FEDERAL COURT OF AUSTRALIA W R Carpenter Holdings Pty Ltd v Commissioner of Taxation [2006] FCA 1252 TAXES AND DUTIES –income tax and related legislation – international agreements between parties not at arm's length from each other – non-arm's length consideration –– request for particulars of the matters taken into account by Commissioner in making the determinations – Div 13 of Pt III of the Income Tax Assessment Act 1936 (Cth) - determinations made by the Commissioner under s 136AD of the Income Tax Assessment Act 1936 (Cth) – relationship between s 177(1) of the Income Tax Assessment Act 1936 (Cth) and s 14ZZO(b) of the Taxation Administration Act 1953 (Cth) – Held: order for provision of particulars not made. PROCEDURE – international agreements between parties not at arm's length from each other – non-arm's length consideration – determinations made by the Commissioner under s 136AD of the Income Tax Assessment Act 1936 (Cth) – request for particulars of the matters taken into account by the Commissioner in making the determinations – Div 13 of Pt III of Income Tax Assessment Act 1936 (Cth) – relationship between s 177(1) of the Income Tax Assessment Act 1936 (Cth) and s 14ZZO(b) of the Taxation Administration Act 1953 (Cth) – Held: order for provision of particulars not made. Income Tax Assessment Act 1936 (Cth) s 136AD, 175, 177(1), 177F(1) Taxation Administration Act 1953 (Cth) s 14ZZO(b) Avon Downs Pty Ltd v Commissioner of Taxation (1949) 78 CLR 353discussed Bailey & Ors v Commissioner of Taxation (1977) 136 CLR 214 discussed Binetter v Commissioner of Taxation (2003) 130 FCR 135 discussed Commissioner of Taxation v Dalco (1990) 168 CLR 614discussed Commissioner of Taxation v Sleight (2004) 136 FCR 211 followed Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 discussed Dorney v Commissioner of Taxation & Simons v Commissioner of Taxation [1980] 1 NSWLR 404 discussed Duggan & Anor v Commissioner of Taxation (1972) 129 CLR 365 discussed Commissioner of Taxation v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 discussed Commissioner of Taxation v Clarke (1927) 40 CLR 246 cited Commissioner of Taxation v Peabody (1994) 181 CLR 359 discussed FJ Bloemen Pty Ltd v Commissioner of Taxation (1981) 147 CLR 360 discussed Gauci v Commissioner of Taxation (1975) 135 CLR 81discussed George v Commissioner of Taxation (1952) 86 CLR 183discussed Giris Pty Ltd v Commissioner of Taxation (1969) 119 CLR 365discussed Jackson v Commissioner of Taxation (1989) 87 ALR 461 discussed Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation (1975) 132 CLR 535discussed Macmine Pty Ltd v Commissioner of Taxation (1979) 53 ALJR 362cited Master Butchers Ltd v Commissioner of Taxation [1974] 1 NSWLR 350 discussed McAndrew v Commissioner of Taxation (1956) 98 CLR 263 discussed McCormack v Commissioner of Taxation (1979) 143 CLR 284cited R v Associated Northern Collieries & Ors (1910) 11 CLR 738 cited R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 cited Rio Tinto Ltd v Commissioner of Taxation (2004) 55 ATR 321 cited Sleight v Commissioner of Taxation (2003) 53 ATR 667cited Syngenta Crop Protection Pty Ltd & Anor v Commissioner of Taxation (2005) 61 ATR 186 followed Western Australian Capital Investment Co Ltd v Commissioner of Taxation (1989) 87 ALR 183 discussed W R CARPENTER HOLDINGS PTY LTD v COMMISSIONER OF TAXATION NSD 931 OF 2005 W R CARPENTER AUSTRALIA PTY LTD v COMMISSIONER OF TAXATION NSD 932 OF 2005 LINDGREN J 20 SEPTEMBER 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NSD 931 OF 2005 NEW SOUTH WALESDISTRICT REGISTRY BETWEEN: W R CARPENTER HOLDINGS PTY LTD (ACN 008 401 796) Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: LINDGREN J DATE OF ORDER: 20 SEPTEMBER 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The motion brought by notice of motion filed on 19 May 2006 (seeking an order for the provision of particulars) be dismissed. 2. The applicant pay the respondent's costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NSD 932 OF 2005 NEW SOUTH WALES DISTRICT REGISTRY BETWEEN: W R CARPENTER AUSTRALIA PTY LTD (ACN 000 032 315) Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: LINDGREN J DATE OF ORDER: 20 SEPTEMBER 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The motion brought by notice of motion filed on 19 May 2006 (seeking an order for the provision of particulars) be dismissed. 2. The applicant pay the respondent's costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NSD 931 OF 2005 NEW SOUTH WALES DISTRICT REGISTRY BETWEEN: W R CARPENTER HOLDINGS PTY LTD (ACN 008 401 796) APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT IN THE FEDERAL COURT OF AUSTRALIA NSD 932 OF 2005 NEW SOUTH WALES DISTRICT REGISTRY BETWEEN: W R CARPENTER AUSTRALIA PTY LTD (ACN 000 032 315) APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: LINDGREN J DATE: 20 SEPTEMBER 2006 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 The applicants move by notices of motion filed on 19 May 2006 for orders that the respondent ("the Commissioner"), in each proceeding, provide particulars of the three matters identified in Annexure A to the notice of motion. Annexure A refer to particulars of the matters taken into account by the Commissioner in making three determinations – under subss 136AD(1), 136AD(2) and 136AD(4) of the Income Tax Assessment Act 1936 (Cth) ("ITAA"). The Commissioner made the determinations on 25 June 2004 in both cases. 2 The two motions have been heard together, the evidence in each being evidence in the other. 3 The applicant in proceeding NSD 931/05, WR Carpenter Holdings Pty Ltd ("WRCH"), and the applicant in proceeding NSD 932/05, WR Carpenter Australia Pty Ltd ("WRCA") ("the Taxpayers"), are members of a group of companies associated with Mr RF Stowe ("Group"). Both were incorporated in Australia and are resident in Australia for tax purposes. On 29 June 2004, following a lengthy audit, the Commissioner issued notices of assessment to the Taxpayers and to other companies in the Group. 4 The Taxpayers have appealed pursuant to s 14ZZO of the Tax Administration Act 1953 (Cth) ("TAA") in respect of appealable objection decisions, relating, in the case of WRCH, to the year of income ended 30 June 1987, and in the case of WRCA, to the year of income ended 30 June 1993. 5 I need not discuss in detail the transactions which are in issue in the two proceedings. In the case of the 1987 assessment, the subject of the WRCH proceeding, that transaction has been called the "CHIL Transaction". The CHIL transaction was a transaction between WRCH and Carpenter Holdings International Limited ("CHIL"), a Group company incorporated in Cyprus and a non-resident of Australia. Briefly, WRCH sold to CHIL shares in certain companies in the Group. The sale price was approximately $129,000,000, of which approximately $79,000,000 was to be paid at the end of 15 years, no interest being payable on that sum. The Commissioner assessed WRCH on an amount of $17,897,644 for "deemed interest" or "imputed interest" in the year of income ended 30 June 1987 ($167,290,826 imputed interest over all years) in respect of the CHIL transaction, as a result of the application of Div 13 of the ITAA. 6 The 1993 assessment to WRCA relates to what has been called "Loan Agreement #13" or "Loan 13". Loan Agreement #13 involved the provision by WRCA to a Group company incorporated in the United States of America and a non-resident of Australia, of loans and "guarantee fees", on which also no interest was charged, and which were written off by WRCA in the 1993 and 1994 years. Under Div 13, the Commissioner assessed WRCA on an amount of $986,180 for imputed interest in respect of the year of income ended 30 June 1993 ($4,762,981 imputed interest over all relevant years being 1989 to 1994). LEGISLATION 7 The central provision of Div 13 of Pt III of the ITAA for present purposes is s 136AD which provided at the relevant time as follows: "(1) Where – (a) a taxpayer has supplied property under an international agreement; (b) the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm's length with each other in relation to the supply; (c) consideration was received or receivable by the taxpayer in respect of the supply but the amount of that consideration was less than the arm's length consideration in respect of the supply; and (d) the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply, then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm's length consideration in respect of the supply shall be deemed to be the consideration received or receivable by the taxpayer in respect of the supply. (2) Where – (a) a taxpayer has supplied property under an international agreement; (b) the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm's length with each other in relation to the supply; (c) no consideration was received or receivable by the taxpayer in respect of the supply; and (d) the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply, then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm's length consideration in respect of the supply shall be deemed to have been received and receivable by the taxpayer in respect of the supply at the time when the property was supplied or, as the case requires, any of the property was first supplied, or at such later time or times as the Commissioner considers appropriate. (3) Where – (a) a taxpayer has acquired property under an international agreement; ... (4) For the purposes of this section, where, for any reason (including an insufficiency of information available to the Commissioner), it is not possible or not practicable for the Commissioner to ascertain the arm's length consideration in respect of the supply or acquisition of property, the arm's length consideration in respect of the supply or acquisition shall be deemed to be such amount as the Commissioner determines." 8 The word "property" was defined broadly in s 136AA(1). Importantly, the notion of arm's length consideration was relevantly defined in s 136AA(3)(c) as follows: "(c) a reference to the arm's length consideration in respect of the supply of property is a reference to the consideration that might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply; …" 9 Central to the resolution of the issue for decision are ss 175 and 177, in particular, s 177(1), of the ITAA, and s 14ZZO of the TAA. Before I set out those provisions, I note that in the substance they have been part of the Australian income tax régime since at least the enactment of the ITAA in 1936. The only change in these provisions since 1936 has resulted from the enactment of Pt IVC of the TAA with effect from 1 March 1992 (effected by Act No 216 of 1991). Since that time, Pt IVC of the TAA has governed objections, reviews and appeals, in place of provisions within the ITAA. Whereas s 14ZZO(b) of the TAA now provides that in proceedings on an appeal to this Court against an appealable objection, the appellant has the burden of proving that the assessment is "excessive", previously it was s 190(b) of the ITAA that contained a similar provision. 10 Sections 175 and 177(1) of the ITAA provide: "175 The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with." "177(1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct." CONSIDERATION General 11 The Commissioner relies on two grounds in the alternative in support of his submission that the motions should be dismissed. The first is that by reason of ss 175 and 177 of the ITAA, the Commissioner's reasoning process leading to his making the determinations is not an issue in the proceeding, is not subject to judicial review in the appeal, and is not to be inquired into. According to this contention, the Taxpayers are not at liberty to attempt to show that the Commissioner's determinations were not authorised by the ITAA because the Commissioner took into account irrelevant considerations or did not take into account relevant considerations. If this is right, it would seem to follow that the Commissioner would not be liable to give discovery, and the Taxpayers would not be entitled to tender evidence or to cross-examine, with a view to establishing that he did or did not. 12 Secondly, and in the alternative, the Commissioner contends that if the first ground should not find favour, nonetheless he should not be required to give particulars because ss 177(1) of the ITAA and 14ZZO of the TAA have the effect that the Commissioner need not propound the due making of the determination as part of a positive case to be made by him. Rather, he is entitled to rely, as he does, on his assessments, leaving it to the Taxpayers to discharge the onus incumbent on them of proving that the assessments are excessive. To express the matter differently, it is not the Commissioner but the Taxpayers who must fail unless a positive case is made out, and particulars may only be required of a positive case. Division 13 13 Division 13 was introduced into Part III of the ITAA following the introduction of Pt IVA. The explanatory memorandum for the Income Tax Assessment Amendment Bill 1982 (Cth) stated (at 4): "The revised Division 13, which this Bill will insert into the Principal Act, is designed ... to provide in the international area a general supplement to the new Part IVA of the Principal Act. Because of policy and technical inter-relationships between the two, a number of the now proposed provisions draw on the measures contained in Part IVA." In his Second Reading Speech on the Bill, the then Treasurer described Div 13 as follows (Cth, Parliamentary Debates, HR, 24 March 1982, 1367-8): "Although complementary to Part IVA, the proposed measures are not limited in scope to arrangements that have a dominant tax avoidance purpose. In that regard, it is important to recognise that an arrangement to shift profits out of Australia may be entered into for a complex mixture of tax and other reasons. However, ... the fact that tax saving is not a key purpose of the particular arrangement or transaction is no reason why we, as a nation, should not be in a position to counteract any loss of the Australian revenue inherent in it. The main requirements for the application of the revised provisions are that a taxpayer has supplied, or acquired property or services under an 'international agreement', one or more of the parties to which were not dealing at arm's length with each other, and that the supply or acquisition was at prices other than those that might have been expected in a transaction between independent parties dealing independently – that is, at arm's length." 