Re Commissioner of Taxation of the Commonwealth of Australia v Hydrocarbon Products Pty Ltd [1987] FCA 129 (14 April 1987)

FEDERAL COURT OF AUSTRALIA

Re: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
And: HYDROCARBON PRODUCTS PTY. LTD.
Nos. VG388 and 389 of 1986
Taxation

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1), Wilcox(1) and Ryan(1) JJ.

CATCHWORDS

Taxation - appeal to State Supreme Court against assessment - Income Tax Assessment Act 1936 (Cth.) - Jurisdiction of Federal Court to entertain appeals from interlocutory orders of a State Supreme Court - whether appeal by leave or as of right - Discretion to grant leave to appeal on matters of practice and procedure - considerations governing discretion to order discovery and provision of particulars of taxpayer's objection to assessment.

Income Tax Assessment Act 1936 (C'th.), Part III Division 3 Sub-division B, ss.185, 187, 196A, 197, 199, 200

Judiciary Act 1903, ss.2, 64

Federal Court of Australia Act 1976, ss. 24, 33

High Court Rules, 0.32 rr.9 and 10, 0.65 rr.1 and 2

George v. Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183 at 207-208

Bailey v. The Commissioner of Taxation of the Commonwealth of Australia [1977] HCA 11; (1977) 136 CLR 214

The Myer Emporium Ltd. v. Federal Commissioner of Taxation 85 ATC 4111 at 4113

Australian Machinery and Investment Co. Ltd. v. Deputy Federal Commissioner of Taxation (1946) 8 ATD 81

Federal Commissioner of Taxation v. Offshore Oil N.L. (1980) 49 FLR 159

Federal Commissioner of Taxation v. Mantle Traders Pty. Ltd. (1980) 49 FLR 256

Kutner v. Phillips (1891) 2 QB 267

Commissioner of Taxation v. Nestle Australia Limited (unreported, 5 November 1986)

Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. [1981] HCA 39; (1981) 148 CLR 170

Niemann v. Electronic Industries Ltd. (1978) VR 431

B.H.P. Petroleum Pty. Ltd. v. Oil Basins Ltd. (1985) VR 756 at 758 and 762

George v. Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183

Naismith v. McGovern [1953] HCA 59; (1953) 90 CLR 336

Bailey v. Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214

House v. The King [1936] HCA 40; (1936) 55 CLR 499

Mace v. Murray [1955] HCA 2; (1955) 92 CLR 370

HEARING

MELBOURNE
14:4:1987

Counsel for the appellant: Mr. R. Merkel Q.C. and Mrs. A. Moshinsky

Solicitors for the appellant: Australian Government Solicitor

Counsel for the respondent: Mr. B.J. Shaw Q.C., and Mr. A.J. Myers

Solicitors for the respondent: Gledhill Burridge and Cathro

ORDER

Leave to appeal against the orders of 22 and 29 October 1986 be granted.

The appeal against the order of 22 October 1986 be dismissed.

The appeal against the order of 29 October 1986 be allowed, that order be set aside and the following directions be substituted therefor:

(i) That the Appellant taxpayer within 60 days of

this day furnish in respect of sub-paragraphs
6(d) and (e) and 7(d) and (e) of the grounds
set forth in its notice of objection dated 7
April 1983, particulars -

(a) identifying each new unit of eligible
property referred to therein, including
each alternative identification of a
unit of eligible property, on which the
taxpayer relies;

(b) specifying each contract for the
construction or acquisition of each such
unit of eligible property, and
identifying each document, conversation
or other matter which is said to
constitute the same or from which the
same is said to be implied.

(ii) That the Listing Master of the Supreme Court
be requested to fix a date for the hearing of
this Appeal after the expiration of the 60
days specified in sub-paragraph 3(i) of this
order and to give it such priority as he is
able.

(iii) That liberty be reserved to either party to
apply to the Supreme Court of Victoria for
such further directions herein as he or it may
be advised.

(iv) That the Commissioner's costs of and
incidental to this appeal and to the hearing
on 29 October 1986 and the order of that day
be the Commissioner's costs in the taxation
appeal.

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

DECISION

These proceedings are respectively an application for leave to appeal, and an appeal from orders made in the Supreme Court of Victoria on 22 and 29 October 1986. Those orders were made in the course of an appeal by Hydrocarbon Products Pty. Ltd. ("the taxpayer") under s.187 of the Income Tax Assessment Act 1936 ("the Act"), against an assessment for the year ended 31 December 1981. In making that assessment, the Commissioner disallowed losses which the taxpayer claimed to be entitled to carry forward, and which resulted from deductions claimed in earlier years pursuant to the investment allowance provisions of sub-division B of Division 3 of Part III of the Act. Those deductions were claimed by reference to expenditure by the taxpayer on the construction of a styrene monomer plant at West Footscray in the year ended 31 December 1977 when the taxpayer expended $73,179,829, and the year ended 31 December 1978 when it expended $2,168,044.

2. The taxpayer objected to the disallowance of those losses. On 17 August 1984 that objection was disallowed, whereupon the taxpayer, pursuant to s.187 of the Act, requested the Commissioner to treat its objection as an appeal and forward it to the Supreme Court of Victoria. That was ultimately done on 27 March 1986.

3. By sub-paragraph 6(d) of its notice of objection the taxpayer contended, inter alia, that the Commissioner should have allowed as a deduction certain eligible expenditure in the sum of $73,179,829 said to have been "of a capital nature in respect of acquisition or construction by the taxpayer of a new unit of eligible property or alternatively certain new units of eligible property in relation to which the said sub-division (B of Division 3 of Part III) applied being eligible expenditure that was incurred in respect of a unit or alternatively units of eligible property acquired by the taxpayer under a contract entered into on or after 1st January 1976 or in respect of a unit of eligible property or alternatively units of eligible property constructed by the taxpayer and the construction of which commenced on or after the 1st January 1976." Sub-paragraph 6(e) of the same notice of objection was in the following terms:

"(e) Further, and without in any way limiting
the generality of the foregoing, the
eligible expenditure of $73,179,329 was
incurred by the taxpayer in the
acquisition or construction of a unit of
property being a styrene monomer plant or
alternatively certain units of property
being the various components of the
styrene monomer plant or some of them."

Similar contentions were advanced in respect of a smaller sum of $867,218 the expenditure of which was said to give rise to an allowable deduction in the substituted accounting period ended 31 December 1978. In that context it was contended that the eligible expenditure was incurred in respect of a unit of property or alternatively units of property acquired under a contract entered into before 1 July 1978 or of which the taxpayer commenced construction before that date. It was then contended in the alternative that each of the two sums or some part thereof was an allowable deduction in "some other one or more of the following years and substituted accounting periods in relation to the taxpayer under the Act namely the 31st December 1976, the 31st December 1978, the 31st December 1979, the 31st December 1980 and 31st December 1981" upon the grounds mutatis mutandis set forth in relation to the respective amounts in the earlier paragraphs of the notice of objection.

4. On 20 June 1986, Tadgell J., in the Supreme Court of Victoria, ordered the Commissioner to provide particulars of his grounds of disallowance of the objection, and of each statutory provision on which he relied. Pursuant to that order, the Commissioner, on 18 July 1986, provided, amongst others, the following particulars:

"4. More particularly, in relation to the
first expenditure and the second
expenditure -

(a) neither expenditure was of a capital
nature incurred by the Appellant on
or after 1st January 1976 in respect
of the acquisition or construction
by it of a new unit or units of
sub-section 82AA(1) property, as
required by s.82AB(1)(a) of the Act;

(b) expenditure in respect of each unit
of property did not exceed $500, as
required by s.82AB (1)(b) of the Act;

(c) neither expenditure had been
incurred in respect of a unit or
units of property acquired by the
Appellant under a contract entered
into on or after 1st January 1976,
as required by s.82AB(1) (c) (i) of
the Act; or

(d) neither expenditure had been
incurred in respect of a unit or
units of property that was or were
constructed by the Appellant and the
construction of which commenced on
or after 1st January 1976, as
required by s.82AB(1)(c)(ii) of the
Act.

