Re Anthony Gordon Oates v the Commissioner of Taxation [1988] FCA 14 (2 February 1988)

FEDERAL COURT OF AUSTRALIA

Re: ANTHONY GORDON OATES
And: THE COMMISSIONER OF TAXATION
No. WAG 2039 of 1987
Taxation

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Taxation - amended assessment - appeal against disallowance of objection - pleadings filed - request for particulars - objections to provision of certain particulars - whether issues sufficiently defined - whether particulars indicate inability to support assessment - function of particulars - elaboration of issues - not provision of evidence - applicant's motion for summary judgment - motion dismissed.

Jurisdiction of Courts (Miscellaneous Amendments) Act 1987 Income Tax Assessment Act 1936

Bailey v Federal Commissioner of Taxation (1977) 136 CLR 224

HEARING

PERTH
2:2:1988

Counsel for the Applicant: A.J. Templeman Q.C. with Mr A. Siopis

Solicitors for the Applicant: Parker & Parker

Counsel for the Respondent: Mr G. Windsor

Solicitors for the Respondent: Australian Government Solicitor

ORDER

The motion is dismissed.

The costs of the motion will be in the cause.

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

DECISION

On 27 January 1984 the Deputy Commissioner of Taxation in Western Australia issued a Notice of Amended Assessment to Anthony Gordon Oates in respect of income derived for the year ended 30 June 1981. The assessment was for an amount of $535,198.60, based upon a taxable income of $925,925.00. The original assessment, notice of which had issued on 28 May 1982 was for $23,540.98, based on a taxable income of $40,594.00.

2. The amended assessment brought to account as part of the taxpayer's income the sum of $899,999.00 being the proceeds of the sale of one share held by him in a company known as Rowdore Pty Ltd. The sale of this share is said to have been connected with the acquisition by Bond Corporation Holdings Ltd of a site in St. George's Terrace, Perth then occupied by the Palace Hotel and the Terrace Arcade.

3. The Commissioner's apparent view of the transaction emerges from an internal report annexed to particulars filed in the Supreme Court. According to that report, the Palace Hotel and Terrace Arcade sites had been owned by the Commonwealth Banking Corporation since 1972. On 22 June 1978 the Bank signed an agreement to sell the premises to three companies, Bond Corporation Pty Ltd which is a wholly owned subsidiary of Bond Corporation Holdings Ltd, Arkindale Pty Ltd and Rowdore Pty Ltd. Arkindale Pty Ltd had as its directors Messrs. Tremain and White, employees of Bond Corporation Holdings Ltd. Rowdore Pty Ltd was said to have as its directors, Messrs. Bond, Beckwith, Oates and Mitchell, all directors of Bond Corporation Holdings Ltd and Bond Corporation Pty Ltd. The latter four, including the taxpayer, were said to have become directors of Rowdore on 21 June 1978. Under the sale agreement Rowdore acquired a 10% interest in the site. Subsequently, in 1979, Arkindale acquired 90% of the interest in the land with 10% remaining in Rowdore. The transaction which is the subject of the appeal, is said to have occurred on 17 October 1980 when Arkindale Pty Ltd purchased the four issued shares in Rowdore Pty Ltd for $3.6 million. On the same day, according to the report, Bond Corporation Holdings Ltd purchased Arkindale Pty Ltd and Rowdore Pty Ltd. The four shareholders in Rowdore, including the taxpayer, are thus said to have made a profit of $899,999.00 upon the sale of the $1.00 share that each held. The profits were said to be taxable pursuant to either s.25(1) or 26(a) of the Income Tax Assessment Act and various considerations said to support those conclusions and the amended assessment are set out in the report.

4. A Notice of Objection to the amended assessment was lodged on 20 March 1984 but was disallowed. Notice of the disallowance was given on 29 May 1984. On 22 June 1984 the taxpayer requested, in writing, that the objection be treated as an appeal and be forwarded to the Supreme Court of Western Australia.

5. On 4 February 1985 the objection was, in accordance with the request, forwarded to the Supreme Court. On 12 December 1985 the taxpayer filed a request for particulars of the basis of the amended assessment.

6. The court record shows no further movement until 25 March 1987 when the Australian Government Solicitor for the Commissioner, filed a request for discovery. A similar request was filed on behalf of the taxpayer on 30 March 1987.

