FEDERAL COURT OF AUSTRALIA Palassis v Commissioner of Taxation [2011] FCA 1305 Citation: Palassis v Commissioner of Taxation [2011] FCA 1305 Appeal from: Taxpayers v Federal Commissioner of Taxation [2011] AATA 33 Parties: STAN MICHAEL PALASSIS v THE COMMISSIONER OF TAXATION SCHEME MANAGERS PTY LTD v THE COMMISSIONER OF TAXATION SCHEME MANAGERS PTY LTD v THE COMMISSIONER OF TAXATION STAMFORDS ADVISORS AND CONSULTANTS PTY LTD v THE COMMISSIONER OF TAXATION STAMFORDS ADVISORS AND CONSULTANTS PTY LTD v THE COMMISSIONER OF TAXATION File numbers: WAD 46 of 2011 WAD 47 of 2011 WAD 48 of 2011 WAD 49 of 2011 WAD 50 of 2011 Judge: MCKERRACHER J Date of judgment: 15 November 2011 Catchwords: PRACTICE AND PROCEDURE – appeal from decision of Administrative Appeals Tribunal – application to strike out or dismiss grounds of appeal – whether question of law – power to strike out purported question of law from notice of appeal – distinction between question of law and finding of fact – Administrative Appeals Tribunal Act 1975 (Cth), s 44 – jurisdiction of the Court – whether appeal limited to question of law – appeal based on weight or existence of evidence before the Tribunal – considerations applicable to a summary striking out of grounds of appeal in contrast to determination at the hearing of the appeal Legislation: Administrative Appeals Tribunal Act 1975 (Cth) ss 33(1), 44(1) Corporations Act 2001 (Cth) s 1305 Federal Court of Australia Act 1976 (Cth) s 31A Income Tax Assessment Act 1936 (Cth) ss 109Y, 170, 226G Taxation Administration Act 1953 (Cth) ss 287-75, 284-85, 284-220, 14ZZK Federal Court Rules O 20 r 5 Federal Court Rules 2011 r 26.01 Cases cited: Australian Securities and Investments Commission v Rich (2005) 216 ALR 320 Australian Securities and Investments Commission v Rich and Another (2009) 236 FLR 1 Australian Telecommunications Corp v Lambroglou (1990) 12 AAR 515 Birdseye v Australian Securities & Investments Commission (2003) 38 AAR 55 Bittmann v Australian Securities and Investments Commission (No 2) [2006] FCA 1786 Briginshaw v Briginshaw (1938) 60 CLR 336 Brown v Repatriation Commission (1985) 7 FCR 302 Colby Corporation Pty Ltd v Federal Commissioner of Taxation (2008) 165 FCR 133 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407 Comcare v Davies (2008) 173 IR 294 Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Hoe v Manningham City Council [2011] VSC 37 Humphrey Earl Ltd. v Speechley (1951) 84 CLR 126 Hussain v Minister for Foreign Affairs (2008) 169 FCR 241 Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 Secretary, Department of Education, Employment and Workplace Relations v Ergin (2010) 54 AAR 60 SBLF v Minister for Immigration and Citizenship (2008) 103 ALD 566 Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 Smalley v Secretary, Department of Health and Ageing [2011] FCA 302 Taxpayers v Federal Commissioner of Taxation [2011] AATA 33 Date of hearing: 8 June 2011 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 100 Counsel for the Applicants: CS Williams Solicitor for the Applicants: Solomon Brothers Counsel for the Respondent: CH Thompson Solicitor for the Respondent: Australian Taxation Office Legal Services Branch IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 46 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAN MICHAEL PALASSIS Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraphs 2.5, 2.14, 2.15, 4.4, 4.13 and 4.14 in the notice of appeal be struck out. 2. The applicant have leave to amend its notice of appeal by substituting for all or any of the paragraphs struck out pursuant to order 1 above. 3. The amended notice of appeal be filed within 21 days. 4. The proceeding be listed for hearing on a date to be fixed. 5. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 47 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: SCHEME MANAGERS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraphs 2.5, 2.10, 4.4 and 4.9 of the notice of appeal be struck out. 2. The applicant have leave to amend its notice of appeal by substituting for all or any of the paragraphs struck out pursuant to order 1 above. 3. The amended notice of appeal be filed within 21 days. 4. The proceeding be listed for hearing on a date to be fixed. 5. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 48 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: SCHEME MANAGERS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraphs 2.5, 2.12, 4.4 and 4.10 in the notice of appeal be struck out. 2. The applicant have leave to amend its notice of appeal by substituting for all or any of the paragraphs struck out pursuant to order 1 above. 3. The amended notice of appeal be filed within 21 days. 4. The proceeding be listed for hearing on a date to be fixed. 5. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 49 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAMFORDS ADVISORS AND CONSULTANTS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraphs 2.5, 2.11, 4.4 and 4.9 in the notice of appeal be struck out. 2. The applicant have leave to amend its notice of appeal by substituting for all or any of the paragraphs struck out pursuant to order 1 above. 3. The amended notice of appeal be filed within 21 days. 4. The proceeding be listed for hearing on a date to be fixed. 5. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 50 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAMFORDS ADVISORS AND CONSULTANTS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Paragraphs 2.5, 2.8, 2.15, 4.4, 4.7, 4.14 in the notice of appeal be struck out. 2. The applicant have leave to amend its notice of appeal by substituting for all or any of the paragraphs struck out pursuant to order 1 above. 3. The amended notice of appeal be filed within 21 days. 4. The proceeding be listed for hearing on a date to be fixed. 5. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 46 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAN MICHAEL PALASSIS AND: THE COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 47 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: SCHEME MANAGERS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 48 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: SCHEME MANAGERS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 49 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAMFORDS ADVISORS AND CONSULTANTS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 50 of 2011 ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: STAMFORDS ADVISORS AND CONSULTANTS PTY LTD Applicant AND: THE COMMISSIONER OF TAXATION Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 15 NOVEMBER 2011 WHERE MADE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 The respondent (the Commissioner) seeks to strike out most of the grounds of 'appeal' advanced by the various applicants in five applications for review. The Commissioner pursues the strike out motions on the basis that the grounds do not raise questions of law within the meaning of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act). 2 The applicants include two associated companies, Scheme Managers Pty Ltd (Scheme Managers) and Stamfords Advisors and Consultants Pty Ltd (Stamfords), and their controlling director, Mr Palassis. 3 There are 31 grounds of appeal and 32 'questions of law' raised in various notices of appeal. The Commissioner argues that all but the first ground of appeal and the first two questions of law in each of the appeals should be struck out. 4 There is overlap between the matters raised in the various appeals. If the motion by the Commissioner is successful, it will limit the appeals to the grounds in relation to the requirements of natural justice in the circumstances of the case before the Administrative Appeals Tribunal (the Tribunal). 5 In my view, however, for the reasons which follow, only a small number of the impugned grounds should be struck out. BACKGROUND 6 At the Tribunal, the applicants sought review of a number of objection decisions made by the Commissioner in respect of Goods and Services Tax (GST), income tax and penalties (Taxpayer v Federal Commissioner of Taxation [2011] AATA 33). Over 50 objections were filed in total by the applicants. Some concessions were made by the Commissioner and the Tribunal varied the objection decisions only to the extent of the concessions. The applicants enjoyed only modest success with some variations being made to penalty in advance of the hearing. 