAN J:
A group of companies, which one might term the Wanless Group, of which Wanless Enviro Holdings Pty Ltd is one, are at odds with the Commissioner of Taxation (Commissioner) in relation to their taxation affairs. Appeals against objection decisions in respect of the relevant assessments are pending in the Court’s list. As long ago as 21 December 2018, case management orders were made to the end of a trial of the tax appeals occurring later this year. Those orders, as subsequently varied, would have seen the trial commence on 2 December 2019.
On Monday this week, the tax appeals were requested to be listed for further case management in light of an asserted adverse development which impacted upon the ability, on the Commissioner’s part, to secure all of the expert evidence upon which he would wish to rely for the purposes of the tax appeals. The Commissioner’s particular difficulty lies, on analysis of an affidavit of Ms Lye of the Australian Government Solicitor filed on 19 November 2019, in conjunction with an affidavit of the Wanless Group’s solicitor, Mr Patane, a partner in Hopgood Ganim, in an absence of earlier disclosure of particular spreadsheets.
The Commissioner’s forensic accounting advisors, Grant Thornton, wish to review these for the purpose of determining what revisions, if any, are needed to opinions earlier expressed in reports which have been provided to the solicitors for the Wanless Group. Mr Patane’s affidavit contains as an annexure, a letter of 19 November 2019 to the Australian Government Solicitor, which offers a very detailed analysis indeed of the position in terms of prior disclosure of documents briefed for the purposes of the expert reports to be relied on for the Wanless Group. The bottom line, though, is that it is common ground that the spreadsheets which were relied on or at least communicated to the Wanless Group experts, have not earlier been provided to the Commissioner’s solicitor. That is not to say that it was impossible to know of their existence beforehand. There is good reason to think that the existence of the spreadsheets was, or perhaps ought to have been, apparent, but they were not provided earlier.
The Court’s practice lays down very particular requirements in relation to the communication to an opposing party of material relied on by an expert to be called. The particular requirement have not been observed. It may be, in hindsight, that the summaries which have been provided are all that was ever necessary, but that will be hindsight. Grant Thornton have advised the Australian Government Solicitor that it will take some three weeks to review the position in light of the spreadsheets. There is nothing to suggest that that particular time estimate was given in anything other than good faith. The impact of it, though, is that that time estimate is quite inconsistent with an ability to conduct a joint expert conference and resultant report prior to trial, or the trial over the period appointed.
Each side in the tax appeals is, unremarkably, of the view that expert evidence is of singular importance in the resolution of whether there is or is not a tax avoidance scheme here of the kind the Commissioner postulates in his appeal statement.
It would be an extreme step to strike out the tax appeals on the basis of non-compliance, although that is a step which these days, in light of the particular overarching purpose and related duties found in s 37M and s 37N respectively of the Federal Court of Australia Act 1976 (Cth), is a contingency. Tax appeals do not stand outside those overarching requirements, nor do they stand outside the modern philosophy of case management, the exemplar case in relation to which is Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; see also UBS AG v Tyne (2018) 92 ALJR 968 at [38], [61].
The consequence, then, is that, for good reason, it has been necessary to conduct a case management hearing today. The interests of justice dictate that, however reluctantly, it is necessary to adjourn the hearing of the tax appeals. Fortuitously, the impact of that will not result in any particular adverse consequence other than in relation to costs to either party in terms of by when, not just the hearing but the determination of the tax appeals is likely to occur. That is because fortuitously I have time available in March. The parties have agreed upon particular directions which each regards as apt for the progression of the case in the event that I were minded to adjourn the hearing of the tax appeals.
Such is the importance of expert evidence in the case I feel compelled, in order to do justice to the Commissioner in the events which have transpired, to adjourn the hearing of the tax appeals so they will be able now to be heard in the fortnight commencing 9 March 2020. The consequence, though, of a non-compliance with the strictures of the practice in relation to expert evidence is not just that today’s case management hearing has had to occur, but also that tax appeals long in the list for trial have had to be adjourned. And, further, even though hindsight might suggest otherwise in prospect, the Commissioner has encountered a need for his forensic accounting advisors to review documents which really ought to have been disclosed earlier. Each of those has a costs impact.
The Commissioner has sought that he be awarded costs in respect of each of those particular consequences. Again, while hindsight might suggest otherwise, I cannot see how prudently the Commissioner’s forensic accountants could have done other than advise the Commissioner of a need to review those documents, given their duties to the Court these days under the Court’s practice note on expert evidence and given their related professional duties. So there have been consequences and the Commissioner is, in my view, entitled to his costs of those consequences.
I also remind myself that the Commissioner and his forensic accounting advisors were operating, in any event, in a compressed timeframe, having regard to earlier delays in the provision of underlying documentation from the Wanless Group, as provided to expert advisors for them. That, in turn, necessarily meant that any particular subsequent lapse detected in the provision of such material was likely to have catastrophic consequences on the Court’s ability to hear the tax appeals on the dates provided. That is an additional reason why the consequences should resonate in costs in favour of the Commissioner.
The outcome today, then, therefore serves as a useful reminder about the interaction in practice in tax appeals in modern times between expert evidence practice and overarching requirements.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 4 December 2019
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