Decision impact statement

Unit Trend Services Pty Ltd v Commissioner of Taxation

Venue: Federal Court of Australia
Venue Reference No: QUD 789 of 2012
Judge Name: Logan J
Judgment date: 5 April 2013
Appeals on foot: No
Decision Outcome: Favourable

Impacted Advice

Relevant Rulings/Determinations:

• N/A

Subject References:
Application for stay
Federal Court Rules
Full Federal Court judgement
Application for special leave

Précis

Outlines the ATO's response to the Federal Court's interlocutory decision to stay a Full Federal Court judgment, pending the outcome of the Commissioner's special leave application to the High Court. The taxpayer was seeking payment of monies that it contends it is owed.

Brief summary of facts

On 5 October 2012, the Full Federal Court made orders following its decision in Unit Trend Services Pty Ltd v Commissioner of Taxation [2012] FCAFC 112. Amongst other things, the Full Federal Court ordered that the decision of the Administrative Appeals Tribunal (AAT) in Taxpayer v Commissioner of Taxation [2010] AATA 497, to the extent that it related to GST and shortfall penalties assessed for specified supplies made by the taxpayer prior to 17 March 2005, be set aside and remitted to the Commissioner with a direction to allow the objections of the taxpayer.

On 2 November 2012 the Commissioner filed an application for special leave to appeal from the above mentioned order of the Full Federal Court.

On 14 December 2012, a panel of judges of the High Court, constituted by French CJ and Gageler J, heard the Commissioner's application for special leave and decided that the application should be referred to a Full Court of the High Court, constituted by five judges.

On 21 December 2012 the taxpayer made an application in the Federal Court under section 39B of the Judiciary Act 1903 for a writ of mandamus compelling the Commissioner to pay monies that the taxpayer alleges it is owed by the Commissioner. The taxpayer contended that it is owed those monies as a result of the order of the Full Federal Court which at the time was the subject of the Commissioner's application for special leave.

On 14 March 2013, argument in the Commissioner's special leave application was heard by a Full Court of the High Court constituted by five judges (French CJ, Crennan, Kiefel, Gageler, Keane JJ). The High Court reserved its decision.

The High Court's decision relating to the Commissioner's application for special leave was handed down 1 May 2013. The High Court granted special leave and unanimously allowed the Commissioner's appeal against the decision of the majority of the Full Federal Court.

Issues decided by the court

The decision follows an interlocutory hearing, in the proceedings brought in the Federal Court by the taxpayer under section 39B of the Judiciary Act 1903, of the Commissioner's application for a stay of some of the Full Federal Court's orders in Unit Trend Services Pty Ltd v Commissioner of Taxation [2012] FCAFC 112 ('Unit Trend').

The issues in dispute were whether:

•

upon a proper interpretation of section 14ZZL of the Taxation Administration Act 1953, the Full Federal Court's orders are not final; meaning that the Commissioner would not be required to implement the Full Court's orders until the outcome of his application for special leave or any resulting appeal is known?

•

if section 14ZZL of the Taxation Administration Act 1953 ('TAA') does not excuse the Commissioner from having to implement the Full Court's orders until the outcome of his special leave application or any appeal is known, would it be appropriate that a stay of the Full Federal Court's orders be granted?

Logan J [at 31] decided that it was not appropriate to determine the issue about the interpretation and application of section 14ZZL of the TAA in the context of the Commissioner's application for a discretionary stay by the Court. His Honour considered that the proper interpretation and application of section 14ZZL of the TAA ought to be considered at the later time when the taxpayer's application for a writ of mandamus under section 39B of the Judiciary Act 1903 is heard and determined.

Having regard to the fact that the Commissioner's application for special leave was referred to five justices of the High Court; the effect of the interest on overpayments legislation in terms of any monies that may ultimately be payable to the taxpayer; and the relative lack of prejudice to the taxpayer, Logan J decided [at 44] that a stay should be granted. His Honour [at 45] decided that the stay ought to run until the outcome of the Commissioner's application for special leave or any resulting appeal is determined.

In the course of stating his reasons for deciding to grant a stay to the Commissioner, Logan J commented on some of the actions of the Commissioner.

At [23] and [24], his Honour refers to correspondence exchanged between the Commissioner and the taxpayer, following the publication of the Full Federal Court's reasons for decision in Unit Trend. In particular, his Honour refers to correspondence issued by the Commissioner that stated section 14ZZQ of the TAA as the basis upon which the Commissioner considered he was not, at that stage, obliged to give effect to the Full Court's orders.

His Honour characterises this mistaken reference in that correspondence to section 14ZZQ as "the Commissioner, then being of the view that, notwithstanding what the High Court said in [Glennan v Commissioner of Taxation (2003) 77 ALJR 1195 at [5]], the law was not as stated in that case."