7 Although the hearing of the applications had been listed for three days commencing on 3 May 2010, a further seven days were listed. The matters were listed for oral submissions on 15 December 2010, on which date the hearing concluded. Therefore, the Tribunal heard argument over nine days in relation to the grounds of review. At the hearing, the applicants were self-represented with Mr Palassis appearing on behalf of all applicants. M/s Thompson, who appears for the Commissioner in these proceedings, appeared for the Commissioner. TRIBUNAL REASONING 8 The Tribunal noted (at [2]) that the applicants were limited to the grounds stated in the taxation objection under s 14ZZK(a) of the Taxation Administration Act 1953 (Cth) (TAA). The onus of establishing that the assessment was excessive was borne by the applicants (s 14ZZK(b) TAA) and not necessarily discharged simply by showing an error on the part of the Commissioner in forming a judgment as to the amount of the assessment: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (at 621). Also, there was no onus on the Commissioner to show that any assessment was correctly made or supported by evidence: Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 per Mason (at 89). 9 The question for determination was not whether the amount assessed was wrong. Rather, the burden on the applicants was twofold, first to prove that each assessment was excessive and, secondly, to prove what the correct assessment should be. 10 The Tribunal noted (at [16]) that the proceedings were substantially delayed by the applicants' conduct which included numerous failures to comply with orders made as to the filing of documents and the provision of information to the Commissioner and the Tribunal, a failure to review documents prior to October 2010, a failure to obtain transcripts to prepare for re-examination, arranging an alternative appointment for one of the hearing dates despite having agreed to the listing of the proceedings on that date and various other causes for delay. 11 The Tribunal also noted (at [17]) that given the standing of Mr Palassis as a senior Perth businessman and his extensive experience as an accountant and business advisor, the approach of the applicants to the Tribunal was unacceptable and 'close to being contemptuous'. Notwithstanding that, the Tribunal granted the applicants considerable latitude due to their not having legal representation at the hearings. 12 The Tribunal was unimpressed with Mr Palassis as a witness. It described the fact (at [21]) that during the course of cross-examination he was frequently aggressive and rude to both counsel and the Tribunal. On numerous occasions, he refused to answer questions on issues that he did not regard as relevant, shouted at and attempted to engage in argument with counsel, failed to listen to questions and made various allegations and assertions of inappropriate behaviour by the Commissioner's audit officer. Such allegations were said to be unsupported by any other evidence and had not been put to that officer when he gave evidence. The Tribunal formed the view that Mr Palassis was in many respects 'deliberately obstructive'. 13 The Tribunal went on to observe (at [22]) that the attitude of Mr Palassis in the conduct of the proceedings appeared to reflect his general attitude to his taxation and financial affairs. This included his failure to comply with his taxation obligations, failure to keep proper records, use of Scheme Managers and Stamfords funds for private purposes and his reckless attitude to 'bouncing' cheques. The criticisms continued. In contrast, the Tribunal accepted the evidence of the Commissioner's audit officer. 14 The Tribunal noted (at [47]) that Stamfords was a company of which Mr Palassis was the sole director and shareholder. It was an accounting firm providing business advisory, audit, tax and accounting services to clients. It had some 30 employees in October 2000 but at other times appears to have had a higher number. Its clients included private clients, government agencies and other clients including the Western Australian Medical Board. 15 In the case of Stamfords, the applications involved GST payments for 24 periods from December 2000 to June 2004 and penalties and income tax assessments for the periods ending June 1999 to 2004. In relation to the GST payments, an audit of Stamfords between May 2004 and June 2006 determined that there was a shortfall of almost $3 million based on the Business Activity Statements (BAS). Penalties were imposed at the level of 75% for intentional disregard plus an uplift for 'hindrance' during the course of the audit totalling almost $1.75 million in all. 16 The Tribunal considered (at [51]) the sole issue to be the question of whether all the tax payable was paid by, what the applicants called, 'the Stamfords Group'. The difficulty with this description was that Mr Palassis was associated with 'dozens of companies' as a director in the relevant period. The Tribunal found that no attempt was made by the applicants to identify, with any precision, what 'the Stamfords Group' constituted and considered that the applicants had chosen to 'obfuscate' rather than clarify it. 17 In relation to the income tax assessments for Stamfords for the periods ending June 1999 to 2004, following an audit conducted between May 2004 and June 2006, amended assessments were issued. These increased the taxable income of Stamfords for each of the years of review. In August 2006 the amended assessments issued for tax was approximately $807,000 and penalties totalling approximately $221,000. The total unpaid income tax and penalties owed by Stamfords for years 1999 to 2004 was over $1.03 million. 18 The Tribunal noted (at [58]) that Mr Palassis accepted the analysis of superannuation default as set out in the audit reports for Stamfords and Scheme Managers. It was noted (at [59]) that Stamfords had not provided any evidence to dispute the analysis or suggest it was incorrect. The Tribunal further noted (at [67]) that there was no onus on the Commissioner to prove that the assessments were correct or to lead evidence to support its assessments. 19 Applications by Scheme Managers, a company also controlled by Mr Palassis, in relation to 16 quarters of GST in the period of September 2000 to June 2004 and income tax assessments for the periods ending June 2001 to 2004 were also heard. Scheme Managers was a 'special purpose vehicle' established to provide services to the Department of Housing and Works in the management of the Department's Key Start Home Loans Scheme (the Loans Scheme). The funds received by Scheme Managers were funds supplied to it by the State Government of Western Australia. Scheme Managers effectively operated as an agency of the State in its administration of the Loans Scheme. 20 In relation to the 16 quarters of GST, the Tribunal noted (at [71]) that Scheme Managers had a very poor lodgement history with the Commissioner. As a result of an audit, it was determined that there was a shortfall in BAS and penalties were imposed at the level of 75% for intentional disregard with an uplift for 'hindrance' during the course of the audit. The shortfall amounted to almost $1.87 million and penalties totalled approximately $1.682 million. The Tribunal noted (at [73]) that the applicants' sole written submission in respect of this application was that there was 'no shortfall on the global basis'. This was the same argument as those raised, and dealt with, in relation to 'grouping' of the liabilities of Stamfords. For the same reasons the Tribunal concluded that the argument was without substance and was rejected. 21 In relation to the income tax assessments of Scheme Managers, following the audit, in August 2006 the amended assessment for tax was issued for approximately $2.946 million and penalties of just over $2.651 million. Therefore, the total unpaid income tax and penalties owed by Scheme Managers for the years 2001 to 2004 was just under $5.6 million. The Tribunal noted (at [91]) that no substantive written submissions were made by the applicants in relation to this aspect of the challenges. 22 In the case of Mr Palassis, the applications involved income tax assessments for the period ending June 2002 to 2004 and specifically concerned the application of Div 7A of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) to deemed dividends in respect of Scheme Managers and another entity associated with Mr Palassis, namely, Chattock Holdings Pty Ltd (Chattock). At all material times, the sole shareholder of Chattock was Tableau Holdings Pty Ltd (Tableau), another entity associated with Mr Palassis. 23 In August 2006, amended assessments and penalty assessments were issued for tax of approximately $1.65 million and penalties of approximately $1.23 million. As at the time of the Tribunal hearing, the total unpaid tax and penalties owed by Mr Palassis for the years 2002 to 2004 was almost $2.9 million excluding interest. 24 At [108] and [109] of the Tribunal's reasons it rejected the evidence of Mr Palassis giving it 'no weight at all', saying: 108. During the course of his cross-examination on this issue, [Mr Palassis] said he would ascertain certain information that he could not then recall and would then deal with it in re-examination: ts215:6. He chose not to do so. The only inference that can be drawn is that [Mr Palassis] could not have led any evidence in support of his position on this point. 