Bailey v Commissioner of Taxation

(i) the form or nature the distribution is alleged to have taken;

(ii) to whom and by what means the distribution is alleged to have been made;

(iii) whether the distribution is alleged to be a distribution of -

(b) In so far as the respondent relies on s. 260 of the Income Tax Assessment Act, the following particulars -

(i) identify the contract, agreement or arrangement alleged to be void as against the Commissioner; and, in so far as the same is not in writing, state the terms thereof, and if it be inferred from circumstances, what are the circumstances; and in each case indicating the part or parts thereof and the steps taken thereunder which are alleged to be void under s. 260;

(ii) identify the parties to or participants in it and, if participation is said to be by or through agents, identify those agents.

Appellants to have general liberty to apply to the Supreme Court of New South Wales for such further orders as may be appropriate. Respondent to pay appellants' costs of the application to that Court.

The facts relevant to the resolution of this appeal and the crucial history of the matter are fully set out in the reasons for judgment prepared by my brother Aickin which I have had the advantage of reading. I fully agree with the conclusion my brother expresses and with the reasons he has given for that conclusion.

I wish to add to those reasons a brief comment of my own.

The assessment to which, for example, ss. 161, 168, 169, 170 (2) and 190 (b) of the Income Tax Assessment Act 1936 as amended ("the Act"), refer, is not the notice of assessment served upon the taxpayer pursuant to s. 174 or the amount of money of which payment is required by such a notice. The assessment of income tax is the process of applying the Act to a state of fact. The duty of the Commissioner is to assess the tax upon the material contained in the return or otherwise in the possession of the Commissioner (s. 166), there being provision in s. 167 for the Commissioner himself to determine in the given circumstances the assessable income of the taxpayer. It is that process of assessment which, by virtue of s. 190 (b), an appellant taxpayer must satisfy the Board of Review or an appellate court is "excessive". If some step in that process which affects the amount of tax lacks the authority of the Act the assessment is "excessive": and the powers of s. 195 or of s. 199, as the case may be, become available.

I have elsewhere indicated, and now confirm, that, in my opinion, it is that process which must be exposed to the Court and with which the Court is exclusively concerned in an appeal by the taxpayer. The Act confers on the Commissioner the power and duty of assessment. It does not confer them upon the Court. It is, of course, otherwise in the case of the Board of Review: see ss. 192 and 193. Thus, the power of the Court given by s. 199 is not a power of initial assessment but a power to correct error in the process of assessment adopted by the Commissioner, the Court being enabled to rectify the error by taking one of the appropriate courses specified in s. 199.

Once these fundamental considerations are observed, it becomes obvious, in my opinion, that the attitude adopted by the Commissioner in the instant case is clearly untenable. Of course, as was submitted, s. 260 is a self-operating provision, in particular not dependent on the opinion of the Commissioner. But the process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner. He must of necessity, as part of that process, adopt a view of the relevant facts. They must be facts which disclose a taxable income. If those facts are the result of the operation of s. 260, the Commissioner must observe and act in his assessment upon that operation. Hence the identification by the Commissioner of that contract, agreement or arrangement which the section has avoided is indispensable to the formation of the view of the facts which are the basis of the assessment. Those are what I might call the taxable facts which avoidance by s. 260 of the contract, agreement or arrangement has exposed.

Quite clearly, the taxpayer is entitled to know the basis on which the assessment has been made. An adjustment sheet supplied with the notice of assessment can be expected to state and should state that basis. The taxpayer should be told the taxable facts. This inevitably, in my opinion, requires the Commissioner to inform the taxpayer of the operation of s. 260 which has warranted the adoption of his view of the taxable facts. This involves the identification and disclosure of the contract, agreement or arrangement which has been treated as avoided by s. 260. It will, of course, be permissible for the Commissioner in an appropriate case to have adopted alternative views of what is the avoided contract, agreement or arrangement, assuming that on either alternative the notified amount of tax results. But the Commissioner must, in my opinion, be specific in his identification of the contract, agreement or arrangement, and if in the alternative each contract, agreement or arrangement which justifies the amount of the assessment.

