FEDERAL COURT OF AUSTRALIA Porter v Commissioner of Taxation [2012] FCA 298 Citation: Porter v Commissioner of Taxation [2012] FCA 298 Parties: SANDRA JOY PORTER v COMMISSIONER OF TAXATION PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION PEOPLE FIRST RETIREMENT SERVICES AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION PEOPLE FIRST RETIREMENT SERVICES AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION ESKATON PTY LTD AS TRUSTEE FOR ESKATON INVESTMENT TRUST v COMMISSIONER OF TAXATION GRACE SENT v COMMISSIONER OF TAXATION EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION File numbers: VID 574 of 2010 VID 576 of 2010 VID 577 of 2010 VID 578 of 2010 VID 241 of 2011 VID 242 of 2011 VID 243 of 2011 VID 244 of 2011 VID 245 of 2011 Judge: JESSUP J Date of judgment: 19 March 2012 Catchwords: PRACTICE AND PROCEDURE – Income tax appeal – Whether amendment of grounds should be allowed – Proposed case based on inference – Whether sufficient discovery provided – Whether too late to facilitate adequate opportunity to challenge inferential case. Legislation: Taxation Administration Act 1953 (Cth) s 14ZZO Date of hearing: 14-16, 19 March 2012 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 10 Counsel for the Applicant: Mr J Rivett with Mr L Warren Solicitor for the Applicant: Russell Kennedy Counsel for the Respondent: Ms D Harding with Mr D Morgan Solicitor for the Respondent: Maddocks IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 574 of 2010 BETWEEN: SANDRA JOY PORTER Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 MARCH 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 576 of 2010 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 MARCH 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 577 of 2010 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 578 of 2010 BETWEEN: EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 march 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 241 of 2011 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 242 of 2011 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 march 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 243 of 2011 BETWEEN: ESKATON PTY LTD AS TRUSTEE FOR ESKATON INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 244 of 2011 BETWEEN: GRACE SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 245 of 2011 BETWEEN: EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 19 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The leave previously given to the applicant to rely as a ground upon the assertion that the minute of the directors of Mainpoint Enterprises (Australia) Pty Ltd dated 30 June 2004 was ineffective because it was made after that date be revoked. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 574 of 2010 BETWEEN: SANDRA JOY PORTER Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 576 of 2010 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 577 of 2010 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 578 of 2010 BETWEEN: EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 241 of 2011 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 242 of 2011 BETWEEN: PEOPLE FIRST RETIREMENT SERVICES PTY LTD AS TRUSTEE FOR PEOPLE FIRST MANAGEMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 243 of 2011 BETWEEN: ESKATON PTY LTD AS TRUSTEE FOR ESKATON INVESTMENT TRUST v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 244 of 2011 BETWEEN: GRACE SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 245 of 2011 BETWEEN: EDUARD CHRISTIAAN SENT v COMMISSIONER OF TAXATION Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE: 19 MARCH 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 These tax appeals have been standing in the list of the court for some time. Recently, the constitution of the applicants' case has undergone a number of amendments for which the court has given leave. Notwithstanding that circumstance, the court was asked by the applicants to give further leave to amend the grounds upon which they would be permitted to rely, notwithstanding the provisions of s 14ZZO of the Taxation Administration Act 1953 (Cth), with respect to matters which included the factual question whether a resolution passed by the directors of Mainpoint Enterprises Australia Pty Ltd, in that company's capacity as trustee of Mainpoint Investment Trust, was made on 30 June 2004, as a minute of that date ostensibly indicates, or at some later date. For present purposes, I assume that the question is an important one which has the potential to have a significant bearing on the outcome of these proceedings. 2 The minute to which I referred was signed by one of the applicants, Mr Eduard Sent, but it seems that he has no actual recollection of having done so, or of the circumstances in which that came to be done. I am told that the minute was prepared by the accountant of the applicants and placed before Mr Sent for signature. However, in the days immediately preceding the commencement of the trial of this proceeding, someone drew it to the attention of counsel for the applicants that there was a sum of money referred to in the minute from which, together with other circumstances of which evidence would be given, it might be inferred that the minute was in fact prepared and signed subsequent to 30 June 2004. I was assured that this was a simple factual point, and that such evidence as was now available to the applicants would make good the inference to which I have referred. 