7. An affidavit and list of documents were filed by the Commissioner on 5 June 1987.

8. In the meantime a chamber summons was taken out by the taxpayer seeking an order that the Commissioner provide full particulars of each of the grounds upon which he had disallowed each objection to the Notice of Amended Assessment and each of the grounds upon which he proposed to support the amended assessment. An order was made in terms of this summons by Rowland J. on 11 June 1987 and particulars were provided on 1 July. On 14 July the taxpayer's solicitors filed a further chamber summons seeking further and better particulars and, on the same day, a summons seeking to strike out various parts of the particulars which had been provided.

9. These summonses were not heard in view of the then impending transfer of the matter to the Federal Court in accordance with the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987.

10. The matter having been transferred to the Federal Court, an affidavit of discovery was filed for the taxpayer on 19 October and on 5 November 1987 I gave various directions including the following:-

"2. The applicant do on or before 19 November 1987 file
and deliver a statement of grounds for appealing
against the assessment in question, the statement
to follow as nearly as practicable the form
applicable to a statement of claim.

3. The respondent do on or before 3 December 1987 file
and deliver a response to the applicant's statement
of grounds, the response to follow as nearly as
practicable the form applicable to a defence
provided that it shall embody a statement of
grounds upon which the respondent supports its
assessment.

4. Each party do have leave within 14 days of delivery
of any pleading, to deliver a request for
particulars thereof.

5. Each party is to answer any request for particulars
on or before 18 January 1988."

11. The statement of grounds for the appeal was filed on 20 November 1987 and the response on 3 December 1987.

12. Paragraph 3 of the Commissioner's response sets out his contentions in the following terms:-

"3(i)the profit on the sale of the share in Rowdore Pty.
Ltd., namely $899,999 was assessable income
received by the Appellant during the financial year
ended 30th June 1981 in that it was:-

(a) money received by the Appellant as gross
income derived directly or indirectly from
sources in Australia which were not exempt
income;

(b) further or in the alternative, profit arising
from the sale by the Appellant of property
acquired by him for the purpose of profit
making by sale;

(c) further or in the alternative, profit arising
from the Appellant carrying on or carrying out
a profit making undertaking or scheme;

(d) further or in the alternative, received by the
Appellant as an allowance, gratuity,
compensation, benefit, bonus and/or premium
allowed, given or granted to him in respect of
or in relation directly or indirectly to the
employment of the Appellant or for services
rendered by the Appellant or for services
rendered by the Appellant to Bond Corporation
Holdings Limited and/or to Bond Corporation
Pty. Ltd. which amount was not an amount paid
on retirement, termination or in lieu of
annual leave or long service leave;

(ii) The Respondent was authorised by s.170 of the
Income Tax Assessment Act (1936) to make the
amended assessments dated the 27th January 1984 and
the 10th February 1984 in that:-

(a) the Appellant did not make a full and true
disclosure of the assessable income received
by him during the year ended 30th June 1981.

Particulars

(1) In the Appellant's Return of Income for
the year ended 30th June 1981 the
Appellant stated that he had sold one
share in Rowdore Pty. Ltd. which was not
acquired by him for the purpose of profit
making by sale;

(2) The Appellant did not state the date of
purchase and sale of the said share, the
profit made and the circumstances of the
acquisition of the share and its
subsequent sale which gave rise to the
profit of $899,999 being received by the
Appellant;

(b) Further or in the alternative if, which is
denied, the Appellant made full and true
disclosure of all material facts necessary for
the assessment of his income for the year
ended 30th June 1981, the Respondent was
authorised to amend the assessments to correct
a mistake of fact, namely the facts and
circumstances surrounding the acquisition and
subsequent sale of the Appellant's share in
Rowdore Pty. Ltd. at a profit of $899,999."

13. Sub-paragraphs 3(i)(a) to (d) inclusive, embody the language of paras. 25(1)(a) and 26(a) of the Income Tax Assessment Act as it was prior to its amendment by No.47 of 1984.

14. A request for particulars of the response was filed on 16 December 1987 and an answer to that request filed on 27 January 1988.

15. The request for particulars in large part follows the form "specify each fact, matter or circumstance relied upon in alleging that....".

16. These requests and some others set out in the taxpayer's notice have been met with an objection that they are by way of requests for evidence rather than for particulars of material facts.

