Elsinora Global Limited v Deputy Commissioner of Taxation [2006] FCAFC 156 (9 November 2006)

ADMINISTRATIVE LAW – appeal against trial judge’s failure to order payment of interest – power to order payment of interest under Federal Court of Australia Act 1976 (Cth) s 51A – consideration of ‘proceedings for the recovery of any money’ for the purposes of s 51A – where appellant sought order for payment of interest from Deputy Commissioner – no action against Deputy Commissioner for recovery of money – consideration of discretion as to rate of interest under s 51A

Federal Court of Australia Act 1976 (Cth) ss 22, 23, 51A
Income Tax Assessment Act 1936 (Cth) s 255
Taxation Administration Act 1953 (Cth) Sch 1, s 260-5
Supreme Court Rules (NSW) Sch J

Elsinora Global Ltd v Healthscope Ltd (No 2) [2006] FCA 18; (2006) 227 ALR 570 referred to
Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No 1) [1991] FCA 519; (1991) 32 FCR 219 discussed
Thakral Fidelity Pty Ltd v Commissioner of Stamp Duties (No 2) [2001] 1 Qd R 428 considered
Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285 applied
Victorian WorkCover Authority v Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520 cited
State Bank of New South Wales Ltd v Commissioner of Taxation (1995) 62 FCR 371 considered
SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346 cited
Collector of Customs v Gaylor Pty Ltd (1994) 35 NSWLR 649 considered
Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390 considered
In Shoppe Pty Ltd v Smith (1976) 6 ATR 242 cited
Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; (1994) 182 CLR 51 cited
Namol Pty Ltd v AW Baulderstone Pty Ltd (No 2) [1993] FCA 606; (1993) 47 FCR 388 considered
Kettle Chip Co Pty Ltd v Apand Pty Ltd (No 2) (1998) 83 FCR 466 cited
Nagy v Masters Dairy Ltd (1996) 150 ALR 273 cited
H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 cited
White Industries (Qld) Pty Ltd v Flower & Hart (No 2) [2000] FCA 1132; (2000) 103 FCR 559 cited
EMCL Pty Ltd v Esanda Finance Corporation Ltd [1999] FCA 978 cited
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688; (2003) 201 ALR 55 cited
Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866 cited
Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 cited

ELSINORA GLOBAL LIMITED, TIOGA WORLDWIDE LIMITED, PERLETTE OVERSEAS LIMITED, PETER ARMSTRONG, JONATHAN BERGER AND EC MEDICAL INVESTMENTS NV v DEPUTY COMMISSIONER OF TAXATION AND ANZ NOMINEES LIMITED (ACN 005 357 568)
NSD 383 OF 2006

GYLES, STONE AND YOUNG JJ
9 NOVEMBER 2006
SYDNEY

BETWEEN:	ELSINORA GLOBAL LIMITED First Cross-Appellant TIOGA WORLDWIDE LIMITED Second Cross-Appellant PERLETTE OVERSEAS LIMITED Third Cross-Appellant PETER ARMSTRONG Fourth Cross-Appellant JONATHAN BERGER Fifth Cross-Appellant EC MEDICAL INVESTMENTS NV Sixth Cross-Appellant
AND:	DEPUTY COMMISSIONER OF TAXATION First Cross-Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Second Cross-Respondent

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

BETWEEN:	ELSINORA GLOBAL LIMITED First Cross-Appellant TIOGA WORLDWIDE LIMITED Second Cross-Appellant PERLETTE OVERSEAS LIMITED Third Cross-Appellant PETER ARMSTRONG Fourth Cross-Appellant JONATHAN BERGER Fifth Cross-Appellant EC MEDICAL INVESTMENTS NV Sixth Cross-Appellant
AND:	DEPUTY COMMISSIONER OF TAXATION First Cross-Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Second Cross-Respondent
JUDGES:	GYLES, STONE AND YOUNG JJ
DATE:	9 NOVEMBER 2006
PLACE:	SYDNEY

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

BETWEEN:	ELSINORA GLOBAL LIMITED First Cross-Appellant TIOGA WORLDWIDE LIMITED Second Cross-Appellant PERLETTE OVERSEAS LIMITED Third Cross-Appellant PETER ARMSTRONG Fourth Cross-Appellant JONATHAN BERGER Fifth Cross-Appellant EC MEDICAL INVESTMENTS NV Sixth Cross-Appellant
AND:	DEPUTY COMMISSIONER OF TAXATION First Cross-Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Second Cross-Respondent

2 I agree with the orders proposed by Young J and with his reasons for those orders.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Stone .

BETWEEN:	ELSINORA GLOBAL LIMITED First Cross-Appellant TIOGA WORLDWIDE LIMITED Second Cross-Appellant PERLETTE OVERSEAS LIMITED Third Cross-Appellant PETER ARMSTRONG Fourth Cross-Appellant JONATHAN BERGER Fifth Cross-Appellant EC MEDICAL INVESTMENTS NV Sixth Cross-Appellant
AND:	DEPUTY COMMISSIONER OF TAXATION First Cross-Respondent ANZ NOMINEES LIMITED (ACN 005 357 568) Second Cross-Respondent

3 The Deputy Commissioner of Taxation abandoned her appeal from the decision of Edmonds J in Elsinora Global Ltd v Healthscope Ltd (No 2) [2006] FCA 18; (2006) 227 ALR 570. As a result, the only issues before the Court are those raised by the cross-appeal instituted by the first to sixth cross-appellants.

