Federal Commissioner of Taxation v. Berry Motors Pty. Limited.
Judges:Sheppard J
Court:
Supreme Court of New South Wales
Sheppard J.:
These five appeals by the Commissioner of Taxation have been pending in the list for some years. They have not come on, so I understand, because the parties had been awaiting the decision of the High Court in
K. Porter & Co. Pty. Ltd. v. F.C. of T. 77 ATC 4472. That decision was delivered on 1st November, 1977.
The matters were restored to the list in February, when I gave directions to enable them to be got ready for hearing. Those directions included a direction that the Commissioner file all affidavits to be relied upon by him on or before 2nd May last. The Commissioner has filed affidavits by Mr. T.J. Akhurst sworn 18th May, 1978. Each of the affidavits is formal. No more is done than to annex to each affidavit a copy of the transcript of the proceedings in the respective appeals before the Board of Review. Those proceedings were heard in the case of matters, Nos. 8 and 9 of 1973 on 19th and 20th October, 1970, and in the case of the other appeals on 22nd and 23rd October, 1970
It is the taxpayers' contention that the Commissioner is not able to put evidence before the Court in this way unless they agree to such a course, which they do not. That is the substantial question which has been argued before me. A subsidiary question which was raised by the Commissioner during the argument was whether the Commissioner or the taxpayer should begin.
The appeals come to this Court pursuant to the provisions of sec. 196(1) of the Income Tax Assessment Act 1936. Section 196A of the Act applies the provisions of the High Court
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Rules, so that the procedure to be followed upon any such appeal is largely governed by O. 65 of those Rules. Those Rules require that within fourteen days from the service of a copy of the notice of appeal upon the chairman or other proper officer of the Board the chairman shall cause to be forwarded to the registry in which the appeal is pending a copy of the documents specified, including a copy of any document necessary for hearing the appeal which is in the possession or power of the Board (O. 65 r. 14). It is the practice of the Board to forward to the registry of this Court not only copies of returns, notices of objection, assessments, and the Board's decision, but also a copy of the transcript before the Board and the exhibits tendered before it.Section 177 of the Act provides that the production of a notice of assessment purporting to be a copy of a notice of assessment by the Commissioner, a second Commissioner, or a Deputy Commissioner, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct. Section 190(b) provides that upon every reference or appeal the burden of proving that the assessment is excessive shall lie upon the taxpayer. Section 192 empowers a Board of Review to review decisions of the Commissioner, a second Commissioner or a Deputy Commissioner. Section 193 provides that for the purpose of reviewing such decisions the Board shall have all the powers and functions of the Commissioner in making assessments, determinations and decisions under the Act, and such assessments, determinations and decisions shall, for all purposes (except for the purpose of objections thereto and review thereof and appeals therefrom) be deemed to be assessments, determinations or decisions of the Commissioner.
Notwithstanding the provisions of sec. 190(b) of the Act, I am of opinion that a taxpayer when confronted in the Supreme Court with an appeal by the Commissioner against a decision of a Board of Review, bears no onus. He is no longer required to show that the Commissioner's assessment is wrong. That is because the assessment made by the Commissioner has been replaced by an assessment made by the Board, and the Board's assessment stands in place of that made by the Commissioner. The assessment is one with which the taxpayer will usually agree. It is that assessment which stands unless there be a successful appeal by the Commissioner to the Court. The provisions of sec. 190(b) no longer have relevance. So far as sec. 177 is concerned, I do not understand how it could, in any proceeding, being an appeal in which an assessment made by the Commissioner or by a Board on reference to it is in question, advantage the Commissioner at all. That is because of the words in brackets in the section to which I have earlier referred.
The views which I have expressed are, I believe, in accordance with those expressed by Fullagar J. in
F.C. of T. v. Finn (1960) 103 C.L.R. 165. Not only am I bound by what his Honour has decided; I respectfully agree with what he has said. It is true that there were some earlier decisions or dicta of single justices of the High Court to a contrary effect. I refer to
F.C. of T. v. Robinson & Mitchell Pty. Ltd. (1941) 64 C.L.R. 612 at p. 618 and to
Watson v. F.C. of T. (1953) 87 C.L.R. 353 at p. 363. But in my opinion the later views expressed by Fullagar J. in Finn prevail and are, in any event, to be preferred.
