FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Industrial Equity Ltd [2000] FCA 420

APPEAL – judgment setting aside notice by Commissioner of Taxation under s 264 Income Tax Assessment Act 1936 (Cth) and ordering Commissioner to pay costs – subsequent notice answered – appeal by Commissioner – motion to stay appeal

TAXATION – income tax – notice by Commissioner of Taxation under s 264 Income Tax Assessment Act 1936 (Cth) – whether notice can validly require attendance before “any or all” of several named persons and the Commissioner – whether notice uncertain

Income Tax Assessment Act 1936 (Cth) s 264

Taxation Administration Act 1953 (Cth) s 8

Leibler v Air New Zealand Ltd [1998] 2 VR 525 considered

Beitseen v Johnson (1989) 28 IR 336 cited

Mayne Nickless Ltd v Transport Workers Union of Australia [1998] FCA 984 cited

Unity APA Ltd v Humes Ltd (No 2)  [1987] VR 474 cited

Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187 cited

Wouters v Deputy Commissioner of Taxation (1988) 20 FCR 342 considered

Watson v Commissioner of Taxation (1999) 99 ATC 5313 discussed

COMMISSIONER OF TAXATION AND ANOR v

INDUSTRIAL EQUITY LIMITED AND ANOR

N 1339 of 1999

HILL, HEEREY AND HELY JJ

4 APRIL 2000

SYDNEY

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.         The motion to strike out or permanently stay the appeal be dismissed.

2.         The appeal be allowed.

3.         The first respondent pay the appellants’ costs of the motion and appeal.

4.         The appellants pay the respondents’ costs at first instance.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT

1                     The appellants, the Commissioner of Taxation (“the Commissioner”) and Mr Killaly (“the Deputy Commissioner”) appeal to the Court from the judgment of a judge of this Court relating to two applications which were brought by Industrial Equity Limited and Gregory Kingston Cottam (both together referred to in this judgment as “the Recipients of the Notices”).

2                     The first application was numbered N 1213 of 1999.  It sought, inter alia, a declaration that a notice (“the First Notice”)dated 10 September 1999 purporting to be given under s 264 of the Income Tax Assessment Act 1936 (Cth)(“the Act”) and signed by the Deputy Commissioner was invalid. The second application was numbered N 1227 of 1999.  In it the Recipients of the Notices sought, inter alia, a declaration that a notice dated 25 October 1999 (“the Second Notice”),purporting to be given under s 264 of the Act and likewise signed by the Deputy Commissioner, was invalid.

3                     The learned primary judge set aside the Second Notice and dismissed the proceedings relating to the First Notice.  In each case he ordered the respondents to the proceedings to pay the costs of the application. 

4                     The Commissioner and Deputy Commissioner appealed in respect of each application.  However the Commissioner subsequently withdrew the appeal so far as it related to the First Notice.  The present appeal, therefore, is concerned only with the Second Notice.

5                     Industrial Equity Limited  (“IEL”) filed a notice of motion in the appeal seeking orders that the appeals be struck out or permanently stayed.  In support of the motion the solicitor for IEL deposed that yet another notice had been issued by the Commissioner on 2 November 1999, that is to say shortly after judgment was delivered and that the second respondent had answered that notice and responded to all questions asked of him.  The First Notice had been superseded by the Second Notice and the time for compliance with the Second Notice had passed, with the consequence, it was said, that but for the issue of costs, the appeal had no further practical significance and should accordingly be struck out or stayed.  The second respondent, it was said in any event submitted to any order the Court might make in relation either to the application or the appeal, other than an order for costs.  This, perhaps ambiguous, position was clarified on the hearing of the motion to be that the second respondent wished to make no submission either in respect to the decision of the learned primary judge or in respect to the appeal, including submissions relating to costs.

6                     Before dealing with the motion it is necessary to set out the background to the original application so far as is relevant to the present appeal.

The background to the appeal

7                     The First Notice was, as a matter of fact, not the first time the Commissioner had attempted to exercise powers to obtain information from the recipients of the notice.  There had been an earlier notice dated 30 June 1999 addressed to Mr Cottam.  Compliance with that notice was not pressed.  The First Notice, that is to say the notice dated 10 September 1999, was in fact revoked.  The proceedings for judicial review in respect of it were largely concerned with an attempt to obtain reasons for the notice being issued.  As the appeal in respect of that notice has been discontinued it is unnecessary to refer further to that notice. 