4 The seventh respondent to the Deputy Commissioner’s appeal, ANZ Nominees Limited (‘ANZ Nominees’), did not cross-appeal. It advised the Court that it did not wish to make any submissions in relation to the orders sought by the cross-appellants, save that it seeks an order that the Deputy Commissioner or the cross-appellants, whichever is unsuccessful, should pay its costs of the cross-appeal.

5 The only question raised by the cross-appeal is whether Edmonds J erred by failing to make an order requiring the Deputy Commissioner to pay interest under s 51A, or alternatively pursuant to ss 22 or 23, of the Federal Court of Australia Act 1976 (Cth). For the reasons that follow, I consider that the primary judge did not fall into error in this regard, and that the cross-appeal must be dismissed.

6 The facts that gave rise to the litigation and the procedural history of the cross-appeal are somewhat complicated, and it is helpful to describe these matters before turning to the issues raised by s 51A.

7 The background facts are set out, clearly and succinctly, in the primary judge’s reasons for judgment. I shall describe only those facts and circumstances which are necessary to understand these reasons for judgment.

8 The sixth cross-appellant, EC Medical Investments NV (‘ECMI’), beneficially owned 194,516,455 ordinary shares in The Gribbles Group Limited (‘Gribbles’), representing 43.05 per cent of its issued capital. ANZ Nominees was the registered holder of these shares as trustee for ECMI.

9 On about 2 November 2004, Healthscope Ltd (‘Healthscope’) announced that it proposed to make a takeover bid for all of the shares in Gribbles. Healthscope was the first respondent in these proceedings but it is not a party to the cross-appeal. On 3 November 2004, Healthscope acquired 44 million shares in Gribbles from ECMI on terms that if Healthscope dispatched a bidders statement to Gribbles’ shareholders by 12 November 2004 offering to acquire shares at $0.63 per share, ECMI would procure the acceptance of Healthscope’s takeover bid for the remaining shares it beneficially owned. On 9 November 2004, Healthscope issued a takeover offer to the shareholders of Gribbles at $0.63 per share.

10 On 15 November 2004, ECMI entered into a nominee agreement with Investec Trustees (UK) Limited (‘Investec’) providing for securities to be held in the name of Investec or in the name of a sub-custodian appointed by Investec, namely Carr Sheppards Crosthwaite Limited (‘CSC’). On the same day, Investec instructed ANZ Nominees that 150,515,455 Gribbles shares that ANZ Trustees held for ECMI should thereafter be held for the account of CSC.

11 On 17 November 2004, ECMI entered into a share sale agreement with each of the first to fifth cross-appellants. By these agreements, the cross-appellants agreed to purchase the remaining 150,516,455 shares in Gribbles at a price that was slightly less than the $0.63 per share being offered by Healthscope in its takeover offer. They also agreed that they would on sell the shares to Healthscope under its takeover offer, and pay the consideration to ECMI by such method as the parties agreed.

12 By virtue of these events, CSC held 90 million shares in Gribbles as custodian for the first, second and third cross-appellants, and about 60 million shares in Gribbles as sub-custodian for Investec which in turn held those shares as custodian for the fourth and fifth cross-appellants. On 17 November 2004, CSC accepted Healthscope’s takeover offer for these shares.

13 On 1 December 2004, the Deputy Commissioner assessed ECMI to income tax of $9,953,426.10 as a result of an alleged capital gain derived by ECMI from the sale of its beneficial interest in the shares in Gribbles.

14 On 8 November and 24 December 2004, the Australian Taxation Office (‘the ATO’) served notices under s 255 of the Income Tax Assessment Act 1936 (‘ITAA’) on the public officer of Healthscope. On 7 January 2005, the ATO served a notice on ANZ Nominees pursuant to s 255 of the ITAA. Following these notices, the Deputy Commissioner wrote to ANZ Nominees on 20 January 2005 and informed it that Healthscope had agreed to retain the sum of $9,953,426.10 (‘the Withholding Sum’) and that ANZ Nominees did not need to retain that amount under the notice it had received.

15 On 21 January 2005, ANZ Nominees received two cheques from Healthscope in payment of the consideration payable by Healthscope under the takeover offer less the Withholding Sum retained by Healthscope. ANZ Nominees forwarded the proceeds, which amounted to $84,871,940.55, to CSC which credited the money to four accounts: one for each of the first, second and third cross-appellants, and one for Investec to be held for the fourth and fifth cross-appellants. On 24 January 2005, CSC forwarded the proceeds to Investec, which disbursed them to the cross-appellants.

16 Subsequently, the ATO issued further notices under s 255 to Healthscope on 15 February 2005, to the first to fifth cross-appellants on 2 June 2005, and to ANZ Nominees on 28 June 2005. On 30 June 2005, the Deputy Commissioner issued notices under s 260-5 of Sch 1 to the Taxation Administration Act 1953 (‘the Administration Act’) to each of the first to fifth cross-appellants, ANZ Nominees, Investec and CSC.