His Honour's conclusion was expressed as follows:
``To require the Commissioner to begin on an appeal from a board would not, in general, be to require him to prove a negative. And O.65, r.14, of the Rules of this Court requires the transmission to this Court of all the material which was before the Board. If oral evidence has been taken before the Board, that material will include a transcript of that evidence. Since the institution of the Boards of Review in 1925 the Commissioner has been the appellant in a large number of appeals from decisions of a board, and it has, I think, been the invariable practice in such cases for the Commissioner to begin. If an exceptional case arises in which law, justice or convenience... requires that the taxpayer should begin, the matter will be within the control of the Court.''
The Commissioner placed reliance upon the last sentence of what his Honour said in that passage. He submitted that that left it open to me, in an appropriate case, to require the taxpayer to begin. I must confess to having myself some difficulty in understanding how
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what his Honour has said in that sentence could be correct, bearing in mind the terms of the legislation and what he has said elsewhere in his judgment. But I do not express a final view about the matter, because it would not be an appropriate course to follow, assuming it to be available in some classes of case, in the present appeals.That disposes of the subsidiary question which was argued. The Commissioner must begin. I turn to the question of whether the Commissioner may tender in evidence the transcript of the proceedings before the Board over the objection of the taxpayers. The Commissioner relies very much on part of what Fullagar J. has said in the passage just cited from his judgment in Finn. He submitted that it is authority for the proposition that the transcript may be used. He contended that the invariable practice to which his Honour referred coupled with his earlier reference to the transcript of the evidence before the Board being transmitted to the Court meant that his Honour was saying that there was an invariable practice permitting the Commissioner to tender and rely upon the transcript when he was the appellant, notwithstanding objections to that course by the taxpayer.
The Commissioner extracted information concerning the matter in which material was presented by him to the High Court in a number of appeals from Boards of Review in which the Commissioner was the appellant. Each of the appeals was decided prior to the date of the decision of Fullagar J. in Finn. In some cases it is not possible to say what material was used by the Court and in others it is clear that the transcript of the proceedings before the Court was used by the agreement of the parties. But there have been other cases apart from Finn where the taxpayer has not appeared, and it is reasonable to infer that the Court, notwithstanding his absence, used the transcript and the exhibits which were before the Board. That is said to evidence the practice to which Fullagar J. was referring, and of which he, so it was submitted, apparently approved.
But the fact is that his Honour referred in terms, not to a practice involving the invariable use of the transcript of the proceedings before the Board, but to a practice which involved the Commissioner, in cases where he was the appellant, in beginning. The passage is not therefore authority for the proposition for which the Commissioner contends.
In the course of his judgment Fullagar J. referred to two dicta from earlier cases. He referred to what had been said by Starke J. in
F.C. of T. v. Lewis Berger & Sons (1927) 39 C.L.R. 468 at p. 469. Starke J. there said:
``The appeal may be brought from any decision of the Board which, in the opinion of this Court, involves a question of law. The Board, in its proceedings, did not exercise the judicial power of the Commonwealth, but an administrative function, namely, that of reviewing the Commissioner's assessments for the purpose of ascertaining the taxable income upon which tax should be levied. The appeal to this Court submits the ascertainment of the taxpayer's liability to judicial review and ascertainment, but the so-called appeal is a proceeding in the original, and not within the appellate, jurisdiction of the Court. It follows, I think, that the parties on this appeal are not limited to the material that was before the Board of Review, but are entitled to adduce before this Court such evidence in support of, or in answer to, the appeal as is relevant to the matter. The material before the Board and its decision and reasons should be brought before this Court, and the parties may use this material if they so desire, but further or additional evidence may be adduced, or the appeal may be conducted as an original cause brought in this Court.''