14 In his Statement of Facts, Issues and Contentions ("SFIC") in each proceeding, the Commissioner states that he made determinations pursuant to: (1) ss 136AD(1) and 136AD(4); or (2) ss 136AD(2) and 136AD(4). That is to say, he relies on the "less than arm's length consideration" and the "no consideration" provisions, in the alternative. 15 By the present motions, the Taxpayers seek orders that the Commissioner provide particulars of (all) the matters he took into account in making the determinations in respect of each of the Taxpayers. 16 The structure of Div 13 is clear. There are "par (d) determinations" provided for in subss (1) and (2), as well as subs (3), of s 136AD, and a determination provided for in subs (4) of that section. The par (d) determinations are identical, mutatis mutandis: "the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the [(1) "supply", (2) "supply", or (3) "acquisition"]". Subsections (1) and (2) are concerned with a supply of property for less than "the arm's length consideration" (subs (1)) or for no consideration (subs (2)); subs (3), not presently relevant, is concerned with an acquisition of property for more than "the arm's length consideration". 17 There are four conditions that must be fulfilled in order for the operative terms of either subss (1) or (2) to be enlivened. In the case of subs (1), for example, the conditions are: (i) that the taxpayer has supplied property under an international agreement (the Taxpayers do not dispute that this condition was satisfied, although there is a question as to the identity of the particular international agreement under which the supply took place); (ii) that the Commissioner is satisfied that the parties were not dealing at arm's length (again, this condition is not in issue – it is not disputed that the Commissioner was so satisfied); (iii) that the amount of the consideration received or receivable by the taxpayer was less than the arm's length consideration in relation to the supply (this condition is in issue); (iv) that the Commissioner determined that subs (1) should apply in relation to the taxpayer in relation to the supply (the Taxpayers concede that there were purported par (d) determinations, but contend that they were not in fact authorised by the ITAA, for the reason, in particular, that the Commissioner took into account irrelevant considerations and failed to take into account relevant considerations). 18 There is but one condition that enlivens the Commissioner's power to make a determination under subs (4), namely, the objective circumstance that "it is not possible or not practicable for the Commissioner to ascertain the arm's length consideration ...". According to subs (4), if it is not possible or practicable to do so, the arm's length consideration is deemed by the subsection to be "such amount as the Commissioner determines". 19 Since conditions (i) and (ii) above are not in issue, condition (iii) is critical. Central to condition (iii) is identification of "the arm's length consideration". The Taxpayers submit that if the Commissioner's reasons for a determination under subs (4) are not examinable, it will follow that the fulfilment of condition (iii) will not be examinable either. The Commissioner concedes that the Taxpayers are able to challenge the existence of the condition precedent to the exercise of the Commissioner's power under subs (4). He contends that if they are unsuccessful, that is to say, by failing to show that it was, after all, possible and practicable for the Commissioner to ascertain the arm's length consideration, the Taxpayers will, so the Commissioner's submission goes, be fixed, for the purposes of condition (iii), with whatever amount the Commissioner has determined under subs (4) to be the arm's length consideration. 20 For convenience, I will call the arm's length consideration as defined in s 136AA(3) the "actual arm's length consideration", and that determined by the Commissioner under s 136AD(4), the "deemed arm's length consideration". The régime proceeds on the basis that in any case, the actual arm's length consideration exists as an objective fact in the real world, and that any dispute over the amount of it can be determined by the Court on evidence in the usual way. It is only if it is not possible or not practicable for the Commissioner to ascertain the amount of the actual arm's length consideration that there can be a deemed arm's length consideration. Whether it is not possible or practicable for him to do so is also an objective criterion. 21 The Taxpayers submit that the legislature must have intended that, in order to render his par (d) and subs (4) determinations examinable, the Commissioner be bound, upon request, to disclose the matters he took into account in making those determinations. 22 The Taxpayers have been supplied with copies of documents recording the determinations. There are two documents applicable to each Taxpayer, one under s 136AD(1) (less than arm's length consideration) and one under s 136AD(2) (no consideration). Accordingly, to take the case of WRCH, there was one determination under s 136AD(1)(d) that s 136AD(1) (less than arm's length consideration) should apply in relation to the year of income ended 30 June 1987, and another determination under s 136AD(2)(d) that s 136AD(2) (no consideration) should apply in relation to that year of income. 23 The two documents in relation to WRCA in relation to the year of income ended 30 June 1993 were the same, mutatis mutandis. 24 In the case of each of the four documents, the Commissioner recorded as a fact that it was not possible or "practical" (sic – practicable) to ascertain the actual arm's length consideration. Under s 136AD(4), the Commissioner determined the deemed arm's length consideration ($17,897,644 in the case of WRCH, and $986,180 in the case of WRCA). 25 The "arm's length consideration" first referred to in s 136AD(4) is the actual arm's length consideration. If it is possible and practicable for the Commissioner to ascertain that amount, the "arm's length consideration" referred to in s 136AD(1)(c) will be that amount, but, if it is not possible or not practicable for the Commissioner to do so, it will be the amount of the deemed arm's length consideration. Proof of excessiveness of assessment 26 The Taxpayers seek to bring down the Commissioner's determinations. If it is permitted to them to do so and they succeed in doing so, the present assessments will be shown to be excessive to the extent of the deemed arm's length considerations included in them. (In saying this, I am assuming that their evidence will exclude the possibility of income from other sources that might "replace" the deemed arm's length considerations.) 27 The Taxpayers seek to bring down each determination in two ways: (1) by showing that the objective conditions that enliven the Commissioner's powers to make the determination did not exist; and (2) by showing that the Commissioner took into account irrelevant considerations or failed to take into account relevant considerations in making the determinations. 28 As to (1), in their notices of objection, the Taxpayers assert, inter alia, that the actual arm's length consideration was received for the supply and that it was possible and practicable for the Commissioner to ascertain that actual arm's length consideration. 29 As to (2), in their notices of objection, the Taxpayers identify irrelevant considerations to which they say the Commissioner had regard, and relevant considerations to which they say he failed to have regard, when making his various par (d) and subs (4) determinations. 30 Although the Taxpayers do not know what matters the Commissioner in fact took into account, in their SFICs they have, as far as practicable, particularised both irrelevant matters that he was bound not to take into account and relevant matters that he was bound to take into account (WRCH's SFIC, par 99 and following; WRCA's SFIC, par 44 and following). Each Taxpayer has added, however, that particulars of the matters considered by the Commissioner would be sought "to confirm the Applicant's understanding". 31 In their written submissions, the Taxpayers submit that the following are relevant matters that the Commissioner was bound to take into account in deciding whether to make the par (d) determinations: (i) whether there was any tax avoidance or profit shifting purpose in relation to the transactions; (ii) whether the Australian revenue was disadvantaged as a result of the transactions; (iii) the total consideration provided in respect of the transactions. They give the following as examples of irrelevant matters that the Commissioner was bound not to take into account in making the par (d) determinations: (i) a part only of the international agreement; and (ii) a subs (4) determination of a deemed arm's length consideration where that determination had miscarried. Apparently, the Taxpayers do not know, in the absence of particulars, whether the Commissioner took into account matters of either class (although the Taxpayers' SFICs state that they are aware that the Commissioner has concluded that the Australian revenue was disadvantaged as a result of the transactions at issue). 32 The Commissioner submits that the Div 13 régime does not make his process of reasoning in arriving at a determination an element going to the substantive tax liability of the Taxpayers. He emphasises, and the Taxpayers do not dispute, that there are the following objective conditions of the operation of subss 136AD(1), (2), and (4), that are open to be challenged by a taxpayer in a proceeding under Pt IVC of the TAA: (1) that the taxpayer in fact supplied property under an international agreement; (2) that the Commissioner was in fact satisfied that the parties were not dealing at arm's length in relation to the supply; (3) that it was not in fact possible or practicable for the Commissioner to ascertain the actual arm's length consideration; (4) that the Commissioner did in fact determine on a deemed arm's length consideration; (5) (if the challenge to (3) succeeds), that the consideration received or receivable by the taxpayer in respect of the supply was in fact less than the actual arm's length consideration (s 136AD(1)(c)), or that in fact no consideration was received or receivable by the taxpayer in respect of the supply (s 136AD(2)(c)); (6) that the Commissioner did in fact purport to determine that subs 136AD(1) or (2), as the case may be, should apply to the taxpayer in respect of the supply. Particulars, SFICs, and excessiveness of an assessment 33 If the thought processes of the Commissioner which underlay the making of his determinations are within the expression "the due making" in s 177(1) in these Pt IVC proceedings, then whether the Commissioner had regard to irrelevant considerations or failed to have regard to relevant considerations cannot be put in issue by the Taxpayers. Although they would be entitled to prove the excessiveness of the assessments by bringing down the determinations by demonstrating that the objective conditions mentioned earlier were not fulfilled, they would not be able to do so by proving that the Commissioner's antecedent procedure involved taking into account irrelevant considerations or failing to take into account relevant considerations. 