FEDERAL COURT OF AUSTRALIA Chevron Australia Holdings Pty Ltd v Commissioner of Taxation [2014] FCA 230 Citation: Chevron Australia Holdings Pty Ltd v Commissioner of Taxation [2014] FCA 230 Parties: CHEVRON AUSTRALIA HOLDINGS PTY LTD v COMMISSIONER OF TAXATION File numbers: NSD 569 of 2012; NSD 570 of 2012; NSD 571 of 2012; NSD 572 of 2012; NSD 573 of 2012; NSD 574 of 2012; NSD 575 of 2012; NSD 576 of 2012; NSD 577 of 2012; NSD 578 of 2012; NSD 151 of 2013; NSD 152 of 2013; NSD 153 of 2013; NSD 154 of 2013; NSD 155 of 2013; NSD 156 of 2013; NSD 440 of 2013 Judge: ROBERTSON J Date of judgment: 14 March 2014 Catchwords: PRACTICE AND PROCEDURE – tax appeals – whether respondent Commissioner's position sufficiently clearly made known to the applicant Legislation: 1 Income Tax Assessment Act 1936 (Cth) ss 136AC, 136AD Cases cited: BAE Systems Australia (NSW) Pty Ltd v Federal Commissioner of Taxation [2008] FCA 48; (2008) 69 ATR 567 Rio Tinto Ltd v Federal Commissioner of Taxation [2004] FCA 335; (2004) 55 ATR 321 Date of hearing: 12 March 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 14 Counsel for the Applicant: Mr SH Steward SC with Ms LA Hespe Solicitor for the Applicant: King & Wood Mallesons Counsel for the Respondent: Mr JW de Wijn QC with Mr TM Thawley SC and Ms C Burnett Solicitor for the Respondent: Maddocks Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 569 of 2012; NSD 570 of 2012; NSD 571 of 2012; NSD 572 of 2012; NSD 573 of 2012; NSD 574 of 2012; NSD 575 of 2012; NSD 576 of 2012; NSD 577 of 2012; NSD 578 of 2012; NSD 151 of 2013; NSD 152 of 2013; NSD 153 of 2013; NSD 154 of 2013; NSD 155 of 2013; NSD 156 of 2013; NSD 440 of 2013 BETWEEN: CHEVRON AUSTRALIA HOLDINGS PTY LTD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: ROBERTSON J DATE OF ORDER: 14 MARCH 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. By letter to be transmitted electronically no later than 21 March 2014, the respondent is to notify the applicant whether or not the respondent contends that the Credit Facility Agreement dated 6 June 2003 has been varied. If the Commissioner does so contend he is to specify the facts and circumstances on which he relies for that contention. 2. Costs of the directions hearing on 12 March 2014 be costs in the cause. 3. If any further clarity is required as to the parties' respective contentions relating to the variation or performance of the Credit Facility Agreement dated 6 June 2003 the parties have liberty to apply on two days' notice, such liberty to be exercised by way of interlocutory application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 569 of 2012; NSD 570 of 2012; NSD 571 of 2012; NSD 572 of 2012; NSD 573 of 2012; NSD 574 of 2012; NSD 575 of 2012; NSD 576 of 2012; NSD 577 of 2012; NSD 578 of 2012; NSD 151 of 2013; NSD 152 of 2013; NSD 153 of 2013; NSD 154 of 2013; NSD 155 of 2013; NSD 156 of 2013; NSD 440 of 2013 BETWEEN: CHEVRON AUSTRALIA HOLDINGS PTY LTD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: ROBERTSON J DATE: 14 MARCH 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 At a directions hearing on 12 March 2014 the applicant taxpayer in these matters sought a direction, as I understood it, that the respondent Commissioner state, preferably by amending his Further Amended Appeal Statement filed on 14 February 2014, what he presently contends is the international agreement for the purposes of s 136AD of the Income Tax Assessment Act 1936 (Cth). 2 I raised with the parties whether this was an appropriate issue to be dealt with at a short directions hearing and although there was no objection on the part of the respondent I remain to be convinced that in a matter of this complexity an issue such as this should not be the subject of an interlocutory application but should be raised only in correspondence between the parties and in a procedurally informal way. Nevertheless, because there was no objection and because the dates set for a trial in 2013 were vacated, I shall deal with the issue of substance. 3 Section 136AD(3) of the Income Tax Assessment Act 1936 speaks of "where … a taxpayer has acquired property under an international agreement". Section 136AC states what an international agreement is for the purposes of Division 13. No complaint is made by the applicant taxpayer about the respondent Commissioner's identification of the property in his Further Amended Appeal Statement but, as I have indicated, the taxpayer contends that the international agreement is not, or is not sufficiently clearly, identified in the Further Amended Appeal Statement. My attention was drawn to paragraphs 50, 51 and 52 of the Further Amended Appeal Statement and the amendments to those paragraphs. 4 The respondent Commissioner identifies the international agreement as being the Credit Facility "made as of June 6, 2003 between Chevron Texaco Australia Holdings Pty Ltd ("CTAHPL") and Chevron Texaco Funding Corporation ("CTFC")" being Annexure WBD-45 to the affidavit of William Brian Dalzell made on 16 April 2013. 5 By section 3.1, subject to the provisions of the Agreement, CTFC agreed "to make Advances from time to time to CTAHPL in the aggregate the equivalent in Australian Dollars (determined on the basis of the total of the then outstandings and the amount to be loaned at the time of each drawdown) of Two Billion Five Hundred Million United States Dollars." 