109. Furthermore, in light of [Mr Palassis'] history of the provision of multiple revisions of company accounts: T(2905-2910) 1:7, and his filing of multiple BAS and income tax returns for each of the entities, as well as the matters set out above, the Tribunal gives no weight at all to [Mr Palassis'] explanations as to his income tax affairs. Specifically, the Tribunal gives no weight at all to the construction of [Tableau's] financial statements which show payments in reduction of principal and interest because they are unaudited and there are no underlying records or source documents which evidence what is claimed in these financial statements. (emphasis added). 25 It may, at one level, appear to be a little overcautious not to categorise the questions of law or the grounds based on them as being within the objectionable sphere of 'dressed up' merits review. As the written arguments are formulated, that complaint may or may not be made good. But as the grounds at present are at least arguably formulated by reference to and dependent upon a question of law, I am not satisfied that at a summary level they can be characterised as merely merits review. THE RELEVANT PRINCIPLES 26 Against that background, it is necessary to consider the relevant principles in relation to the current motions by the Commissioner to strike out various grounds of the 'appeals' from the Tribunal's decision. 27 An appeal to this Court lies under s 44(1) of the AAT Act which provides that a party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding. 28 Before I examine these principles, I should observe that I am approaching these strike out applications on the basis that the questions of law must be shown, within the General Steel test (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125), as not being even arguably questions of law for s 44. It does not follow that a conclusion that something may be 'arguable' will amount to an ultimate acceptance, when the full appeal is presented, that the question of law raised is in reality, against the full background of argument, truly a question of law. The question posed in these strike out motions is whether the impugned grounds can not even arguably be said to be questions of law for the purposes of s 44. 29 As has been noted many times, the provision limits appeals to this Court to an appeal 'on a question of law' which is narrower than an appeal that 'involves a question of law': Hussain v Minister for Foreign Affairs (2008) 169 FCR 241 (at [31]). The requirement of a 'question of law' is not merely a qualifying condition to ground an appeal but is the 'sole subject matter' of the appeal: Brown v Repatriation Commission (1985) 7 FCR 302 (at 304). 30 It is well established that the role of the Court is not to conduct a merits review. It is not at liberty to find the facts on which a question of law might emerge. Therefore, merely asserting that the Tribunal erred in law in making a particular finding does not elevate a factual finding to a question of law: Australian Telecommunications Corp v Lambroglou (1990) 12 AAR 515, see also Secretary, Department of Education, Employment and Workplace Relation v Ergin (2010) 54 AAR 60. Further, an assertion that the findings are against the weight of the evidence is not a question of law: Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407 (at 410-411). 31 It has also been held that a mixed question of law and fact is not a question of law within the meaning of s 44(1) of the AAT Act: Hussain (at [32]) relying on Birdseye v Australian Securities & Investments Commission (2003) 38 AAR 55 (at [18]). No question of law arises in circumstances where the Tribunal did not resolve an issue and did not make findings of fact in relation to an issue which had not been the subject of any contention advanced before it for resolution: Comcare v Davies (2008) 173 IR 294 (at [21]). 32 However, the decisions referred to above establishing these points of principle do not all deal with interlocutory strike out motions. The power for summary interlocutory dismissal on this ground has been expressed in various ways. 33 In Bittmann v Australian Securities and Investments Commission (No 2) [2006] FCA Kenny J said (at [12]): … In McGregor v Chief Executive Officer of Centrelink [2000] FCA 701 at [17], Spender J expressed the view that there was power under O 20 r 2 of the Rules to dismiss an appeal purportedly under s 44 of the AAT Act on the basis that it stated no question of law and thus disclosed no reasonable cause of action: see also Zoia v Administrative Appeals Tribunal [2003] FCA 303 at [6] per Carr J and Barghouthi v ING Custodians Pty Ltd [2003] FCA 1272 at [15] per Allsop J. In Lambroglou, Ryan J expressed the view (at 519) that O 53 r 15(1) of the Rules conferred a power sufficiently broad to allow the Court to strike out the whole or part of an appeal under s 44 of the AAT Act. Whatever the correct analysis of the Rules, s 23 of the Federal Court Act confers broad power on the Court to make orders of such kinds as it thinks appropriate. I accept that, pursuant to s 23, the Court has power to strike out a notice of appeal in reliance on s 44 where the notice does not state a question of law: compare also Lambroglou at 519-520. 34 A recent decision which did examine the position from the perspective of an interlocutory strike out motion was Smalley v Secretary, Department of Health and Ageing [2011] FCA 302 where Dodds-Streeton J cited provisions of the AAT Act and a number of the authorities referred to above. The case dealt with a review of a compensation payment and the method of its computation. It was submitted that not only was there a lack of jurisdiction but also that the appeal had no reasonable prospect of success. It was argued that judgment should be given in favour of the respondent pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (FCA). Alternatively, it should be dismissed as frivolous, vexatious or an abuse of process pursuant to O 20 r 5 of the Federal Court Rules or r 26.01 of the Federal Court Rules 2011. 35 In Smalley, Dodds-Streeton J noted (at [26]) the approach taken by Pagone J in Hoe v Manningham City Council [2011] VSC 37 and referred to the objectives underpinning the need to identify an error of law to enliven and to form the basis of the Court's jurisdiction to hear an appeal under the Victorian Civil and Administrative Tribunal (VCAT) Act. Pagone J stated at [4] (footnotes omitted): 4 The need to identify precisely an error of law is important also to identify and define the subject matter and ambit of any appeal to this Court and thus to ensure that the statutory appellate jurisdiction of this Court is lawfully engaged, defined and circumscribed. In Osland v Secretary to the Dept of Justice French CJ, Gummow and Bell JJ emphasised the need for precision in definition of the question of law upon which an appeal under s 148 of the VCAT Act was brought saying [at [21]]: There is a need for better definition of the questions of law upon an appeal to the Court of Appeal under s 148 of the VCAT Act than appeared in these proceedings. The questions of law are not to be distilled from the grounds of appeal. What Gummow J said of s 44 of the Commonwealth AAT Act in TNT Skypak International (Aust) Pty Ltd v FCT is true also of s 148: … The existence of a question of law is … not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself. These observations emphasise the need for precision in articulating the question of law in an appeal and emphasise a fundamental reason for the need for that precision. The Court's jurisdiction to hear an appeal depends upon there being a question of law in issue but it is only the question of law which the Court is permitted by the statutory appeals jurisdiction to consider. The fact that a question of law may have been involved in a decision does not permit the whole of the decision to be agitated upon an appeal. The question of law is the trigger for an appeal but is also the entire subject matter of the appeal and for both purposes it is essential that the question of law said to have been erroneously decided is identified exactly. 36 The present questions of law and grounds of appeal have been drawn with an eye to the requirements of s 44(1) of the AAT Act and the considerable jurisprudence in relation to that section. On the other hand, at the same time they do invite an excursion into the detail of the evidence. 37 To justify that excursion, the applicants rely upon several principles. The applicants rely upon the proposition that a tribunal that makes a finding of fact or draws an inference when there is no evidence at all which is capable of supporting the finding or inference, makes an error of law: Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 per Hayne, Hayden, Crennan and Kiefel JJ (at [91]). 