Fullagar J. also referred to what had been said by Williams J. in
F.C. of T. v. Sagar (1946) 71 C.L.R. 421 at pp. 423-424. Williams J. said:
``It is only competent for the Court to entertain an appeal under sec. 25(7) if the decision of the Board involves a question of law. Unless the statute provides that some portion of the Board's decision is to be unappealable, the whole decision and not merely the question of law is then open to review and the Court must rehear the whole case although it rejects the point of law.... The appeal is a proceeding in the original jurisdiction of the Court so that, unless the parties agree that the evidence given before the Board shall be used on the appeal, the evidence must be tendered again, and, as the appeal is a rehearing, further evidence can be called.''
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The legislation with which Williams J. was dealing was the Estate Duty Assessment Act 1914, but it is plain that Fullagar J. thought that the considerations were the same.
It is to be observed that the two learned judges are not at one as to what the position is. Starke J. in Lewis Berger thought that the material before the Board should be brought before the Court. He must, accordingly, have thought that it should be used, even though it might be added to by either of the parties. On the other hand, Williams J. thought that the evidence before the Board could not be used unless the parties agreed to that course being taken.
The question at issue here was not raised for determination before Fullagar J. That no doubt explains why he did not find it necessary to resolve the conflict between the two judges. It is true that he seems to have contemplated that the transcript would be used, notwithstanding the then absence of the taxpayer. But his mind was not directed to the present problem. Having decided that the Commissioner was not entitled to succeed, so to speak, by default, he referred the matter to a Full Court. The taxpayer was represented when the substance of the appeal was argued. His counsel did not object to the transcript before the Board being used; see Finn (1961) 106 C.L.R. 60.
Before drawing some conclusions there are some further dicta to which I should refer. In
F.C. of T. v. Students World (Australia) Pty. Ltd. 78 ATC 4040 Mason J. said (pp. 4045-4046):
``There is an initial difficulty in dealing with this question which arises from the manner in which the proceedings were conducted in the Supreme Court and the approach taken by his Honour to the issues of fact. Although in form an appeal, the proceedings in the Supreme Court were an exercise of original jurisdiction in which it was for the judge to decide issues of fact, without being constrained to accept the findings made by the Board of Review - see F.C. of T. v. Finn (1960) 103 C.L.R. 165 and the cases there cited. The issues of fact in this case evidently involved questions of credibility of witnesses, yet the parties contented themselves with presenting the transcript of evidence taken before the Board. No oral evidence was called, the case before his Honour being conducted exclusively by reference to the materials before the Board. How his Honour could adequately determine questions of credibility in these circumstances does not readily emerge. It is not surprising that the judge seems to have embraced the evaluation of the witnesses and the findings of fact made by Mr. O'Neill in the Board of Review.
I am not suggesting that on appeal from the Board the Supreme Court is not at liberty to conduct the case by reference to the materials before the Board. But where there is an issue of fact involving credibility it is desirable that the witnesses whose evidence is in question should be recalled - see, for example,
Moruben Gardens Pty. Ltd. v. F.C. of T. 72 ATC 4147, at pp. 4149-50; (1972) 46 A.L.J.R. 559, at pp. 560-561 - so that the judge may evaluate the oral testimony and form his own impressions of what it is worth. If this course is not pursued the judge will be restricted in deciding whose evidence is to be accepted. Certainly it will not be easy for a party who seeks to show that findings of fact made by a Board of Review are erroneous.''
In the same case Aickin J. said (pp. 4051-4052):
``It is open to those Courts to adopt their own procedure and, at least in cases where both parties agree, to treat the material placed before a Board of Review as if it were evidence given in the proceedings. Where no critical questions of credibility arise, and where the parties are content to accept the view adopted by a Board, or a majority of its members, on credibility, no serious difficulties are likely to arise. In the present case the whole of the oral evidence and all the documents before the Board were included in the material before Mahoney J. and before this Court.''
The emphasis is mine.
