Lombardo v. Federal Commissioner of Taxation.

Judges:
Wickham J

Court:
Supreme Court of Western Australia

Judgment date: Judgment handed down 26 October 1978.

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Wickham J.: This is an appeal by a taxpayer from a decision of a Board of Review upholding assessments for income tax. The appeal to this Court is brought under sec. 196(1) of the Act from the decision of the Board which is said to involve a question of law. The assessments concerned are those for the years ending the 30th June 1968 and the 30th June 1969. The taxpayer objected and upon the objections being disallowed they were referred to the Board. By consent the reference was heard

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ATC 4622

by the Board together with two others by relatives of the taxpayer. It was a sec. 26(a) case.

Putting it broadly, the taxpayer was a member of a closely knit Italian migrant family and his affairs were interlocked with his relatives in a way suggesting a type of family community of property, but for the purposes of assessment of tax and for other purposes in connection with the references and the appeals, the taxpayer's interests were treated singly.

The taxpayer required his appeal to be heard separately in this Court and that request was granted. The taxpayer through counsel also indicated that he required a new hearing and that the transcript of the proceedings before the Board was not to be part of the appeal material. The Commissioner contended that the whole transcript should be before this Court. On this point I ruled in favour of the appellant, adopting the reasons and conclusions of Sheppard J. in
F.C. of T. v. Berry Motors Pty. Ltd. & Ors. 78 ATC 4306. In this respect I do not think there to be any distinction in principle between an appeal by a taxpayer and an appeal by the Commissioner. Counsel for the Commissioner of course used the transcript in the usual way for purposes of cross-examination, although did not tender any direct evidence of ``admissions''.

There were other peculiar features of the case at it came to this Court.

The appellant, not using the transcript, gave evidence again and called some of the same witnesses as called before the Board, and also called additional witnesses. He did not call his brother Vince, who was called by him before the Board and who it appears likely was the person who knew most about the transactions. The respondent did not call Vince either. An attempt was made in that respect but upon it being found that Vince was away from Perth, no further adjournment was requested. The evidence therefore which was adduced before me was probably very different from that adduced before the Board.

The reasons and conclusions of the Board were agreed to be part of the material before me, but the appellant did not accede to the proposition that I could treat any of the findings of primary fact contained in those reasons as evidence. The appellant's contention was that the reasons only came to me so that I could see whether, on the fact of the reasons and of the conclusions, the decision of the board involved a question of law. It was, further, the appellant's case that the question of law said to be involved was not the question as to whether the conclusion could be supported by the findings of primary fact, but that from the reasons it could be seen that other questions of law were raised before the Board.

The respondent submitted that no question of law was involved in the decision and that I lacked jurisdiction.

The operative part of the notice of appeal is as follows:

``The Questions of Law involved in the decision were, inter alia, as follows:

• 1. The proper construction of Section 26(a) of the Income Tax Assessment Act 1936.
• 2. Whether the Appellant acquired his interest in the properties referred to in the decision of the Board of Review as `Helm Street' and `Clay Lands' for the purpose of profit making by sale.

The grounds of this Appeal are, inter alia, as follows:

• 1. That on the evidence and the weight of the evidence the Board of Review should have upheld the Appellant's objections to the assessments aforesaid.
• 2. That the finding of the Board of Review that the purpose of the person referred to in the decision of the Board of Review as Vince in purchasing the aforesaid properties was for profit making by sale was against the evidence and the weight of the evidence and wrong in law.
• 3. That the finding of the Board of Review that the Appellant had no independent purpose in relation to the purchase of the aforesaid properties was against the evidence and the weight of the evidence and wrong in law.
• 4. That the finding of the Board of Review that the Appellant adopted the purposes of the person referred to as

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  ATC 4623

  Vince in purchasing the properties aforesaid was against the evidence and the weight of the evidence and was wrong in law.
• 5. That as a matter of law the Board of Review should have held that the properties aforesaid were not purchased for the purpose of profit making by sale, or as part of a profit making undertaking or scheme, and that the proceeds from the purchase and resale thereof were not otherwise part of the assessable income of the Appellant.''

The appellant having declined to treat the transcript as part of the appeal material, it is apparent that ground 1 of the grounds of appeal (as distinct from the questions of law framed) cannot be sustained. It is also apparent that there is no way, as a matter of evidence or of fact, of testing grounds 2 to 4 inclusive, without the transcript. Further it being asserted by the appellant that the grounds of appeal do not cover the proposition that on the findings of primary fact the conclusion of the Board was not open to it, there is no question of law contained in grounds 2 to 4 inclusive. The only question of law that could arise is under ground 5 as read with ground 1 of the questions of law - this could raise a point of construction. I will return to the matter of whether ground 2 of the questions of law is a question of law.

In the first instance the submission of counsel for the appellant was that the application of a statutory provision to facts as found always involves a question of law. I reserved my decision on the matter of jurisdiction until I had heard the evidence, and at the end of the case counsel for the appellant expanded his submission to include the contention that if questions of law were raised in the proceedings before the Board then this is enough. He referred to a number of questions of law of that kind.