5. Further or alternatively, in relation to
the first expenditure and the second
expenditure, to the extent to which such
expenditure related to plumbing, fixtures
and fittings, they were not plumbing,
fixtures and fittings to which s.54(2)(c)
of the Act applied and accordingly such
expenditure was excluded from eligibility
for the investment allowance by virtue of
s.82AE of the Act.

6. Further or alternatively, if (which is not
admitted) the unit or units of property
was or were acquired by the Appellant,
such property was excluded from the
operation of sub-division B by virtue of
the provisions of s.82AF(4) of the Act.

7. Further or alternatively, if (which is not
admitted) the unit or units of property
was or were acquired by the appellant,
s.82AL(1) and/or (2) apply by reason
whereof the Appellant is not entitled to
the deduction claimed."

Section 82AB(1) of the Act provides that:

"(1) Subject to this Subdivision, where -

(a) on or after 1 January 1976, a taxpayer has
incurred expenditure of a capital nature
(in this section referred to as 'eligible
expenditure') in respect of the
acquisition or construction by him of a
new unit of sub-section 82AA (1) property;

(b) the eligible expenditure exceeded $500;

(c) the eligible expenditure was incurred -

(i) in respect of a unit of property
acquired by the taxpayer under a
contract entered into on or after 1
January 1976 and before 1 July 1985;
or

(ii) in respect of a unit of property
that was constructed by the taxpayer
and the construction of which
commenced on or after 1 January 1976
and before 1 July 1985; and

(d) the unit of property was first used or
installed ready for use before 1 July
1987,

there shall be allowed as a deduction from the
taxpayer's assessable income of the first year of
income during which that unit was either used for
the purpose of producing assessable income, or
installed ready for use for that purpose, an
amount (in this section referred to as the
'relevant amount') ascertained in accordance with
the following provisions of this section."

Section 82AF(4) of the Act, to which reference was made in paragraph 6 of the Commissioner's particulars is in the following terms:

"This Subdivision does not apply in relation to
property acquired by a taxpayer from another
person, being property that was not trading stock
of that other person, if that other person
acquired the property under a contract entered
into before 1 January 1976 or commenced
construction of the property before that date."

The effect of s.82AC(1), to which the Commissioner referred in paragraph 7 of his particulars, is that where the Commissioner is satisfied that a contract or arrangement was entered into by a taxpayer before 1 January 1976 for the acquisition or lease of an original unit of property and the taxpayer, after that date, entered into a contract (whether with the same or another person) for the acquisition or lease of the original unit or another unit in substitution therefor, the Commissioner may refuse to allow a deduction under Subdivision B of Division III of Part III of the Act, if one of the purposes for which the taxpayer contracted to acquire or lease the original or substitute unit was that of obtaining a deduction under Subdivision B. Correspondingly, s.82AL(2) gives the Commissioner a discretion to refuse a deduction where he is satisfied that on or after 1 January 1976 the taxpayer commenced construction of a substitute unit, or entered into a contract to acquire or lease the original, or a substitute unit, if the taxpayer had commenced construction of the original unit before 1 January 1976. Like that in s.82AC(1), the discretion conferred by s.82 AC(2) is conditioned upon one of the purposes for which the construction of the substitute unit was commenced or the contract for the acquisition or lease of the original or substitute unit was entered into, having been that of obtaining a deduction under Subdivision B.

5. On 16 September 1986, the Commissioner issued a summons seeking an order that the taxpayer make an affidavit of documents relating generally to the matters in dispute in the appeal. Alternatively, an order was sought requiring the taxpayer to make an affidavit of documents relating to ten specified aspects of the acquisition or construction of each unit of eligible property referred to in the taxpayer's notice of objection. By his order made on 22 October 1986, Tadgell J. dismissed the Commissioner's summons. In the course of his reasons for judgment given on that day, his Honour noted that in support of the summons the Commissioner's officer had sworn that the Commissioner maintained the view formed "at the time of assessment and maintained at the time of consideration of the objection and on further consideration during the course of the subsequent events, that the appellant was not entitled to a deduction for the investment allowance claimed". His Honour also noted that the same officer had sworn that the Commissioner was concerned that, if he did not have:

"discovery of the relevant documents and other
relevant information prior to the hearing of the
appeal it may result in injustice in the conduct
of the hearing and determination of the appeal as
well as a protraction of the hearing of the
appeal by reason of the necessity of the
appellant being required to go to proof of all
aspects of its claim which could be avoided if
the orders sought are made".

His Honour then criticised those passages and the width of the discovery sought by the Commissioner, saying;

"These two statements, if not actually
inconsistent, are not altogether easy to reconcile.
Having determined that the appellant's objection
should be disallowed, and having taken 16 months
to do so, the Commissioner seeks now, before the
already long-pending appeal is heard, to have
access to every document which could conceivably
bear on the question whether the claimed
deduction is allowable or not. The extent of the
order for discovery sought can only be seen by a
consideration of paragraph 1(a) and (b) of the
summons, which I append as a schedule to these
reasons."

After referring to the invocation by counsel for the Commissioner of a litigant's general right to discovery arising either by application of the High Court Rules or at common law, his Honour observed, at p.39 of the Appeal Book:

"In other words, the Commissioner would seek to
require the appellant to catalogue on affidavit
every document which might or could - not would -
affect the result of the appeal. Thus he seeks,
at this stage, to require the appellant to
provide information which the Commissioner has
not already obtained and which might tend to
support his disallowance of the objection. This
is not, in my opinion, an approach that the Court
should ordinarily countenance in proceedings
under s.187: it may be doubted whether it is a
course which will usually be necessary in order
to do justice to the revenue, and I do not
consider it to be necessary here.

An order for general discovery against a taxpayer
such as that now sought in paragraph 1(a) of the
summons is inappropriate in this case. Moreover, an
order for discovery by reference to broadly-described
categories of documents such as that alternatively
sought by paragraph 1(b) of the summons is
inappropriate in this case."

His Honour then drew support from the judgment of Fullagar J. in George v. Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183 at 207-208 where it was indicated that because the Commissioner is only nominally a "party" to a so-called taxation appeal, "certain orders which are quite appropriate as between parties to an action are quite inappropriate as between an appellant taxpayer and the Commissioner". From that basis, Tadgell J. continued:

"In my opinion the question whether the
Commissioner should have discovery in proceedings
such as these depends upon the convenience and
commonsense of the matter and whether he can
fairly meet the appeal without it."

Having thus identified the question, his Honour resolved it against the Commissioner's application for discovery. He was led to that conclusion by the scheme of sub-division B of Division 3 of Part III of the Act which, he suggested, prescribed exclusions of a right to an investment allowance which are "like hurdles that a taxpayer must clear if he is to succeed." Against the background of that scheme, it weighed with his Honour that:

"It is common ground that the issues have been
sufficiently defined here by means of the
appellant's notice of objection, on the one
hand, and the notice of particulars of the
Commissioner's grounds of disallowance of it on
the other."

Account was also taken of the fact that s.190(b) of the Act rests the onus of proving that an assessment is excessive upon the taxpayer, as to which his Honour said:

"The necessity for discovery in favour of the
Commissioner of documents or facts is to be
considered in the light of the peculiar onus
which rests on an appellant by virtue of
s.190(b). If, as the affidavit for the
Commissioner asserts here, the Commissioner has
actually concluded on specified grounds that the
appellant was not entitled to the claimed
deduction, the Commissioner has strictly no case
to make out upon the hearing of the appeal. If
the true position is that the Commissioner is
simply not satisfied that the appellant has
established a claim to the deduction, and has
disallowed the claim on that footing, the
position is in practical terms no different: the
Commissioner has no case to make. Any hardship
to him from a failure to provide him at this
stage with access to documents which might
support his assessment, or his disallowance of an
objection to it, is difficult to perceive unless
it results from his being taken by surprise."

Reference was then made to the access which the Commissioner already had to a great deal of documentary material, and to the fact that the Commissioner's course of investigation of the taxpayer's entitlement to an investment allowance began long before he examined the appellant's return for the 1981 year. From those references his Honour proceeded to this conclusion:

"In assessing whether the Commissioner should
receive the discovery of documents that he now
seeks, I must endeavour to balnce -

(1) the fair entitlement of the appellant to
have the appeal determined by the Court
within reasonable limits of time in the
manner contemplated by s.187 and s.196A of
the Act; and

(2) the entitlement of the Commissioner fairly
to meet the appeal.