34 As noted earlier, the Commissioner's alternative case is that even if the "due making" of the assessment does not shield from attack the Commissioner's thought processes antecedent to the making of the determinations, the Taxpayers are still not entitled to particulars sought because the due making of them is not something the Commissioner needs to prove; rather, the taxpayers must prove that they were not duly made. 35 Order 12, r 5(1) of the Federal Court Rules ("FCRs") provides: "The Court may order a party to file and serve on any other party – (a) particulars of any claim, defence or other matter stated in his pleading, or in any affidavit ordered to stand as his pleading; or (b) a statement of the nature of the case on which he relies; or (c) where he claims damages, particulars relating to general or other damages." Order 12, r 5(1) is not applicable because an SFIC is not a pleading, notwithstanding the inclusory nature of the definition of "pleading" in O 1, r 4 of the FCRs. If an appeal against an objection decision proceeded on pleadings, the taxpayer would go first with a statement of claim, followed by the Commissioner's defence, followed by any reply by the taxpayer. Moreover, O 11, r 2 of the FCRs would apply to require, for example, that the statement of claim or defence contain only a statement in a summary form of the material facts on which the taxpayer or Commissioner relies. (In an article, "Anatomy of a Federal Court Tax Case" (2000) 23(2) UNSW Law Journal 237 at 238-9, the late Justice Bryan Beaumont discussed similarities and differences between a pleading and an SFIC.) 36 In my view, however, the Court has implied power to order particulars (cf the reference to "inherent" power to order particulars in Master Butchers Ltd v Commissioner of Taxation [1974] 1 NSWLR 350 at 356 (Mahoney J) ("Master Butchers"); Bailey and Ors v Commissioner of Taxation (1977) 136 CLR 214 at 221 (Jacobs J), 227, 231 (Aickin J)) ("Bailey"). 37 Order 52B, r 5, introduced with effect on 1 March 1992, provided, relevantly, that within 28 days after service of a sealed copy of the taxpayer's application, the Commissioner must file "a statement outlining succinctly the Commissioner's contentions and the facts and issues in the appeal as the Commissioner perceives them." The requirement was introduced for historical reasons, which no longer apply, and also for a practical reason. The practical reason was a concern that the Court should know, at the earliest time practicable, the nature of the real issues in a tax appeal. The usual practice was and is for the Court, at the first or a subsequent directions hearing, to direct that the taxpayer also file and serve an SFIC. However, the sequence in which SFICs are filed and served should not be allowed to mislead (as from 1 December 2005, r 5 has required the Commissioner to file, at the Commissioner's choice, either an SFIC ("Appeal Statement") or an affidavit in support of the making of directions departing from the régime just described ("Appeal Affidavit"): see Select Legislative Instrument 2005 No. 291 (Cth)). As Practice Note No 22, "Appeals against Appealable Objection Decisions made under the Taxation Administration Act 1953" (made on 1 December 2005) puts it: "Practitioners are reminded that nothing in the Rules or this Note can affect the operation of s 14ZZO of the Act, which provides that in proceedings on an appeal to the Court against an appealable objection decision the appellant ('applicant' in the Court): · is, unless the Court orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and · has the burden of proving the matters referred to in s 14ZZO, such as, if the taxation decision concerned is an assessment (other than a franking assessment), that the assessment is excessive." In a sense, the taxpayer can be seen to have "gone first" by reason of the provision in s 14ZZO(a) of the TAA limiting the taxpayer, unless the Court orders otherwise, to the grounds stated in the taxation objection. 38 No doubt, many descriptions of the purpose of particulars can be found. It suffices to refer to that given by Isaacs J in R v Associated Northern Collieries & Ors (1910) 11 CLR 738 ("Northern Collieries") at 740: "I take the fundamental principle to be that the opposite party shall always be fairly apprised of the nature of the case he is called upon to meet, shall be placed in possession of its broad outlines and the constitutive facts which are said to raise his legal liability. He is to receive sufficient information to ensure a fair trial and to guard against what the law terms 'surprise' ... ." I see no meaningful distinction between inquiring whether the Commissioner should be required to give the particulars sought, and inquiring whether his SFIC is inadequate for not having included them: cf the taxpayer's notice of motion in Rio Tinto Ltd v Commissioner of Taxation (2004) 55 ATR 321 at 329, which sought an order that the Commissioner file and serve an SFIC "in compliance with O 52B, r 5 of the Federal Court Rules". 39 In the present case, the Taxpayers know what the Commissioner's case is. They know that he relies on the assessments and ss 175 and 177 of the ITAA. The Commissioner's SFIC in each proceeding states: "The Commissioner relies on s. 14ZZO of the [TAA] and requires the Applicant ... to discharge its burden of proving the assessment is excessive. Nothing in this statement constitutes an admission of any fact or matter, or otherwise limits the operation of s 14ZZO of the TAA. The Commissioner reserves the right to supplement, vary or replace this statement to meet the submissions of [the taxpayer]or if further information comes to his attention that warrants such a course." Without prejudice to that position, the Commissioner relies on the fact that he made the various determinations, copies of which he has provided to the Taxpayers. Section 136AD does not make the antecedent procedure of the making of the determinations an element of liability to tax: it makes only the actual making of them an element of that liability, and, accordingly, the Commissioner relies only on the fact, not the process, of the making of them. 40 The question is whether the Commissioner must provide particulars, not of something on which he relies, but with a view to equipping the Taxpayers with information on the basis of which they may be able to bring down the determinations and thereby establish that the assessments are excessive. This would be an unusual role for particulars, akin to discovery or interrogatories in relation to an issue raised by the party seeking such procedural aid. (It is asserted by the Commissioner in submissions that the Taxpayers have, in substance, already had discovery of the documents that were before the Commissioner, pursuant to the Freedom of Information Act 1982 (Cth).) The authorities 41 Recently in Syngenta Crop Protection Pty Ltd & Anor v Commissioner of Taxation (2005) 61 ATR 186 ("Syngenta"), a case in which the taxpayer also sought particulars of the kind sought here, Gyles J observed (at 188): "I do not propose to track through all the authorities or endeavour to reconcile all of the statements in them on the topic. Such statements are not always easy to reconcile, partly because appeals cover many situations." I agree with the second sentence, although I will refer below, in chronological order, to those authorities which seem to me to be the most important. 42 Two matters should be noted at the outset: 1. Subsection 177(1) of the ITAA expressly recognises a distinction between reviews or appeals under Pt IVC of the TAA and other proceedings, in relation to the conclusive evidence of the due making of an assessment that is provided by production of a notice of the assessment. The reason is that s 14ZZO within Pt IVC contemplates that if an assessment is excessive, the taxpayer should, in a proceeding under that part, have the opportunity of proving that it is. The tension between s 177(1) of the ITAA on the one hand, and s 14ZZO(b) of the TAA (or its predecessor, s 190(b) of the ITAA) on the other hand, permeates the cases. 2. It will prove to be important to identify precisely the conditions of tax liability specified in the ITAA, and to distinguish between provisions referring to the Commissioner's state of mind, eg his "opinion", or his being "satisfied" or "not satisfied", on the one hand, and provisions referring to his taking a step, such as making a "determination" or "decision" on the other hand. I will refer to them as "state of mind" and "Commissioner's determination" classes of cases, respectively. 43 Avon Downs Pty Ltd v Commissioner of Taxation (1949) 78 CLR 353 ("Avon Downs"), a state of mind case, was an appeal to the High Court in its original jurisdiction against an objection decision. It concerned the deductibility of past years' losses. In order to be entitled to a deduction, a taxpayer had to establish certain things (for convenience, I will use the expression "continuity of beneficial ownership") to the satisfaction of the Commissioner: ITAA s 80(5). Dixon J stated (at 360): "But it is for the commissioner, not for me, to be satisfied of the state of the voting power at the end of the year of income. His decision, it is true, is not unexaminable. If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some misconception." 44 There was no reference to s 177(1) or s 190(b). Nonetheless, Dixon J may be taken to have accepted: · that it was open to the taxpayer to prove the excessiveness of the assessment by showing that the Commissioner's not being satisfied as to continuity of beneficial ownership could not stand on judicial review grounds; and · that if it was established that at law the Commissioner had been bound to be satisfied, the taxpayer would be entitled to the deduction for past years' losses. 45 Avon Downs does not address the question whether the Commissioner could be required to give particulars. It appears, however, that Dixon J contemplated that the taxpayer would have to proceed on the basis that the Commissioner was not obliged to disclose his reasons, but that the taxpayer would have available the materials that had been before the Commissioner. 46 The role of ss 177(1) and 190(b) of the ITAA arose in George v Commissioner of Taxation (1952) 86 CLR 183 ("George"). A condition of the enlivening of the Commissioner's power to make an assessment under s 167 was, relevantly, his not being satisfied with the return furnished by a person. There were also alternative conditions, namely, default in making a return, or the Commissioner's having reason to believe that a person who had not furnished a return had derived assessable income. Mr George, however, had lodged a return. On appeal to the High Court in its original jurisdiction against the Commissioner's objection decision, the taxpayer sought an order for particulars of the sources of the additional income that the Commissioner had assessed to tax. Thus, like Avon Downs, George was a state of mind case, but the particulars sought did not relate to the Commissioner's state of mind. 47 At first instance, Kitto J dismissed the application for particulars. His Honour's exposition of the effect of s 190(b) is clear and deserves to be quoted at some length. His Honour stated (at 189-190): "If at the hearing the onus would be upon the commissioner to establish that the appellant did in fact derive more income in the relevant year than he had disclosed, there would be much to be said for ordering him to give particulars for the purpose of defining the precise issues for trial and preventing surprise. But s 190(b) places the burden of proving that the assessment is excessive upon the appellant; and in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse, the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived. The object of the present application is really to have the commissioner say whether he is prepared to assign a source or sources for the moneys included in taxable income in the assessment over and above those disclosed as taxable income in the return, and to admit that if they did not come from that source, or from one or more of those sources, those moneys were not liable to be included in the appellant's taxable income. The commissioner may, if he chooses, voluntarily narrow the possible range of evidence in that way, but there could be no justification for ordering him to do so, under the guise of ordering particulars. If he attempts to prove derivation from a particular source and fails, he is none the less entitled under the Act to point to another source, or, without troubling about source at all, to stand upon his assessment and submit that the presumption in its favour has not been displaced. Even if the commissioner at present has in mind to seek to prove that income not disclosed in the return was derived from a particular source, he cannot be pinned to that source, nor would it be proper to order him to reveal his present plan of campaign. He is entitled to say, 'I do not allege anything about source at all; I may have ideas on the subject, but if I have I shall develop or modify or abandon or replace them as occasion may require, until the evidence on the hearing is complete, and then I shall make my submissions to the Court'." His Honour then said, by reference to English authorities, that a defendant may be ordered to provide particulars where it is clear that he intends to establish his denial of the plaintiff's averment of a negative by proving a positive. His Honour said that if the Commissioner had admitted that he intended to set up a case that the additional income was derived from a particular source, he should give particulars sufficient to enable the taxpayer to meet that case. But the Commissioner had made no such admission, express or implied. 