8                     The Second Notice was in the following form:

“Pursuant to paragraph 264(1)(b) of the Income Tax Assessment Act 1936, I, James Michael Killaly require you to attend and give evidence on oath –

1.                  concerning the income or assessment of:

(i)                 Arthur Yates & Co Limited for the year ending 30 June 1991;

(ii)               Burnley Finance Amsterdam BV, Seymour Finance BV, and Wilbur Enterprises Limited for the years ending 30 June 1991 and 30 June 1992, and

(iii)             the entities and/or persons listed in Schedule A for the years ending 30 June 1991 to 30 June 1994 inclusive,

2.                  at the Australian Taxation Office, 100 Market Street, Sydney.

3.                  on Thursday 28 October 1999 at nine o’clock in the forenoon and until you are excused from further attending.

4.                  before any or all of Ms Jan Farrell, Ms Jillian Saint, Mr Frank Breen and Mr John Sheldon whom I authorise for that purpose and myself.

The powers of the Commissioner of Taxation under section 264 of the Income Tax Assessment Act 1936, have been delegated to me pursuant to an instrument of delegation under section 8 of the Taxation Administration Act 1953.”  [Schedule A being a list of companies]

The judgment appealed from

9                     As already indicated his Honour set aside the Second Notice.  Two matters arose for decision in respect of that notice.  The first was whether a notice could, as a matter of construction of s 264, validly be given under s 264(1)(b) that requires attendance before both a person authorised by the Commissioner and the Commissioner (or person exercising by delegation the powers and functions of the Commissioner).  The second associated question was whether a notice under s 264(1)(b) must specify particular persons before whom the recipient must attend, rather than specifying “any or all” of the persons before whom attendance was required.  Put another way the question was whether the notice in the present case was uncertain.

10                  The judgment dealt only with the first of these questions.  His Honour indicated, however, an inclination to find the notice invalid on the second ground as well as the first.

11                  After referring to cases in which it had been held that the word “or” was disjunctive in some contexts and not in others, his Honour said at paragraph 18:

“In my opinion, the section does contain a true alternative as submitted by counsel for the applicants.  I have considered each of the cases to which reference has been made, and, beyond the general proposition that “or” may sometimes not be a true disjunctive, I find little assistance in construing this section.  The only direct guidance to be gleaned from these authorities is, if anything, in favour of the applicants.  In Wouters (supra) [v Deputy Commissioner of Taxation (NSW) (1988) 20 FCR 342] their Honours noticed an argument by counsel for the appellants to the following effect, at 348-9:

‘However, they argue that there is here an expression of a contrary intention;  the provision for attendance before “any officer” is an alternative to attendance before the Commissioner.  The Commissioner is necessarily a single person.  So, according to counsel, the intention of Parliament was examination by a single person; …’

Although the construction contended for by counsel for the appellants in that case was not acceded to, their Honours said nothing to cast doubt upon the foundation for that particular submission.”

The motion

12                  Having heard the motion we indicated that we were of the view that the appeal should not be stayed.  We said that we would deliver reasons later.  The following are our reasons.

13                  In a case where no controversy at all exists between the parties to an appeal, there will be no “matter” within the meaning of that expression in Chapter III of the Constitution and thus no jurisdiction for the Court to proceed with the hearing of an appeal.  It is, however, accepted by the parties in the present case that there remains a controversy as to whether the order for costs at first instance was correctly made.  The determination of that question necessarily involves the Court determining who is entitled to succeed, that is to say the substantive merits of the appeal.

14                  It may be – it is unnecessary to decide in this case – that the Court has a discretion not to proceed to hear and determine an appeal where there is a controversy between the parties but the interests of justice require that, for some other reason, the appeal should not proceed.  The question whether there is such a discretion arose in the Court of Appeal in Victoria (where the constitutional issue had no bearing) in Leibler v Air New Zealand Ltd [1998] 2 VR 525.  The Court of Appeal held, however, that if there were such a discretion it should not, in the circumstances of that case, be exercised in favour of dismissing or staying the appeal. 