17 The cross-appellants contend that, but for the notices issued by the Commissioner, the Withholding Sum would have been paid by Healthscope to ANZ Nominees and by ANZ Nominees to CSC on 21 January 2005.

18 On 17 February 2005 and again on 20 July 2005, Healthscope’s representative informed the Court that the Withholding Sum was deposited by Healthscope in a bank account that attracted a floating commercial interest rate. As at 17 February 2005, the Court was told that the applicable interest rate was 4 per cent. On 14 February 2006, Healthscope’s representative informed the primary judge that interest of just over $500,000 had accrued on the Withholding Sum.

19 The proceedings were instituted on 24 January 2005 by the filing of an application and statement of claim. Both documents were amended several times during the course of the proceedings. As finally amended, the application sought, inter alia, declarations that the notices issued under s 255(1)(b) of the ITAA and s 260-5 of Sch 1 to the Administration Act were invalid, and orders that Healthscope pay the Withholding Sum, together with any interest earned on it, to ANZ Nominees, and that ANZ Nominees pay the Withholding Sum and any interest on it to the first to fifth cross-appellants. While the amended application did not contain any claim against the Deputy Commissioner for interest on the Withholding Sum, the statement of claim did. Somewhat irregularly, the statement of claim (as amended) contained a section that claimed relief additional to that set forth in the application, including an order that the Deputy Commissioner pay interest on the Withholding Sum to the first to fifth cross-appellants according to Federal Court rates.

20 Edmonds J delivered his reasons for judgment on 3 February 2006. In those reasons, Edmonds J held that none of the notices imposed any statutory obligation on the recipients in accordance with their terms: at 595-596 [122]-[123]. However, his Honour refused to make declarations that the notices were invalid. In his Honour’s view, the challenge to the notices went not so much to their validity, but to the question whether they imposed a statutory obligation on the recipients in accordance with their respective terms. Edmonds J also dismissed the Deputy Commissioner’s cross-claim: at 596 [124]-[126].

21 On 3 February 2006, Edmonds J gave the parties leave to make submissions as to whether any further orders ought to be made consistent with the reasons for judgment. Upon the Deputy Commissioner’s undertaking as to damages, the Court also ordered that, until further order, Healthscope retain the Withholding Sum in its custody and control.

22 On 14 February 2006, Edmonds J heard further submissions as to the orders that should be made to give effect to his reasons for judgment. The cross-appellants submitted short minutes of order to Edmonds J which sought, inter alia, orders as follows:

The cross-appellants submitted that the first order was supported by s 51A as the proceedings sought the payment of money and interest and, but for the notices, the Withholding Sum would have been paid down the chain to the first to fifth cross-appellants at a much earlier date. The Deputy Commissioner opposed the orders on the ground that the proceedings did not seek payment from the Deputy Commissioner, and s 51A only applies where the cause of action relating to the recovery of money is a cause of action against the person from whom interest is sought.

23 In the result, on 16 February 2006 Edmonds J made final orders to the effect that Healthscope and ANZ Nominees were not obliged or acquired by any of the notices to retain the Withholding Sum or to pay it to the Deputy Commissioner, orders as to costs, and an order that Healthscope retain the Withholding Sum in its custody and control until the final determination of any appeal or further order. This last order was made upon the Deputy Commissioner giving the usual undertaking as to damages, and also undertaking not to issue any further notices in respect of the Withholding Sum and to prosecute any appeal as expeditiously as possible. The application was otherwise dismissed. Edmonds J did not make any order that the Deputy Commissioner pay interest to the first to fifth cross-appellants.

24 Following the making of these orders, the solicitors for the cross-appellants enquired of Edmonds J whether he wished to provide supplementary reasons dealing with the question of interest. Through his associate, Edmonds J responded by letter dated 1 March 2006 that the claim for interest was rejected for reasons which were sufficiently disclosed by the written and oral submissions of the parties together with the exchanges between counsel and the bench. I infer that Edmonds J refused to award interest for the reasons advanced by the Deputy Commissioner.

25 On 24 February 2006, the Deputy Commissioner instituted an appeal from that part of the judgment and orders of Edmonds J given on 3 February 2006 and 16 February 2006 whereby his Honour ordered that the notices did not oblige or require Healthscope, ANZ Nominees or the first to fifth cross-appellants to retain the Withholding Sum or to pay it to the Deputy Commissioner, and otherwise dismissed the Deputy Commissioner’s cross-claim. The cross-appellants filed a notice of contention in the appeal and a notice of cross-appeal.

26 The notice of cross-appeal contends that the trial judge erred by not making an order that, within five days, the Deputy Commissioner pay to Healthscope interest on the Withholding Sum at the rate of 9 per cent per annum from 22 January 2005 to the date of the payment of the interest, less any interest which has in fact accrued upon the Withholding Sum whilst retained by Healthscope.

27 On 16 June 2006, the solicitors for the Deputy Commissioner advised the other parties that ECMI’s objections to the amended assessment would be allowed, the amended assessment would be reduced to nil, and the Deputy Commissioner would discontinue the appeal. The Deputy Commissioner’s appeal was subsequently discontinued. Accordingly, there is no need to resolve the notice of contention filed on behalf of the first to sixth respondents. This left the notice of cross-appeal to be resolved by this Court.