48 In a joint judgment dismissing the taxpayer's appeal, the Full Court said (at 204): "The fact is that unless the taxpayer discharges the burden laid upon him by s. 190(b) of proving that this ascertainment or judgment is excessive, he cannot succeed and it can be no part of the duty of the commissioner to establish affirmatively what judgment he formed, much less the grounds of it, and even less still the truth of the facts affording the grounds. Yet that is what is involved when the demand for particulars of the sources alleged of the appellant's income is justified by reference to s. 167. It is an error to treat the formation by the commissioner of a judgment as to the amount of the taxable income as if it were not the ascertainment of the taxable income which constitutes assessment or a necessary part of that process and as if it were but the fulfilment of a condition precedent to the power or authority to assess. If, however, it were a condition precedent the question would at once arise whether the fulfilment of the condition was not part of 'the due making of the assessment' of which s. 177(1) makes the production of a notice of assessment conclusive evidence. But of this it is unnecessary to speak specifically." 49 At 206-207, their Honours said that s 177 distinguished between "the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer". The former, their Honours said, involved the "due making" of the assessment, as to which production of the assessment was conclusive. They concluded (at 207): "Obviously the 'due making of the assessment' was intended to cover all procedural steps, other than those [apparently, procedural steps] if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal." The distinction between two classes of procedural steps is a difficult one. A taxpayer is to be at liberty, by attacking procedural steps of one class, to prove in an appeal that the amount of the assessment is excessive, but may not attack other procedural steps which are left shielded by the "due making" of the assessment. 50 As noted earlier, in his SFIC in each of the present cases, the Commissioner has stated, in accordance with a familiar formula, that he relies on s 14ZZO of the TAA, and requires the Taxpayer "to discharge its burden of proving that the assessment is excessive" (see [39] above). 51 The Commissioner has identified the various objective conditions, the determinations made, and the amounts of the respective arm's length considerations involved ($17,897,644 in the case of WRCH, and $986,180 in the case of WRCA). He has not, however, positively asserted, or foreshadowed an intention to prove, that he had regard to any particular matters in making the determination. Why would he? His having regard to any particular matters is not made a condition of liability to tax. 52 George is at least clear authority against the Taxpayers' right to particulars on the second ground on which the Commissioner relies. 53 McAndrew v Commissioner of Taxation (1956) 98 CLR 263 ("McAndrew") was also an appeal to the High Court in its original jurisdiction against an objection decision. Subsection 170(2) of the ITAA provided that where a taxpayer had not made to the Commissioner a full and true disclosure of all material facts necessary for his assessment, and there had been an avoidance of tax, the Commissioner might amend the assessment. Where the Commissioner was of opinion that the avoidance was due to fraud or evasion, he might do so at any time, otherwise there was a six year time limit. Thus, the power to amend was conditioned upon the objective fact of the taxpayer's not having made a full and true disclosure, and on the subjective fact of the Commissioner's being of the opinion that there had been an avoidance of tax. At the parties' request, Dixon J stated a case which submitted certain questions for the opinion of a Full Court. 54 The Full Court held, referring, inter alia, to s 190(b) of the ITAA, that upon production of a notice of assessment, the Commissioner did not bear the onus of establishing satisfaction of the conditions, but that the taxpayer bore the onus of establishing their non-fulfilment. 55 In a joint judgment, Dixon CJ, McTiernan and Webb JJ referred to the distinction, recognised in George at 206, 207, between the procedure or mechanism by which taxable income and tax are assessed on the one hand, and the substantive liability to tax on the other. They said that the conditions went to substantive liability, and that it was open to the taxpayer to dispute their existence on an appeal against an assessment. If the conditions were not satisfied, the Commissioner's power to amend would not be enlivened and the amended assessment would be shown to be "excessive" (at 271). 56 Similarly, Kitto J said (at 274-275) that the expression "due making" in s 177(1) covered "all procedural steps, other than those (if any) which go to substantive liability and so contributing to the excessiveness of the assessment" (his Honour also cited George at 207). His Honour added (at 275): "It [the expression 'due making' is s 177(1)] therefore covers the step of forming the opinion that an avoidance of tax is due to fraud or evasion, and the step of thinking that particular alterations or additions are necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of tax. The correctness of these steps may be challenged on a reference to a board of review, for s. 177(1) seems clearly enough to be a provision relating only to evidence in the sense of material to be considered by judicial tribunals. (Doubtless it is for that reason that the words of exception in the sub-section, which refer to proceedings on appeal, make no mention of proceedings on a reference.)" His Honour referred to a statement by Isaacs ACJ in Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 276 that the legislation does not contemplate "a curial diving into the many official and confidential channels of information to which the commissioner may have recourse to protect the Treasury". 57 The case was neither a state of mind class of case (as to the enlivening of the power to amend) nor a Commissioner's determination class of case. The power to amend was enlivened by the fulfilment of two objective conditions. 58 Consistently with the joint judgment in McAndrew, the Taxpayers seek to establish non-satisfaction of the conditions that enliven of the powers to make the par (d) and subs (4) determinations. Only Kitto J in McAndrew addressed the question of the Commissioner's antecedent thought processes, and his view, as expressed above, was that by reason of s 177(1) they were not to be inquired into on an appeal to the court. 59 The Taxpayers rely on Giris Pty Ltd v Commissioner of Taxation (1969) 119 CLR 365 ("Giris"). Giris concerned the alternative bases of assessment of the income of trust estates provided for by ss 99 and 99A of the ITAA. Section 99A did not apply only if the Commissioner was "of the opinion that it would be unreasonable" that it should apply, in which case s 99 applied. The Commissioner assessed under s 99A. 60 In the High Court, Menzies J referred to a Full Court the question of the constitutional validity of relevantly, s 99A. All members of the Court held that s 99A was not constitutionally invalid as imposing an incontestable tax, because the taxpayer had access to the court to challenge the Commissioner's opinion. 61 Barwick CJ and Windeyer J indicated how this access might be availed of. The Chief Justice said that the Commissioner was under a duty to form an opinion and that the taxpayer was entitled to be informed of it, "and upon the taxpayer's request, the Commissioner should inform the taxpayer of the facts he has taken into account in reaching his conclusion" (p 373). His Honour added (at 374): "Thus the Commissioner must hold the opinion. The Court can decide whether or not he did hold it. In my opinion, the Court can require him to form it. It can determine whether the opinion is held bona fide and, although as I have said, the discretion is wide and though being really legislative in nature, what is relevant to its formation may range over an extremely wide spectrum of fact and consideration, the Court can determine whether or not the opinion was formed arbitrarily or fancifully, or upon facts or considerations which could not be regarded as relevant even to such a question as the unreasonableness of applying a taxing provision to a particular taxpayer in respect of the income of a particular year. In my opinion, it cannot properly be said that there is here an unchallengeable tax as that expression is used in reasons for decisions given in this Court." Windeyer J also observed (at 384) that the Commissioner could be asked by a taxpayer to state the grounds of his opinion, and, if asked, that he should do so. 62 Owen J approached the matter differently. His Honour seems to have accepted that the taxpayer might not be in a position to prove that the Commissioner had taken into consideration irrelevant matters (at 388-389). His Honour said that all that mattered for constitutional validity purposes, was that the taxpayer was not prevented from invoking the aid of the courts to determine whether his tax liability had been lawfully and correctly assessed. It did not matter for that purpose that it might be "difficult or impossible to exercise the right of appeal successfully because the facts necessary to success [could not] be established" (at 388). 63 Neither Kitto J at first instance nor the members of the Full Court referred to the relationship between ss 177(1) and 190(b) of the ITAA. 64 Giris was another state of mind case. Moreover, examinability of the Commissioner's opinion was, in substance, all that stood between a contestable tax and an incontestable one. On the assumption that there was no challenge to the Commissioner's assessment of the taxpayer's taxable income, the only question going to the excessiveness of his assessment of tax was his opinion that it was not unreasonable that the special rate of tax imposed pursuant to s 99A should apply. 65 In Duggan & Anor v Commissioner of Taxation (1972) 129 CLR 365 ("Duggan"), an appeal to the High Court against objection decisions, Stephen J set aside assessments under s 99A. The Commissioner had informed the taxpayer of the three grounds on which he had relied in thinking it not unreasonable for s 99A to apply. Stephen J held that while the grounds stated relevant considerations, they involved errors of fact, with the result that the Commissioner's opinion ceased to be of any legal effect. His Honour added (at 370): "[i]t is as if he has failed to reach any opinion or has reached it upon the basis of irrelevant facts". 66 Duggan is distinguishable from the present case on two grounds: first, it was a state of mind case, whereas the present case is a Commissioner's determination case; secondly, the Commissioner had positively stated the matters he had taken into account in arriving at his state of mind. 67 Like Avon Downs, Commissioner of Taxation v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 ("Brian Hatch") concerned the carry forward loss provisions. A necessary condition of deductibility under s 80A of the ITAA was the taxpayer company's satisfying the Commissioner concerning continuity of beneficial ownership – a state of mind case. At first instance, Walsh J upheld the taxpayer's appeal, applying the passage from Dixon J's judgment in Avon Downs. The only material before the Commissioner that was before his Honour was the taxpayer's return and a record of interview. In substance, Walsh J held that on this slim material, the Commissioner had not been entitled not to be satisfied of continuity of beneficial ownership. 68 In allowing an appeal, all members of the Full Court also referred to Dixon J in Avon Downs, but considered that the taxpayer had not established any of the grounds to which Dixon J had referred. In other words, so far as the evidence led by the taxpayer showed, the Commissioner had been entitled not to be satisfied. 