38 The applicants also argue that if there is only one conclusion that is open or reasonably open on evidence adduced before the Tribunal, it is an error of law for the Tribunal not to reach that conclusion: Humphrey Earl Ltd. v Speechley (1951) 84 CLR 126 per Dixon J with whom McTiernan, Williams, Webb and Fullagar JJ agreed (at 133-135). There, Dixon J held: In my opinion the conclusion was not open and the decision in favour of the respondent cannot be supported. … … The point in such a case as this is not whether it is reasonable to eat lunch or reasonable to want fish for lunch. The question is whether the course adopted by the employee was reasonably incidental to the performance on that occasion of his duties … Such questions must involve matters of degree, but it does not follow that their decision is always a question of fact open in point of law to a finding either way. Even in a matter of degree the fact may show so great a departure from what is an allowable incident of the employment that it is not open to a court to make any but one finding. … For these reasons the finding of the facts of this case that the respondent was injured in the course of his employment was not reasonably open to the commission. The appeal should be allowed … the question in the case stated should be answered that the commission did err in holding that the injury sustained by the application (the respondent in this appeal) was sustained in the course of his employment. … (emphasis added) 39 The applicants contend that although such a question of law of this nature (going to evidence) involves some factual issues, that does not detract from it being a question of law: Colby Corporation Pty Ltd v Federal Commissioner of Taxation (2008) 165 FCR 133 per Branson and Stone JJ and Jessop J agreeing (at [16]). Their Honours said: Nothing in Birdseye 38 AAR 55 is intended to suggest that a question of law within the meaning of s 44(1) cannot contain any reference to factual matters. Whether primary facts constitute evidence of an ultimate fact is uncontroversially a question of law within the meaning of s 44(1). An example would be whether the primary facts constitute evidence of compliance with a statutory test. It is also uncontroversial that, except in the limited circumstances identified by s 44(7), the legislature intended the Tribunal to be the final arbiter of fact and the Federal Court not to be permitted to make factual findings on an appeal under s 44(1). For this reason, an appeal under s 44(1) is not a vehicle whereby a party may have the Federal Court review the Tribunal's findings of fact. Unless the answer to the question of law, which is the subject-matter of the s 44(1) appeal, reveals that a factual finding of the Tribunal is affected by error (in which case the matter will ordinarily be remitted to the Tribunal), an appeal under s 44(1) must proceed on the basis of the findings of fact made by the Tribunal. (emphasis added) 40 The final principle of importance in relation to these grounds of appeal is the notion that fact finding is a process that involves consideration of all probative material placed before the fact finder. The applicants rely upon the observations of Gray J in SBLF v Minister for Immigration and Citizenship (2008) 103 ALD 566 (at [38]) where his Honour said: … It is not open to the fact-finder to choose not to rely on probative material properly before him or her. There is a clear distinction between making a finding of fact inconsistent with some of the material of a probative nature, after consideration of the whole of the material, and choosing not to rely on some of the material at all. In many, if not most, cases, it will be inevitable that the fact-finder will make findings inconsistent with some of the probative material before him or her. That is the natural result of the process, which involves determining what to accept and what to reject. That process is altogether different from arbitrary rejection of probative material by labelling it as without probative value, or weight, altogether, when it has probative value. That is what the Tribunal did in this case. (emphasis added) 41 With those principles in mind, I turn now to the strike out grounds. CONSIDERATION 42 As the Commissioner seeks to strike out all but the first two questions of law and first ground of appeal in each application, it is necessary to set them out. As mentioned above, similar grounds are raised in each 'appeal'. 43 The Commissioner noted that many of the questions, as currently drafted, are not questions of law and do not 'elucidate what the real issue is'. However, the Commissioner was prepared to accept that a number of grounds, if properly formulated, could raise a question of law. Particular reference was made to questions alleging no evidence to support a particular finding or no evidence on a particular issue. Appeal WAD 46 of 2011, Palassis Income Tax 44 The following questions of law are raised in this appeal: 2.1 Was the Tribunal required to observe the requirements of natural justice? 2.2 If so, did the requirements of natural justice that the Tribunal was required to observe extend to: 2.2.1 entitling each party to effectively cross-examine witnesses called by the other party; and 2.2.2 if so, entitling the party to put to those witnesses documents which had not been included in any hearing bundle and then to tender those documents? 2.3 Was there any evidence from which the Tribunal could have concluded that [Scheme Managers] undertook activities as agent for [Stamfords]? 2.4 Could the Tribunal have reasonably found on the material before it that Scheme Managers did not act as agent for Stamfords? 2.5 Can it be inferred from a failure to provide evidence to the [Commissioner] prior to the commencement of proceedings that no evidence exists? 2.6 Does a person derive taxable income when acting solely as agent for another? 2.7 Did any payments made by Scheme Managers constitute loans to shareholders or associates of any shareholders, at all or within the meaning of s. 109D of the [ITAA 1936]? 2.8 Did any payments made by Scheme Managers properly deemed to be dividends pursuant to s. 109D of the [ITAA 1936]? 2.8.1 exceed the distributable surplus of Scheme Managers pursuant to s. 109Y of the [ITAA 1936]? 2.8.2 constitute exempt payments pursuant to s. 109K of the [ITAA 1936]? 2.9 Did [Mr Palassis] receive the benefit of any payments made by Scheme Managers, for the purpose of s. 109C of the [ITAA 1936]? 2.10 Did any payments made by [Chattock] constitute loans to shareholders, or associates of any shareholders, at all or within the meaning of s. 109D of the [ITAA 1936]? 2.11 Did any payments made by Chattock to [Tableau]: 2.11.1 not constitute dividends pursuant to ss. 109C or 109D of the [ITAA 1936]? 2.11.2 meet the criteria of minimum interest rate and maximum term in accordance with s. 109N of the [ITAA 1936]? 2.12 Did any payments made by Tableau to [Mr Palassis] meet the criteria of minimum interest rate and maximum term in accordance with s. 109N of the [ITAA 1936]? 2.13 Did the advancing of any funds from Chattock to Tableau and then from Tableau to [Mr Palassis] constitute part of arrangement involving the advancing of funds from Chattock to [Mr Palassis] to which s. 109T of the [ITAA 1936] applied? 2.14 Can it be inferred that a document was not executed on or about the date it bears in the absence of evidence to the contrary, alternatively any contention of sham? 2.15 Can the Tribunal accord no weight to books kept by a body corporate under a requirement of the Corporations Act 2001? 2.16 Was the [Commissioner] authorised by s. 170 of the [ITAA 1936] to issue the assessments the subject of the Tribunal's decision? 45 The Commissioner argues that each of the questions posed in 2.3 and 2.4 (the agency questions), 2.5 (the evidence question), 2.7-2.13 (the loan questions) and 2.16 are questions of fact. The Commissioner contends that while in an appropriate case question 2.6 might be a question of law, in this appeal it is not. 46 This appeal (WAD 46 of 2011) relates to Mr Palassis personally in relation to his income tax assessments in the period June 2002 to June 2004 and specifically the question of whether Div 7A ITAA 1936 applied. The Commissioner contends that no issue of agency arises as between Scheme Managers and Stamfords in relation to the personal income tax of Mr Palassis. 47 The applicants submit that the findings as to the agency questions were made when there was no evidence capable of supporting the findings or only one reasonable conclusion was open on the evidence. 