The submission was said to be supported by the remarks of Menzies J. in
Stewart v. F.C. of T. 73 ATC 4007. This however was a case where a submission was made to the Board in respect to the construction of sec. 65 of the Act and the Board did not accept the contention advanced. To that extent therefore, the decision of the Board involved a question of law. Likewise I do not think that the dicta of Gibbs J. in
XCO Pty. Ltd. v. F.C. of T. 71 ATC 4152 at 4154 support the appellant. That case involved a consideration of the legal meaning of the word ``income'' and also a question of construction of sec. 26(a).

Nevertheless, the question of jurisdiction in this case is not easy.

A convenient starting point is the dictum of Fullagar J. in
Hayes v. F.C. of T. (1956) 96 C.L.R. 47 at 51, where his Honour said: ``Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally - so far as I can see, always - be a question of law.'' It is tempting from this to conclude that whenever it is necessary to apply a statutory provision to found facts, then the question whether the ultimate fact to be proved is established, is always a question of law. However, his Honour was re-stating in another form and purporting to apply the dicta of Latham C.J. in
F.C. of T. v. Miller (1946) 73 C.L.R. 93 at 97, to the effect that when ``the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only''. Latham C.J. was in turn quoting from Lord Parker in
Farmer v. Cotton's Trustees (1915) A.C. 922. The important phrase here is the phrase ``within the provisions properly construed'' from which it is seen that a question of construction must be involved for the principle stated to apply.

This conclusion seems to me to be supported by authority. Although it is not necessary for the appellant to show that there has been an error of law by the Board, and although so far as evidence is concerned the matter may go beyond a ``no evidence'' submission, a question of law must be involved in the decision, e.g. such a question may sufficiently appear where it is being claimed that upon the evidence only one conclusion was possible: see
Krew v. F.C. of T. 71 ATC 4213 per Walsh J. at 4215.

Section 26(a) decisions have often been treated by the parties as involving a question of law but this has sometimes been when there has been no argument to the contrary.

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ATC 4624

In
Fisher v. D.F.C. of T. (1966) 40 A.L.J.R. 328 the transcript was produced for the sole purpose of demonstrating that there was no evidence capable of supporting some of the Board's inferences of fact. This was also a case where the Court heard additional evidence or different evidence, and evidence had been called before the Board which was not called in the Court. As Owen J. remarked, the first question for decision was whether the Board's decision did involve a question of law. His Honour after reading the transcript concluded, ``that the Board had before it evidence which was capable of supporting not only its final conclusion of fact that the land in question was bought for the purpose of resale at a profit, but also the inferences of fact which led to that conclusion''. Having seen that to be so, his Honour considered that the question ``was a plain question of fact''. In this case, as in that case, the question before the Board was litigated on that basis and ``it is, in my opinion, necessary, in order to bring a case within sec. 196 that a question of law should be really, and not merely colourably, involved'': F.C. of T. v. Miller (1946) 73 C.L.R. 93 per Rich J. at 101.

I think it clear that not every decision in relation to facts involving the application of sec. 26(a) involves a question of law, but it was said that certain questions were raised before the Board which involved questions of law in respect to inferences which could be open on evidence, and also relating to construction.

As seen from para. 21 of the Board's reasons, a point of law was raised, the point being that the purposes of Vince, (the brother of the taxpayer who seemed to do all the business) could not be deemed to be the purpose of the taxpayer. The Board however did not decide the case in the light of this question. Specifically it did not impute any of Vince's purposes to the taxpayer but found as a fact that the taxpayer's intentions were the same as those of his brother and that he, on the balance of probabilities, adopted the brother's purposes as his own. This is a conclusion of fact and not a conclusion of law and it does not involve a question of law.

The question of whether the transactions fell within the second part of sec. 26(a) was raised by the Commissioner before the Board and this it was said could involve a question of construction. I think that it could. The Board however did not decide the case on that basis and its decision did not involve any question of law arising out of that submission. The decision of the Board is stated in para. 23 of the reasons and is the conclusion that on the balance of probabilities the properties in question were each acquired for the purpose of profit making by sale - in that context acquired by the taxpayer for that purpose. This in my opinion is in this case a decision involving only a question of fact.

There was also, as I was told, some question before the Board as to whether the taxpayer might have acquired some interest in some of the property concerned by way of gift. The effect of this would involve a question of law, but whether it was so or not was a question of fact. There was nothing in this case to raise the question of what in law is or is not a gift or the meaning of the word ``acquired'' in the section.

Notwithstanding the fringe questions of law raised before the Board, it seems clear that the case there was ventilated as a matter of fact. The appellant had the option of referring the objections either to this Court or to the Board. He chose the latter. Under those circumstances, the right of ``appeal'' or original hearing by this Court is limited by the terms of the statute. When it can be seen that there is a real question of law involved in the decision of the Board then this Court must exercise its jurisdiction in the unfettered manner indicated by the authorities, but it ought not ``to render nugatory the provision that only where there is a question of law involved is there an appeal from a decision of the Board'' by purporting to detect some remote legal point which may be debatable but which was not involved in the decision: see Windeyer J. in
Buckland v. F.C. of T. (1960) 34 A.L.J.R. 60 at 62.

In my opinion this Court lacks jurisdiction. I add that should I be wrong in that conclusion, I have heard the evidence of the parties and their witnesses and I am in a position to make a decision, adopting the approach indicated by the Federal Court in
McCormack v. F.C. of T. 77 ATC 4543, should the case go any further and be returned to me for that purpose.

The appeal is dismissed.