69 Barwick CJ said (at 45) that the primary Judge had rightly regarded the Commissioner's lack of satisfaction as examinable on Avon Downs grounds, noting that the taxpayer had not taken the course of seeking from the Commissioner "an account of the material upon which he acted in rejecting the claim to the deduction" (at 45). The Chief Justice added that it was unsatisfactory that the Commissioner had not led evidence of any matter that he had before him. It is implicit, I think, that Barwick CJ thought that the taxpayer would have been entitled to particulars of the material that was before the Commissioner, and, perhaps, of the matters he had taken into account. 70 Menzies J likewise thought it "unfortunate that the basis of the Commissioner's not being satisfied of what was requisite for allowing the deduction claimed was not revealed" (at 52). His Honour noted that the taxpayer might properly have inquired of the Commissioner why he was not satisfied, and observed that "[s]uch an inquiry would no doubt have been answered" (ibid). 71 Windeyer J pointed out (at 56) that the question was not whether a discretion was properly exercised, but whether a fact existed: did the taxpayer in fact satisfy the Commissioner of beneficial ownership as prescribed by s 80A? 72 Owen J (with whom Windeyer J agreed) noted that the taxpayer had not taken various courses that had been open to it, one of which was to inquire of the Commissioner what matters he had considered in disallowing the deduction claimed, or why he had not been satisfied about the state of the shareholding at the relevant times (at 59-60). Again, it seems clear that in their Honours' view, the Commissioner would have been compellable to answer such inquiries. 73 In Brian Hatch, there are fairly clear obiter dicta that upon request, the taxpayer would have been entitled to compel the Commissioner to expose his reasons for his state of mind and to identify all the material that was before him when he disallowed the objection. Again, however, there was no reference to s 177(1) or s 190(b) of the ITAA. 74 In Master Butchers, the Commissioner contended that s 260 of the ITAA applied. The taxpayer requested that its objection be treated as an appeal to the Supreme Court of New South Wales pursuant to s 187 of that Act. The taxpayer requested particulars of the way in which the Commissioner contended s 260 applied, including particulars of the contract, agreement or arrangement relied on. The Commissioner, referring to s 190(b), replied to the effect that he reserved the right, at the conclusion of the evidence to advance such arguments based on s 260 as seemed appropriate. 75 Mahoney J held that the Court had inherent power to order further and better particulars where the requirements of justice so dictated, and cited Isaacs J in Northern Collieries at 740 (see [38] above). While his Honour accepted that in an appropriate case, the Court had power to order the Commissioner to provide further and better particulars "of a matter in issue in the proceeding" (at 356), he did not order the Commissioner to provide any of the particulars sought. For his Honour, the test to be applied was whether it appeared to the court, upon the material before it, that there was "a real and a substantial danger that the party seeking the particulars [would] be prejudiced by not knowing the nature of the case to the [sic – be] made out against him" (at 357). His Honour said that in a proper case, such a party may be entitled to an order that the other party furnish particulars of "the general nature and of the constituent facts, of the case to be relied upon or to some other order appropriate in the circumstances" (ibid). 76 Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation (1975) 132 CLR 535 ("Kolotex") was another case concerning the carry forward loss provisions. On the taxpayer's appeal to the High Court against the Commissioner's disallowance of its objection, the Commissioner's file was in evidence before the primary Judge, Mason J, who held that the Commissioner had been entitled to be "not satisfied" of continuity of beneficial ownership. 77 The Full Court affirmed his Honour's decision. The majority, Gibbs J and Stephen J, in separate judgments, thought that, although the course of reasoning the Commissioner had followed in reaching the conclusion that he was not satisfied involved errors of law, it was not open to the Court to regard the Commissioner as having had the required state of satisfaction that there was continuity of beneficial ownership. Indeed, their Honours thought that, for other reasons, on the law and the facts he could not properly have been satisfied that there was. On that basis, his state of non-satisfaction and the assessment must stand, and the appeal be dismissed. 78 Barwick CJ dissented. His Honour said (at 541) that the Commissioner should have recorded "his relevant state of mind and the facts or his view of the facts on which it is based", and that it should not be left to the Court to draw inferences as to whether he had considered a matter. The Chief Justice added, citing his own judgment in Giris,that the Commissioner "must expose to the taxpayer, particularly if so requested, both his state of mind at the relevant time and its basis" (at 541) (emphasis added). Like the majority and Windeyer J in Brian Hatch, his Honour saw the issue as being one of fact: was the Commissioner in fact satisfied at the point of assessment or not? His Honour disagreed with the majority, however, as to the Commissioner's right to support his state of dissatisfaction at the time by a course of reasoning devised later. 79 The Chief Justice also said (at 543) that the Commissioner's purported state of dissatisfaction would be negated if the taxpayer could prove the existence of relevant facts which ought to have satisfied him. His Honour thought it unacceptable that by not fully investigating or by being in ignorance of relevant facts, the Commissioner might be regarded as having been properly dissatisfied on such material as happened to be in his possession. 80 All Judges accepted that the Commissioner's state of non-satisfaction was reviewable on Avon Downs grounds. However, none of the judgments referred to the interaction between ss 177(1) or s 190(b) of the ITAA. 81 The operation of s 190(b) of the ITAA was explained by Mason J (dissenting) in Gauci v Commissioner of Taxation (1975) 135 CLR 81 at 89 as follows: "Section 190(b) of the Act imposed on the appellants the burden of proving that the assessments were excessive. The appellants relied on their evidence and that of Graham [their land agent who acted for them] in order to show that the assessments were excessive. Once that evidence was rejected, the appellants' case necessarily failed. The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s. 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail." The view expressed by Mason J in this passage has been endorsed: see McCormack v Commissioner of Taxation (1979) 143 CLR 284, esp at 302-304 (Gibbs J), 306 (Stephen J), 323 (Murphy J); Macmine Pty Ltd v Commissioner of Taxation (1979) 53 ALJR 362, esp at 371 (Stephen J), 381 (Murphy J); Commissioner of Taxation v Dalco (1990) 168 CLR 614 esp at 624-5 (Brennan J with whom Dawson, Gaudron and McHugh agreed, and Deane J generally agreed) ("Dalco"). Practice Note No 22, referred to at [37], is consistent with it. 82 A question of the Commissioner's liability to supply particulars arose in Bailey. The Commissioner had relied on the then general anti-avoidance rule in s 260 of the ITAA. The Court ordered him to provide particulars of the arrangement he alleged was rendered void against him by s 260. 83 Aickin J delivered the leading judgment (Barwick CJ, and Gibbs, Mason and Jacobs JJ expressed agreement with his Honour's reasons). His Honour said that the particulars sought were necessary so that the case would "proceed in an orderly and comprehensible manner" (at 227). His Honour thought that it was not in the interests of the proper administration of justice that on the hearing the appellant should have to "speculate about, and adduce evidence to negate, every possible kind of agreement or arrangement and avoidance which the imagination of his advisers can conjure up" (ibid). It did not matter that s 260 was "self-executing" and did not depend on the Commissioner's forming an opinion or reaching a state of satisfaction. With his Honour's approach may be contrasted that of Kitto J in George (see [47] above). 84 Barwick CJ referred to s 190(b). His Honour stated that if some step in the process of assessment lacked "the authority of the Act", the assessment would be shown to be excessive. His Honour continued (at 217): "I have elsewhere indicated, and now confirm, that, in my opinion, it is that process which must be exposed to the Court and with which the Court is exclusively concerned in an appeal by the taxpayer." The Chief Justice stated (ibid): "Quite clearly, the taxpayer is entitled to know the basis on which the assessment has been made". 85 In this case, again, Barwick CJ expressed himself in favour of disclosure and particularisation by the Commissioner. However, apparently his Honour contemplated only a brief particularisation of the assessment by the Commissioner. He said (at 218) that "a statement by the Commissioner in his adjustment sheet of the assessable income as determined by him would be a sufficient compliance with … [his] obligation in informing the taxpayer of the basis of the assessment". 86 A little confusingly at times, the judgments in Bailey contain references to both particulars of the assessment, and particulars of the Commissioner's case to be raised on the hearing. The adjustment sheet which accompanied the notice of assessment showed that the Commissioner had included the taxpayer's proportion ($77,235) of a distribution of $411,920 by Bailey Holdings Pty Ltd. In the course of correspondence, the Commissioner informed the taxpayer that he was relying on s 260 in including that amount. The particulars ordered to be provided were further particulars of the distribution and particulars of the arrangement said to be within s 260. Thus, the order was for further particulars of matters that the Commissioner had already positively asserted as having formed part of his assessment. 87 There is no suggestion that the Commissioner would not have been permitted to identify the arrangement concerned in alternative ways, or to amend later the particulars given of the arrangement, subject to any special order as to costs. 88 Bailey was neither a state of mind nor a Commissioner's determination class of case. I understand Bailey, like Master Butchers, as a case concerned with the practical running of a trial. It does not determine the question whether the Commissioner should be ordered to provide particulars, not of positive assertions made by him, but of his thought processes antecedent to a positive statutorily required step that he does assert – the making of a determination. 89 The judgments in Bailey do not refer to s 177(1), and make only passing reference to s 190(b). 90 FJ Bloemen Pty Ltd v Commissioner of Taxation (1981) 147 CLR 360("FJ Bloemen") comprised two appeals, heard together, from decisions of the New South Wales Court of Appeal: FJ Bloemen Pty Ltd v Commissioner of Taxation (unreported) and Dorney v Commissioner of Taxation and Simons v Commissioner of Taxation [1980] 1 NSWLR 404 ("Dorney and Simons"). The appeal against the Commissioner's objection decision in the FJ Bloemen proceeding was heard by Rath J: (1978) 36 FLR 191. However, by reason of the judgments which that Court had in meanwhile delivered in the Dorney and Simons appeals, the Court of Appeal dismissed the FJ Bloemen appeal. Thus, the reasons of the Court of Appeal are to be found in the Dorney and Simons appeals. 91 Taxpayers sought declarations that certain notices of assessment were void in that there had been no valid assessments. The taxpayers filed points of claim and, the Commissioner, points of defence. Certain questions raised by the points of defence were ordered to be separately determined and were referred to the Court of Appeal. The question that was pursued in that Court was whether the facts alleged by the taxpayers entitled them to the declaratory relief claimed. 92 Hutley and Glass JJA answered the separate questions, in so far as they related to the jurisdiction of the Supreme Court of New South Wales to grant the declaratory relief sought, but Mahoney JA, dissenting, held (at 414) that the questions were not appropriate to be answered. 93 Both Hutley JA and Mahoney JA made certain observations relevant to the scope of an appeal, then under Pt V of the ITAA, against an objection decision. Hutley JA said (at 411), referring to Duggan and George, that an appeal under Pt V was of "the most comprehensive kind", so that, for example, it could be shown on such an appeal that a belief by the Commissioner as to the existence of certain facts was unsound. 