28 The notice of cross-appeal seeks a different order from that which was sought from Edmonds J, in that ANZ Nominees has been substituted for Healthscope as the proposed recipient of the interest payment. The reason is that the Withholding Sum was in the hands of Healthscope as at 16 February 2006 when Edmonds J made final orders. Subsequently, following the abandonment of the Deputy Commissioner’s appeal, Healthscope paid the Withholding Sum to ANZ Nominees. Consequently, the cross-appellants now seek an order that the Deputy Commissioner pay interest to ANZ Nominees on the Withholding Sum at the rate of 9 per cent per annum, less any interest that accrued upon the Withholding Sum while it was retained by Healthscope.

30 The cross-appellants focused their submissions on the opening words of s 51A. They contended that the proceedings they instituted against Healthscope, ANZ Nominees and the Deputy Commissioner can properly be characterised as ‘proceedings for the recovery of any money (including any debt or damages or the value of any goods)’. They pointed out that, while the proceedings sought declarations that the notices issued by the Commissioner were invalid, they also sought orders that Healthscope pay the Withholding Sum to ANZ Nominees, that ANZ Nominees pay it, plus interest thereon, to the cross-appellants and that the Deputy Commissioner pay interest on the Withholding Sum to the first to fifth cross-appellants. Accordingly, the cross-appellants submitted that the proceedings sought relief that would have secured the recovery of the Withholding Sum and interest thereon.

31 Divergent views have been expressed in the authorities as to whether proceedings by way of administrative review, or proceedings seeking purely declaratory relief or a writ of mandamus, can fall within the scope of s 51A or equivalent State provisions: see eg, Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No 1) [1991] FCA 519; (1991) 32 FCR 219 (‘Kawasaki’) and Thakral Fidelity Pty Ltd v Commissioner of Stamp Duties (No 2) [2001] 1 Qd R 428 (‘Thakral’); see also Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285 (‘SCI Operations’). The proceedings in question in this case were not so narrowly confined. The Court does not need to resolve this conflict in order to decide the cross-appeal. The fact that declaratory relief is sought, in addition to a claim for the payment of money, does not prevent the application of s 51A, or equivalent State provisions, in respect of the money claims that are in fact raised by the action: see Victorian WorkCover Authority v Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520 (‘Victorian WorkCover Authority’) at 538 [41] per Gleeson CJ, Gummow, Hayne and Callinan JJ, and at 558-559 [105] per Kirby J.

32 I am prepared to accept that, in general terms, the proceedings before Edmonds J can be characterised as proceedings for the recovery of money. But this characterisation stops short of addressing the critical elements that must be established to obtain an order for interest against the Deputy Commissioner under s 51A.

33 Section 51A applies in any proceedings ‘for the recovery of any money... in respect of a cause of action...’. Where there is such a cause of action, and the cause of action results in a judgment, s 51A empowers the Court to order that interest be included in the judgment for the whole or any part of the money or ‘for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered’. This language suggests that the power to order interest attaches to a cause of action against a party for the recovery of any money. The language does not contemplate that an order for interest might be made against any party to a proceeding for the recovery of money, including a party against whom there is no cause of action for the recovery of money, merely because the proceedings include a cause of action for the recovery of money against another party.

34 The Deputy Commissioner submitted that, before an order can be made under s 51A, there must be judgment for a sum, and that judgment must be entered against the party against whom interest is claimed. In the Deputy Commissioner’s submission, the party liable to pay the money and the party liable to pay the interest must coincide.

35 The cross-appellants acknowledged that their claim for interest was novel in that there was no action against the Deputy Commissioner for the recovery of money; yet it is the Deputy Commissioner against whom an order is sought for the payment of interest. Undaunted, the cross-appellants submitted that this circumstance does not prevent s 51A(1) applying. In particular, the cross-appellants submitted that it did not alter the fact that the proceedings were for the recovery of money. That being so, they said that the cross-appellants were entitled to interest because they did not receive the Withholding Sum on 21 January 2005, and had been kept out of their money, by reason of the notices issued by the Deputy Commissioner.

36 Section 51A was enacted to address the anomaly that the Federal Court lacked statutory power to award interest. It is a remedial and facultative provision that confers a wide power on the Court to do justice between parties in relation to pre-judgment interest: State Bank of New South Wales Ltd v Commissioner of Taxation (1995) 62 FCR 371 (‘State Bank’) at 385 per Wilcox J. I agree with Wilcox J’s observation that the provision should not be construed narrowly or restrictively but as widely as its language and purpose allows. Nonetheless, I consider that the claim for interest in this case confronts insuperable difficulties.

37 No proceedings were commenced against the Deputy Commissioner for the recovery of money. Indeed, no cause of action for the recovery of money was raised or established as against the Deputy Commissioner. No judgment for money was entered against the Deputy Commissioner. Unlike Kawasaki and Thakral, the proceedings did not involve a claim for the refund of overpaid duty where the Revenue had enjoyed the use of the funds and a claim for interest might, subject to relevant statutory provisions, otherwise be open.