I have had regard to the long history of the
matter, to the Commissioner's powers apart from
his right to seek discovery, to the extent of the
information that he has already received and to
the ultimate benefit and detriment that would be
likely to accrue to the one side and the other if
the extensive discovery now sought were granted.
I am clear that, on balance, the discovery sought
should not be allowed. To grant it would involve
exceedingly extensive effort, protracted delay
and large expense, all calculated to
inconvenience and disadvantage the appellant
unwarrantably in the hearing and determination of
its appeal. On the other hand the Commissioner
has not shown that, without the discovery he
seeks, he will not be fairly enabled to test and
to contest the matters that the appellant must
prove."

In the context of a reference to Bailey v. The Commissioner of Taxation of the Commonwealth of Australia [1977] HCA 11; (1977) 136 CLR 214 and the authorities there cited, his Honour repeated that here full particulars had been supplied on either side. His Honour then acknowledged that he had adverted to the matters referred to by Murphy J. in The Myer Emporium Ltd. v. Federal Commissioner of Taxation 85 ATC 4111 at 4113, but went on to observe:

"The issues in the present case are plainly
defined; and upon that definition I consider that
the appeal is in a position fairly to proceed
without the discovery that is now sought. I
recall nevertheless the dictum of Kitto, J., in
George v. Federal Commissioner of Taxation [1952] HCA 21; 86 CLR
183, 190 which, if I may respectfully say so,
applies here mutatis mutandis, namely -

'In my opinion it would not be consistent
with the authorities I have cited, or with
the commonsense of the situation, to order
particulars. If the Commissioner's case
at the hearing of the appeal develops upon
lines which the appellant cannot fairly be
expected to be ready to meet, the
presiding judge will be in a position to
ensure that no injustice results.

The summons will be dismissed with costs."

After that judgment was delivered, the matter apparently came back to Tadgell J. on 29 October 1986 for further directions. On that occasion, Counsel for the Commissioner requested his Honour to direct that the taxpayer provide particulars of each unit of property which is alleged to be eligible property in respect of which a deduction by way of investment allowance is claimed. His Honour refused that request, after noting:

"For the taxpayer, a large body of affidavit
material has been filed which, it seems to me,
does provide information and all the information
upon which the taxpayer will rely in support of
its appeal.

The identification of individual units of
eligible property, insofar as that is required,
seems to be likely to involve to some extent a
matter of opinion. Such identification will be a
task which the Court will ultimately have to
perform upon the available evidence."

The Commissioner also sought particulars of each contract referable to the construction or acquisition of each unit of eligible property. That request was similarly refused by his Honour who observed:

"Once again, I should think that, on the face of
it, is not an unreasonable request and, in
substance, I should accede to it.

The solicitor for the taxpayer this morning,
however, has indicated, in a fashion which binds
the taxpayer and is intended to bind it, that the
only contracts relied on are those which are to
be discerned from the affidavit material and the
exhibits upon which the taxpayer intends to rely
and which have been provided to the Commissioner.

I think no sensible purpose would be served by
directing any further particularisation and I do
not do so."

A third request by the Commissioner on 29 October 1986 was for a direction that the taxpayer produce for inspection the contracts in its custody, possession or power for the construction or acquisition of each of the units of eligible property, together with any plans and specifications relating to those units. His Honour also refused that request, saying of it:

"It seems to me that that request is too broad. To
a great extent, it carries with it much of the
vice of the application for discovery which I
have already refused. If there were some
specific plan or some plan which could be
identified as being necessary for the
understanding of the function of the plant which
it was necessary for the Commissioner to see, or
more than one, then I should certainly direct
that he be entitled to see it. To impose at this
stage on the taxpayer a blanket obligation to
disgorge each and every piece of paper which
might satisfy the description of a plan or
specification relating to the plant is, it seems
to me, in all the circumstances, unduly onerous
and unnecessary. I refuse the request in the
form in which it has been made."

The final relevant request made by the Commissioner on 29 October 1986 was that there should be reserved to him a right to seek leave to deliver interrogatories for the examination of the taxpayer and to have a date fixed for the return of a subpoena duces tecum before the date fixed for the hearing of the taxpayer's appeal. Of that request his Honour said:

"Without knowing the kind of interrogatories which
might be sought, and without having really any
idea of what they might be or how far they might
extend, and without having any idea of the kind
of subpoena which might be sought to be issued, I
find myself unable to make any sensible judgment
upon that request. If, hereafter, the Commissioner
can demonstrate to me or to someone else
that it is appropriate that particular
interrogatories be delivered before the case
comes on for hearing or that particular
documents, which might be the subject of a
subpoena, should be produced upon subpoena before
the case comes on for hearing, then I should
think that nothing I do this morning would shut
the Commissioner out from making appropriate
application."

We have first to determine whether an appeal lies to this Court from orders of the kind which Tadgell J. made on 22 and 29 October 1986, and, if so, whether such appeal is as of right or by leave.

6. Section 185 of the Act enables a taxpayer to lodge with the Commissioner an objection in writing to an assessment, and by s.187(1) a taxpayer dissatisfied with the Commissioner's decision on an objection may 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 to a specified Supreme Court."

Section 196A(1) which applies to, amongst other proceedings, an objection forwarded to a Supreme Court, provides (so far as is relevant) as follows:

" . . . the High Court Rules as in force immediately
before the date of commencement of this section
under the Judiciary Act 1903-1969 apply, so far
as practicable, to and in relation to a
proceeding to which this section applies in like
manner as they applied immediately before that
date to and in relation to the like proceeding in
the High Court."

The constitution of a Supreme Court by which an appeal pursuant to s.187 is to be heard is prescribed by s.197 in these terms:

"Where, at the request of the taxpayer, the
Commissioner has treated his objection as an
appeal and forwarded it to a Supreme Court, the
appeal shall be heard by a single Judge of the
Court."

The powers in respect of an appeal under s.197 of a Supreme Court constituted in accordance with that section are enumerated in s.199 which, at the time relevant to these proceedings, provided:

"199. (1) The Supreme Court hearing an appeal
under section 197 may make such order as it
thinks fit, and may by such order confirm,
reduce, increase or vary the assessment.

(2) An appeal does not lie from an order
referred to in sub-section (1) except as provided
in section 200."

Section 200, in turn, provides that:

"The Commissioner or the taxpayer may appeal
against an order referred to in section 199 -

(a) to the Federal Court of Australia;

(b) with special leave of the High Court, to
that Court."

It will be seen that the legislation does not, in terms, provide for an appeal against an interlocutory order made by a single Judge of a Supreme Court in the course of hearing a so-called appeal pursuant to s.197 of the Act. On one construction, s.199(1) contemplates only a final order disposing of the appeal by confirming, reducing, increasing or varying the assessment. That construction accords a limiting effect to the words "by such order", so that they operate to cut down the very wide discretion which is ordinarily conferred by the words "may make such order as it thinks fit.". The other available construction is that the words "may by such order confirm, reduce, increase or vary the assessment", are not words of limitation but are facultative indications of the kinds of final orders which may be made. Support for the latter construction is provided by Australian Machinery and Investment Co. Ltd. v. Deputy Federal Commissioner of Taxation (1946) 8 ATD 81 where Latham C.J. observed, at 92:

"Section 199 of the Act provides that the court
hearing the appeal may make such order as it
thinks fit and may by such order affirm,
increase, reduce or vary the assessment. In my
opinion the initial words of this provision
enable the Court to set aside an assessment."

A similar view was expressed by Starke J. at 97 and by Dixon J. who said, at 99:

"The language of s.199(1) appears to me quite
general enough to empower the Court to make
orders setting aside assessments whether for the
purpose of directing re-assessment or in order to
give effect to a determination that there is no
liability to assessment. I see no reason for
restricting the words 'such order as it thinks
fit' to the kinds of order specifically referred
to in the sub-section, viz., orders confirming
reducing, increasing or varying assessments. It
would be a misfortune if such a restriction were
placed on the provision. For justice could not
be done in some cases unless the Court could
quash an assessment, and, in others, unless it
could vacate an assessment and remit the question
of the amount of the taxable income to the
Commissioner for complete re-assessment."

