CATCHWORODS TAXATION - practice and procedure - direction to file statement of grounds of appeal - statement reserving right to rely upon any ground of objection -~- inconsistent with context and purpose of direction - discovery and interrogatories - whether can be used to make case where none exists - paragraph reserving rights struck out. Taxation (Unpaid Company Tax) Assessment Act 1982 Jurisdiction of Courts (Miscellaneous Amendments) Act 1987 Federal Court Rules W.A. Pines Pty Ltd v Bannerman (1980) 30 ALR 559 Nestle Australia Limited v Deputy Commissioner of Taxation 86 ATC 4,130 Hutchins v Federal Commissioner of Taxation 86 ATC 4,549 WESTERN AUSTRALIAN CAPITAL INVESTMENTS CO. LTD. v THE COMMISSIONER OF TAXATION NO. WAG 2049 OF 1987 FRENCH J. PERTH 9 MARCH 1988 JUDGMENT No. 4897.%¢ IN THE FEDERAL COURT )} OF AUSTRALIA ) WESTERN AUSTRALIAN ) DISTRICT REGISTRY ) ) GENERAL DIVISION No. WAG 2049 of 1987 BETWEEN: WESTERN AUSTRALIAN CAPITAL INVESTMENTS CO. LTD. Applicant and THE COMMISSIONER OF TAXATION Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 9 MARCH 1988 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraph 14 of the applicant's points of claim be struck out. 2. The applicant pay the respondent's costs of the motion filed 12 February 1988. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. creme ceed IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIAN DISTRICT REGISTRY GENERAL DIVISION we No. WAG 2049 of 1987 BETWEEN: WESTERN AUSTRALIAN CAPITAL INVESTMENTS CO. LTD. Applicant and THE COMMISSIONER OF TAXATION Respondent CORAM: FRENCH J. 9 March 1988 REASONS FOR JUDGMENT On 30 March 1983 the Commissioner of Taxation issued an Assessment to Clifton Towers Pty Ltd for income tax and undistributed profit tax for the year ended 30 June 1981. The amount payable under the assessments was said to be $479,796.54. On the same day a notice was sent to the applicant, one of the company's former shareholders, pursuant to the provisions of the Taxation (Unpaid Company Tax) Assessment Act 1982 ("TUCT Act") as a preliminary step towards the raising of a recoupment tax assessment. The applicant, having received the notice, exercised its right to file an objection to the assessment. The objection was dated 30 May 1987 and contained well over 100 grounds, including attacks on the constitutional validity of the TUCT Act. eee ee tee 2. On 31 August 1983 the Commissioner gave notice of his decision to disallow the objection and on 12 October the applicant requested that the objection be treated as an appeal and forwarded to the Supreme Court of Western Australia. It was so transmitted just over two years later on 31 January 1986. Following the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987, the appeal was transferred to this court. On 29 September 1987 directions were given which included the following:- 1. The applicant do on or before 30 October 1987 file and deliver a statement of its grounds' for appealing against the assessment in question, the statement to follow as nearly as practicable the form applicable to a statement of claim. 2. The respondent do on or before 27 November 1987 file and deliver a response to the applicant's statement of grounds, the response to follow as nearly as practicable the form applicable to a defence provided that it shall embody a statement of grounds upon which the respondent supports its assessment. The applicant filed points of claim and later amended points of claim pursuant to the directions. The points of claim are concisely expressed and contend, inter alia, that the subject assessment was ultra vires for reasons which it is not necessary to set out here. The applicant's case as set out in the points of claim is with one exception, considerably narrower than the very wide ranging grounds set out in the original Notice of Objection. The exception is in the last paragraph, para.l14 of the points of claim, which provides:- 3. "The Applicant reserves its rights to rely upon any one or more of the grounds set out in uts Notice of Objection." The respondent moves to strike out this paragraph pursuant to 0.11 r.16 or 0.52A r.13 of the Federal Court Rules. The direction for the filing of points of claim and the response was made pursuant to 0.52A r.13, which in the relevant part provides:- "(1) On a directions hearing under this Order the Court or a Judge shall give such directions with respect to the conduct of the proceeding as is thought proper. (2) Without prejudice to the generality of sub-rule (1) the Court or a Judge may:- (c) make orders with respect to: (iv) the defining of the issues". The complaint made by the respondent concerning para.14 is that it fails to comply with the directions given and is, in any event, embarrassing. The applicant, on the other hand, contends that while the points of claim set out the grounds upon which it presently intends to rely, it should be allowed to see whether, after the processes of discovery and interrogatories are complete, any support exists for any other of the grounds of objection. 4. This amounts to an admission that the applicant regards the remaining grounds in the Notice of Objection as speculative and hopes to use the processes of discovery and interrogatories to see whether it has a case. To approach the appeal in this way with a host of speculative grounds in reserve 1s quite inconsistent with the purpose of the direction which was to achieve definition of the issues. It discloses an intention to use the processes of discovery to determine whether there is a case in respect of grounds for which there is otherwise no support. That is not a course which the Court will permit ~- W.A. Pines Pty Ltd v Bannerman (1980) 30 ALR 559, 567 (Brennan J.), 575 (Lockhart J.). That 1s not to say that the Court will not allow resort to these ancillary processes where there 1s evidence to ground a suspicion that the applicant has a good case ~ Nestle Australia Limited v Deputy Commissioner of Taxation 86 ATC 4,130 at 4,134 per Wilcox J. But there is nothing advanced in this case to suggest that there is a good case on any of the grounds in the objection in respect to which the applicant seeks to reserve its rights. Reference was made to a decision of Jenkinson J. in Hutchins v Federal Commissioner of Taxation 86 ATC 4,549, as authority for the proposition that it is a legitimate purpose to seek to expose all the processes used by the Commissioner and his officers in arriving at an assessment. In that case such a submission was made in support of a contention that the taxpayer 5. should not be vrequired to furnish particulars of his objection until after discovery of documents by the Commissioner. Jenkinson J. did not accede to the taxpayer's suggestion and said at 4,551:- "I think the disclosure of the issues between the parties is likely to be best achieved if the respondent's particulars of assessment be followed by particulars of the grounds of objection, before any other interlocutory proceeding. If after discovery by the respondent the appellant desires to amend his particulars, the Court can entertain an application to amend if the respondent will not consent." The decision cannot, in my opinion, be taken as authority for the very wide proposition advanced by the applicant in this case. The respondent seeks to strike out para.14 under O.11 r.16, but I doubt that that Order is directly applicable to the points of claim filed in this case. The real question is whether the applicant has by the inclusion of para.14, failed to comply with the direction relating to the filing of the points of claim. In my opinion, he has. The purpose and content of the direction required definition of the issues between the parties. It 18 quite inconsistent with that to include a reservation of a right to raise one or more as yet unspecified additional ycounds from among those set out in a lengthy and complex Notice of Objection. In the exercise of the power under 0.52A to give directions as to the defining of the issues, I will order that para.14 of the points of claim be struck out. 6. I certify that the preceding five (5) pages are a true copy of the Reasons for Judgment of his Honour Justice French. Associate: ae heot~ Wek ' c Date: CE WAN tS Counsel for the Applicant: Mr S.R. Paterniti Solicitors for the Applicant: Parker & Parker Counsel for the Respondent: Mr P. Macliver Solicitors for the Respondent: Australian Government Solicitor Date of Hearing: 4 March 1988 Date of Judgment: 9 March 1988