CALCHWORDS Taxacion - appeal - leave to appeal from decision of Supreme Court of New South Wales — no requirement for question of general or public importance to exist before leave granted ~ whether a question of law is sufficient to warrant loave ~ additional factors relating to questions of general importance - leave io appeal granted. TI COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v. REGINALD ERNEST NIXON NSW NO. G. 42 OF 1979 LOCKHART J. ny wise IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY NSW No. G 42 of 1979 GENERAL DIVISION THE COMMISSIONER OF TAXATTON OF THE COMMONWEALTH OF AUSTRALIA Applicant REGINALD ERNEST NIXON Respondent ORDER - t JUDGE MAKING ORDER: LOCKHART J. WHERE MADE: SYDNEY DATE OF ORDER: 6 SEPTEMBER 1979 THE COURT ORDERS THAT: 1. Leave be granted to the Commissioner of Taxation to appeal from a decision of the Supreme Court of New South Wales allowing the taxpayer's appeal from a decision of the Taxation Board of Review confirming the Commissioner's amended assessment of income tax in respect of the year of income ended 39 June 1970 ON CONDITION that the Commissioner pay the taxpayer's costs of this application 1n any event oe aed me pp hiy etrds Stet IN _THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSW No. G 42 of 1979 GENERAL DIVISION THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Applicant REGINALD ERNEST NIXON Respondent REASONS FOR JUDGMENT 6 September 1979 CORAM: LOCKHART J. This is an application by the Commissioner of faxation for leave to appeal from a decisizon of the Supreme Court of New South Wales allowing the taxpayer's appeal from a decision of the Board of Review (No. 1) confirming the Commissioner's amended assessment of income tax in respect of the year of income ended 30 June 1970. The source of the Commissioner's right to appeal to this court by leave is the Income Tax Assessment Act 1936 s. 196 (5). "As Toohey J. observed in Lombardo v. Federal Commissioner of Taxation (1979) 79 A.T.C. 4079 at p. 4080: "The section does not define the circumstances 1n which leave may be given, nor does it prescribe any criteria to be applied." I agree with has Nonour's conclusion; and I agrec with has Honour that the existence of a question of general or public importance or special circumstances is not necessary before leave to appeal to this court may be granted, 2/2 In my opinion, the existence of a question of Law generally will not, per se, be enough to warrant leave. TI agree with Toohey J. that a question @ilaw that has importance or is of general application is sufficient, but there may be other considerations that justify leave. I also agree with his Honour that when the exercise of this court's power to hear an application for leave to appeal is exercised by a single judge of this court pursuant to the Federal Court of Australia Act 1976 s. 25 (2) the court's inquiry: "should be directed to the existence of an arguable question, the implications of that / question for the case in hand and, if urged as a reason for leave, 1ts wider implications. The correctness or otherwise of the decision challenged may be a relevant consideration when the application 1s before a Full Court, Predericksy., May (1973) 47 A.L.J.R. 362. Sittang as a single judge, particularly when the correctness of the decision was not fully argued, the situation 1s different. If leave is granted, the Full Court is not bound by any view of the law I take, but it seems to me undesirable that a single Judge should grant leave on the basis that the decision of the Supreme Court was wrong. That 1s a matter for the Full Court." The appeal to the Supreme Court of New South Wales arose out of the disallowance by the Commissioner of an objection by the taxpayer to the anclusion of an amount of $26,747.00 in the assessable income of the taxpayer for the year of ancome ended 30 June 1970 representing the sale of shares held by the taxpayer in Tasminex N/L which the Commissioner included in the taxpayer's amended assessment as profits arising from the sale of property acquired by the taxpayer for the purpose of profit-making by sale within the 22/3 meaning of s. 26 (a) of the Assessment Act. On 25 March 1975 the taxpayer requested the Commissioner to refer the objection to the inclusion of the abovementioned sum of $26,747.00 in his assessable income to a Board of Review for review. The reference vas heard by the Taxation Board of Review No. 1 on 7 and 8 August 1978, and the board unanimously confirmed the taxpayer's assessment to income tax for the year ended 30 June 1970. By notice of appeal filed on 28 September 1978 the taxpayer appealed to the Supreme Court of New South Wales from the board's decision. The appeal to the Supreme Court was heard by Hunt J. who on 26 July 1979 made orders upholding the appeal with costs, It appears from the material and arguments before me that the questions involved in the appeal included the following:- - (a) whether the taxpayer had acquired the shares, the realization of which gave rise to profit, for the purpose of profit making by sale in terms of s. 26 (a) of the Assessment Act; (b) whether the taxpayer had discharged the onus of provang that the intention of profit making by sale had not existed; and (c) whether the decision of the Board of Review anvolved a question of law such that the Supreme Court had jurisdiction to hear and determine the appeal. wee Jt This application for leave is sought upon grounds D ! which include the folloving:- 1. That his Honour erred in concluding that the taxpayer had not acquired the shares for the purpose of profit making by sale, the proper inference to be drawn from all the evidence pointing to the opposite conclusion; That his Honour erred in concluding that the Board of Review had misdirected itself in relation to the discharge by the taxpayer of the statutory onus of proof provided by s. 190 (b) of the Assessment Act; and That his Honour should have held that it was open to the Board of Review on the evidence before it to hold that the taxpayer had not discharged the statutory onus of proof provided by s. 190 (bv), and that his Honour should have been satisfied on the evidence before him, and from the proper inferences to be drawn therefrom, that the taxpayer had not discharged the onus of proof requared by s. 190 (vb). It has been submitted by Mr. Conta Q.C., who rer appears with Mr. Marks for the commissioner, that the questtion- which would be raised upon appeal to this court would involve, unter alia, the questions of the proper construction of ss. 26 (a) and 190 (b) of the Assessment Act; that the decision of Hunt J. is attended by doubt and uncertainty having regard to a number of matters, including the fact that the opposite conclusions were unanimousiy reached by the Board of Review; and that this court would be in as good a position as Hunt J. to determine the proper inferences to be drawn from the evidence of the case, particularly the evidence of the taxpayer and his niece Janet Muriel Draper; and that if this court enters upon the task of considering that evidence 1t would, whilst gaving due weight and respect to the conclusions of his Horlour, reach the conclusion that the shares in question were acquired for the purpose of profit making by sale. It is also submitted by Mr. Contz that a question of law anvolved 1s whether his Honour's conclusion to the effect that the Board of Review had misdirected itself in relation to the nature of the onus of proof required by s. 190 (b) of the Assessment Act was relevant and, if relevant, correct. Mr. Conti has also submitted that a further question of law involved is whether, assuming his Honour was correct in accepling the taxpayer as a witness of truth, nevertheless, when the evidence 1s viewed as a whole, this court would be compelled to reach the conclusion, based on the principles enunciated by the High Court in a number of cases. including Warren v. Coombes and Anor. (1979) 53 Aw.L.JR. 292 that the taxpayer had not discharged the requisite onus of proof for the purposes of the Assessment Act. 22/6 —— It has alse been submitted by Mr. Conti that in t } : a case such as this, where the evidence before the Supreme Court had a dual source, namely evidence that was before the Board of Review, and evidence, including viva voce evidence of witnesses, led for the first time before the Supreme Court itself, LtLhere shouki be a determination of the proper pranciples to be applied by this court in deciding the circumstances in which findings of the Supreme Court ave liable to be reviewed, especially where they rest to some extent on inferences to be drawn from the cvidence together with findings of credibility in favour of the taxpayer. In my opinion not only are there questions of law to be determined on the hearing of any appeal from the order of Hunt J., but there are some questions of general importance which arise in the case. I summarise them as follows:~ A. The circumstances in which this covrt will review conclusions of the court from which the appeal lies, ;which raise inferences to be drawn from evidence, some of which is given before a tribunal such as a Board of Review under the Assessment Act and the balance is led before the court itself; B. The relevance of his Honour's conclusion in the present case to the effect that the Board of Review had misdirected atself in relation to the nature of the onus of proof 00/7 re required by s. 190 (b) of the Assessment Act; Cc. The principles to be applied in determining whether a decision of the Board of Review does involve a question of Law for the purposes of s. 196 (1) of the Assessment Act; although I must say at once that it is certainly possible that this question of law may not in fact arise on any hearing of the appeal before a full court of this court. On the other hand it 1s clear from the argument that it may arise. I have said already there are in my view questions of law to be argued before the full court of this court. I need not enumerate them all except to say they would anclude those I had described earlier and prefaced by the letters (a), (b) and (c). Mr. Conti Q.C. also submitted that there were some discretionary matters that I ought to take .anto account in favour of the grantang of leave. These were disposed of aun the course of argument against the Commissioner. TI need not refer further to them, This 1s not a case in which the Commissioner maintains that it 1s a test case or one that will determine the fate of other pending assessments or assessments under review or appeal. In my view the only basis that exists for the granting of leave is the fact that there are some questions of general importance involved. «../8 Accordingly I am satasfied that this 1s a proper case for the granting of leave to appeal. On the question of costs, as the basis for the granting of leave is that the appeal involves questions of general importance I think 11 proper that a condition be imposed on the granting of leave that the Commissioner pay the taxpayer's costs of this application whatever the outcome of the appeal to thzs court may be. I do not think 1t proper to go beyond that and ampose a further condition that the taxpayer's costs of the appeal to this court be paid by the Commissioner in any event. . Accordingly I grant leave to the Commissioner of Taxation to appeal on condition that the Commissioner pays the taxpayer's costs of this application for leave to appeal in any event. If there 1s any other matter arising from my reasons which requires directions, either party 15 al liberty to apply within fourteen days. | certify that ths and the precea.ng pages aro a true cory cf the t, Reasens fer Judgment herein of hs roncur Wir. Justice Locknart. md 7 oF teh ee fee c Acsoc.ate ++