38 Further, the final orders entered by Edmonds J did not include any orders for the payment of any sum of money. Orders or declarations were made as to the effect and operation of the notices issued by the Deputy Commissioner. However, the cross-appellants’ claims for orders that Healthscope should pay the Withholding Sum to ANZ Nominees, and that ANZ Nominees should pay the Withholding Sum to the cross-appellants, were dismissed. The cross-appellants did not appeal from the orders dismissing their claims for payment of the Withholding Sum.

39 In my opinion, the claim for interest under s 51A is fatally flawed. Section 51A authorises an award of interest only where there is a cause of action against a party for the recovery of money, and the claim for interest is made against the same party. In other words, the statute confers a power to award interest as an incident of a cause of action for the recovery of money that results in a judgment.

40 This construction of s 51A is supported by the following passage from the joint judgment of Gleeson CJ, Gummow, Hayne and Callinan JJ in Victorian WorkCover Authority at 538 [41]:

41 Even stronger support is provided by the High Court’s decision in SCI Operations. In that case, the High Court held that importers had no entitlement to interest under s 51A(1) because there was no cause of action for the recovery of overpaid customs duty to which the claim for interest could attach.

42 The importers had paid customs duty under protest on goods imported by them between September 1987 and June 1994 at the rates of duty that prevailed at the time. In September 1987, one of the importers applied for a commercial tariff concession order which would have eliminated the obligation to pay duty. The application was refused on this occasion and on several later occasions. Subsequently, on 31 March 1994, the Full Court of the Federal Court made a conditional order for the making of a concession order as from 1 September 1987. A concession order was made on 3 June 1994. It specified 1 September 1987 as the day from which the order was to have effect, in accordance with s 269N of the Customs Act 1901 (Cth). The importer commenced proceedings in the High Court on 3 June 1994 claiming a refund of duty (ie the difference between the duty paid and the duty payable on the basis that the order came into effect on 1 September 1987) together with interest. On the same day but after the commencement of proceedings, the duty was refunded and a small amount of interest was paid by Customs. The importer persisted in a claim for interest on the duty it had paid under protest for periods running from 1 September 1987 to 14 October 1993 and from 1 April 1994 to 3 June 1994 under s 51A or under the general law of restitution.

43 A majority of the Full Federal Court (Beaumont and Einfeld JJ, Sackville J dissenting) held that interest should be awarded under s 51A(1): see SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346. Beaumont and Einfeld JJ said at 365-366:

Beaumont and Einfeld JJ also held that s 51A(1)(b) could be regarded as an independent power to award interest in a lump sum amount that was not tied to the accrual of a cause of action for the recovery of the principal sum: at 366F and 375D.

44 The High Court rejected the Full Court’s construction of s 51A(1) and allowed the appeal. The common and decisive thread in the separate judgments of Brennan CJ and Gaudron J, and in the joint judgment of McHugh and Gummow JJ, is that the power to award interest under s 51A is closely linked to the existence of a cause of action for the recovery of what might be called the principal sum. In applying s 51A(1), their Honours said that it was necessary to determine the nature of the legal right or other entitlement of the importers to recoup the duty in question: at 295-296 [10]-[11] per Brennan CJ, at 303 [34] and 305 [40] per Gaudron J, and at 309 [56] per McHugh and Gummow JJ. Gaudron, McHugh and Gummow JJ accepted that the refund provisions of the Customs Act conferred a right of action that was enforceable by an action for debt: at 305 [40] per Gaudron J, and at 310 [59] and 313 [65] per McHugh and Gummow JJ. Brennan CJ said that it was unnecessary to determine whether the importers’ entitlement to a refund should be classified as a cause of action for debt or as an entitlement to a public law remedy compelling the making of a refund: at 295 [10]. Only Kirby J thought that the importers were confined to a public law remedy: at 327 [99]. Critically, Brennan CJ, Gaudron, McHugh and Gummow JJ held that there was no foundation for any application of s 51A because the duty was refunded on the day on which the concession order was made and there was no period in which debts in respect of the refunds were due and owing but unpaid. Thus, there was no period between the date when the cause of action arose and the date as of which judgment could be entered so as to satisfy the condition in par (a) of s 51A(1): at 296 [11] per Brennan CJ, at 306 [42] per Gaudron J, and at 314 [68] per McHugh and Gummow JJ. As there was no sum for which judgment could be given against the Commonwealth within the meaning of s 51A(1), there was no entitlement to interest.

45 Gaudron J expressly rejected the Full Court’s view that interest could be awarded under s 51A(1)(b). Her Honour held that par (b) of s 51A(1) was a subsidiary provision that was not independent of subs (1)(a); it merely allowed a lump sum to be awarded in lieu of interest under par (a). More broadly, Gaudron J said that par (b) cannot be construed as conferring a discretion to award interest independently of the existence of a cause of action or for a period prior to the date on which the cause of action arose: at 299-300 [22].

46 Kirby J decided the case on the distinct basis that the provisions of the customs legislation, properly understood, stated the entirety of the sums which may be recovered by an importer following the making of a concession order and ousted both the general power of the Federal Court to include interest on judgments and any power to do so under the general principles of the law of restitution or otherwise: at 320 [85]; cf McHugh and Gummow JJ at 313-314 [66]-[67].