The considerable reliance placed by the Commissioner in argument upon this Court's decision in George v. Federal Commissioner of Taxation [14] , was in my opinion, misplaced. In that case, an unsuccessful endeavour was made to obtain details of the assessment of assessable income made by the Commissioner under s. 167 of the Act. This element of the process of assessment in the particular circumstances was not an application of the Act to a factual situation: on the contrary, it was an exercise of the Commissioner's power to determine the principal fact to which the Act should be applied. The situation dealt with in that case bears, in my opinion, no resemblance or analogy to the situation to which the Court must apply itself in this. Consequently, I find no need in this case to discuss the reasons advanced in that case for the result attained in it. As the decision stands at present a statement by the Commissioner in his adjustment sheet of the assessable income as determined by him would be a sufficient compliance with what I have earlier said was the Commissioner's obligation in informing the taxpayer of the basis of the assessment.

I have had the advantage of reading the reasons for judgment prepared by my brother Aickin. I agree with them and would add only a few remarks.

Broadly speaking, the argument advanced on behalf of the Commissioner is put in two ways. The first branch of the argument rests on a sound basis - namely that s. 260 of the Income Tax Assessment Act 1936 Cth is part of the law which the court must apply to the facts whether or not the Commissioner invokes its operation. That being so, it is said that any views that the Commissioner holds as to the application of the section to the circumstances of the case, and any facts on which he bases those views, are irrelevant. It is further suggested that the administration of the revenue laws might be hampered if the Commissioner were required to give particulars, because the Commissioner might commit himself to some view of the operation of the section or of the facts when another view, more favourable to the revenue, might appear and ought to be acted upon. The second branch of the argument is that the facts in a case arising under s. 260 are peculiarly within the knowledge of the taxpayer who, for that reason, is not entitled to particulars.

Particulars fulfil an important function in the conduct of litigation. They define the issues to be tried and enable the parties to know what evidence it will be necessary to have available and to avoid taking up time with questions that are not in dispute. On the one hand they prevent the injustice that may occur when a party is taken by surprise; on the other they save expense by keeping the conduct of the case within due bounds. These considerations are no less important in revenue cases than in other cases. A taxpayer who comes to court in a case in which it is suggested that s. 260 applies is, as a matter of justice, entitled to know what case it is that the Commissioner intends to raise against him. The circumstance that s. 260 must be applied to the facts whether or not the Commissioner holds any opinion on the subject provides no reason why the issues of fact arising in the case should not be defined. The fact that the taxpayer bears the onus of proving that the assessment is excessive makes it all the more necessary that he should be given particulars of the basis of the assessment - cf. R. v. Associated Northern Collieries [15] . The Commissioner is not likely to be disadvantaged by supplying particulars. In an appropriate case no doubt particulars may be framed in the alternative and if the Commissioner's particulars prove to be too narrow or to be erroneously stated the court may allow him to depart from them if the interests of justice require such a course - cf. Mummery v. Irvings Pty. Ltd. [16] .

1. (1910) 11 C.L.R. 738, at p. 741. 2. (1956) 96 C.L.R. 99, at p. 110.

The facts in a case arising under s. 260 are not necessarily all within the knowledge of the taxpayer. However, it is a misapprehension to think that the only function of particulars is to reveal to a party facts of whose existence he is unaware. As I have indicated, particulars have the important function of informing a party of the nature of the case he has to meet and of limiting the issues of fact to be investigated by the court.

The question whether and what particulars should be ordered is one within the discretion of the court. In the present case the learned primary judge indicated that he thought that the taxpayer was morally entitled to particulars but that legally there was no power to order them to be given. In these circumstances this Court may exercise the discretion that the learned primary judge thought was not available to him.