6 Senior Counsel for the applicant taxpayer submitted that all of the parties had been of the view until about September 2013, when the trial was adjourned, that the loan was an Australian dollar loan. Then the respondent Commissioner said that the loan was a US dollar loan not an Australian dollar loan because he had received some bank account statements from the applicant which indicated that the loan had been performed by crediting a US bank account with US dollars. The Commissioner therefore contended that the property supplied or acquired was US dollars not Australian dollars. 7 The applicant taxpayer submitted that it did not now know with clarity precisely the way in which the Commissioner put his case because he, the Commissioner, the applicant submitted, had clearly decided to resile away from the Credit Facility Agreement and had clearly made a choice in his Further Amended Appeal Statement not to tell the applicant what the international agreement was under which the property was acquired or supplied for the purposes of s 136AD. The applicant taxpayer submitted there was a disconformity between the respondent Commissioner's submissions and his Further Amended Appeal Statement and that the Further Amended Appeal Statement was incomplete. The applicant taxpayer submitted that if the respondent Commissioner contended that the international agreement could be another agreement other than the Credit Facility Agreement he should say so and if the respondent Commissioner contended that the agreement was varied or amended he should say so. 8 I was referred to Rio Tinto Ltd v Federal Commissioner of Taxation [2004] FCA 335; (2004) 55 ATR 321 per Sundberg J. 9 The respondent Commissioner submitted, in answer to the applicant's contention that he needed to say what the agreement was under which the 2.5 billion US dollars was advanced to the applicant, that he would like to know that as well because it was the applicant who entered into the agreement. At paragraph 14 of the Further Amended Appeal Statement the Credit Facility Agreement was referred to, which expressly provided the advance was to be in Australian dollars. The Commissioner submitted that the taxpayer applicant had, until August 2013, asserted that the property was Australian dollars. What was provided under the agreement was US dollars. That was all, the Commissioner submitted, he said in his written submissions and in the Further Amended Appeal Statement. 10 The Credit Facility Agreement contemplated Australian dollars being supplied and it was quite clear that US dollars were supplied. The taxpayer applicant had the knowledge of how it came about that under an agreement to advance Australian dollars, US dollars were advanced. In the applicant's appeal statement the applicant said it was a matter of administrative convenience but that did not explain how the variation took place. 11 The respondent Commissioner then submitted that in any event, or on any basis, the advance that was made was not made solely under the credit facilities. It could only have been made under the credit facility as amended or possibly some other agreement. The Commissioner was not aware of any other agreement but it was clear that where there was a loan agreement that provided for an advance in Australian dollars and what was advanced was US dollars there must have been a variation to the agreement or some formal or informal amendment and that was within the applicant's knowledge. Senior Counsel for the Commissioner asked "How can we plead what the variation is?". It was only the applicant which could give evidence about how the Credit Facility Agreement was amended and, if necessary, why. 12 I was referred to BAE Systems Australia (NSW) Pty Ltd v Federal Commissioner of Taxation [2008] FCA 48; (2008) 69 ATR 567 per Stone J. 13 In reply, the applicant submitted that section 4.2 of the Credit Facility Agreement always contemplated that it would be performed by crediting a US dollar bank account and the agreement clearly contemplated that this was to be an Australian dollar loan but to be performed by crediting the taxpayer's US bank account and the Commissioner was quite incorrect insofar as he thought that there was a variation. If the Commissioner wanted to allege there was a variation to the agreement then he should state it so the taxpayer applicant knows what the variation the Commissioner contends has been made. That was the barest minimum requirement that procedural fairness suggested was justified in a case of this size. 14 In light of the opposing submissions by Senior Counsel for the parties there may now be sufficient clarity as to their respective positions. Nevertheless, in my opinion, the applicant should be told more formally and more precisely by the respondent Commissioner whether or not he contends that the Credit Facility Agreement has been varied. If the Commissioner does so contend he should specify the facts and circumstances on which he relies for that contention. He should do this by letter to be transmitted electronically no later than 21 March 2014. I so direct. The costs of the directions hearing will be costs in the cause. If any further clarity is required as to the parties' respective contentions relating to this issue of the variation or performance of the Credit Facility Agreement I grant the parties liberty to apply on two days' notice, such liberty to be exercised by way of interlocutory application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson. Associate: Dated: 14 March 2014