94 Mahoney JA stated (at 423): "(74) ... Ordinarily, whether an assessment was 'duly made' would be affected by, eg, whether the Commissioner took into account irrelevant matters, or failed to take into account relevant matters, in the exercise of a discretion affecting a component of the taxable income. But this is a matter which obviously is open for consideration on an appeal under Pt V; and the production of the notice of assessment cannot, as conclusive evidence that the assessment was 'duly made', prevent the taxpayer raising such a matter. Therefore, the suggestion was, the operation of s 177 must be read down. (75) Were the matter free from authority, this argument would, in my opinion, carry substantial force. But, as Mr Simos [senior counsel for the Commissioner] properly pointed out, the course of decision has been so to construe s 177 that such matters fall, not within 'the due making of the assessment' in the first part of the section, but within 'the amount and all the particulars of the assessment' in the second part of it. On that basis, the production of the notice of assessment is not conclusive on appeal against it: George [at 206, 207]; McAndrew [at 270, 271, 274, 275, 281, 282]." His Honour seems to have accepted the general proposition that in an appeal, any exercise of discretion by the Commissioner affecting a component of the taxable income is open to attack on judicial review grounds. 95 The question raised on the appeal to the High Court in FJ Bloemen was stated by Mason and Wilson JJ in their Honours' joint judgment to be whether the Supreme Court of New South Wales, in a statutory appeal under the ITAA or in a proceeding for declaratory relief, has jurisdiction to determine that an assessment of the taxpayer to income tax under s 166 of the ITAA is invalid, notwithstanding that a notice of assessment is produced by the Commissioner, and that the notice has the force of conclusive evidence (except in proceedings on appeal against the assessment) under s 177. Their Honours noted (at 365) that the case presented by the taxpayers had been that the Commissioner did not in truth make final assessments, but purported to make assessments which, if made at all, were only tentative or provisional, in neither case being authorised by the ITAA. In the FJ Bloemen case, the taxpayer also contended that the Commissioner had not made his assessments from the return or from any other information in his possession, in accordance with s 166, and that his real purpose was not to assess the amount of taxable income or of the tax payable thereon, but to cause a debt for tax to come into existence so that he could exercise his powers under s 218 of the ITAA (at 365-366). 96 In the High Court, the taxpayers argued that s 177(1) was enlivened only where something amounting to an "assessment" had been made, and that production of a notice of assessment did not preclude inquiry into whether that condition was satisfied. However, the Court unanimously rejected the submission. Mason and Wilson JJ, with whom Stephen J agreed, said that upon production of a notice of assessment that was final and definitive on its face, as distinct from provisional or tentative, the notice was conclusive evidence that an assessment was actually made, not merely conclusive evidence that an assessment, if made, was duly made (at 378). 97 The High Court judgments in FJ Bloemen do not assist greatly in the present appeals. 98 Part IVA was introduced into the ITAA by Act No 110 of 1981, replacing s 260 as the ITAA's general anti-avoidance rule. Div 13's more specific anti-avoidance provision was introduced the following year as complementary to Pt IVA (see [13] above). Part IVA and Div 13 are similarly structured. Unlike the former s 260, they both provide for the making of determinations by the Commissioner as conditions of liability to tax. None of the cases considered above were of such a Commissioner's determination class of case. 99 In Jackson v Commissioner of Taxation (1989) 87 ALR 461 ("Jackson"), the Commissioner made a determination pursuant to s 177F that the amounts of certain tax benefits should be included in the taxpayer's assessable incomes for two years. The taxpayer served on the Commissioner a notice to produce. Gummow J set aside certain questions for separate decision. 100 The first question was whether, on the hearing of an appeal against the disallowance of an objection against an assessment made consequent upon the making of a determination under s 177F(1), it is necessary or relevant for the court to inquire into the matters taken into account by the Commissioner, or his reasoning process, when he formed the view that a tax benefit had been obtained, or would have been obtained, but for the operation of s 177F, by a taxpayer in connection with a scheme to which Pt IVA applied. His Honour answered this first question "No". 101 This holding is instructive but not presently relevant. The obtaining of a tax benefit was one condition precedent to the arising of the Commissioner's power to make a determination under s 177F. Whether that condition was satisfied was to be decided by the application of objective criteria. The condition was thus akin to the present objective condition that the taxpayer supplied property under an international agreement, or that the amount of the consideration received or receivable by the taxpayer was less than the arm's length consideration. 102 While, no doubt, the Commissioner did think that that condition was satisfied, his opinion that it was not made an element of the liability to tax, and his reasons for being of that opinion were therefore irrelevant. Defective reasoning on his part would not advance the taxpayer's case if the condition was in fact satisfied. 103 The second separate question was related to the Commissioner's determination pursuant to s 177F, but not to the provision of particulars. The question was whether, in an appeal, documents are discoverable by the Commissioner or liable to be the subject of a subpoena or notice to produce addressed to the Commissioner, by reason only that the documents record or comprise, in substance, the submissions and internal memoranda prepared by the Commissioner's officers for consideration by the officer who made the determination under s 177F, and any decision or reasons for decision recorded by that officer, or the facts, matters or circumstances referred to in such submissions and memoranda. 104 Gummow J answered this second question "Yes" because like the Taxpayers in the present case, the taxpayer was attempting to show that the Commissioner's determinations were not authorised by the ITAA. 105 His Honour observed: (1) (at 469-470) that s 177F fell into "that category where an opinion formed by the Commissioner or a determination by him or his state of mind, is made a crucial element in the process of assessment", citing Bailey at 225 (Aickin J); (2) (at 470) that the assessment would be "excessive" if some step in the Commissioner's process of ascertainment of the amount of tax lacked the authority of the ITAA, citing Bailey at 217 (Barwick CJ); and (3) (at 470) that a determination by the Commissioner under s 177F would lack the authority of the ITAA if, inter alia, the Commissioner had regard to irrelevant considerations or omitted to have regard to relevant ones, citing Avon Downs at 360 (Dixon J). It will be noted that Gummow J did not distinguish between state of mind cases and Commissioner's determination cases: both belonged to the same "category" (at 469). Consistently, his Honour considered that a determination would lack the authority of the ITAA, just as a state of mind would do, if defective on judicial review grounds. 106 Gummow J's answer to the second question does not resolve the present question of the Taxpayers' entitlement to particulars. It does, however, suggest that those particulars are not to be refused on the broad ground relied on by the Commissioner that s 177(1) of the ITAA prevents the Taxpayers from attacking the Commissioner's par (d) and subs (4) determinations on judicial review grounds. While his Honour did not refer to s 177(1) of the ITAA, he did refer to s 190(b), and must have regarded a determination not authorised by the ITAA, whether because it failed to satisfy statutorily prescribed conditions or because of judicial review grounds, as lying outside s 177(1). (An appeal from his Honour's judgment, in so far as it answered a further separate question not presently relevant, was dismissed: Commissioner of Taxation v Jackson (1989) 27 FCR 1.) 107 The taxpayer was held entitled to particulars in Western Australian Capital Investment Co Ltd v Commissioner of Taxation (1989) 87 ALR 183 ("WA Capital"). The Commissioner had issued notices under the Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) ("the TUCTA Act"). Subsection s 18(1) of the TUCTA Act governed the giving of such a notice. The relevant condition which enlivened the Commissioner's power to give a notice was that the Commissioner was of the opinion that vendor's recoupment tax was likely to become payable by a person or persons in relation to ordinary company tax or undistributed profits tax, as the case may be. The taxpayer asserted, and the Commissioner denied, that the Commissioner did not, prior to the issue of the notice, address his mind to this matter. The taxpayer said that the inference that he did not do so was to be drawn from the Commissioner's letter that accompanied the notice, which did not refer to the Commissioner's being of the opinion that vendor's recoupment tax was likely to become payable. 108 The case can be classified as a state of mind case, albeit one in which the legislation did not operate to create a liability immediately upon the existence of the specified state of mind. Rather the existence of the state of mind was expressed as the condition which enlivened the Commissioner's power to give the notice. 109 The taxpayer sought particulars as to the making of the opinion, such as who made it, what facts he or she took into account, whether the facts of opinion were recorded in writing, and the authority of the person who formed the opinion. 110 The Commissioner submitted that particulars should not be ordered unless it appeared that he proposed to advance a positive case (at 189). He maintained that he was entitled to resist passively the taxpayer's attack on the opinion issue, in relation to which he did not intend to call evidence. He contended that the taxpayer bore the onus of showing either that the opinion had not been held, or that, although held, it was legally insupportable. This is in accordance with the alternative submission made by the Commissioner in the present case, the Commissioner's primary submission here being that, by reason of ss 175 and 177 of the ITAA, it is not open to the Taxpayers to attempt to prove that the making of the determinations was legally insupportable. 111 Pursuant to directions, the issues before the primary Judge were defined by the taxpayer's delivering points of claim and the Commissioner's delivering a response. The taxpayer asserted, and the Commissioner denied, that prior to the issue of the assessment, the Commissioner did not address his mind to the matter mentioned. 112 The primary Judge held that, in the absence of an affirmative statement by the Commissioner, the taxpayer was not entitled to particulars. However, the Full Court (Pincus, Gummow, Lee JJ) disagreed. Their Honours thought that Bailey, which they described as "the leading case on this subject", was "inconsistent with the general proposition that if the Commissioner intimates that he will not call any evidence about a matter necessary to the validity of his assessment, but will simply argue at the trial that the taxpayer had not displaced the assessment, particulars of its basis would ordinarily not be ordered" (at 191). They said: "[n]o trace of such a doctrine can be found in the reasons [in Bailey]". 113 Their Honours conceded, as the primary Judge had implied, that if the particulars sought were ordered, that might enable the taxpayer to win an otherwise unwinnable case. However, they thought that particulars should have been ordered, having regard to the fact that the holding of the opinion was itself made a condition of the validity of the assessment and that the covering letter had made further examination of that opinion a legitimate subject of inquiry. 114 The case can be distinguished from the present one on the ground that the ITAA does not make the Commissioner's state of mind on any matter a condition of the power to make either the par (d) determinations or the subs (4) determination, and, therefore, a condition of liability to tax. Whether that is a satisfactory ground of distinction is another matter (see [155] below). 