I would allow the appeal and make an order for particulars.

In my opinion the appeal should be allowed and the Commissioner should be ordered to provide particulars of the basis of the assessments, including the more detailed particulars set forth in the reasons for judgment prepared by Aickin J. Except as to one aspect of the case I do not wish to add to the reasons given by Aickin J. for this conclusion.

During the course of argument it was submitted that the Commissioner should be accorded some special immunity from particulars on the ground that to expose him to an order for particulars would in some undefined way prejudice or inhibit the collection of the revenue. It was suggested that public-spirited citizens who have hitherto zealously reported to the Commissioner instances of tax evasion by their fellow citizens would henceforth maintain a stern silence if the shroud of secrecy presently cloaking their communications is swept aside by an obligation imposed upon the Commissioner to give particulars. The suggestion is completely misconceived. An order for particulars does no more than require the Commissioner to furnish in advance of the hearing particulars of the case which he intends to present in court. Such an order does not require the Commissioner to disclose the evidence by which he proposes to support his case or the source of information which comes into his possession. As it is the function of particulars to indicate the nature of the case to be presented at the hearing, they cannot involve the Commissioner in the disclosure of information which would not be revealed in court at the hearing itself.

There is therefore no foundation for the notion that the Commissioner stands apart from ordinary litigants in some special position in relation to the giving of particulars. Like any other litigant he may be ordered to give particulars in an appropriate case, that is, when they are required so that the other party to the litigation, and for that matter the court itself, may be acquainted with the nature of the case that is intended to be presented, so that the issues to be determined may be defined. To conclude otherwise would result not merely in injustice to the taxpayer, who will remain in doubt as to the Commissioner's case until it is presented at the hearing, but also in unnecessary preparations and in a hearing of unnecessary length as the taxpayer endeavours to deal with matters on which, as it may subsequently transpire, the Commissioner is placing no reliance whatsoever.

To this it is not an answer to say that all the relevant facts are within the knowledge of the taxpayer. Although, speaking generally, the taxpayer knows or should know the facts relevant to a correct assessment of his income, there are other facts which will be relevant on the hearing of an appeal. Under s. 190 the taxpayer bears the onus of showing that the Commissioner's assessment is excessive. Consequently the relevant facts in the appeal include the view of the facts on which the Commissioner has based his assessment, the manner in which he has arrived at his assessment. These facts are not within the knowledge of the taxpayer; they are within the knowledge of the Commissioner.

Indeed, there is very much to be said for the view that fairness to the taxpayer demands that the Commissioner should be compelled to give particulars of his assessment when it issues so that the taxpayer is adequately informed as to the manner in which the assessment has been arrived at and may then determine whether he will object to the assessment and subsequently appeal. But that is a matter for the legislature. It goes quite beyond the scope of this case where we are concerned with the giving of particulars in litigation after an appeal has been instituted.

A court has inherent power to order particulars. It is far more usual to order particulars of an allegation or claim which the party advancing it bears the burden of proving than particulars of a matter which may be alleged without undertaking the burden of its proof; but this is so because the latter case is comparatively rare. The present is such a case because of the operation of s. 190 (b). But rules or practices as to particulars must be sufficiently flexible to allow all parties to an action or matter to meet with necessary evidence and without delay to court processes questions which may be raised at the hearing. Their purpose is to concentrate and define the issues of fact and to prevent surprise and consequent delay.

At the same time it must be borne in mind that particulars do not constitute a pleading and do not ordinarily define issues of law. They must tend to advance the clear and speedy determination of all the questions which fall to determined. They are not a net in which the ready and comprehensive determination of the ultimate issue can become enmeshed and delayed.

