WR Carpenter Holdings Pty Ltd v Commissioner of Taxation

[2008] FCA 625

FEDERAL COURT OF AUSTRALIA

WR Carpenter Holdings Pty Ltd v Commissioner of Taxation [2008] FCA 625

W.R. Carpenter Holdings Pty Ltd & Anor v Commissioner of Taxation (2007) 161 FCR 1

W.R. CARPENTER HOLDINGS PTY LIMITED v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

NSD 931 OF 2005

W.R. CARPENTER AUSTRALIA PTY LIMITED v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

NSD 932 OF 2005

EDMONDS J
14 MAY 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 931 OF 2005

BETWEEN: W. R. CARPENTER HOLDINGS PTY LIMITED
Applicant

AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Respondent

JUDGE:	EDMONDS J
DATE OF ORDER:	14 MAY 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Subject to an agreement in terms of that outlined in [9] of the reasons for judgment, the parties bring into existence draft short minutes of order to give effect to these reasons.

2.Costs of the motion be costs in the cause.

3.This proceeding be listed for further directions on 21 May 2008 at 9:30 am.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 932 OF 2005

BETWEEN:	W. R. CARPENTER AUSTRALIA PTY LIMITED Applicant
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent

JUDGE:	EDMONDS J
DATE OF ORDER:	14 MAY 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Subject to an agreement in terms of that outlined in [9] of the reasons for judgment, the parties bring into existence draft short minutes of order to give effect to these reasons.

2.Costs of the motion be costs in the cause.

3.This proceeding be listed for further directions on 21 May 2008 at 9:30 am.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 931 OF 2005

BETWEEN: W. R. CARPENTER HOLDINGS PTY LIMITED
Applicant

AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Respondent

JUDGE:	EDMONDS J
DATE:	14 MAY 2008
PLACE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 932 OF 2005

BETWEEN:	W. R. CARPENTER AUSTRALIA PTY LIMITED Applicant
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent

JUDGE:	EDMONDS J
DATE:	14 MAY 2008
WHERE MADE:	SYDNEY

REASONS FOR JUDGMENT

1. These proceedings came before me for directions on Wednesday, 12 March 2008 when I was informed by Senior Counsel for the applicants that subject to one matter, an appeal pending in the High Court of Australia (now reserved) from part of the judgment of a Full Court of this Court in W.R. Carpenter Holdings Pty Ltd & Anor v Commissioner of Taxation (2007) 161 FCR 1; the proceedings were ready for hearing. Irrespective of the outcome of the appeal in the High Court, Senior Counsel for the applicants pressed for hearing dates to be fixed later this year in November – December or early next year and that I should set aside four weeks for this purpose.

2. Senior Counsel for the respondent opposed this course on two grounds:

   (1)First and foremost, the respondent’s position has always been that the related proceedings in the Administrative Appeals Tribunal (‘AAT’) numbered NT 2005/224 – 227, NT 2005/229 – 252 and NT 2005/255 – 268 should be heard and determined together with these proceedings.  Indeed, there were adjourned part-heard motions (by notices dated and filed 13 September 2006) in these proceedings seeking orders in those terms, but no evidence had been filed in the AAT proceedings.  The opportunity provided by the necessary determination of the High Court appeal should be  taken to enable the AAT proceedings to ‘catch up’, so to speak, with these proceedings.

   (2)Second, there was a matter of discovery in these proceedings, albeit limited, arising from the inspection of documents recently produced on subpoena by Westpac Banking Corporation and that the respondent was in the process of identifying categories of discovery in this regard.

3. I indicated that I was not proposing to fix a hearing date without giving the matter further thought; certainly not in the absence of knowing what dates counsel from both sides had available.  Senior Counsel for the respondent informed me she had no instructions on the availability of all of the respondent’s counsel because she had no notice that the applicants would be seeking a hearing date that day.

4. I also indicated that I was disposed to resume the hearing of the part-heard motions for sequential hearings of these proceedings and the AAT proceedings on a date in June and that I would also list these proceedings for directions on that date with a view to fixing a hearing date.

5. The issue of discovery by the applicants of documents arising out of the respondent’s inspection of the Westpac documents produced on subpoena was left on the basis that the respondent would provide lists of categories of documents by 9 April 2008 and the applicants would respond by 7 May 2008.  If agreement could not be reached, the proceedings could be listed before me to deal with this matter.  I indicated to the respondent that I would need to be persuaded why, at this stage, orders for discovery, albeit limited to confined categories, should be made.

6. The AAT proceedings were then called and I continued to hear the parties in camera as a Presidential Member of the AAT.