115 The effect of ss 175 and 177(1) of the ITAA was considered by the High Court in Dalco. The Commissioner had assessed under ss 166 and 167 as in George. A majority in a Full Court of this Court had held that the taxpayer had shown that each assessment was excessive "in that it was not warranted by law" (Dalco v Commissioner of Taxation 88 (1988) ATC 4649 at 4666). Accordingly, this Court had remitted each matter to the Commissioner for reassessment. 116 The High Court reversed this Court's decision. Mason CJ, Deane, Gaudron and McHugh JJ agreed with Brennan J and Toohey J. Brennan J said (at 621) that a taxpayer's burden of proving that an assessment is excessive is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment. His Honour distinguished McAndrew as a case in which it was denied that the Commissioner had the power to make an amended assessment, for non-fulfilment of a condition precedent to the arising of that power. His Honour said (at 623): "[t]he amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous". 117 Brennan J and Toohey J (ibid) referred to George, in which the High Court stated that the burden lay on the taxpayer of "establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income" (George at 201). 118 I see the cases under ss 166 and 167 as distinguishable from cases under Pt IVA and Div 13 in one respect. In cases under Pt IVA and Div 13, the making of determinations by the Commissioner is a necessary element in the assessment. All other things being equal, if the taxpayer is permitted to establish and does establish that the determinations were not authorised by the ITAA, the real world will be left in place, the ITAA will work on it to establish the amount of the taxpayer's liability, and that amount will be less than the amount assessed. Under ss 166 and 167, however, in order to prove excessiveness, the taxpayer must prove affirmatively the correct amount of taxable income and of tax. If the taxpayer fails to do so, the possibility will always remain that the Commissioner's assessment is not excessive. 119 The distinction between state of mind cases and Commissioner's determination cases was referred to by the High Court in Commissioner of Taxation v Peabody (1994) 181 CLR 359 ("Peabody"), a Part IVA case. In a joint judgment, all seven members of the High Court stated (at 382): "Under s. 177F(1), the Commissioner's discretion to cancel a tax benefit extends only to a tax benefit obtained in connexion with a scheme to which Pt IVA applies. The existence of the discretion is not made to depend upon the Commissioner's opinion or satisfaction that there is a tax benefit or that, if there is a tax benefit, it is obtained in connexion with a Pt IVA scheme. Those are posited as objective facts [citing McAndrew at 276-277 (Kitto J), and referring to Avon Downs at 360 (Dixon J)]. The erroneous identification by the Commissioner of a scheme as being one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit with such a scheme will result in the wrongful exercise of the discretion conferred by s. 177F(1) only if in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind, however, may have that result – where, for example, it leads to the identification of the wrong taxpayer as the recipient of the tax benefit. But the question in every case must be whether a tax benefit which the Commissioner has purported to cancel is in fact a tax benefit obtained in connexion with a Pt IV A scheme and so susceptible to cancellation at the discretion of the Commissioner" (emphasis added). The "erroneous identification" and "misconception" to which their Honours referred might be compared to an erroneous identification by the Commissioner of the international agreement in question in the present case. The error may or may not vitiate the Commissioner's exercise of his discretion determining that subss 136AD(1) or (2) (as the case may be) is to apply in relation to the Taxpayers in relation to the supply of property. 120 Following the passage noted above, their Honours continued by noting that the Commissioner may be required to supply particulars of the scheme relied on (they cited Bailey), but was entitled to put his case in alternative ways (I suggest by identifying different schemes in the alternative), provided no undue embarrassment or surprise was caused to the taxpayer. Even after a scheme had been particularised, they noted (at 382-383), the position might be cured by amendment, provided the interests of justice allowed such a course (citing Bailey at 219). 121 Their Honours did not refer to the question of defects in the process of the making of the discretionary determination under s 177F (except in the one respect mentioned in the passage quoted above). 122 In Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 ("Richard Walter"), in substance the Commissioner made two determinations under s 177F on the same day in respect of the same tax benefit: one that the amount be included in the assessable income of Richard Walter Pty Ltd ("the taxpayer"); and the other that it be included in the assessable income of Morlea Professional Services Pty Ltd ("Morlea"). The taxpayer appealed to this Court against the disallowance of its objection. 123 The Deputy Commissioner sued to recover the unpaid tax in the Supreme Court of New South Wales. The taxpayer sought in this Court an injunction under s 39B of the Judiciary Act 1903 (Cth) ("the Judiciary Act") restraining him from proceeding with that action. In the s 39B proceeding, the Deputy Commissioner moved for dismissal on the ground that upon production of the notice of the assessment, s 177(1) of the ITAA had the effect that this Court lacked jurisdiction to grant relief under s 39B. The Commissioner's motion was removed to the High Court. 124 In the High Court, upon a stated case, there was reserved for consideration by the Full Court the question raised by the motion. 125 Six independent judgments were delivered. Little was said that specifically related to the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA: the focus of attention was on the production of a notice of assessment in a proceeding to recover tax, and on a responsive application for relief under s 39B of the Judiciary Act. 126 Several references were made to the principle enunciated by Dixon J in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 at 615, where, as is well known, his Honour said that a privative clause (cf s 177(1)) is given effect despite non-compliance with provisions governing the exercise of a power, provided always that the purported exercise (1) is a bona fide attempt to exercise the power, (2) relates to the subject matter of the legislation, and (3) is reasonably capable of being regarded as referable to the power ("the Hickman principle"). 127 It was held (Mason CJ, Dawson, Toohey and McHugh JJ) that s 177(1) of the ITAA does not purport to deprive this Court of the jurisdiction conferred on it by s 39B of the Judiciary Act; (Deane and Gaudron JJ) that s 39B overrides or amends s 177(1) to the extent that s 177(1) would make a notice of assessment conclusive evidence of the due making of an assessment in a proceeding under s 39B in which the applicant's case is that an assessment is invalid on the ground that it was not made bona fide; (Brennan J) that in proceedings other than reviews or appeals under Pt IVC of the TAA, ss 175 and 177(1) operate congruently and are to be given effect consistently with the Hickman principle. Brennan J said that in proceedings under Pt IVC, however, s 177(1) presents no obstacle to giving full effect to the general provisions of the ITAA governing the assessment of the taxpayer's taxable income and tax liability (at 198). 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax" (emphasis in original). His Honour referred to the distinction recognised in George, McAndrew, FJ Bloemen and Dalco, between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George, McAndrew, FJ Bloemen and Dalco, is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative régime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added). 129 Unguided by later authority, one might be excused for thinking that the effect of both passages from the judgment of Mason CJ is that it is open to a taxpayer on an appeal to this Court under Pt IVC of the TAA to challenge a determination under s 177F, and, I suggest it would follow, under s 136AD, on judicial review grounds. The reason is that the taxable income and tax are as high as they are only because the discretion to make a determination was exercised, and it is open to the taxpayer to show the excessiveness of the assessment by bringing down the determination. As will be seen, however, in the case to be discussed next, both the primary Judge and a Full Court of this Court understood Mason CJ differently. 130 In Binetter v Commissioner of Taxation (2003) 130 FCR 135, Hill J ordered the Commissioner to provide particulars. The Commissioner had made a determination under s 177F(1) of the ITAA. The proceeding was an appeal to this Court against the Commissioner's disallowance of the taxpayer's objection. 131 His Honour noted that it was not in dispute that the Court had power to order particulars where they were "necessary for the orderly disposition of the appeal" or to order discovery "where as a matter of discretion the court is of the view that it is appropriate that discovery be given" (at 137). 132 His Honour ordered that the Commissioner: (1) identify which of the determinations (under s 177F(1)) referred to in the Commissioner's SOFIC the Commissioner proposed to rely upon at the hearing; (2) identify which, if any, of the determinations the Commissioner proposed to rely upon in the alternative; (3) make available for inspection by the taxpayer documents that were before the person who made the determination or determinations, at the time or times of the making of it or them; (4) identify the steps comprising any scheme within the meaning of s 177A of the ITAA on which the Commissioner proposed to rely, indicating if any scheme was to be relied on in the alternative; (5) advise the applicant whether the Commissioner alleged that the Commissioner made a determination or determinations under s 177F(3) (for a "compensating adjustment"), and, if so, advise the name of the officer who made the determination, the date it was made and the terms of it; (6) produce for inspection the documents that were before the officer who made any determination which the Commissioner alleges was made, at the time it was made. 133 There is nothing in these orders that suggests that a taxpayer is entitled to particulars going to judicial review grounds as are sought in the present case, or is entitled to attack the making of a determination under s 177F(1) on judicial review grounds. 134 The Commissioner's discretionary power to make a determination under s 177F(1) is conditioned on the obtaining of a tax benefit by a taxpayer in connection with a scheme to which Pt IVA applies – objective criteria. His Honour thought it to be in the interests of justice that the Commissioner be required to specify the determination or determinations, and the scheme or schemes, on which he would rely on the hearing. His Honour recognised the possibility that the Commissioner might put his case in alternative ways and might seek to depart from the particulars supplied (if he were to take the latter course, the matter would have to be addressed if and when the occasion arose). 135 Of some relevance to the present case is the following statement made by his Honour (at 138-139): "A taxpayer may seek to challenge the making of such a determination on the basis that it is not authorised by the Act. Indeed, the objection to the present assessment includes such a ground. In such a case the court has a discretion to order that there be produced to the court, and subject to matters of privilege, to the taxpayer, the material which was before the decision-maker who made the determination at the time the decision maker did so. The court's power to make such an order was recognised by Gummow J when a Judge of this court and is discussed by his Honour in Jackson vCommissioner of Taxation (Cth) (1989) 20 ATR 611 at 621. I am of the view in the present case that discovery of such documents should be given and the applicant be permitted inspection of them but that discovery and inspection be limited to the material that was before the decision-maker." Hill J's reference to a determination's not being "authorised by the Act" is capable of being read as a reference to the non-satisfaction of the statutorily prescribed conditions of the power to make a determination under s 177F(1), or as a reference to judicial review grounds (or as both). The question is not resolved by the reference to the particular passage cited in Gummow J's judgment in Jackson that his Honour cited. In view of his Honour's judgment in the next case to be discussed, however, I would not understand him to have intended to include a reference to judicial review grounds. 