Although particulars are essentially particulars of fact and not of law, when there are no sufficiently defined issues it is not always possible to obtain particulars of facts without first ascertaining whether those facts will be relevant to questions which may be raised. In the present case it is therefore necessary for the taxpayer and the Court to know the basis of the assessments. Particulars in this sense have been given by the Crown Solicitor in his letter of 18th February 1976. The sums, it is stated, are included in the assessable incomes of the taxpayers by the operation of s. 260. By the adjustment sheets it is further stated that the income is a proportion of a distribution of money made by Bailey Holdings Pty. Ltd. on 28th April 1969. That is all the taxpayers have been told. It is not enough to enable them to present to the court on their appeals any comprehensive or coherent case in rebuttal of the Commissioner's claim that they derived assessable income from a distribution which was made by Bailey Holdings Pty. Ltd. on 28th April 1969. Particulars are needed which will define the manner in which s. 260 is claimed by the Commissioner to have operated so that payments made by Bailey Holdings Pty. Ltd. on 28th April 1969 were income of the appellants. What payments? To whom in fact - the taxpayers or to another or others? What contract, agreement or arrangement, or part or parts thereof, will the Court be asked to find void as against the Commissioner whereby payments by Bailey Holdings Pty. Ltd. on 28th April 1969 come to be treated as payments to and assessable income of the appellants? Further, it is necessary to define the facts which may be said to show, or tend to show, a purpose of any or all of the kinds referred to in s. 260. The purpose or purposes may be sought to be inferred from the impugned contract, agreement or arrangement. If so, this should be stated; but if the purpose is to be said to appear from other circumstances, those other circumstances should be made known.

I would only add that I agree with the reasons given by Aickin J. for concluding that particulars may properly be required of the Commissioner in this case, and I agree with the form of order proposed.

This is an appeal in six different matters heard together by Helsham J. in the Supreme Court of New South Wales, Administrative Law Division, in which an application by the appellant taxpayers for orders for particulars and discovery of documents was refused. This Court on 30th April 1976 granted special leave to the appellants to appeal from that decision.

In respect of the income year ended 30th June 1969 each of the taxpayers lodged returns of income showing either a small loss or a small taxable income. By notice of assessment dated 2nd March 1971 each of the taxpayers was assessed by the Commissioner to tax on a substantially larger income than shown in the relevant return. Each of the notices of assessment was accompanied by an adjustment sheet issued by the Commissioner which, so far as material, read as follows:

Taxable income as returned Loss $196 Add Income derived by you being your proportion of the distribution by Bailey Holdings Pty. Limited as follows: Amount of Distribution $411,920 Date of Distribution 28 April 1969 Your Taxable Proportion $77,235 77,235 77,039 Less Life Assurance now allowed 537 Taxable income as shown in attached notice $76,502

Other amounts described in the same manner were shown in the alteration sheets sent with the notices of assessment in respect of each taxpayer. Each of the taxpayers had been a shareholder in Bailey Holdings Pty. Ltd. during the year ended 30th June 1969, but had disposed of his shares during that year. Each of the taxpayers lodged a notice of objection within due time. In substance the notice of objection stated that the amount referred to in the alteration sheet was not income and was not derived from a distribution by Bailey Holdings Pty. Ltd., but was in fact the proceeds of sale of shares in that company. The objections further stated that the shares had not been acquired for purposes of resale at a profit and that the taxpayer was not engaged in the business of share dealing. It further stated that s. 260 had no application and that the taxpayer was not a party to any contract, agreement or arrangement falling within the terms of that section. Further detailed objection was taken to the amount of the distribution attributed to each taxpayer but the details are not presently material. An objection was also made in respect of the imposition of a penalty by the Commissioner but again that is not the matter material at the present stage.

The Commissioner disallowed the objections and on 6th June 1973 and 23rd July 1973 notices were given by the taxpayers requesting that each objection should be treated as an appeal and forwarded to the Supreme Court of New South Wales. On 9th December 1975 the Commissioner transmitted the objections to the Court.