To similar effect, Williams J. observed, at 115:

"Section 199 provides that the Court hearing the
appeal may make such order as it thinks fit and
may by such order confirm, reduce, increase or
vary the assessment. It was contended that the
initial generality of the section is limited by
its subsequent explicitness, so that the
jurisdiction of the Court is confined to
confirming, reducing, increasing or varying the
assessment. A casual glance at the Commonwealth
Law Reports is sufficient to show that orders
setting aside assessments have been frequently
made. The power conferred upon the Court to make
such order as it thinks fit is expressed in the
most general terms and is clearly intended, in my
opinion, to bestow upon it the most ample
authority to mould its order to meet the
circumstances of any particular appeal."

In Federal Commissioner of Taxation v. Offshore Oil N.L. (1980) 49 FLR 159 it was held by Franki and Lockhart JJ. that a declaration by a Supreme Court on a preliminary question of law that it had jurisdiction to entertain certain taxation appeals, and an order as to the costs of that question were "orders" within s.200 of the Act. Deane J., however, doubted the correctness of that view saying at 164:

"As regards the question of the jurisdiction of
this Court to entertain the appeals and cross
appeals, I entertain some doubt as to whether
either the declaration on the preliminary point
or the order for costs made by the Supreme Court
was 'an order referred to in' s.199 of the Income
Tax Assessment Act 1936 ('the Act') from which an
appeal lies to this Court pursuant to s.200 of
the Act. I can see much force in the argument
that the 'order' referred to in s.199 is an order
effectively disposing of an appeal to the Supreme
Court. The other members of the court are,
however, of the opinion that the court does have
jurisdiction to hear the appeals and cross
appeals and both parties submitted that that view
was correct. In these circumstances, it is
unnecessary that I reach any concluded view on
the question since I consider that I should, in
any event, bow to the views of the other members
of the court and deal with the substance of the
appeals and cross appeals."

There was no counterpart of s.199(1) in s.196 of the Act which, until its repeal, governed appeals or references to a Supreme Court from a Board of Review on a question of law. Sub-sections 196(3)(4) and (5) simply provided as follows:

"(3) An appeal or reference to a Supreme Court
under this section shall be heard by a single
Judge of the Court.

(4) Except as provided in sub-section (5), an
appeal does not lie from the decision of a
Supreme Court constituted by a single Judge on an
appeal or reference under this section.

(5) The Commissioner or the taxpayer may appeal
against a decision of a Supreme Court on an
appeal or reference under this section -

(a) by leave of the Federal Court of
Australia, to that Court; or

(b) by special leave of the High Court, to
that Court."

Whether an appeal lay to this Court from the decision of a Supreme Court on a preliminary question arising in an appeal by the Commissioner under s.196(1) was considered by a Full Court, in Federal Commissioner of Taxation v. Mantle Traders Pty. Ltd. (1980) 49 FLR 256 where Bowen C.J. (with whom Franki and Brennan JJ. agreed) after noting that a somewhat similar question arose in Federal Commissioner of Taxation v. Offshore Oil N.L. (supra), observed, at 258:-

"The answer to the question in this case must turn
on the interpretation of s.196(4) and (5).
Section 196(4) by its reference to 'the decision
. . . on an appeal . . . under this section' seems to
point to the decision of the Supreme Court
determining the appeal under s.196(1). Section
196(5), on the other hand, is general in its
terms. It refers to 'an appeal against a
decision of a Supreme Court on an appeal . . .
under this section' which suggests it covers any
decision of the Supreme Court on the appeal. If
so, it would cover a decision on a preliminary
question, such as has been given in the present
case, or an interlocutory order.

But s.196(4) says 'except as provided in
sub-section (5)'. It might be argued that
s.196(5) is limited, operating simply as an
exception from s.196(4). However, s.196(4) is a
prohibition. The words of exception were
appropriate to lift the prohibition from
s.196(5). This would appear to leave the scope
of s.196(5) itself to be determined by the words
used in that section. Since the words are
general, it may be argued that its scope is
general. In the result, though in absence of
argument, my view as at present advised is that
we should entertain the appeal."

In our opinion, the better view in the light of the authorities is that s.200 should be taken as making appellable any order of a Supreme Court made in the exercise of the discretion conferred by s.199(1) to make such order as it thinks fit, and should not be confined to final orders. We are also influenced to favour the former construction by the consideration that, without it, a Supreme Court would have no express power to make orders dealing with procedural or other interlocutory issues arising in taxation appeals under s.197, although clearly, on the authority of Federal Commissioner of Taxation v. Mantle Traders Pty. Ltd. (supra), it has such a power in respect of appeals or reference coming from a Board of Review.

7. It thus becomes necessary to consider whether an appeal to this Court from a decision of a Supreme Court on a procedural or other interlocutory issue is by leave or as of right. Mr. Merkel Q.C., for the Commissioner, contrasted s.200 with the former s.196(5) and argued that the express requirement for leave of the Federal Court to pursue an appeal under s.196, negatived any intention that leave should be required to pursue any appeal under s.200. However, s.196 was concerned with an appeal from a Supreme Court on a question of law which had arisen at first instance before a Board of Review. It is therefore understandable that the legislature should be concerned that there be control of the opportunity for a review by this Court of a question which may have been twice litigated previously, even where the second litigation resulted in a final order. There would naturally be less concern about an appeal of the kind contemplated by s.200 from a final order made after only one review of the Commissioner's disallowance of an objection. That is not to say that the draftsman of s.200 set out to confer on the Commissioner and a taxpayer an unfettered right of appeal to this Court, even from procedural or interlocutory orders of a Supreme Court. The stronger inference, in our opinion, is that Parliament intended that appeals to the Federal Court under s.200 should be attended by whatever restrictions, conditions or procedural requirements might generally be made applicable by the Federal Court of Australia Act 1976. Sub-section 24(1) of that Act provides as follows:

"24. (1) Subject to this section and to any other
Act, whether passed before or after the
commencement of this Act (including an Act by
virtue of which any judgments referred to in this
section are made final and conclusive or not
subject to appeal), the Court has jurisdiction to
hear and determine -

(a) appeals from judgments of the Court
constituted by a single Judge;

(b) appeals from judgments of the Supreme
Court of a Territory; and

(c) in such cases as are provided by any other
Act, appeals from judgments of a court of
a State, other than a Full Court of the
Supreme Court of a State, exercising
federal jurisdiction."

The following new sub-section was inserted by Act No. 72 of 1984:

"(1A) An appeal shall not be brought from a
judgment referred to in sub-section (1) that is
an interlocutory judgment unless the Court or a
Judge gives leave to appeal."

Accordingly, on the view we favour, an appeal from the orders pronounced by Tadgell J. on 22 and 29 October 1986 in respect of the present taxation appeal, is by leave of this Court. We are encouraged in this conclusion by a consideration of the legislative history of the provision of appeals under the Act to the High Court.

8. Sections 37 and 38 of the Income Tax Assessment Act 1915 provided as follows:

"37.-(1.) A taxpayer who is dissatisfied with the
assessment made by the Commissioner under this
Act may, within thirty days after service by post
of the notice of assessment, lodge an objection
in writing with the Commissioner against the
assessment stating fully the reason for the
objection.

(2.) The Commissioner shall consider the
objection, and may either disallow it, or allow
it, either wholly or in part.

(3.) The Commissioner shall give to the
objector written notice of his decision on the
objection.

(4.) A taxpayer who is dissatisfied with the
decision of the Commissioner, may, within thirty
days after the service by post of notice of the
decision of the Commissioner, ask the
Commissioner to treat his objection as an appeal,
and forward it either to the High Court, the
Supreme Court, or a County or District Court of a
State, or such other Court as is specified in
that behalf by proclamation, as required by the
taxpayer.

(5.) When the appeal is to the High Court or a
Supreme Court, it shall be heard by a single
Justice of the Court.

(6.) An inferior Court of a State shall not
have jurisdiction under this section unless it is
constituted or presided over by a Judge
authorized in that behalf by the Governor-General.