17. The taxpayer now moves for orders in the following terms:-

"1. The respondent having failed to comply with an
order of this Honourable Court to supply by 18
January 1988 further and better particulars to the
applicant's request for the same, the respondent's
response be struck out and the applicant's appeal
be allowed.

2. The costs of this application and the action be
paid by the respondent."

18. It is said in support of the motion that the court has an "inherent power" to strike out the response and to give judgment for the applicant. Senior Counsel for the taxpayer sought to justify the proposed order on the basis that the particulars provided, read in conjunction with the earlier particulars given in the Supreme Court, made it clear that the Commissioner had no evidence on which to base the amended assessment.

19. In support of his submission that there had been a failure to comply with the Court's order of 5 November 1987, counsel submitted in substance that the Commissioner's response, together with such particulars as had been provided, did not give to the taxpayer a sufficient indication of the case he had to meet. The decision of the High Court in Bailey v Federal Commissioner of Taxation (1977) 136 CLR 224 was invoked in support of his submission that a taxpayer appealing under Part V of the Income Tax Assessment Act is entitled to particulars of the basis of the assessment under challenge.

20. In the judgment of Aickin J. (with which Barwick CJ, Gibbs, Mason and Jacobs JJ agreed), it was said at 227:-

"The purpose of particulars is to assist in the defining
of issues and there is in my opinion no reason why in
appropriate cases the Commissioner should not give
particulars where they are necessary in order that both
the appellant and the court may understand the basis
upon which the assessment has been made."

21. Similar statements about the purpose of particulars are to be found in the judgments of Gibbs J. at 219, Mason J. at 220 and Jacobs J. at 221.

22. These statements make it clear that the need for or sufficiency of particulars is a matter of judgment according to the requirements of the case before the Court. In Bailey's case they were required to overcome the bald invocation by the Commissioner of s.260 of the Income Tax Assessment Act.

23. As Aickin J. said at 227:-

"To tell a taxpayer and the Court that an assessment is
based upon s.260 reveals nothing beyond the fact that
the Commissioner contends that there is some contract,
agreement or arrangement which falls within the ambit of
that section and that either the whole or some part of
it, or some step taken pursuant to it, or in the course
of carrying it out, is void as against the Commissioner
and that a taxable situation stands revealed by such
avoidance. If no more is said the taxpayer and the
Court are left entirely in the dark as to critical
matters and the issues remain undefined except as to the
ultimate conclusion contended for by each party."

24. In my opinion the purposes of justice did not require the Commissioner in the present case to "specify each fact, matter or circumstance relied upon" by him in connection with the various allegations set out in his response to the taxpayer's statement of grounds for the appeal.

25. Particulars will be ordered where the court is satisfied that the interests of justice require broad contentions to be elaborated or finer detail disclosed. A request for a statement of each fact, matter or circumstance relied upon in relation to an allegation goes beyond the function of elaboration to the point of requiring disclosure of all facts however peripheral which will be involved in support of the broader contention. Indeed on a literal reading it may go so far as to require disclosure of evidence.

26. In the circumstances the reply filed by the Commissioner and the objections taken to him are not unreasonable nor do they either alone or in conjunction with the particulars filed in the Supreme Court, indicate an inability to adduce evidence to support the assessment. I might add that the statement of an objection to answer a specific request is a reply to the request in accordance with the form of direction that was given and does not amount to a failure to comply with it. It will, of course, leave open the issue whether the particular objection taken can be maintained. The remedy for the applicant for particulars in such a case is to seek an order requiring that the particular sought be provided.

27. As to that, I am of the opinion that broadly speaking, the respective pleadings filed are sufficient to inform each party and the Court of the case to be made on either side. I am reinforced in this view by a perusal of the particulars provided by the Commissioner on 1 July 1987 in answer to the order of Rowland J. Whether or not they may be criticised for failing to respond precisely to the terms of the questions posed, those particulars annexed internal reports which were relied upon by the Commissioner in disallowing the taxpayer's objection to the assessment.

28. Assuming, without deciding, that the Court possesses power to make the orders sought on the motion, I could not be satisfied that the assessment in question is demonstrably insupportable. The motion will be dismissed. As foreshadowed yesterday, however, I will hear debate on whether particulars should be provided in answer to requests to which objection has been taken by the respondent.