136 In Commissioner of Taxation v Sleight (2004) 136 FCR 211, the taxpayer ("Mr Sleight") appealed to the Court against an adverse objection decision. He contended that a determination by the Commissioner under s 177F was invalid because the Commissioner's discretion had miscarried because there had been a failure to consider certain circumstances personal to Mr Sleight. 137 The primary Judge, RD Nicholson, held (Sleight v Commissioner of Taxation (2003) 53 ATR 667at (697)) that the making of a s 177F determination was "part of the process of making the assessment ... and not liable to challenge in this proceeding save in respect of matters going to substantive liability: Richard Walter at CLR 178, 203". His Honour held that it followed that any deficiency was validated by s 175. For this last proposition, his Honour referred to Richard Walter at 182, 187-8, 193-5, 196-7, 198-9, 209-211, 222-3 and 240-2. Finally, his Honour noted that no argument had been made that the case fell within "the conditions delineated in R v Hickman ". 138 A Full Court of this Court allowed the taxpayer's appeal, but on the present issue agreed with the conclusion of the primary Judge. 139 Hill J, whose eminence in this field is beyond question, delivered the leading judgment. His Honour held that a taxpayer cannot challenge a determination under s 177F on the ground that the Commissioner had erred in the making of the determination, for example, by failing to take into account a relevant consideration. His Honour was clear in his view that ss 175 and 177(1) produced this result. He referred to George at 207 (see [49] above) and Richard Walter at 184 (Mason CJ) (see [128] above). Of the latter passage, Hill J stated (at 237): "In other words, it is not open to a taxpayer to challenge an assessment under Pt IVA by showing some error in the making of that determination." His Honour found support in the fact that in Richard Walter their Honours held that the question in every case was whether there was a tax benefit obtained in connection with a Pt IVA scheme susceptible to cancellation by the Commissioner. Hill J added (at 238): "The question whether the Commissioner's discretion [sic – decision] as to whether there was a scheme to which Part IVA applied miscarried is thus not an issue in an appeal. Rather the issue will be, relevant to the present appeal, whether, the determination having been made, there was a scheme to which the provisions of Part IVA applied and if so, whether there was a tax benefit obtained in connection with that scheme. These will be matters of fact and the burden will lie on the taxpayer to show that objectively there was no scheme in connection with which the taxpayer obtained a tax benefit. If the taxpayer satisfies that burden he or she will have shown the assessment was excessive. That will not be shown by the taxpayer demonstrating that the person who made the determination in some way erred in making it so that the discretion conferred upon the Commissioner miscarried." 140 Carr J (at [242]) and Hely J (at [247]) agreed with Hill J on the present issue. 141 While Sleight related to a determination under s 177F(1), and the present case relates to determinations under s 136AD, there is no material difference in the statutory architecture that would render the Full Court's decision in Sleight inapplicable to the circumstances of the present case. Even if Sleight is not strictly binding on me, I think I should follow the approach that was taken by the primary Judge and all three Judges in the Full Court. 142 With respect, however, their Honours appear to have found the result to be more clearly dictated by the authorities, and, in particular, by Richard Walter, than I have found it to be. It is not clear to me why the passage from the judgment of Mason CJ in Richard Walter at 184 (set out in [128] above) establishes that in an appeal it is not open to the taxpayer to challenge the making of a determination on judicial review grounds. Moreover, there is no reference to the passage from the judgment of Mason CJ at 187-8 (also set out at [128] above) (the primary Judge, RD Nicholson J, did refer to that passage, but did not discuss it). There is no reference, either, to Gummow J's answer to the second separate question in Jackson(see [104]–[106] above) or, admittedly less relevantly, to WA Capital (see [107]–[114] above). 143 Hill J also said (at 237) that Richard Walter was consistent with what the High Court said in Peabody at 382 (the passage set out at [119] above). I respectfully agree that that passage in Peabody does favour the view that the only basis on which a determination by the Commissioner under s 177F (and, it would follow, determinations by him under s 136AD) could be challenged, even in an appeal, is the non-fulfilment of the statutorily specified conditions precedent to the enlivening of the discretion (and, I suggest, the Hickman principle). 144 In both ss 177F and 136AD, the ITAA specifies a number of conditions, and provides that if they are met, the Commissioner may make a determination, the effect of which is that the taxpayer's taxable income will be greater than it would otherwise have been. With one exception, all of the conditions are "objective" (the exception is the condition in s 136AD(1)(b) and s 136AD(2)(b) (and s 136AD(3)(b), not presently relevant) that the Commissioner is satisfied that the parties to the international agreement were not dealing at arm's length with each other). Neither section makes the existence of any particular state of mind of the Commissioner in relation to the making of the determination, a condition of the power to make it. Sleight should be regarded as establishing that the legislature has revealed an intention that even in an appeal under Pt IVC of the TAA, the Commissioner's reasoning that led him to make the determination is shielded by s 177(1) from attack on judicial review grounds as part of the "due making" of the assessment. Of course, the fact itself of the making of the determination goes to the substantive liability to tax: if a determination was not even purportedly made, or if a determination purportedly made was not authorised by the ITAA because the statutorily prescribed conditions of the enlivening of the power were not satisfied, or, I suggest, failed to satisfy the Hickman principle, the assessment will be shown to be excessive. 145 Consistently with Sleight, so understood, not only should the Commissioner not be ordered to provide particulars relating to judicial review grounds, but also he should not be required to give discovery, and the taxpayer should not be entitled to lead evidence or to cross-examine any witnesses called by the Commissioner, in each case in relation to such grounds. 146 Finally, in Syngenta,Gyles J dismissed a taxpayer's motion for discovery and particulars in circumstances substantially identical to those of the present case. For reasons given by his Honour, he delivered an ex tempore judgment. 147 Gyles J considered that an appeal to the Court assumed the existence of a valid assessment, and raised only the question whether the amount of it was excessive. This, in turn, his Honour said, involved only one issue: whether or not the actual consideration was an arm's length consideration as defined in s 136AA (see [8] above). His Honour remarked that this is an objective question, and that the Commissioner's opinion concerning it is not probative evidence in respect of it. I respectfully agree (cf Gummow J's treatment of the first separate question in Jackson). 148 It follows from his Honour's judgment that it is not open to a taxpayer to establish excessiveness by attacking purported par (d) and subs (4) determinations on judicial review grounds. 149 In relation to discovery, his Honour said (at [18]): "It follows of course that the discovery now sought from the Commissioner is pretty much entirely irrelevant, although I would not make a final judgment about discovery yet. That would depend upon what evidence the Commissioner calls and from whom and under what circumstances. It may be that once that is known, there will be a case for discovery or some other ancillary process. The Court will be involved in a fairly conventional valuation exercise." His Honour's reference to the discovery sought having become virtually entirely irrelevant is a reference to discovery based on judicial review grounds having become entirely irrelevant. 150 His Honour noted that while he regarded his view as consistent with Sleight, he did not regard Sleight as necessary to his conclusion. Resolution 151 It is difficult to reconcile all that is said in all of the authorities discussed above. 152 I am concerned with an appeal under Pt IVC of the TAA, that is to say, a proceeding in which production of the Commissioner's notice of assessment is not conclusive evidence as to the amount or particulars of the assessment, yet is conclusive as to the due making of the assessment in other respects. Cases such as FJ Bloemen and Richard Walter are distinguishable on their facts as not being in the nature of appeals. 153 The first reason why the Commissioner should not be required to supply the particulars sought relates to the Commissioner's primary and more general submission. I hold, in accordance with Peabody, Sleight and Syngenta, that the Commissioner should not be required to supply the particulars sought because, under the statutory provisions mentioned, it is not open to the Taxpayers to make the Commissioner's state of mind and reasoning processes leading to the making of the determinations under s 136AD an issue in the appeals. My reasoning in this respect is found largely in my discussion of Sleight and Syngenta at [136]–[150], and in particular, [144] above. 154 The position established by Peabody (see [119] above), Sleight (see [136]–[145] above), and Syngenta (see [146]–[150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs, George, Giris, Duggan, Brian Hatch, Kolotex, WA Capital, Dalco), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson, Peabody, Richard Walter, Binetter, Sleight, Syngenta). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer. 155 Since every determination must be immediately preceded by a state of mind, namely, an opinion that the determination should be made, it may be questioned whether the state of mind/Commissioner's determination distinction is an entirely satisfactory one. But it carries the day in a situation in which the distinction between procedural steps going to substantive liability (or excessiveness of the assessment) on the one hand, and other procedural steps, on the other hand, is itself a difficult one. 156 There are yet other cases which do not fall into the two classes mentioned (state of mind and Commissioner's determination). Examples are those arising under the former s 260 of the ITAA. I prefer not to attempt to describe this residual class in a comprehensive way, beyond saying that, subject to any indication of legislative intention, the Court retains a general discretionary power to order particulars where the justice of the case, and, in particular, the fairness of the hearing, so requires. 157 The second reason why the Commissioner should not be required to supply the particulars sought is that he has not asserted, and does not propose to assert, a positive case as to his state of mind or reasoning processes, of which, in accordance with the general principles governing the supply of particulars, particularisation might be appropriate (cf George, (Kitto J), discussed at [46] above). In the light of ss 136AD and 177(1) of the ITAA and 14ZZO of the TAA, the Commissioner is entitled not to assert any particular state of mind or reasoning process, and simply to rely on his assessment. 158 Although the Taxpayers are not at liberty to attempt to bring down the present determinations on judicial review grounds, the determinations remain vulnerable to attack in the appeals on the basis of both non-satisfaction of the statutory conditions of the Commissioner's power to make them, and the Hickman principle. CONCLUSION 159 For the above reasons, both motions will be dismissed with costs. I certify that the preceding one hundred and fifty-nine (159) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 20 September 2006 Counsel for Applicant in each proceeding: Mr JW Durack SC, Ms RL Seiden and Mr JH Momsen Solicitors for Applicant in each proceeding: Becwell Legal Services Pty Ltd Counsel for the Respondent in each proceeding: Ms MM Gordon SC and Mr HP Steward Solicitor for the Respondent in each proceeding: Australian Government Solicitor Date of Hearing: 29 June 2006 Date of Judgment: 20 September 2006