(7.) If the assessment has been reduced by the
Commissioner after considering the objection, the
reduced assessment shall be the assessment
appealed from.

38.-(1.) On the hearing of the appeal, the Court
may make such order as it thinks fit, and may
either reduce or increase the assessment and its
order shall be final and conclusive on all
parties except as provided in this section.

(2.) The costs of the appeal shall be in the
discretion of the Court.

(3.) On the hearing of the appeal, the Court
may, if it thinks fit, state a case in writing
for the opinion of the High Court upon any
question arising in the appeal which in the
opinion of the Court is a question of law.

(4.) The High Court shall hear and determine
the question, and remit the case with its opinion
to the Court below, and may make such order as to
costs of the case stated as it thinks fit.

(5.) An appeal shall lie to the High Court,
in its appellate jurisdiction, from any order
made under sub-section (1.) of this section."

The corresponding provisions in the Income Tax Assessment Act 1922-1925 were ss.50 and 51A which, so far as relevant, were in the following terms:

"50.-(1.) A taxpayer who is dissatisfied with the
assessment made by the Commissioner under this
Act may, within forty-two days after the service
by post of the notice of assessment, post to or
lodge with the Commissioner an objection in
writing against the assessment stating fully and
in detail the grounds on which he relies.

(2.) The Commissioner shall consider the
objection, and may either disallow it, or allow
it, either wholly or in part.

(3.) The Commissioner shall consider the
objection, and may either disallow it, or allow
it, either wholly or in part.

(4.) A taxpayer who is dissatisfied with the
decision of the Commissioner, Assistant
Commissioner or Deputy Commissioner may within
thirty days after the service by post of notice
of that decision -

(a) in writing, request the Commissioner to
refer the decision to a Board of Review
for review; or

(b) in writing, request the Commissioner to
treat his objection as an appeal and to
forward it either to the High Court or to
the Supreme Court of a State."

"52A. -(1.) Where a taxpayer has, in accordance
with section fifty of this Act, requested the
Commissioner to treat his objection as an appeal
and to forward it to the High Court or the
Supreme Court of a State, the Commissioner shall
forward it accordingly.

(2.) The appeal shall be heard by a single
Justice of the Court.

(3.) A taxpayer shall be limited, on the
hearing of the appeal, to the grounds stated in
his objection. . . .

(5.) On the hearing of the appeal, the Court
may make such order as it thinks fit, and may
reduce, increase or vary the assessment.

(6.) An order of the Court shall be final and
conclusive on all parties except as provided in
this section. . . .

(10.)The Commissioner or a taxpayer may
appeal to the High Court, in its appellate
jurisdiction, from any order made under
sub-section (5.) of this section."

By the Income Tax and Social Services Contribution Assessment Act 1936-1962 the right to appeal directly to a Court against disallowance by the Commissioner of a taxpayer's objection was governed by ss.197, 199 and 200 which provided:

"197. Where, at the request of the taxpayer, the
Commissioner has treated his objection as an
appeal and forwarded it to the High Court or the
Supreme Court of a State, the appeal shall be
heard by a single Justice or Judge of the Court.

199. -(1.) The Court hearing the appeal may make
such order as it thinks fit, and may by such
order confirm, reduce, increase or vary the
assessment. The costs of the appeal shall be in
the discretion of the Court.

(2.) Every such order shall be final and
conclusive except as hereinafter provided.

200. The Commissioner or taxpayer may appeal to
the High Court in its appellate jurisdiction from
any such order.

The appellate jurisdiction of the High Court, to which a reference was preserved throughout that legislative history, was a concept expressly embodied in Part V of the Judiciary Act 1903 which, as in force until 1973, contained ss. 34 and 35 in substantially this form:

"34. The High Court shall, except as provided by
this Act, have jurisdiction to hear and determine
appeals from all judgments whatsoever of any
Justice or Justices, exercising the original
jurisdiction of the High Court whether in Court
or Chambers.

35. (1) The appellate jurisdiction of the High
Court with respect to judgments of the Supreme
Court of a State shall extend to the following
judgments whether given or pronounced in the
exercise of federal jurisdiction or otherwise and
to no others, namely:

(a) Every judgment, whether final or
interlocutory, which -

(1) is given or pronounced for or in
respect of any sum or matter at
issue amounting to or of the value
of Three thousand dollars; or

(2) involves directly or indirectly any
claim, demand, or question, to or
respecting any property or any civil
right amounting to or of the value
of Three thousand dollars; or

(3) affects the status of any person
under the laws relating to aliens,
marriage, divorce, bankruptcy, or
insolvency;

but so that an appeal may not be brought
from an interlocutory judgment except by
leave of the Supreme Court or the High
Court -

(b) Any judgment, whether final or
interlocutory, and whether in a civil or
criminal matter, with respect to which the
High Court thinks fit to give special
leave to appeal:

(c) Any judgment of the Supreme Court of a
State given or pronounced in the exercise
of federal jurisdiction in a matter
pending in the High Court.

(2) It shall not be necessary in any case, in
order to appeal from a judgment of the Court of a
State to the High Court, to obtain the leave of
the Court appealed from."

It is significant that ss. 199 and 200 of the Act were amended to the form in which they are reproduced above by s. 8 of the Income Tax Assessment Amendment (Jurisdiction of Courts) Act 1976, which was passed in the same year and the same session of Parliament as the Federal Court of Australia Act 1976, and the Judiciary Amendment Act No. 164 of 1976. The latter Act by s. 6 inserted a new section 35 in the Judiciary Act, in substitution for that reproduced above. So far as relevant to this case, the new s. 35 contained the following sub-sections:

"35. (1) The jurisdiction of the High Court to
hear and determine appeals from -

(a) judgments of the Supreme Court of a State,
whether given or pronounced in the
exercise of federal jurisdiction or
otherwise; or

(b) judgments of any other court of a State
given or pronounced in the exercise of
federal jurisdiction,

whether in civil or criminal matters, is subject
to the exceptions and regulations prescribed by
this section.

(2) Except as provided by the succeeding
provisions of this section, an appeal shall not
be brought from a judgment, whether final or
interlocutory, referred to in sub-section (1)
unless the High Court gives special leave to
appeal.

(3) Subject to sub-section (4), an appeal may be
brought as of right from a final judgment of a
Full Court of the Supreme Court of a State given
or pronounced -

(a) for the sum of $20,000 or upwards; or

(b) in any proceedings in which the matter in
issue amounts to or is of the value of
$20,000 or upwards or which involve
directly or indirectly a claim, demand or
question to or respecting any property or
any civil right amounting to or of the
value of $20,000 or upwards.

(4) An appeal shall not be brought from a
judgment referred to in sub-section (3) on a
ground that relates to the quantum of any damages
in respect of death or personal injury unless the
High Court has given special leave to appeal on
that ground.

(5) The foregoing provisions of this section
have effect subject to any special provision made
by an Act other than this Act, whether passed
before or after the commencement of this section,
preventing or permitting appeals from the Supreme
Courts of the States in particular matters."

Sub-sections (3) and (4) were subsequently repealed by the Judiciary Amendment Act (No. 2) of 1984 which amended sub-s. (2) to read:

"An appeal shall not be brought from a judgment,
whether final or interlocutory, referred to in
sub-section (1) unless the High Court gives
special leave to appeal."

9. At all times since 1976 the appellate jurisdiction of the High Court to hear and determine appeals from this Court has been governed not by the Judiciary Act but by Part IV of the Federal Court of Australia Act 1976. Section 33 of that Act originally distinguished the cases in which an appeal lay as of right from a Full Court of this Court, from those in which special leave was required, by providing as follows:

"(3) Except as provided by the succeeding
provisions of this section, an appeal shall not
be brought from a judgment of a Full Court of the
Court unless the High Court gives special leave
to appeal.

(4) Subject to sub-section (5), an appeal may be
brought as of right from a final judgment of a
Full Court of the Court given or pronounced -

(a) for the sum of $20,000 or upwards; or

(b) in any proceedings in which the matter in
issue amounts to or is of the value of
$20,000 or upwards or which involve
directly or indirectly a claim, demand or
question to or respecting any property or
any civil right amounting to or of the
value of $20,000 or upwards.