In the course of correspondence with the Commissioner and interviews with officers of his department representatives of the taxpayers sought information as to the basis of the Commissioner's calculation and of the assessment itself. They were informed that the Commissioner was relying upon the operation of s. 260 and that:

it was considered that there was an arrangement of the type against which s. 260 of the Income Tax Assessment Act operates. When this arrangement was set aside by the operation of s. 260, a situation was disclosed which left the Bailey shareholders liable for assessment on the distributions made on 28th April 1969. The Commissioner stated: it is not considered that this office is under any obligation at this stage to furnish a precise detailed statement setting out the form of the arrangement which the Commissioner took the view was set aside by s. 260 of the Act. After the matters had been referred to the Court the appellants' solicitors again requested from the Crown Solicitor the following particulars:

(1) details of "the facts gathered by the Commissioner" on consideration of which "it was considered that there was an arrangement of the type against which s. 260 of the Income Tax Assessment Act operates";

(2) what is the "situation" which is alleged to have been disclosed and to have left the Bailey shareholders liable for assessment on the distributions made on 28 April 1969 when this alleged arrangement was "set aside by the operation of s. 260";

(3) if they are different from the facts referred to in (1) above, details as to "the facts" which allegedly "indicated the existence of an arrangement such as would be set aside by the operation of s. 260".

The reply to that request, so far as material, stated:

As all the facts in relation to the sale by the appellants to Fondulac Pty. Ltd. are peculiarly within the knowledge of the appellants and in the light of the foregoing, it is considered that the Commissioner is not required to provide any further particulars in relation to the assessment.

Thereafter, the taxpayers applied to Helsham J. for particulars and for discovery, and that motion was supported by affidavits relating the history of the correspondence and discussions, and to some extent the transaction under which the taxpayers had disposed of their shares. When the matter came before Helsham J. the Commissioner contested the taxpayers' right to obtain an order for particulars and for discovery.

The judgment of Helsham J. set out the history of the transactions in so far as known to the taxpayers and it is not necessary to refer in detail to those facts. They were produced on the application for particulars only and are not necessarily all the facts which would be before the Court upon the hearing of the appeal. It was submitted by the taxpayers to Helsham J. that they were entitled to know what the alleged arrangement under s. 260 was and what was it that the Commissioner contended was avoided and the end result thereby revealed.

Helsham J. referred to the authorities which show that s. 260 is "self-executing" and does not depend upon any exercise of discretion or the formation of some particular opinion by the Commissioner. These principles are not in doubt but it was sought to draw the conclusion that the Commissioner is not required to indicate in advance what case he proposes to make out so that the taxpayer can know what evidence he should adduce.

There have been a number of cases in which the question of taxpayers' entitlement to particulars from the Commissioner in proceedings by way of what is called an appeal under s. 187 (b) of the Income Tax Assessment Act and I refer to these cases below. From these cases the learned judge concluded that, although in a case where under the Act an opinion formed by the Commissioner, or his state of mind, is the basis of an assessment different considerations might apply, in other cases there was no right to obtain particulars. He said Giris Pty. Ltd. v. Federal Commissioner of Taxation [1] ; Krew v. Federal Commissioner of Taxation [2] and Kolotex Hosiery (Australia) Pty. Ltd. v. Federal Commissioner of Taxation [3] were all cases of the former kind and that in such cases the court may be in a position to order the provision of such particulars prior to the hearing. The learned judge concluded as follows:

In my view it has not been established that the opinion of the Commissioner and the facts upon which it is based is and are in any way relevant to the appeals before the Court. If the facts upon which the appeals will be heard and determined require, in the interests of justice, particulars to be furnished or discovery ordered, then that can be dealt with in due course, as can any problem, if it arises, such as that which caused Windeyer J. in the Casuarina Case [4] to seek elucidation of how the Commissioner intended to put his case. Consequently, the motion for particulars and discovery fails. In my view it fails as a matter of principle. It is unnecessary for me to express any view therefore as to whether the motion is premature. 1. (1969) 119 C.L.R. 365. 2. (1971) 45 A.L.J.R. 249. 3. (1975) 132 C.L.R. 535. 4. (1971) 127 C.L.R. 62.