7. At the conclusion of hearing from Senior Counsel for each party in the AAT proceedings, I indicated that I proposed to abandon the course I had earlier foreshadowed, namely, to list the part-heard motions for further hearing on a date in June.  Instead, I indicated that I would give judgment on the motions as soon as I was able to do so, that is, after reviewing and considering the written and oral submissions on the earlier hearing of the motions and the respective oral submissions made that day.

8. Having undertaken that task, I have come to the following six conclusions:

   (1)The W.R. Carpenter Holdings Pty Limited (‘WRCH’) proceeding in this Court (NSD 931 of 2005) concerning the 1987 year of income should be heard and determined together with the W.R. Carpenter Australia Pty Limited (‘WRCA’) proceeding in this Court (NSD 932 of 2005) concerning the 1993 year of income.  While such an order was sought in each of the motions, it was not opposed by either WRCH or WRCA.

   (2)All the WRCH proceedings in the AAT, except for 2005/257 concerning the deductibility of management fees, and all the WRCA proceedings in the AAT, except for 2005/256 concerning the deductibility of management fees, both in the 1996 year of income, should be heard and determined together with NSD 931 and 932 of 2005, subject to what is said in [9] below.

   (3)All the Griffin Coal Mining Company Pty Ltd (‘GCM’) proceedings in the AAT except for 2005/249 (1990) – the deductibility of management fees, 2005/250 – 251 (1991 and 1992) – the deductibility of management fees and aircraft expenses, 2005/252 (1995) – the deductibility of management fees, 2005/262 (1996) – the deductibility of management fees and allowance of a capital loss, and 2005/245 – 246 (1997 and 1998) – allowance of a capital loss, should be heard and determined together with NSD 931 and 932 of 2005, subject to what is said in [9] below.

   (4)All the Claude Group Pty Ltd (‘Claude Group’) proceedings in the AAT should be heard and determined together with NSD 931 and 932 of 2005, subject to what is said in [9] below.

   (5)The Instant Access Australia Pty Ltd (‘Instant Access’) proceedings in the AAT for the 1989 year – 2005/247, but not the AAT proceeding for the 1996 year – 2005/255, should be heard and determined together with NSD 931 and 932 of 2005, subject to what is said in [9] below.

   (6)Each of the excepted WRCH and WRCA AAT proceedings referred to in (2) above; all of the excepted GCM AAT proceedings referred to in (3) above; the excepted Instant Access AAT proceeding referred to in (5) above; all of the Devereaux Holdings Pty Ltd (‘Devereaux’) AAT proceedings and the one Claude Gaming (Aust) Pty Ltd (‘Claude Gaming’) AAT proceeding should be heard and determined together but not with NSD 931 and 932 of 2005.

9. In the AAT proceedings which are to be heard and determined together with NSD 931 and 932 of 2005; provided WRCH, WRCA, GCM, Instant Access and Claude Group on the one hand, and the Commissioner on the other, agree that on the issues of:

   (1)the deductibility of management fees;

   (2)the deductibility of interest on moneys borrowed to purchase preference shares in Chatswood Inc;

   (3)the deductibility of aircraft expenses;

   (4)the deductibility of boat expenses; and

   (5)the availability of a capital loss

   they will be bound by the outcome of the Tribunal’s decisions in the proceedings referred to in [8(6)] above, I would not require any evidence to be put on in relation to these issues in the first mentioned proceedings.

10. A timetable for the hearing of the AAT proceedings which are to be heard and determined together with NSD 931 and 932 of 2005 would be fixed with a view to having all those proceedings (including of course NSD 931 and 932 of 2005) ready for hearing by 2 March 2009.

11. I would fix a timetable for the filing and service of evidence in the AAT proceedings referred to in [8(6)] above, which are to be heard and determined together, but not with NSD 931 and 932 of 2005, by reference to a hearing date commencing 1 June 2009.

12. On the publication of these reasons, I do not propose to make any orders specific to the orders sought by the respondent’s motions because my preferred course is conditional upon agreement in terms of that outlined in [9] above.  If that agreement is not forthcoming, I will have to consider alternative orders which are unlikely to be as palatable to either party as orders to give effect to these reasons.

13. In the meantime, the orders I will make on the publication of these reasons are directed to having the parties agree on specific orders to give effect to these reasons.  A timetable for the filing and service of evidence and any other matters in the AAT proceedings ‘joined up’ to these proceedings, and a timetable of the filing and service of evidence and any other matters in the other AAT proceedings, will be more appropriately fixed in those proceedings.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Associate:
Dated:       14 May 2008

Counsel for the Applicant:	Mr JW Durack SC, Ms R Seidon and Mr JH Momsen
Solicitor for the Applicant:	Becwell Legal Services Pty Ltd
Counsel for the Respondent:	Ms H Symon SC and Mr P Sest
Solicitor for the Respondent:	Australian Government Solicitor

Date of Hearing:	12 March 2008
Date of Judgment:	14 May 2008