(5) An appeal shall not be brought from a
judgment referred to in sub-section (4) on a
ground that relates to the quantum of any damages
in respect of death or personal injury unless the
High Court has given special leave to appeal on
that ground."

However, by the Federal Court of Australia Amendment Act 1984 which was passed in conjunction with the Judiciary Amendment Act (No. 2) 1984, sub-ss. (4) and (5) were omitted and the introductory exception in sub-s. (3) was amended to read "Except as otherwise provided by another Act . . .". No right of appeal from an order of a Full Court of this Court pursuant to s. 200 of the Act was conferred by the Act itself but it was recognized that such a right existed by virtue of s. 33 of the Federal Court of Australia Act. Hence, s. 200A was inserted in the Act by s. 43 of the Jurisdiction of Courts (Miscellaneous Amendments) Act 1979 to provide:

"An appeal does not lie from a decision of the
Federal Court of Australia in a matter under this
Part unless the High Court gives special leave to
appeal."

As a result of the amendments in 1984 to s. 33 of the Federal Court of Australia Act, s. 200A of the Act now has no practical operation. In our opinion, that legislative history argues strongly in favour of the conclusion that s. 200 of the Act as amended in 1976 was intended to entrust to the appellate jurisdiction of this Court, or alternatively by special leave of the High Court to the appellate jurisdiction of that Court, a review of an order made by the Supreme Court of a State on a so-called taxation appeal, but to leave the conditions for the exercise of the appellate jurisdiction of this Court and any right of appeal from its exercise to the High Court to be defined by the Federal Court of Australia Act as in force from time to time.

10. Mr. Merkel contended that the Statute Law (Miscellaneous Provisions) (No. 1) Act, 1984 which inserted sub-s. 24 (1A) into the Federal Court of Australia Act, was a later general Act which was not to be construed as cutting down the earlier special enactment to be found in s. 200 of the Act. He referred to Kutner v. Phillips (1891) 2 QB 267 where A.L. Smith J. observed, at 272:

"Unless two Acts are so plainly repugnant to each
other, that effect cannot be given to both at the
same time, a repeal will not be implied, and
special Acts are not repealed by general Acts
unless there is some express reference to the
previous legislation, or unless there is a
necessary inconsistency in the two Acts standing
together."

However, on the construction which we have adopted of s. 200 of the Act no question arises of its repeal or abrogation by the insertion of sub-s. 24(1A) IN the Federal Court of Australia Act. It is true that sub-s. 24(1A) affects the operation of s. 200 of the Act, but that was no more than was contemplated when s. 200 was amended to permit resort to the appellate jurisdiction of this Court as, we consider, it might be defined from time to time.

11. Accordingly, the Commissioner cannot bring an appeal against an interlocutory judgment such as those given by Tadgell J. on 22 and 29 October 1986, unless this Court or a Judge of this Court gives leave to appeal.

12. We turn now to consider whether the Commissioner should have leave to appeal in the present case.

13. The approach to be taken by an appellate court to whether it should grant leave to appeal from an interlocutory order is reasonably well settled. However, various formulations of the appropriate test have been expressed in different authorities. In Commissioner of Taxation v. Nestle Australia Limited (unreported, 5 November 1986) a Full Court of this Court (Bowen C.J., Lockhart and Sheppard JJ.) adopted, the following passage from the joint judgment of Gibbs C. J., Aickin, Wilson and Brennan JJ. in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. [1981] HCA 39; (1981) 148 CLR 170, at 177:

"Nor is there any serious dispute between the
parties that appellate courts exercise particular
caution in reviewing decisions pertaining to
practice and procedure. Counsel for Brown urged
that specific cumulative bars operate to guide
appellate courts in the discharge of that task.
Not only must there be error of principle, but
the decision appealed from must work a
substantial injustice to one of the parties. The
opposing view is that such criteria are to be
expressed disjunctively . . . For ourselves, we
believe it to be unnecessary and indeed unwise to
lay down rigid and exhaustive criteria. The
circumstances of different cases are infinitely
various. We would merely repeat, with approval,
the oft-cited statement of Sir Frederick Jordan
in In re the Will of F.B. Gilbert (dec.) (1946)
46 SR (NSW) 318 at p 323:

'. . . I am of opinion that, . . . there is a
material difference between an exercise of
discretion on a point of practice or
procedure and an exercise of discretion
which determines substantive rights. In
the former class of case, if a tight rein
were not kept upon interference with the
orders of Judges of first instance, the
result would be disastrous to the proper
administration of justice. The disposal
of cases could be delayed interminably,
and costs heaped up indefinitely, if a
litigant with a long purse or a litigious
disposition could, at will, in effect
transfer all exercises of discretion in
interlocutory applications from a Judge in
Chambers to a Court of Appeal.'"

We were referred also to Niemann v. Electronic Industries Ltd. (1978) VR 431 where Murphy J., with whom McInerney J. agreed, suggested that for leave to be granted, the order in respect of which it is sought must be seen clearly to be "attended with sufficient doubt", and, if wrong, to work substantial injustice. See also B.H.P. Petroleum Pty. Ltd. v. Oil Basins Ltd. (1985) VR 756 at 758 and 762. Without regarding that formulation as an exhaustive test to be applied to all cases, we believe it useful to ask first whether it has been clearly demonstrated that Tadgell J's exercise of discretion was attended with sufficient doubt to warrant this Court re-examining the considerations to be taken into account.

14. The first suggested error, into which Mr. Merkel argued his Honour had been led, was to fail to recognize that the Commissioner had a right to discovery by virtue of 0.32 rr.9 and 10 of the High Court Rules which are made applicable to so-called taxation appeals by 0.65 rr.1 and 2 of the High Court Rules. Order 65 rr.1 and 2 provide:

"(1) This Order applies to an appeal to the
High Court or to the Supreme Court of a
State or Territory under or pursuant to a
law of the Commonwealth or of a Territory
dealing with the assessment of taxation
and to questions referred under such a law
to the High Court.

(2) Subject to this Order and to any law of
the Commonwealth, the provisions of the
other Orders of these Rules apply, so far
as is practicable, to proceedings to which
the last preceding rule applies."

Order 32 rr.9 and 10, in turn stipulate that:

"(9) A party may serve a notice in accordance
with the form numbered 30 in the First
Schedule upon another party to a
proceeding requiring him to make discovery
on oath of the documents which are or have
been in his possession or power, relating
to a matter in question in the proceeding.

(10) Where a party is served with a notice for
discovery -

(a) that party; or

(b) where that party is a body politic
or corporate, or any other body of
persons empowered or allowed by law
to sue or be sued whether in its own
name or in the name of an officer or
other person, the secretary or other
proper officer, agent or servant of
the body,

shall, within fourteen days after service
of the notice, make an affidavit in answer
to the notice."

Reference was also made to 0.1 r.5 in which "party" and "parties" are defined to include, as well as the plaintiff and the defendant:-

"(a) a person not originally a party against
whom a counter-claim is set up or who has
been served with notice to appear under
any of these Rules; and

(b) a person served with notice of or
attending a proceeding although not named
on the record or in the process;"

15. Counsel for the Commissioner relied strongly on the fact that 0.65 of the High Court Rules came into operation on 1 January 1953, shortly after judgment was given by the High Court in George v. Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183. In that case the Court in a joint judgment upheld a decision of Kitto J. refusing to order the Commissioner to furnish particulars of the basis on which the taxpayer had been assessed on two additional sums of money, and of internal processes by which the assessment was arrived at. At first instance, Kitto J., at 190 observed of the first part of the request for particulars:-

"I was not referred to any authority on the point,
and so far as I know there is none. But an
analogy may be found in the cases in which the
courts in England have considered applications by
plaintiffs upon whom lies the onus of proving a
negative, for particulars from defendants who
have put in issue the plaintiff's negative
allegation. The principle laid down is that if
it is clear to the court, either from the nature
of the case or from the admission of counsel or
otherwise, that the defendant intends under his
denial of the negative, to set up an affirmative
case, particulars of the defendant's case may be
ordered; but not otherwise (Pinson v. Lloyds and
National Provincial Foreign Bank Ltd. (1941) 2 KB
72 at p 80; Duke's Court Estates, Ltd. v.
Associated British Engineering Ltd. (1948) Ch
458; cf. Weinberger v. Inglis (1918) 1 Ch 133.)
So, if in this matter the commissioner were to
admit that he intended to set up a case that the
additional income upon which he has assessed tax
was derived from a particular source, I should
think that he ought to give particulars to enable
the appellant to meet that case. But the
commissioner has made no admission and there is
nothing which could entitle me to infer that he
has such an intention. All that appears is, as I
have said, that the appellant is put to the proof
of his negative case. In my opinion it would not
be consistent with the authorities I have cited,
or with the commonsense of the situation, to
order particulars. If the commissioner's case at
the hearing of the appeal develops upon lines
which the appellant cannot fairly be expected to
be ready to meet, the presiding Judge will be in
a position to ensure that no injustice results."