47 In my opinion, the High Court’s reasoning is fundamentally inconsistent with the argument advanced by the cross-appellants in this case. The thrust of the decision is that s 51A(1) cannot be construed as conferring a discretion to award interest independently of the existence of a cause of action or for a period prior to the date on which the cause of action arose. Of its very nature, interest is incidental to the recovery of a principal sum. It follows that s 51A(1) cannot be construed as conferring a discretion to award interest against a person against whom there is no cause of action for the recovery of the principal sum.

48 This construction is also supported by the reference in s 51A(1)(a) to an order for interest being ‘included in the sum for which judgment is given’. This obviously refers to judgment on, or arising from, the cause of action that is referred to elsewhere in s 51A(1). Consequently, it reinforces the view that interest cannot be awarded against a party against whom there was no cause of action for the recovery of money.

49 These conclusions do not stand in any tension with Wilcox J’s conclusion in State Bank at 385-386 that interest can be ordered under s 51A(1) where the principal sum in question is paid before the trial. In that case, a sum of approximately $150,000 remained unpaid when the proceeding was instituted and, by an amendment to the statement of claim, it was claimed in the proceeding. The fact that this sum was paid before trial did not prevent the proceeding being characterised as one for the recovery of money within the meaning of s 51A. Similarly, in SCI Operations, Gaudron J said that the requirement of s 51A that there be a ‘sum for which judgment is given’ before interest can be included does not mean that interest cannot be awarded if money claimed in the proceedings is paid prior to judgment. In her Honour’s view, the mere payment of a debt or other money sum claimed in legal proceedings would not deprive the Court of power to enter judgment for the costs of the proceedings, which would be enough to trigger the operation of s 51A(1): at 301 [26]-[27].

50 Nothing in the State Bank case, or in these passages in Gaudron J’s judgment in SCI Operations, provides any support for the cross-appellants’ argument. It is one thing to conclude that the early payment of money claimed in legal proceedings does not prevent the proceedings being characterised as an action for recovery of money or prevent the entry of judgment for costs and interest. It is another thing altogether to argue that s 51A empowers the Court to make an order against a third party against whom there is no cause of action for the recovery of money. Moreover, the language, structure and purpose of s 51A is inconsistent with any suggestion that it was intended to confer a free-standing right to the recovery of interest whenever it seems fair that one party, rather than another, should redress the consequences of a party being kept out of its money, regardless of whether the claimant can establish a cause of action for the recovery of the money from that party.

51 For the foregoing reasons, s 51A has no application in the circumstances of this case.

52 It is desirable to say something more about the Full Court decision in Kawasaki as the Deputy Commissioner relied upon it as an obstacle to the cross-appellants’ claim for interest, and the cross-appellants submitted that the decision was distinguishable or, alternatively, that it should not be followed. In Kawasaki, Hill and Heerey JJ said at 266-267 that s 51A could not be relied upon to support the claim for interest in that case. The proceedings sought an order for repayment of excess duty under s 16(1)(d) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘the ADJR Act’) and, in their Honours’ view, proceedings of that kind were not proceedings ‘for the recovery of any money’:

Hill and Heerey JJ proceeded to draw a distinction between an order under s 16(1)(d) directing the Comptroller to repay the excess duty and an order for the entry of judgment for the overpaid customs duty: at 267. It appears that, in their Honours’ view, only a proceeding that seeks an order of the latter kind would attract s 51A.

53 These observations by Hill and Heerey JJ were not, in my view, strictly necessary for their decision. The case turned on their earlier finding that, in the period between 1989 and 1991, s 167 of the Customs Act was an exclusive code for the recovery of customs duty and interest thereon, and it had not been complied with. After observing at 265 that, in an appropriate case, s 16(1)(d) could extend to directing the decision-maker to make a payment that had been refused contrary to law, Hill and Heerey JJ said at 266:

Thus, whether or not s 16(1)(d) or s 51A were potentially capable of authorising a payment of interest, any application of those provisions was foreclosed by s 167.

54 Later cases have not disputed the conclusion that Hill and Heerey JJ reached in Kawasaki as to the effect of s 167 of the Customs Act. By the time the New South Wales Court of Appeal decided Collector of Customs v Gaylor Pty Ltd (1994) 35 NSWLR 649 (‘Gaylor’), s 167 was no longer the exclusive method for disputing overpaid customs duty. The Commonwealth Parliament had enacted s 273GA of the Customs Act which provided a parallel procedure through the Administrative Appeals Tribunal for determining such disputes. As Handley JA explained at 655, s 273GA could now be used to expose the Collector’s demand for the payment of additional customs duty as unlawful, so as to open the way for a restitutionary action for the recovery of the overpaid duty. That is exactly what transpired in Gaylor. Following the Administrative Appeals Tribunal’s decision that no duty was payable, the importer commenced separate proceedings in the Supreme Court of New South Wales seeking judgment for the amount of the overpaid duty, together with interest thereon: see Cole JA at 656.

