FEDERAL COURT OF AUSTRALIA

Weyers v Federal Commissioner of Taxation [2006] FCA 1319

BARBARA KAREN WEYERS v FEDERAL COMMISSIONER OF TAXATION

QUD 156 OF 2004

ROBERT WEYERS v FEDERAL COMMISSIONER OF TAXATION

QUD 157 OF 2004

NOMMACK NOMINEES PTY LTD (ACN 002 872 871) v FEDERAL COMMISSIONER OF TAXATION

QUD 142 OF 2005

DOWSETT J

8 SEPTEMBER 2006

BRISBANE

REASONS FOR JUDGMENT

1                     The issues raised in this case were particularly complex, largely because the assessments against which the various taxpayers appealed were generated as a result of the Commissioner’s concern at the use of losses incurred by the former trustee of a trust referred to in my reasons for judgment as the “Sydney Trust”. The losses had been incurred a very long time ago. Details of the transactions appear sufficiently from the reasons for judgment. The Commissioner assessed each of the three taxpayers to tax on a total income over several years of about $2.6 million. The outcome of the appeals has been that Nommack Nominees’ taxable income over those years has been reduced to nil, and that of each of Mr and Mrs Weyers, to about $1 million.

2                     The Commissioner identified six issues which were ventilated at the trial. They were:

          ·                whether or not the Sydney Trust still existed;

          ·                whether that trust had any “carried forward” losses;

          ·                the nature of the disposition of income of Cherrybrook as trustee of another trust associated with the Weyers family;

          ·                whether Mr and Mrs Weyers had received funds by way of loan or by way of distribution;

          ·                whether there was any basis for amended assessments; and

          ·                whether or not the imposed tax penalties were appropriate.

3                     The Commissioner points out, in my view correctly, that he has been successful on all but the first of those grounds, and that such substantial degree of success is a matter of significance in formulating appropriate orders as to costs. On the other hand, Nommack Nominees has been successful in reducing its tax liability to nil, and Mr and Mrs Weyers have been successful in substantially reducing their assessments. My findings may have consequences in other proceedings which are presently in the Administrative Appeals Tribunal, but that matter is not presently relevant.

4                     Given the transactions entered into by the taxpayers in connection with the Sydney Trust, it was inevitable that the Commissioner would contest many of the factual assertions which they made concerning those transactions. Numerous aspects of the Trust’s history were unsatisfactory or, at least insofar as the evidence went, appeared to be unsatisfactory. On the other hand it was always, I think, clear that the assessments made by the Commissioner were in the alternative. The Commissioner is entitled to adopt that approach. However, if he does so, it may put him at risk of an adverse order for costs in the event that he fails against one or other of the relevant taxpayers.

5                     As I have said, it was inevitable that the Commissioner would challenge the alleged tax losses. It was also inevitable that, once the Commissioner had chosen to investigate the scheme and issue amended assessments against the various taxpayers, there would be proceedings of this kind. Whether or not it was necessary that they be as extended and, apparently, acrimonious as they were, is not so clear. In the end, the order for costs should reflect the fact that both sides have had some success in terms of the overall outcome, and that the Commissioner has been substantially successful upon the individual issues. I do not wish to underestimate the extent of the Commissioner’s success. The thrust of my findings is that the transactions entered into on behalf of the Weyers and, perhaps, Nommack Nominees were such as, effectively, to conceal income actually derived. It was entirely appropriate that the Commissioner seek to demonstrate that this was so, and he did so. However I consider that he must bear the consequences of the assessments as against Nommack Nominees, which have not been justified, and of the excessive assessments as against Mr and Mrs Weyers.

6                     I find the question of costs quite difficult. It is important that I distinguish between Nommack Nominees, on the one hand, and the Weyers, on the other. One must keep in mind the wider range of persons who have, or may in the future have, interests in the asset position of the company in the event of its insolvency. It is not open to me to take a global approach to the costs of all parties.

7                     In the circumstances, I consider that the order which I should make, to reflect the considerations to which I have referred, is that the Commissioner pay three-quarters of Nommack Nominees’ costs of its appeal, and that Mr and Mrs Weyers together pay three-quarters of the Commissioner’s costs of their appeals.

Associate:

Dated: 9 October 2006