48 The Tribunal noted on this topic (at [77]-[78]) that: [77] It appears that the first time any legal advice as to this alleged agency arrangement was sought was in December 2004: ts 143:22, there is no evidence that any prior advice was sought. Furthermore, Norton Smailes advised [Mr Palassis] that if the [Commissioner] did not accept his explanation of the position (as in fact happened), he should provide certain additional evidence. That step was never undertaken by the applicants: ts 146-150. The Tribunal infers that there was no such evidence. [78] The advice of Norton Smailes clearly hinges on what they were told by [Mr Palassis]. In light of the Tribunal's findings as to the general unreliability of his evidence and in light of what the audit found was the actual position in respect to payments made by the Department of Housing and Works to both [Scheme Managers] and [Stamfords], along with the total failure of the applicants to follow the advice provided to them as to what evidence would be necessary to support their position, the very basis of the Norton Smailes advice is not proved. The agency contention is rejected by the Tribunal. 49 In oral argument, the Commissioner accepted that although the question as to the conclusion of whether or not one party was an agent for another was a question of law, it was one which was 'underpinned by the factual findings'. Therefore, the applicants would be seeking to review the evidence and for the Court to 'come to a different view on the facts; a different view on the evidence' to determine the agency questions. Hence, the agency questions did not raise questions of law. 50 Beyond the legal argument as illustrated by the evidence, that is a course which would not be open in my view. However, it does not appear to me that the question of law and the ground turning on it can be shut out at this stage. 51 In relation to the evidence question, the submissions as to the agency questions were repeated. The applicants argued that the inference was not open to the Tribunal. Therefore, the evidence question raised a question of law. 52 Although there is merit in the Commissioner's submission, I treat question 2.3 and question 2.4 (or, rather, the grounds flowing from them), as being that there was no evidence whatsoever on which the conclusion as to agency could have been reached by the Tribunal. It would be difficult to rule, at this summary stage, that this could not arguably constitute a question of law. Whether the assertion is correct is for later determination. 53 However, question 2.5 (ground 4.4) is in a different situation. The Tribunal was entitled to take into account, as part of the very extensive opportunity that it had, the totality of factors including the issue raised by question 2.5. It was open to the Tribunal to consider that issue together with the other evidence in reaching its conclusion. In my view, question 2.5 is unarguable. It will be struck out. 54 As to questions 2.6 to 2.13 (grounds 4.5 to 4.12), the applicants argue that these questions raise the issue of whether facts fall within the terms of a particular statute, which is ordinarily a question of law: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 per Neaves, French and Cooper JJ (at 287-289). The proceedings before the Tribunal involved the application of Div 7A ITAA 1936 as discussed above. In particular, Mr Palassis challenged the assessment by the Commissioner based on deemed dividends having been paid to him by Scheme Managers. Whether Scheme Managers derived income in its capacity as agent for Stamfords is said also to be relevant to, if nothing else, the calculation of Scheme Managers' net assets for the purpose of calculating Scheme Managers' distributable surplus in accordance with s 109Y of the ITAA 1936. 55 In my view, question 2.6 is a question of law. Question 2.7 may raise a question of law as may questions 2.8, 2.9, 2.10, 2.11, 2.12 and 2.13. 56 Determining the ground of appeal on the question of law does not require the facts to be ignored or divorced from the issue. The merits are not open to review but whether the facts as found (or the only facts open to be found) have a legal characterisation, is a question of law. In Colby (Branson and Stone JJ with Jessop J agreeing) (at [16]) it was noted that nothing in Birdseye was intended to suggest that a question of law within the meaning of s 44(1) cannot contain any reference to factual matters. Whether primary facts constitute evidence of an ultimate fact may be a question of law within the meaning of s 44(1). An obvious example would be whether the primary facts constitute evidence of compliance with a statutory test. Although factual questions follow in the formulation of the grounds in these 'appeals' those questions cannot arise unless there is first a question of law. I do not consider that the complaint reaches either the General Steel test or the s 31A FCA test. These questions will not be struck out. This is not to invite a reconsideration of the merits but I consider that it is arguable that there is a s 44 question of law foundation for jurisdiction. 57 In relation to question 2.14 (ground 4.13), the Commissioner asserts that it is a challenge to a factual finding. The Tribunal reached the following conclusions (at [103]-[105]): 103. [Mr Palassis] relies on two loan agreements, each dated purportedly 1 March 2005 for the 2004 year: ExA5 @[12] and tab 5 & ExA5 @[14] and tab 7. These loan agreements were not provided to the [Commissioner] during the course of its audit or the objection phase: T(2905-2910) 1:7. There were undated loan agreements between [Scheme Managers and Stamfords] provided during the course of the audit, being relevantly, at T(1966-69) 2:375, which was first provided by facsimile to the [Commissioner] on 28 June 2005 T(1966-69) 2:318 and despite request, no further information was ever provided as to when the loan agreements were signed: T(1966-69) 2:320-324. 104. The evidence of [Mr Palassis] in respect to the loan agreement purportedly dated 1 March 2005 between [Chattock] and [Tableau] is in ExA5 @[12]: The remainder of the funds distributed to me during the year ended 30 June 2004 were advanced by [Chattock] to [Tableau] as its sole shareholder in accordance with a loan agreement entered into between the parties. Exhibited at tab 5 of the bundle of documents annexed to this witness statement is a copy of the loan agreement entered into between [Chattock] and [Tableau] dated 1 March 2005. 105. This evidence fails to descend to particulars regarding the circumstances of the execution of the loan agreement. Critically there is no evidence from [Mr Palassis] that the parties signed the document prior to lodgement of his 2004 taxation return, nor is there any corroborative evidence from [Mr Palassis'] brother or the witnesses to their signatures, nor is there evidence of the company records of either party supporting the date of execution of the agreement. The Tribunal infers from these failures that this loan agreement was not signed on 1 March 2005, but on some later date and merely dated 1 March 2005. (emphasis added) 58 The Commissioner says it is plain from this that the Tribunal has concluded that the documents were 'a sham' and needs to be understood in the context of the onus on the applicants in the Tribunal, as reflected in the passage and authorities discussed above. 59 To this complaint, the applicants say that question 2.14 is 'plainly a question of law'. Mr Palassis gave evidence of the existence of a loan agreement pursuant to which funds were distributed and annexed a copy of the loan agreement to his witness statement. However, the Tribunal, despite there having been no contrary evidence or at least not referred to in its reasons, found that the loan agreement had been executed at a later date and backdated to 1 March 2005. The applicants argue that in the absence of any contention or finding of 'a sham', which would have required the Tribunal to be satisfied to the Briginshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336), the only finding available to the Tribunal was that the loan agreement was executed on or about the date it bore and governed the legal rights and obligations of the parties to it: Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 per Lockhart J (at 453-454 and 461). 