In
McCormack v. F.C. of T. 77 ATC 4543 Bowen C.J. and Brennan J. referred at p. 4546 to the fact that the appeal before them was one of some difficulty by reason of its complexity. They went on to say that the difficulty was compounded by the procedure adopted before the Supreme Court of tendering the transcript of evidence before the Board without calling the appellant or her husband to give any oral evidence. At p. 4548 Deane J. referred to the fact that the evidence before the Court was
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confined to the transcript of evidence before the Board, exhibits before it, and the reasons for decision of the members of the Board, ``all of which were admitted, without objection, into evidence.''The dicta in Students World and in McCormack indicate that there will be cases where it is undesirable not to call any oral evidence before the Court. More importantly, but perhaps by inference only, except in the case of the dictum of Aickin J. (see the words I have emphasised), they envisaged circumstances where the parties may properly object to the transcript before the Board of Review being used at all.
As a result of a consideration of the legislation and the various dicta to which I have made reference, I have reached the conclusion that it is not open to the Commissioner without the consent of the taxpayer, to tender, or ask the Court to use, the transcript which has been before the Board. The Court is exercising original and not appellate jurisdiction. It approaches the matter, therefore, upon the basis that the parties may put before it such relevant evidence as they choose to do. I do not understand how it can be said that a transcript of evidence given by witnesses before a Board is itself evidence. It may be that where the taxpayer is a natural person, and not a company, the evidence given by him will be admissible because it is a statement by him of what he says about the facts of the matter. It may not amount to an admission, but it is just as much an account of the facts as would be a statement appended to his return, or a letter written by him in support of an objection. The same may be said, perhaps, of the evidence given by directors of a company or of the evidence of senior executives thereof. But I am not asked by the Commissioner to approach this matter in that way. He contends that he is entitled to hand up or to tender the transcript, and that it is receivable or admissible by reason of the fact that it was the transcript of the proceedings before the Board of Review and by reason of that circumstance alone.
If one considers the position in relation to taxpayers' appeals, say in relation to the inclusion of a profit under sec. 26(a) of the Act, the Commissioner might well decide, in a given case to object to the transcript before the Board being used, and require the taxpayer to give his evidence afresh. That indeed has happened in at least one case within my own experience. I do not understand why the position is any different when the appellant is the Commissioner, notwithstanding that he may be placed on some occasions in a difficult position.
But I doubt very much whether the burden which such a course will impose upon the Commissioner is of such grave proportions as his counsel suggested. I have already referred to what may be the position in relation to evidence given by personal appellants (i.e., appellants to a Board), or witnesses who are agents of appellants, whether or not they be companies. The evidence of witnesses who are strangers to the proceedings is evidence which is available to both parties. The evidence can be called as easily by the Commissioner as by the appellant. It is true that witnesses, having given evidence for one party, may tend to join his camp. But there will be available the transcript, and if a witness strayed very far from what he had said before the Board there would be available what he had said in the transcript. This could be relied upon in an appropriate case as an inconsistent statement for the purpose of having him declared hostile, although I agree that he would have to exhibit hostility as well. Furthermore, I see little wrong with the course, where facts are expected to come out in much the same way as they did before the Board, of asking a witness whether what he said before the Board was true, and in that way having a transcript of his evidence admitted.
In this State there is in force sec. 82 of the Supreme Court Act, 1970. The matter has not been argued, but I would assume it to be applicable by reason of the provisions of either sec. 79 or sec. 80 of the Judiciary Act, 1903. I would think that in cases where there was no real dispute this Court would be anxious to exercise its powers under that section.
It ought not to be thought that the taxpayers' objections to the use of the transcript in the present cases are captious or unreasonable. I am satisfied upon what has been put to me by senior counsel that there are good reasons for the stand they have taken. Counsel said that he was prepared to consider with counsel for the Commissioner the admission of part of the transcript, and otherwise to facilitate proof where matters were not really in issue.
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In the result, I have reached the conclusion that the transcripts annexed to Mr. Akhurst's affidavits should be rejected, and I do reject them. I propose to stand this matter over to enable counsel to consider what I have said.
Before concluding I should mention that the Commissioner placed strong reliance upon the decision of the High Court in
George v. F.C. of T. (1952) 86 C.L.R. 183. That, however, was a case involving the provisions of sec. 166 and 167 of the Act. I do not understand it to be relevant to the present problem.
The matters will be stood over to a date convenient to counsel for the purpose of enabling them to consider what I have said, and then to make submissions as to what further directions should be given to enable the matters to be brought on for hearing.
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