15                  In the circumstances of the present appeal we too do not need to decide whether a discretion exists.  We also do not think it necessary in this case to determine whether, for this purpose, there is any distinction to be drawn between industrial cases (where cost orders are usually not made) and other cases where cost orders are: cf Beitseen v Johnson (1989) 29 IR 336 and Mayne Nickless Ltd v Transport Workers Union of Australia [1998] FCA 984.

16                  In the present case there is an existing controversy as to costs and there is an appeal brought by the Commissioner and Deputy Commissioner as of right.  To the extent there is a discretion which the Court might exercise, factors weighing against its exercise are that the present appeal involves an issue of construction having a significance beyond the immediate rights of the present parties and there are serious arguments capable of being advanced as to the correctness of the judgment, which can be disposed of quite shortly.  For these reasons we were of the view that we should proceed with the hearing of the appeal.

The substantive appeal

17                  Section 264(1)(b) of the Act provides relevantly:

“The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority:

(a)               ...

(b)               to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person’s income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.”

18                  For the purposes of the appeal we accept a construction of the subparagraph, when considered in the light of s 8 of the Taxation Administration Act 1953 that the word “him” where first appearing in s 264(1)(b) includes a person (not being the Commissioner himself) who acts as the delegate of the Commissioner pursuant to a delegation under s 8 of the Taxation Administration Act.  No argument to the contrary was put.

19                  Ordinarily the word “or” where used in a statute will be disjunctive.  But whether this is the case will depend upon the context in which the word appears, context including for this purpose the legislative intention.  Examples of cases where the word “or” was held not to be disjunctive include: Unity APA Ltd v Humes Ltd (No 2)  [1987] VR 474 at 481, Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187 at 194-5.  As the latter case indicates, the word “or” may, in an appropriate context mean “or as well”.  In a case such as the present, if the context requires it the word “or” could signify “and/or”.  The issue is whether when a statute refers to A or B the statute is referring to, on the one hand, A or B or bothor merely A or B but not bothon the other.

20                  In our view the present context does not suggest that the word “or” is used so as to indicate that attendance may be required before either a person or persons authorised on the one hand or the Commissioner on the other, but not before both a person or persons authorised and the Commissioner.  There is no rational explanation why Parliament would intend to produce that result.  All persons before whom attendance is required act in the same interest and are part of the same organisation.  As this Court held in Wouters v Deputy Commissioner of Taxation (1988) 20 FCR 342,the Commissioner may under s 264(1)(b) require attendance before more than one authorised officer.  There could be no logic in a construction which accepts as valid a notice requiring attendance before two or more officers but invalid if one of those officers is the Commissioner himself. 

21                  It becomes necessary, therefore, to consider the alternative basis for invalidity not ultimately decided by the learned primary judge.  The alternative argument proceeds upon the basis that the recipient of the notice might be uncertain as to before whom the recipient is to appear.  A similar argument failed in Watson v Commissioner of Taxation (1999) 99 ATC 5313.  The notice in that case required attendance “before either or both Stanley Robert Loader and Robert Mason, whom I authorise for the purpose”.  Heerey J in holding the notice to be valid said at paragraph 25:

“But I think the present notice is perfectly clear.  To comply with the notice the recipient has to attend at the stated time and place before one or other of Mr Loader and Mr Mason, or before both of them.  If she attends before either, she has complied with the notice.  If both are present, she has also complied.”

22                  In our view the same may be said of the present notice.  To comply with it the recipient has to attend at the stated time and place before one or more of the persons nominated in the notice including Mr Killaly.

23                  It follows that the appeal should be allowed.  It was common ground that if the Court was of this view the orders made by the learned primary judge should be set aside and in lieu thereof it should be ordered that the application should be dismissed.

Costs

24                  Industrial Equity Limited has been unsuccessful on the motion for a stay and should pay the costs of it.  The costs at first instance should follow the event.  The respondents advanced arguments before the primary judge which have now been held to be erroneous.  The Commissioner was entitled to lodge and prosecute his appeal and IEL at no time consented to the appeal being allowed.  IEL should pay the costs of the appeal.  We make no order as against Mr Cottam so far as the costs of the appeal are concerned because, at the outset, he consented to any order the Court should make with respect to it.

Associate:

Dated:                          4 April 2000