60 I cannot accept this submission for the applicants. It appears to me that in the plainest and broadest of terms the Tribunal rejected any explanation by Mr Palassis in relation to his taxations affairs. That includes his evidence concerning the loan agreement and his reliance upon it. The plain language adopted by the Tribunal above falls clearly within the area of this credit finding. Having regard to the onus the applicants bore in the Tribunal, this is an attempt at merits review. It is not a circumstance where a conclusion favourable to Mr Palassis was the only conclusion available on the evidence. The Tribunal had the benefit of hearing the cross-examination of Mr Palassis at length and reached a conclusion demonstrably adverse to him in relation to the onus which he bore. This question and ground will be struck out. 61 In relation to question 2.15 (ground 4.14), the Tribunal reached the following finding (at [109]): Furthermore, in light of [Mr Palassis'] history of the provision of multiple revisions of company accounts: T(2905-2910) 1:7, and his filing of multiple BAS and income tax returns for each of the entities, as well as the matters set out above, the Tribunal gives no weight at all to [Mr Palassis'] explanations as to his income tax affairs. Specifically, the Tribunal gives no weight at all to the construction of [Tableaus'] financial statements which show payments in reduction of principal and interest because they are unaudited and there are no underlying records or source documents which evidence what is claimed in these financial statements. (emphasis added) 62 Consistent with the findings at [109], the Tribunal concluded that no weight could be accorded to the unaudited financial statements of a related entity of the applicants, Tableau. 63 The Commissioner contends that the issue raised is in relation to the legal effect of s 1305 of the Corporations Act 2001 (Cth) (CA). Section 1305 assists a party seeking to rely on the books of a company, as explained in Australian Securities and Investments Commission v Rich and Another (2009) 236 FLR 1 (at [389]-[395]) and Australian Securities and Investments Commission v Rich (2005) 216 ALR 320 (at [225]), by excluding the need to call witnesses to formally prove the documents. (In any event, there are a variety of evidentiary provisions which achieve the same result including s 33(1) of the AAT Act.) The reality is, according to the Commissioner, that this ground of appeal is simply seeking to challenge the Tribunal's finding as to the proper weight to be afforded to the unaudited financial statements in all the circumstances of this particular case. This is not a question of law. 64 The applicants emphasise that the real complaint raised, concerning this issue, is that it was impermissible for the Tribunal to give 'no weight at all' to the books of the company as it did in [109]. The applicants argue that if there was evidence that contradicted the matters recorded in the books of Tableau or if there was some inherent quality or characteristic of those books which showed that they may be unreliable (for example, if they were expressed as 'drafts' or contained internal inconsistencies), the position may be different. In this instance, all the Tribunal relied upon, according to the applicants, was the fact that the books were unaudited and no underlying records or source documents were tendered. The entitlement of the Tribunal to give no weight at all to books of a company simply for those reasons, is said to raise a question of law involving a proper construction of s 1305 CA. 65 It seems to me that this is a highly optimistic ground given the serious and generally adverse finding reached by the Tribunal in relation to Mr Palassis which appears to infect the totality of the evidence. It is not a circumstance where a conclusion favourable to Mr Palassis was the only conclusion available on the evidence. The Tribunal had the benefit of hearing the cross-examination of Mr Palassis at length and reached a conclusion demonstrably adverse to him in relation to the onus which he bore. This question and ground will be struck out. 66 Question 2.16 (ground 4.15) asks whether the Commissioner was authorised by s 170 ITAA 1936 to issue the assessments that were the subject of the Tribunal's decision. The Commissioner says that in the context of this case, that is not a question of law. It seeks to challenge the factual findings at [97] and [100] of the Tribunal's reasons which, in turn, needs to be read in the context of the findings at [48], [55], [69] and [80] as to the chronology of events. These include the audit which commenced in May 2004, the notice of the outcome of which was provided in June 2006 and the amended assessments which were issued in August 2006. 67 That chronology is detailed in the following paragraphs: 48. An audit of [Stamfords] commenced in May 2004 and concluded in June 2006. The [Commissioner] had determined that [Stamfords] was habitually late in meeting its lodgement obligations and that there were frequent instances of BAS lodged prior to the commencement of the audit having no figures on the labels: ExR1: [4] @ 2, 3, 39. … 55. Following the audit of [Stamfords] conducted between May 2004 and June 2006, amended assessments were issued which increased the taxable income of [Stamfords] for each of the years of review. … 69. The audit of [Scheme Managers] commenced in May 2004 and concluded in June 2006. Numerous amended BAS were lodged after the commencement of the audit and are set out in a table at page 52-53 of the audit report at tab 12 Ex A3. Information obtained during the audit indicated that the original BAS as lodged and the amended BAS were incorrect: T(1964)1:4, which was explained in cross-examination by Mr Bei, being that he obtained information from the Department of Housing and Works which identified payments made to [Scheme Managers] and this formed the basis of the decisions made in the audit report: ts 450: 45, 452:30, 454:30, T(1966-1969)2:314-1317. … 80. Following the audit of [Scheme Managers] conducted between May 2004 and June 2006, amended assessments were issued which increased the taxable income of [Scheme Managers] for each of the years of review. … 97. [Mr Palassis] lodged his first income tax return: 97.1 for the 2002 year, on 25 March 2004: T(2905-2910)1:34-41; 97.2 for the 2003 year, on 1 April 2004: T(2905-2910)1: 43-50; and 97.3 for the 2004 year, on 24 March 2005: T(2905-2910)1: 52-59. 68 As there is no apparent challenge to the validity of the legislation itself, the Commissioner contends that this issue appears to simply seek a merits review of the applicants' arguments before the Tribunal. 69 The applicants make clear, as I understand their submissions, that this ground simply operates as a consequence of the other grounds. In other words, if those grounds fail, this ground would fall away. If they succeed, this ground would simply follow, if it be necessary. 70 On the understanding that this ground succeeds or fails only with those that are remaining, I would not strike it out. 71 Therefore, for the reasons above ground 4.4 (question 2.5), ground 4.13 (question 2.14) and ground 4.14 (question 2.15) will be struck out. Appeal WAD 47 of 2011, Scheme Managers Income Tax 72 The following questions of law are raised in this appeal: 2.1 Was the Tribunal required to observe the requirements of natural justice? 2.2 If so, did the requirements of natural justice that the Tribunal was required to observe extend to: 2.2.1 entitling each party to effectively cross-examine witnesses called by the other party; and 2.2.2 if so, entitling the party to put to those witnesses documents which had not been included in any hearing bundle and then to tender those documents? 2.3 Was there any evidence from which the Tribunal could have concluded that [Scheme Managers] undertook activities as agent for [Stamfords]? 2.4 Could the Tribunal have reasonably found on the material before it that [Scheme Managers] did not act as agent for Stamfords? 2.5 Can it be inferred from a failure to provide evidence to the [Commissioner] prior to the commencement of proceedings that no evidence exists? 2.6 Does a person derive taxable income when acting solely as agent for another? 2.7 … 2.8 Did any of: 2.8.1 s. 226G of the [ITAA 1936]; 2.8.2 Part 4-25, ss. 284-75, 284-85, 284-220 or Item 1 of s. 284-90 of the TAA; and/or 2.8.3 any other provisions of the [ITAA 1936], the TAA or the Income Tax Assessment Act 1997 ("ITAA97"), render [Scheme Managers] liable to the imposition of any penalties? 2.9 If [Scheme Managers] was liable for any penalty pursuant to any of: 2.9.1 s. 226G of the [ITAA 1936]; 2.9.2 Part 4-25, ss. 284-75, 284-85, 284-220, Item 1 of s. 284-90, s.286 or s. 298-20 of the TAA; and/or 2.9.3 any other provisions of the [ITAA 1936], the TAA or the ITAA97, should that penalty have been remitted in whole or in part? 2.10 Can the conduct of proceedings before the Tribunal warrant or justify the imposition of an uplift to a penalty, in circumstances where the uplift and the penalty were imposed before those proceedings were commenced? 2.11 Did any payments made by [Scheme Managers] constitute loans to shareholders, or associates of any shareholders, at all or within the meaning of s. 109D of the [ITAA 1936]? 2.12 Did any payments properly deemed to be dividends pursuant to s. 109D of the [ITAA 1936]: 2.12.1 exceed the distributable surplus of [Scheme Managers] pursuant to s. 109Y of the [ITAA 1936]? 2.12.2 constitute exempt payments pursuant to s. 109K of the [ITAA 1936]? 2.13 Was the [Commissioner] authorised by s. 170 of the [ITAA 1936] to issue the assessments the subject of the Tribunal's decision? 