Fullagar J. was a party to the joint judgment on the appeal from Kitto J. but went on, at 207, to deliver the following addendum:-

"I wish, however, to add for myself that, in my
opinion, apart altogether from any question of
burden of proof, the application for
'particulars' was rightly rejected by Kitto J.
It was not really an application for particulars
at all. The subject matter of the demand for
information was rather subject matter for
interrogatories, and I can see no warrant for
ordering interrogatories to be answered in a case
of this type, even if I am to assume that the
Court has power to make such an order, which I
doubt. It is common practice, in the Court lists
and in the Law Reports to entitle a taxation
appeal as if it were a proceeding between a named
taxpayer and the Commissioner of Taxation. But
the Commissioner is only nominally a 'party' to
the proceedings. The proceedings are really
proceedings between Crown and subject. A similar
position exists under the Patent Act 1952 and the
Trade Marks Act 1905-1948. The substance of the
position in taxation cases is not affected by the
fact that the Commissioner is given eo nomine a
right of appeal from decisions of the Board of
Review. The Commissioner is an officer who, in
the performance of his statutory functions, does
acts which prima facie create an obligation as
between the Crown and a particular subject, and
the statute provides means whereby the subject
may test before a court or a board the question
whether the Commissioner has acted according to
law. In proceedings before court or board the
Commissioner's acts are called in question, but
he is in no real sense a party. This does not
mean that he is not, in many respects, subject to
orders of the court, but it does mean that
certain orders which are quite appropriate as
between parties to an action are quite
inappropriate as between an appellant taxpayer
and the Commissioner."

That was the passage from which, as we have already noted, Tadgell J. drew support in the present case.

16. We are not persuaded that the insertion of 0.65 in the High Court Rules was specifically directed to supplying some procedural deficiency in respect of taxation appeals which was perceived to exist as a result of the judgments in George's Case. However, we accept that the effect of the insertion of 0.65 was to lay down for the hearing of a taxation appeal by the High Court or the Supreme Court of a State or Territory, a procedural code which incorporates by reference other Orders of the High Court Rules by making them apply "so far as is practicable".

17. Nor do we consider that a taxation appeal is a suit to which the Commonwealth is a party within the meaning of s.64 of the Judiciary Act 1903, which provides:

"In any suit to which the Commonwealth or a State
is a party, the rights of parties shall as nearly
as possible be the same, and judgment may be
given and costs awarded on either side, as in a
suit between subject and subject."

Section 2 of the Judiciary Act provides that:

"In this Act, unless the contrary intention
appears -

'Suit' includes any action or original proceeding
between parties;

'Cause' includes any suit, and also includes
criminal proceedings;

'Matter' includes any proceeding in a Court,
whether between parties or not, and also any
incidental proceeding in a cause or matter."

Although it is clear that the Commonwealth may be a party to a suit, it is equally clear that not every cause or matter in which the Commonwealth or some person representing the Commonwealth is involved, is a suit. We prefer to regard an appeal to a specified Supreme Court pursuant to s.187(1)(b) of the Act as a proceeding sui generis to which any particular provision of the High Court Rules will be applicable, so far as the substance of that provision and the nature of the proceeding makes such application practicable. The proceedings in Naismith v. McGovern [1953] HCA 59; (1953) 90 CLR 336 to which Mr. Merkel referred us, were not of that kind but were by action commenced in the High Court by the Commissioner of Taxation for a declaration that the defendant had been guilty of offences under the Act, and for an order for the payment of penalties in respect of the alleged offences. Accordingly, the High Court (Williams, Webb, Kitto and Taylor JJ.) was able to say, at 343:

"Section 222 of the Assessment Act provides that
taxation prosecutions are proceedings by the
Crown for the recovery of pecuniary penalties
under the Assessment Act. Such prosecutions are
original proceedings in this Court. They proceed
in accordance with the usual practice and
procedure of the Court in civil cases. We can
see no reason why s.64 of the Judiciary Act
should not apply to such proceedings."

Nor do we consider that Bailey v. Federal Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214 supports the view that discovery is now available in a taxation appeal as of right by virtue of 0.65 rr.1 and 2 of the High Court Rules. That case affirmed the existence of a discretion to order particulars in a taxation appeal. However, in none of the judgments is there any suggestion that George v. Federal Commissioner of Taxation (supra) has been overtaken by some change in the context of the Act and the Rules pursuant to which taxation appeals have to be resolved.

18. It follows, therefore, that whether the taxpayer should be ordered to provide particulars or afford discovery to the Commissioner was a matter to be resolved in the exercise of his Honour's discretion. Accordingly, as Mr. Shaw Q.C. for the taxpayer submitted, if this Court were to review that exercise of discretion, it would be bound to apply the principles laid down in such cases as House v. The King [1936] HCA 40; (1936) 55 CLR 499 and Mace v. Murray [1955] HCA 2; (1955) 92 CLR 370. In the former case it was observed in the joint judgment of Dixon, Evatt and McTiernan JJ. at 504:

"The manner in which an appeal against an exercise
of discretion should be determined is governed by
established principles. It is not enough that
the judges composing the appellate court consider
that, if they had been in the position of the
primary judge, they would have taken a different
course. It must appear that some error has been
made in exercising the discretion. If the
judge acts upon a wrong principle, if he allows
extraneous or irrelevant matters to guide or
affect him, if he mistakes the facts, if he does
not take into account some material
consideration, then his determination should be
reviewed and the appellate court may exercise its
own discretion in substitution for his if it has
the materials for doing so. It may not appear
how the primary judge has reached the result
embodied in his order, but, if upon the facts it
is unreasonable or plainly unjust, the appellate
court may infer that in some way there has been a
failure properly to exercise the discretion which
the law reposes in the court of first instance.
In such a case, although the nature of the error
may not be discoverable, the exercise of the
discretion is reviewed on the ground that a
substantial wrong has in fact occurred."

We have already indicated our view that his Honour did not act on a wrong principle in concluding that the Commissioner was not entitled, as of right, to a general order for discovery. However, the fact that the application for discovery was made first and was pressed as if some such absolute entitlement existed may have led the learned judge at first instance to rely on irrelevant or extraneous matters, or to have disregarded or given insufficient weight to some material considerations.

19. The difficulty which was created for his Honour because the application for discovery was argued first and without reference to the Commissioner's desire for particulars of taxpayer's objection is illustrated by the criticism which Mr. Merkel directed at that passage in his Honour's reasons for judgment of 22 October 1986 where it was observed:

"It is common ground that the issues have been
sufficiently defined here by means of the
appellant's notice of objection, on the one hand,
and the notice of particulars of the
Commissioner's grounds of disallowance of it on
the other."

The basis of that observation was a submission by Senior Counsel for the Commissioner who is recorded as saying:

"I should say, Your Honour, that the notice of
objection is very detailed and I - the
particulars provided for the Commissioner clearly
define the issues and the ambit of those issues
for the purpose of discovery, in other words
points of claim and points of defence, being the
notice of objection and the particulars do not,
we would submit, provide any difficulty with
identifying what the issues are in respect of
which discovery is required to be made."