55 The Court of Appeal held that, where the importer has established in proceedings before the Tribunal under s 273GA that excessive duty was demanded, s 167 does not foreclose a subsequent action in the Supreme Court for the recovery of the duty: at 654 per Clarke JA, at 655 per Handley JA and at 662 per Cole JA. Cole JA said at 662 that the effect of s 273GA was to bring about a revocation of the exclusive method by which an owner could dispute the imposition of customs duty and recover any wrongly levied duty that had been paid under protest.

However, Cole JA did not address the question whether administrative review proceedings of the kind he described can be characterised as proceedings for the recovery of money within the meaning of s 51A or equivalent State provisions. That question simply did not arise because separate recovery proceedings of a restitutionary character had been instituted by the importer in the Supreme Court.

57 In Thakral, the Queensland Court of Appeal considered the powers of the Supreme Court under s 30(1)(d) of the Judicial Review Act 1991 (Qld), which is in similar terms to s 16(1)(d) of the ADJR Act. It held that in proceedings under the Judicial Review Act for a statutory order of review of an assessment of stamp duty, the Supreme Court had power under s 30(1)(d) to order the payment of interest. The Court expressly held that interest could be awarded under s 30(1)(d) even if the proceedings did not qualify as proceedings for the recovery of money within the meaning of the Queensland equivalent of s 51A (s 47(1) of the Supreme Court Act 1995 (Qld)).

58 McPherson JA (with whom White J agreed) delivered the leading judgment. Pincus JA dissented. On the question whether the statutory review proceeding could be characterised as a proceeding for the recovery of money within the meaning of s 47(1) of the Supreme Court Act, McPherson JA concluded as follows (at 440 [15]):

Immediately after this passage, McPherson JA turned to the actual ground for his decision and said that even if the proceedings were, strictly speaking, not for the recovery of money, the Supreme Court had the necessary power to award interest pursuant to s 30(1)(d) of the Judicial Review Act.

59 McPherson JA considered, in passing, whether Kawasaki supported a narrower construction of s 30(1)(d). In this context, McPherson JA observed at 439 that the conclusion arrived at by Hill and Heerey JJ in Kawasaki was influenced by the fact that the proceedings before them involved an illegitimate attempt, by way of judicial review, to recover an amount of overpaid customs duty without complying with the exclusive procedure prescribed by s 167 of the Customs Act.

60 In an appropriate case, proceedings seeking declaratory relief and such other relief as may be appropriate can be regarded as proceedings for the recovery of money. In Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390, the claim was for a declaration that the plaintiffs were entitled to a one-third share of the proceeds of sale of a particular property and such further or other relief as may be appropriate. The proceeds of sale had been paid into Court. In addition to making the declaration sought, the trial judge ordered that judgment be satisfied by payment out of the money in Court and made an award of interest. Wilson J (Gibbs CJ, Murphy, Aickin and Brennan JJ agreeing) held that in these circumstances the proceedings came within the description of proceedings in respect of a cause of action for the recovery of money: at 398-399; cf In Shoppe Pty Ltd v Smith (1976) 6 ATR 242 at 247-248.

61 On the other hand, there are other instances, aside from Kawasaki and the cases it mentions, where judges have taken a narrow view of what constitutes a proceeding for the recovery of money: see SCI Operations at 327 [99] per Kirby J; and Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; (1994) 182 CLR 51 at 92 per Brennan J.

62 To decide this cross-appeal, I do not need to express any definitive or comprehensive view about the limits of the expression ‘any proceedings for the recovery of any money’ where it appears in s 51A and I will not attempt to do so. Nor, as I have said, is it necessary for me to resolve any conflict in the authorities concerning those limits as the claims for relief in this proceeding extend to the recovery of money and interest and the proceedings themselves cannot be described merely as public law proceedings.

63 Where s 51A(1) applies, the applicant will be entitled to interest ‘unless good cause is shown to the contrary’. No rate of interest is fixed or prescribed by, or for the purposes of, s 51A. The Court has a discretion as to the rate of interest that should be fixed, and the period over which it should be calculated.

64 The Deputy Commissioner submitted that if, contrary to the conclusion I have reached, s 51A(1) was capable of applying in the circumstances of this case, then there was good cause why no order for interest should be made in favour of the first to fifth cross-appellants against the Deputy Commissioner.

65 The Deputy Commissioner relied upon two matters. First, it was not disputed that the Withholding Sum had earned interest while it was retained by Healthscope. Senior Counsel for the cross-appellants confirmed that this interest had been paid by Healthscope to ANZ Nominees for the benefit of the cross-appellants. It follows that the commercial rationale for the cross-appeal, and the claim for interest, must be that the cross-appellants wish to secure the differential between the 9 per cent per annum rate of interest they claim and the rate of interest that was in fact earned on the Withholding Sum. The submissions made to Edmonds J on 14 February 2006 disclose that interest of just over $500,000 had accrued on the Withholding Sum while it was invested by Healthscope, whereas the cross-appellants sought an order from Edmonds J for interest at 9 per cent per annum which, as at 8 February 2006, amounted to $937,531.14.