73 The Commissioner contends that each of the questions posed in 2.3, 2.4, 2.5, 2.8, 2.9, 2.11 and 2.12 are questions of fact. 74 Questions 2.3 to 2.5 (grounds 4.2 to 4.4) are effectively identical to the corresponding questions in appeal WAD 46 of 2011. Question 2.6 (ground 4.5) is effectively identical to question 2.6 (ground 4.5) in appeal WAD 46 of 2011. Question 2.11 and question 2.12 (ground 4.10 and ground 4.11) are effectively identical to question 2.7 and question 2.8 (ground 4.6 and ground 4.7) in appeal WAD 46 of 2011. Question 2.13 (ground 4.12) is similar to question 2.16 (ground 4.15) in appeal WAD 46 of 2011. The parties repeated their submissions and I repeat my rulings for the same reasons. 75 In relation to ground 4.6 (question 2.7), the applicants conceded that this ground was incompetent. The ground was abandoned. 76 Ground 4.7 and ground 4.8 (question 2.8 and question 2.9) in this appeal relate to the Tribunal failing to find that if Scheme Manager was liable to penalties pursuant to any of the provisions set out in s 226G of the ITAA 1936, Pt 4-25, ss 287-75, 284-85, 284-220 or item 1, s 280-90 of the TAA or any other provision of the ITAA 1936, TAA or the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) that penalty should be remitted. The submissions relating to questions 2.6 to 2.13 (grounds 4.5 to 4.12) of appeal WAD 46 of 2011 were repeated. 77 Accordingly, as the same submissions are advanced, I reach the same conclusions in relation to Scheme Managers as those in relation to Mr Palassis. Therefore, ground 4.7 and ground 4.8 (question 2.8 and question 2.9) will not be struck out. 78 Question 2.10 (ground 4.9) in this appeal relates to the question of whether the conduct in the proceedings before the Tribunal could warrant or justify the imposition of an uplift to penalty in circumstances where the uplift in penalty was imposed before those proceedings were commenced. The Commissioner argues that this question could be a question of law in an appropriate case, however, in this case it is hypothetical because no finding of the nature alleged and the grounds supporting the question was made. 79 The finding relates to [115] of the Tribunal's decision, which is as follows: Additionally, [Mr Palassis'] behaviour in these proceedings was entirely consistent with his obstructionist behaviour in the audit which led to the hindrance up-lift. In the circumstances the Tribunal is of the view that the uplift was entirely justified. 80 The Commissioner argues that para 115 cannot be read as a finding that Mr Palassis' conduct at the hearing justified the uplift but rather that the evidence of Mr Palassis' conduct before the Tribunal was consistent with the conduct relied upon by the Commissioner. Therefore, the issue is that the applicants failed to discharge their onus to show the Commissioner's decision in imposing the uplift was wrong. Thus, no question of law arises. 81 In my view, this is a fair reading of para 115. The conclusion was that there had been a failure to discharge the onus to prove the imposition was wrong. Additional comments about the conduct in the hearing were simply corroborative or part of the reason why there had been a shortcoming in the discharge of the onus on that topic. This ground will be struck out. 82 Question 2.13 (ground 4.12) relates to the question of whether the Commissioner was authorised to issue the assessments. This will be treated on the same basis as it was in relation to appeal WAD 46 of 2011 and will not be struck out on the clear understanding that it succeeds or fails with other grounds. 83 Therefore, for the reasons above and the rulings made in appeal WAD 46 of 2011 ground 4.4 (question 2.5) and ground 4.9 (question 2.10) will be struck out. Appeal WAD 48 of 2011, Scheme Managers' GST 84 The following questions of law are raised in this appeal: 2.1 Was the Tribunal required to observe the requirements of natural justice? 2.2 If so, did the requirements of natural justice that the Tribunal was required to observe extend to: 2.2.1 entitling each party to effectively cross-examine witnesses called by the other party; and 2.2.2 if so, entitling the party to put to those witnesses documents which had not been included in any hearing bundle and then to tender those documents? 2.3 Was there any evidence from which the Tribunal could have concluded that [Scheme Managers] undertook activities as agent for [Stamfords]? 2.4 Could the Tribunal have reasonably found on the material before it that [Scheme Managers] did not act as agent for Stamfords? 2.5 Can it be inferred from a failure to provide evidence to the [Commissioner] prior to the commencement of proceedings that no evidence exists? 2.6 Does a person make a taxable supply when acting solely as agent for another? 2.7 Does a party make a creditable acquisition when acting solely as agent for another? 2.8 Was there a [GST] shortfall for which [Scheme Managers] was liable? 2.9. Can there be a GST shortfall for the purposes of Subdivision 284-B of the [TAA] in circumstances where an agent initially erroneously lodged BAS and remitted GST to its own behalf when the BAS should have been lodged and the GST remitted by the principal? 2.10 Did any of: 2.8.1 s. 226G of the [ITAA 1936]; 2.8.2 Part 4-25, ss. 284-75, 284-85, 284-220 or Item 1 of s. 284-90 of the TAA; and/or 2.8.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], render [Scheme Managers] liable to the imposition of any penalties? 2.11 If [Scheme Managers] was liable for any penalty pursuant to any of: 2.11.1 s. 226G of the [ITAA 1936]; 2.11.2 Part 4-25, ss. 284-75, 284-85, 284-220, Item 1 of s. 284-90, s.286 or s. 298-20 of the TAA; and/or 2.11.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], should that penalty have been remitted in whole or in part? 2.12 Can the conduct of proceedings before the Tribunal warrant or justify the imposition of an uplift to a penalty, in circumstances where the uplift and the penalty were imposed before those proceedings were commenced? 85 In the Commissioners' notice of motion to strike out grounds of appeal filed on 6 May 2011, the Commissioner did not list ground 4.2 (question 2.3). The applicants assume the Commissioner also objects to ground 4.2 (question 2.3) as grounds 4.2 to 4.5 (questions 2.3 to 2.6) are effectively identical to the corresponding grounds in appeal WAD 46 of 2011. 86 The Commissioner submits that questions 2.3, 2.4, 2.5, 2.8, 2.9, 2.10 and 2.11 are questions of fact. 87 Questions 2.10 to 2.12 (grounds 4.8 to 4.10) are effectively identical to questions 2.8 to 2.10 (grounds 4.7 to 4.9) in appeal WAD 47 of 2011. Therefore, the submissions in relation to those questions for each of the parties are repeated. The specific submissions in relation to question 2.6 (ground 4.5) in appeal WAD 46 of 2011 are repeated for question 2.6 (ground 4.5) and question 2.7 (ground 4.6) in this appeal. Similarly, the submissions in relation to questions 2.7 to 2.13 (grounds 4.6 to 4.12) in appeal WAD 46 of 2011 are repeated for question 2.8 and question 2.9 (ground 4.7). 88 For the same reasons, I reach the same conclusions and rule that ground 4.4 (question 2.5) and ground 4.10 (question 2.12) be struck out. Appeal WAD 49 of 2011, Stamfords' GST 89 The following questions of law are raised in this appeal: 2.1 Was the Tribunal required to observe the requirements of natural justice? 2.2 If so, did the requirements of natural justice that the Tribunal was required to observe extend to: 2.2.1 entitling each party to effectively cross-examine witnesses called by the other party; and 2.2.2 if so, entitling the party to put to those witnesses documents which had not been included in any hearing bundle and then to tender those documents? 2.3 Was there any evidence from which the Tribunal could have concluded that [Scheme Managers] undertook activities as agent for [Stamfords]? 2.4 Could the Tribunal have reasonably found on the material before it that Scheme Managers did not act as agent for [Stamfords]? 2.5 Can it be inferred from a failure to provide evidence to the [Commissioner] prior to the commencement of proceedings that no evidence exists? 2.6 Does a person make a taxable supply when acting solely as agent for another? 2.7 Was there a [GST] shortfall for which [Stamfords] was liable? 2.8 Can there be a GST shortfall for the purposes of Subdivision 284-B of the [TAA] in circumstances where an agent initially erroneously lodged BAS and remitted GST to its own behalf when the BAS should have been lodged and the GST remitted by the principal? 2.9. Did any of: 2.9.1 s. 226G of the [ITAA 1936]; 2.9.2 Part 4-25, ss. 284-75, 284-85, 284-220 or Item 1 of s. 284-90 of the TAA; and/or 2.9.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], render [Stamfords] liable to the imposition of any penalties? 