The Commissioner's application for further particulars of the notice of objection, although an application for discovery had been foreshadowed on 23 June 1986, was not made until 29 October 1986 after his Honour had on 22 October given judgment on the application for discovery. In the course of' the second hearing before his Honour, Senior Counsel for the Commissioner referred to his earlier submission quoted above, and went on to say:

"What we were identifying, Your Honour, is that
the definition of the issues for the purpose of
discovery is defined, but, Your Honour, when we
come to look at the affidavits and the threat of
a hearing upon those affidavits and upon the
notice of objection and the particulars, what we
find, Your Honour, is that there is not an
identification anywhere of each unit of eligible
property in respect of which the allowable
deductions are claimed, and nor is there, your
Honour, as a consequence, contracts defined in
respect of each unit of property either for the
construction or acquisition of them.

Your Honour will recall it is a complicated
chemical plant that we are concerned with, and
critical to the issues is the definition of the
units of relevant property, or eligible
property.

. . .

We would say whilst it is clearly a matter for
the court as to what are the units of property at
the end of the day, the taxpayer has a case to
put which may be many alternative cases, but at
the worst, it should be asked to identify each
unit of property or eligible property referred to
in its objection."

Notwithstanding that inversion of the logical sequence of the applications for particulars and discovery, his Honour, as indicated by the second passage which we have quoted above from his judgment of 29 October 1986 was, at first, disposed to accede to the application for particulars of each contract referable to the acquisition or construction of eligible property. However, he was deflected from that course by the indication given on behalf of the taxpayer that particulars of each contract on which it intended to rely could be discerned from the affidavits which had been filed on its behalf and the exhibits thereto.

20. The taxpayer's affidavits and exhibits occupied almost 800 pages of the present appeal books. To say that, because within that mass of material can be discerned the only contracts on which the taxpayer relies, "no sensible purposes would be served by further particularisation" is, with respect, to misapprehend the function of particulars. That function, in the present context was described in several passages in the judgments of the High Court in Bailey v. Federal Commissioner of Taxation (supra). Gibbs J. observed, at 219:

"The facts in a case arising under s.260 are not
necessarily all within the knowledge of the
taxpayer. However, it is a misapprehension to
think that the only function of particulars is to
reveal to a party facts of whose existence he is
unaware. As I have indicated, particulars have
the important function of informing a party of
the nature of the case he has to meet and of
limiting the issues of fact to be investigated by
the court."

To similar effect Mason J. at 220, pointed out that:

"There is therefore no foundation for the notion
that the Commissioner stands apart from ordinary
litigants in some special position in relation to
the giving of particulars. Like any other
litigant he may be ordered to give particulars in
an appropriate case, that is, when they are
required so that the other party to the
litigation, and for that matter the court itself,
may be acquainted with the nature of the case
that is intended to be presented, so that the
issues to be determined may be defined. To
conclude otherwise would result not merely in
injustice to the taxpayer, who will remain in
doubt as to the Commissioner's case until it is
presented at the hearing, but also in unnecessary
preparations and in a hearing of unnecessary
length as the taxpayer endeavours to deal with
matters on which, as it may subsequently
transpire, the Commissioner is placing no
reliance whatsoever."

Jacobs J. also emphasised the role which particulars can serve in defining the questions at issue between parties saying, at 221:

"But rules or practices as to particulars must be
sufficiently flexible to allow all parties to an
action or matter to meet with necessary evidence
and without delay to court processes questions
which may be raised at the hearing. Their
purposes is to concentrate and define the issues
of fact and to prevent surprise and consequent
delay.

At the same time it must be borne in mind that
particulars do not constitute a pleading and do
not ordinarily define issues of law. They must
tend to advance the clear and speedy
of all the questions which fall to determination
determined (sic). They are not a net in which
the ready and comprehensive determination of the
ultimate issue can become enmeshed and delayed.

Although particulars are essentially particulars
of fact and not of law, when there are no
sufficiently defined issues it is not always
possible to obtain particulars of facts without
first ascertaining whether those facts will be
relevant to questions which may be raised."

Aickin J's. treatment at 227 of the same matter can be paraphrased to point cogently to the need for appropriate particulars of the taxpayer's notice of objection in the present case. His Honour said:

"There is nothing in the policy of the Act nor in
general considerations of policy to require that
the Commissioner should not inform the appellant
prior to the commencement of the hearing of those
details so that the case may proceed in an
orderly and comprehensible manner. It is not in
the interests of the proper administration of
justice that, when the matter comes before the
court, the appellant should have to speculate
about, and adduce evidence to negate, every
possible kind of agreement or arrangement and
avoidance which the imagination of his advisers
can conjure up. Such a process is not merely
time-wasting but is likely to obscure the real
issues. It is no doubt possible that in the
course of the evidence facts may emerge which
were not previously known to the Commissioner and
which suggest that there was some contract,
agreement or arrangement other than that which he
had previously supposed existed and which would
support the actual assessment, but that is a
situation which can readily be cured by amendment
and it cannot be doubted that the Commissioner
would in those circumstances be permitted to
amend his particulars even though he would again
have to specify the details of the arrangement
which he was then alleging."

21. Of the request for particulars of each unit of eligible property to which the taxpayer may point, Tadgell J., as appears from the first passage quoted above from his judgment of 29 October 1986, considered that the task of identifying the unit or units was ultimately one for the Court, perhaps after taking into account conflicting expressions of opinion. That is undoubtedly true. However, the truth of that proposition does not entail the consequence that no sensible or useful purpose would be served by requiring the taxpayer to give particulars of each item or collection of items which it contends constitutes a unit of eligible property for the purpose of its objection. Even if such a requirement were to elicit a number of alternative formulations identifying units of eligible property, the parties and the Court would at least have a finite number of specific contentions on which to focus.

22. The passages from Bailey's Case which we have quoted make clear that particulars may be ordered in an appropriate case which identify those questions that the party to whom the request for particulars is addressed seeks to raise. Specifically, in the present case, it seems to us, to paraphrase the passage from Aickin J.'s judgment which we have just quoted, that it is not in the interest of the proper administration of justice that the Commissioner should have to speculate about, and be prepared to cross-examine the taxpayer's witnesses upon, every possible permutation and combination of units of eligible property which the imagination of his advisers can conjure up, after digesting the large body of affidavit material to which his Honour referred.

23. It will be apparent, from what we have said so far, that we are persuaded that his Honour was led into an error which caused the exercise of his discretion to order particulars of the taxpayer's objection to miscarry. We are also satisfied that the consequences for the continued litigation of this very substantial taxation appeal are sufficient to overcome the reluctance, for the reasons indicated in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (supra) of an appellate court to interfere with an exercise of discretion on a point of practice or procedure.

24. However, we believe that the same considerations do not require, at this stage even a limited order for discovery in favour of the Commissioner. In forming that belief we have assumed that any documents to which particulars which we propose to order the taxpayer to give will refer, have been exhibited to one or other of the affidavits already filed on its behalf, or that copies of them have otherwise been obtained by the Commissioner. Should that assumption prove unfounded, an application for appropriately limited discovery or inspection can be made pursuant to the liberty to apply which we propose to reserve.

25. Accordingly, we grant leave to appeal, dismiss the appeal against the order of 22 October 1986 and allow the appeal against the order of 29 October 1986. In lieu of the latter order we give the following directions:

1. That the Appellant taxpayer within 60 days of this day
furnish in respect of sub-paragraphs 6 (d) and (e) and
7(d) and (e) of the grounds set forth in its notice of
objection dated 7 April 1983, particulars -

(a) identifying each new unit of eligible property
referred to therein, including each alternative
identification of a unit of eligible property, on
which the taxpayer relies;

(b) specifying each contract for the construction or
acquisition of each such unit of eligible
property, and identifying each document,
conversation or other matter which is said to
constitute the same or from which the same is said
to be implied.

2. That the Listing Master of the Supreme Court be
requested to fix a date for the hearing of this Appeal
after the expiration of the 60 days specified in
paragraph 1 of this order and to give it such priority
as he is able.

3. That liberty be reserved to either party to apply to
the Supreme Court of Victoria for such further
directions herein as he or it may be advised.

4. That the Commissioner's costs of and incidental to this
appeal and to the hearing on 29 October 1986 and the
order of that day be the Commissioner's costs in the
taxation appeal.