3 Counsel for the respondent resisted the application for leave to amend on a number of grounds, including that, having come so late in the piece, it would place their client at a disadvantage, and in that sense would be unfair to him. Having regard to what was said by the applicants in support of the amendment, and to the position taken by the respondent on 15 March 2012, the second day of the trial, I gave the applicants leave to make an amendment, the effect of which would have been to add a particular to one of the grounds, that the minute dated 30 June 2004 was never effective since it had been made after that date. I gave that leave conditional upon the imposition upon the applicants of an obligation to provide a kind of ad hoc discovery in relation to the issue about the timing of the execution of the minute. In making those orders, I made it clear that the discovery obligation extended to the servants and agents of the applicants at the relevant time. It was apparent from the course of the interchanges which I then had with counsel that my concern extended to their accountant, Mr Diggerson, by whom the minute was apparently prepared and put before Mr Sent for signature. 4 In purported compliance with the obligation referred to, this morning one of the applicants, Sandi Porter, has made an affidavit of discovery, by which she verifies a list of documents containing some 41 items. Two of those items which, from their description, cannot be dismissed as most probably inconsequential, are no longer in the power, possession or control of the applicants because, in the case of one of them, the laptop computer containing the files was handed to the receiver and manager of an entity described as the PFRL Management Trust and, in the case of the other of them, the computer server upon which it was located was repossessed by a bank in 2009. Those two circumstances in themselves indicate the kind of difficulty which arises in the establishment and proper testing of facts which occurred many years ago. It is true that the two documents referred to probably could not have been brought forward for inspection by the applicants even had the point arisen at the time when they lodged their original notices of objection, but it provides a context for the consideration of the difficulty confronted by the respondent as a party who never had direct access to the documents in question, and who is now obliged to contest a case based upon inference, such inference said to be available only by reference to documents which remain. 5 I would have expected, in the circumstances, that Mr Diggerson would have been a critical point of inquiry for the applicants in complying with their discovery obligation arising under the order which I made on 15 March 2012. However, I was told by counsel for the applicants this morning that it had not been possible to contact Mr Diggerson in the time required to complete their clients' discovery since the making of that order. This involves the proposition that, by reason of the urgency with which the applicants' discovery obligation had necessarily been addressed, it has not been possible for what I would regard as the conventional and appropriate inquires to be made of the very person who not only prepared this minute but placed it before Mr Sent for signature. 6 I find it difficult to comprehend how the applicants might have complied with the conditions to which the amendment order was subject without having involved Mr Diggerson as a central part of that exercise. I have been told that, in place of contacting Mr Diggerson, the applicants have spoken to the practice manager of his accounting practice, and I accept that that practice manager has been substantially involved in the search for documents which might satisfy the requirements which were imposed on the applicants. However, I am also told that the practice manager was not employed in that practice in June 2004 or thereabouts, from which it must follow that even her contact with and appreciation of the relevance of these documents would be indirect. 7 It has been put to me this morning by counsel for the applicants that his clients have done everything possible in the time available to comply with the discovery obligations which were imposed on them. The difficulty with that position, and I make no finding one way or the other about it, is that the very shortness of time, and the lateness of the occasion upon which these issues have come to be controversial, presents, in a much more acute form, the prejudice which must be suffered by the respondent if the amendment is to be made. It must be borne in mind that it is the applicants who are asking for an indulgence at this stage. They came to the trial of this matter on certain grounds of objection. They were required by s 14ZZO to adhere to those grounds, unless they obtained the leave of the court. On any view, the circumstances by reference to which the giving of that leave should be governed include the ability of the respondent properly to test critical factual questions which concern matters which occurred many years ago. 8 My reservations as to the appropriateness of the amendment are reinforced, rather than diluted, by the circumstance that it is not a piece of direct, conclusive, evidence upon which the applicants now seek to rely. Rather, they seek to make an amendment which would introduce a new ground dependent entirely upon inference. It is in a situation of that kind that it is, in my view, essential that the other party should have revealed to it, and have the ability to test, all the facts and circumstances by reference to which the making of any such inference might be resisted. 9 The present position is a most unsatisfactory one, but I am bound to say that it is a position for which I am obliged to hold the applicants responsible. If there was anything in the point which touches the timing of the minute to which I have referred, it is something which could have been brought forward at the outset, when the matter might have been addressed properly, and in sufficient time for the respondent to have an opportunity to run a complete case in response to it. I am not satisfied that the respondent has had that opportunity. 10 In the circumstances, I propose to revoke the leave which I gave on 15 March 2012. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 4 April 2012