2.10 If [Stamfords] was liable for any penalty pursuant to any of: 2.10.1 s. 226G of the [ITAA 1936]; 2.10.2 Part 4-25, ss. 284-75, 284-85, 284-220, Item 1 of s. 284-90, s.286 or s. 298-20 of the TAA; and/or 2.10.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], should that penalty have been remitted in whole or in part? 2.11 Can the conduct of proceedings before the Tribunal warrant or justify the imposition of an uplift to a penalty, in circumstances where the uplift and the penalty were imposed before those proceedings were commenced? 90 Questions 2.3 to 2.5 (grounds 4.2 to 4.4) are effectively identical to the corresponding grounds in appeal WAD 46 of 2011. Questions 2.6 to 2.8 (grounds 4.5 and 4.6) are effectively identical to questions 2.6, 2.8 and 2.9 (grounds 4.5 and 4.7) of appeal WAD 48 of 2011. Also, questions 2.9 to 2.11 (grounds 4.7 to 4.9) are effectively identical to questions 2.8 to 2.10 (grounds 4.7 to 4.9) of appeal WAD 47 of 2011. The applicants' submissions regarding those corresponding questions are repeated. 91 The Commissioner submits that questions 2.3, 2.4, 2.5, 2.7, 2.8, 2.9 and 2.10 are questions of fact. In relation to question 2.6 (ground 4.5) and question 2.7, the Commissioner repeats the submissions made in respect of question 2.6 (ground 4.5) in appeal WAD 47 of 2011. Similarly, in relation to question 2.11 (ground 4.9), the Commissioner repeats the submissions in relation to question 2.10 (ground 4.9) in appeal WAD 47 of 2011. 92 Consistent with the rulings above and for the same reasons, I make the ruling that ground 4.4 (question 2.5) and ground 4.9 (question 2.11) will be struck out. Appeal WAD 50 of 2011, Stamfords' Income Tax 93 The following questions of law are raised in this appeal: 2.1 Was the Tribunal required to observe the requirements of natural justice? 2.2 If so, did the requirements of natural justice that the Tribunal was required to observe extend to: 2.2.1 entitling each party to effectively cross-examine witnesses called by the other party; and 2.2.2 if so, entitling the party to put to those witnesses documents which had not been included in any hearing bundle and then to tender those documents? 2.3 Was there any evidence from which the Tribunal could have concluded that [Scheme Managers] undertook activities as agent for [Stamfords]? 2.4 Could the Tribunal have reasonably found on the material before it that Scheme Managers did not act as agent for [Stamfords]? 2.5 Can it be inferred from a failure to provide evidence to the [Commissioner] prior to the commencement of proceedings that no evidence exists? 2.6 Does a person derive taxable supply when acting solely as agent for another? 2.7 Does a person derive income when acting solely in their capacity as agent for another? 2.8 Did [Stamfords] adduce evidence capable of disputing the [Commissioner's] analysis of superannuation default or suggesting that the [Commissioner's] audit report was incorrect? 2.9 Did the superannuation related deductions claimed by [Stamfords] in the income years 1999 to 2004 constitute allowable deductions? 2.10 What superannuation related payments was [Stamfords] required to make in the income years 1999 to 2004? 2.11 Did the interest deduction claimed by [Stamfords] in the income year 2002 constitute an allowable deduction? 2.12 Did [Stamfords] carry on the same business for the purposes of s. 298-20 of the [TAA] during the income year 2004? 2.13 Did any of: 2.13.1 s. 226G of the [ITAA 1936]; 2.13.2 Part 4-25, ss. 284-75, 284-85, 284-220 or Item 1 of s. 284-90 or s. 286 of the TAA; and/or 2.13.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], render [Stamfords] liable to the imposition of any penalties? 2.14 If [Stamfords] was liable for any penalty pursuant to any of: 2.14.1 s. 226G of the [ITAA 1936]; 2.14.2 Part 4-25, ss. 284-75, 284-85, 284-220, Item 1 of s. 284-90, s.286 or s. 298-20 of the TAA; and/or 2.14.3 any other provisions of the [ITAA 1936], the TAA or the [ITAA 1997], should that penalty have been remitted in whole or in part? 2.15 Can the conduct of proceedings before the Tribunal warrant or justify the imposition of an uplift to a penalty, in circumstances where the uplift and the penalty were imposed before those proceedings were commenced? 2.16 Did any payments made by [Stamfords] constitute loans to shareholders, or associates of any shareholders, at all or within the meaning of s. 109D of the [ITAA 1936]? 2.17 Did any payments properly deemed to be dividends pursuant to s. 109D of the [ITAA 1936]: 2.17.1 exceed the distributable surplus of [Stamfords] pursuant to s. 109Y of the [ITAA 1936]? 2.17.2 constitute exempt payments pursuant to s. 109K of the [ITAA 1936]? 2.18 Was the [Commissioner] authorised by s. 170 of the [ITAA 1936] to issue the assessments the subject of the Tribunal's decision? 94 The Commissioner submits that questions 2.3, 2.4, 2.5, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.16 and 2.17 are questions of fact. The Commissioner's submissions in relation to question 2.6 (ground 4.5) in appeal WAD 47 of 2011 are repeated for question 2.6 (ground 4.5) in this appeal. In relation to question 2.7 (ground 4.6), the submissions regarding question 2.6 (ground 4.5) in appeal WAD 46 of 2011 are repeated. Also, the submissions in relation to question 2.10 (ground 4.9) in appeal WAD 47 of 2011 are repeated for question 2.15 (ground 4.14) and submissions in relation to question 2.16 (ground 4.15) in appeal WAD 46 of 2011 are repeated for question 2.18 (ground 4.17) in this appeal. 95 The applicants submit that questions 2.3 to 2.5 (grounds 4.2 to 4.4) are effectively identical to the corresponding questions in appeal WAD 46 of 2011. Question 2.6 (ground 4.5) is substantially identical to question 2.6 (ground 4.5) of appeal WAD 48 of 2011. Question 2.7 (ground 4.6) is effectively identical to question 2.6 (ground 4.5) to appeal WAD 46 of 2011. Questions 2.13 to 2.15 (grounds 4.12 to 4.14) are effectively identical to questions 2.8 to 2.10 (grounds 4.7 to 4.9) of appeal WAD 47 of 2011. Question 2.16 and question 2.17 (ground 4.15 and ground 4.16) are effectively identical to question 2.7 and question 2.8 (ground 4.6 and ground 4.7) of appeal WAD 46 of 2011. Question 2.18 (ground 4.17) is effectively identical to question 2.16 (ground 4.15) of appeal WAD 46 of 2011. The corresponding submissions are repeated. The applicants also repeat the submissions in relation to questions 2.7 to 2.13 (grounds 4.6 to 4.12) of appeal WAD 46 of 2011 for questions 2.9 to 2.12 (grounds 4.8 to 4.11) of this appeal. 96 In relation to question 2.8 (ground 4.7), the applicants also submit that the issue is whether there is any evidence capable of establishing a finding of fact or inference. That is a question of law. This issue was raised in the discussions above in relation to questions 2.3 to 2.5 (grounds 4.2 to 4.4) of appeal WAD 46 of 2011. As noted, the Tribunal observed (at [58]) that Stamfords had not provided any evidence to dispute the analysis or to suggest it was incorrect. The Tribunal further noted (at [67]) that there was no onus on the Commissioner to prove that the assessments were correct or to lead evidence to support its assessments. Question 2.8 will be struck out. 97 Consistent with the rulings above and for the same reasons, I make the following ruling that ground 4.4 (question 2.5), ground 4.7 (question 2.8) and ground 4.14 (question 2.15) will be struck out. CONCLUSION 98 In some circumstances it may be a little overcautious not to categorise the questions of law (or the grounds based on them) as being within the objectionable sphere of 'dressed up' merits review. As the written arguments are formulated, the complaint that the grounds are not in relation to questions of law may or may not be made good. But as the grounds remaining are at least arguably formulated by reference to and dependent upon a question of law, I am not satisfied that at a summary level, they can be characterised as merely merits review. As the argument is developed, however, it may well be that the Commissioner's complaints are made good. This is a realistic prospect the applicants may wish to take into account in simplifying the proposed grounds. 99 As a consequence of the foregoing in each of the appeals, the following grounds will be struck out: 1. Ground 4.4 (question 2.5), ground 4.13 (question 2.14) and ground 4.14 (question 2.15) in appeal WAD 46 of 2011; 2. Ground 4.4 (question 2.5) and ground 4.9 (question 2.10) in appeal WAD 47 of 2011; 3. Ground 4.4 (question 2.5) and ground 4.10 (questions 2.12) in appeal WAD 48 of 2011; 4. Ground 4.4 (question 2.5) and ground 4.9 (question 2.11) in appeal WAD 49 of 2011; 5. Ground 4.4 (question 2.5), ground 4.7 (question 2.8) and ground 4.14 (question 2.15) in appeal WAD 50 of 2011. 100 The issue of costs will be reserved until the hearing of the appeal. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 15 November 2011