At [25], whilst acknowledging that in the ordinary course of events the Federal Court is the appropriate forum to seek a stay of the operation of a judgement of the Full Court, pending the outcome of an application for special leave, his Honour states that the course which this case took was "hardly an ordinary case". On this basis, his Honour, at [24] and [38], is critical of the Commissioner for not having raised the issue of a stay with the five judges of the High Court seized with the Commissioner's special leave application.

ATO view of Decision

Application of section 14ZZL and 14ZZQ of the Taxation Administration Act 1953

The Commissioner respectfully agrees that the High Court's statement in Glennan v Federal Commissioner of Taxation (2003) 77 ALJR 1195; [2003] HCA 31 ('Glennan') at [5] means that section 14ZZQ has no application or operation with respect to matters, such as Unit Trend, that commence in the AAT and proceed on appeal to the Federal Court.

The correspondence issued by the Commissioner following the publication of the Full Federal Court's reasons for decision in Unit Trend regrettably contained a mistaken reference to section 14ZZQ instead of section 14ZZL. The Commissioner's submissions to the Court referred to section 14ZZL of the TAA (not section 14ZZQ). It is by virtue of section 14ZZL that the Commissioner submitted that the Full Court's orders were not final, and that he was not compelled to give effect to the Full Federal Court's orders pending the outcome of his application for special leave and any appeal. The Commissioner does not contend that the law in relation to section 14ZZQ is other than as stated by the High Court in Glennan.

The Commissioner's submission was that, read in the context of section 14ZZQ and the legislative history, the reference in section 14ZZL to when a decision of the Tribunal 'becomes final' should not include a case where an application for special leave is pending in the High Court. It seemed improbable, the Commissioner submitted, that Parliament intended that the Commissioner would not be required to give effect to a decision where there is a special leave application pending if the matter commenced as an appeal to the Federal Court but would be required to do so in the same circumstances if the matter commenced in the Tribunal. The comments of the High Court in Glennan's case have no bearing on this issue.

Applying for a stay of orders of the Full Federal Court in the Federal Court

In seeking to invoke the Federal Court's jurisdiction to grant a stay, rather than the High Court, the Commissioner noted the decision of the High Court in Jennings Construction Limited v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681 ('Jennings Construction'). In that case, Brennan J stated at [6]:

"When an application for special leave to appeal is made to this Court, a jurisdiction to stay may be exercised by the Court below and it is to that Court - the Court in which the matter is pending and which is familiar with the matter - that an application to stay should first be made. In this case the Court of Appeal, not wishing to pre-empt the view that may be expressed in this Court, tailored its order accordingly. In future, there should be no inhibition on the Court in which the matter is pending framing a stay order, if a stay be appropriate, to avoid the necessity for application to this Court."

The above statement by Brennan J in Jennings Construction was referred to and reaffirmed by the High Court in Smith Kline & French Laboratories (Australia) Ltd v Secretary to the Department of Community Services and Health [1991] HCA 13 (at [20]) and De Lewinski v Director-General of Community Services (NSW) [1996] HCA 9 (at [8]).

At the 8 February 2013 directions hearing before Logan J, the Commissioner foreshadowed that, as a fallback position, he intended to apply to the Federal Court for a stay of the Full Federal Court's orders in case his reliance upon section 14ZZL of the TAA was determined to be incorrect. His Honour ordered that the Commissioner file and serve any application for a stay on or before 1 March 2013.

The Commissioner proceeded, as foreshadowed and consistent with his Honour's order, to file the application for a stay in the Federal Court.

Administrative Treatment

As a result of the High Court's decision handed down on 1 May 2013, the Federal Court did not have a further opportunity in this case to rule upon whether section 14ZZL has the same practical effect for proceedings commenced in the Tribunal as section 14ZZQ has for direct appeals to the Federal Court, when a special leave application is pending.

As no ruling was made in this case about the application of section 14ZZL, when similar circumstances arise in a future case, the Commissioner will again seek a stay of the Full Federal Court's orders but will also seek independent advice from senior counsel about whether to seek a declaration from the Court about the application of section 14ZZL.

Implications for ATO precedential documents (Public Rulings & Determinations etc)

N/A

Implications on Law Administration Practice Statements

N/A

Court citation:
[2013] FCA 333
(2013) 87 ATR 1

Legislative References:
Taxation Administration Act 1953 (Cth)
s 14ZZL
s 14ZZQ

Judiciary Act 1903 (Cth)
s 39B

Federal Court of Australia Act 1976 (Cth)
s 25

Federal Court Rules 2011 (Cth)
r 41.03

Case References:
Glennan v Commissioner of Taxation
(2003) 77 ALJR
[2003] HCA 31
53 ATR 101
2003 ATC 4619

Jennings Construction Limited v Burgundy Royale Investments Pty Ltd (No 1)
(1986) 161 CLR 681
[1986] HCA 84

Taxpayer v Commissioner of Taxation
[2010] AATA 497
2010 ATC 1-022
76 ATR 917

Unit Trend Services Pty Ltd v Commissioner of Taxation
[2012] FCAFC 112
2012 ATC 20-342