66 The cross-appellants claim interest at the rate of 9 per cent per annum on the basis that this rate is fixed by Sch J of the Supreme Court Rules of New South Wales. Although the matter remains one of judicial discretion, the usual but not invariable practice that has been followed by this Court in applying s 51A has been to adopt the rates of interest applied by the Supreme Court of the State or Territory in which the case was heard, unless there is evidence indicating that those rates are penal and not commercial: Namol Pty Ltd v AW Baulderstone Pty Ltd (No 2) [1993] FCA 606; (1993) 47 FCR 388 (‘Namol’) at 389; Kettle Chip Co Pty Ltd v Apand Pty Ltd (No 2) (1998) 83 FCR 466 at 482; Nagy v Masters Dairy Ltd (1996) 150 ALR 273 at 317; H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795; White Industries (Qld) Pty Ltd v Flower & Hart (No 2) [2000] FCA 1132; (2000) 103 FCR 559 at 575-576 [47]; EMCL Pty Ltd v Esanda Finance Corporation Ltd [1999] FCA 978 (‘EMCL’) at [58]-[62]; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688; (2003) 201 ALR 55 at 59-60 [13]; and Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866 at [22]- [24] (unaffected on this point by Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 135).

67 Secondly, the Deputy Commissioner submitted that under cl 4.1 of the share sale agreements that were in evidence before Edmonds J, the first to fifth cross-appellants were obliged to pay most of the Withholding Sum to the sixth cross-appellant, ECMI, within three working days of its release to them. On this basis, the Deputy Commissioner submitted that the first to fifth cross-appellants only lost the use of the Withholding Sum for a period of three days.

68 Edmonds J was not asked to consider these issues, and he did not exercise his discretion against the award of interest. I infer that he simply accepted the Deputy Commissioner’s submission that s 51A did not apply. There is, accordingly, no issue as to whether the primary judge’s discretion miscarried.

69 The first argument raises particular difficulties in this Court because of the dearth of evidence before Edmonds J. No evidence was led at trial concerning the interest derived by Healthscope or the arrangements that existed between Healthscope, ANZ Nominees and the cross-appellants concerning interest on the Withholding Sum. The only information that Edmonds J had before him on 16 February 2006 comprised broad statements from the Bar table about the interest that had been earned by Healthscope; there was no evidence about the precise nature and commerciality of that interest rate. Nevertheless, it is clear that if these matters had been fully argued before Edmonds J, there would have been a real question whether the interest in fact earned by Healthscope contradicted the assumption implicit in the Namol practice that the 9 per cent rate fixed by Sch J represents a commercial rate of interest: see Namol at 389, per Davies J; and EMCL at [59]-[62]. The cross-appellants may have advanced the countervailing argument that s 51A does not refer to ‘commercial’ interest and, consequently, the Court’s ability to have regard to State legislated rates of interest should not depend on any assumption that those rates are ‘commercial rates’: Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 at 328-329 [16] and 331 [21] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; cf EMCL at [61]-[62]. Further, if the matter had been fully argued, a question may have arisen whether the claim for interest was excluded by s 51A(2)(b).

70 The Court may not confront quite the same problems if it were to determine the second argument. At first blush, it is difficult to see why the payment obligation that the first to fifth cross-appellants assumed under their agreement with ECMI should be regarded as ‘good cause’ to the contrary within the meaning of s 51A(1). Moreover, the argument takes no account of the fact that, as a group, the cross-appellants claimed that the Deputy Commissioner should pay interest on the Withholding Sum. Even so, it is possible that additional evidence or other considerations may have emerged if the matter had been fully argued before Edmonds J.

71 In view of my conclusion that s 51A is wholly inapplicable, it is unnecessary for me to determine these issues. If, contrary to my view, s 51A applied, the appropriate course to take would be to remit the matter to the primary judge for his determination.

72 Accordingly, I consider that it is not only unnecessary, but also inappropriate, for this Court to undertake the exercise of determining whether there was ‘good cause’ to the contrary within the meaning of s 51A(1).

73 The notice of cross-appeal, and the cross-appellants’ written submissions, also relied upon ss 22 and 23 of the Federal Court of Australia Act. In oral submissions, however, the cross-appellants did not place any serious reliance on these provisions.

74 In my opinion, neither ss 22 nor 23 empowers this Court to make an order for interest when it is not empowered to do so under s 51A or under the general law. The cross-appellants did not identify or articulate any legal or equitable claim that would give them an entitlement to an award of interest against the Deputy Commissioner under ss 22 or 23.

75 For the foregoing reasons, I consider that the cross-appeal must be dismissed. The cross-appellants must also pay the costs of the Deputy Commissioner, and the costs of ANZ

I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young.

Counsel for the Cross-Appellants:	DH Bloom QC, GA Flick SC and TM Thawley

Solicitor for the Cross-Appellants:	Piper Alderman

Counsel for the First Cross-Respondent:	GJ Davies QC and P Sest

Solicitor for the First Cross-Respondent:	Australian Government Solicitor

Solicitor for the Second Cross-Respondent:	Freehills

Date of Hearing:	18 August 2006

Date of Judgment:	9 November 2006

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 383 OF 2006

JUDGES:	GYLES, STONE AND YOUNG JJ
DATE OF ORDER:	9 NOVEMBER 2006
WHERE MADE:	SYDNEY

Federal Court of Australia - Full Court Decisions

Elsinora Global Limited v Deputy Commissioner of Taxation [2006] FCAFC 156 (9 November 2006)