In argument before this Court it was submitted for the Commissioner that there was a power in the Court to order particulars where the opinion of the Commissioner was an element in the assessment but that in cases where the assessment was in no way dependent (pursuant to some provision of the Act) upon the formation of a particular opinion by the Commissioner, there was no power to order particulars. It was said that the views which the Commissioner entertained and the facts he may have had before him were not in any way in issue before the Court. It was said that the only issue before the Court is whether the assessment is excessive and George v. Federal Commissioner of Taxation [5] was relied upon. Accordingly, as no direction was involved on the part of the Commissioner in issuing an assessment in reliance upon s. 260, there was no right in the taxpayer to obtain particulars. It was argued that each of the cases in which particulars had been ordered could be explained on the basis that the Commissioner's state of mind was involved.

In my opinion this analysis of the cases mistakes the individual application or illustration for the principle itself. Whatever the position may be at the time of the issuing of a notice of assessment and whether or not it is correct to say, as Williams J. said in H. R. Lancey Shipping Co. Pty. Ltd. v. Federal Commissioner of Taxation [6] , that the Commissioner is under no obligation to furnish an "alteration sheet" indicating the adjustments which he has made to the taxable income as returned whether by way of addition of income or denial or allowable deductions, when an appeal comes before this Court or a Supreme Court from the Commissioner's disallowance of an objection, the position is quite different. Under ss. 187 and 196A such appeals go to the Supreme Courts of the States, and until regulations are made, are conducted under the High Court Rules which provide by O. 65, r. 2 that, subject to that order, the provisions of other orders also apply to taxation "appeals", which are of course in the original jurisdiction. It has not been the practice in this Court to require pleadings in taxation appeals, though it may well be that the rules are wide enough to enable this to be done. (See the definitions of plaintiff, defendant and proceeding in O. 1, r. 5 and the terms of O. 20.) In the absence of pleadings, the provisions of O. 20, r. 6 may not be directly applicable but in my opinion this Court and the Supreme Courts of the States hearing taxation appeals have inherent jurisdiction to require parties to give particulars if it appears just to do so. The fact that a proceeding may go forward without pleadings does not deprive the Court of such control as is necessary to ensure that the issues are defined and that each party is provided with the necessary information as to the case which he has to meet. The basis of the decision in Philliponi v. Leithead [7] applies equally in the High Court.

1. (1951) 25 A.L.J.R. 145. 2. [1959] S.R. (N.S.W.) 352.

The purpose of particulars is to assist in the defining of issues and there is in my opinion no reason why in appropriate cases the Commissioner should not give particulars where they are necessary in order that both the appellant and the court may understand the basis upon which the assessment has been made. See Spedding v. Fitzpatrick [8] , R. v. Associated Northern Collieries [9] and Astrovlanis Compania Naviera S. A. v. Linard [10] . No doubt there are many cases in which the return, the notice of assessment, the alteration sheet and the notice of objection will reveal the issues with sufficient certainty so that no particulars are necessary. This however is seldom the case where an assessment has been issued upon the basis of s. 260. To tell a taxpayer and the Court that an assessment is based upon s. 260 reveals nothing beyond the fact that the Commissioner contends that there is some contract, agreement or arrangement which falls within the ambit of that section and that either the whole or some part of it, or some step taken pursuant to it, or in the course of carrying it out, is void as against the Commissioner and that a taxable situation stands revealed by such avoidance. If no more is said the taxpayer and the Court are left entirely in the dark as to critical matters and the issues remain undefined except as to the ultimate conclusion contended for by each party.

1. (1888) 38 Ch. 410. 2. (1910) 11 C.L.R. 738, at pp. 740-741. 3. [1972] 2 Q.B. 611, at pp. 619-620.

There is nothing in the policy of the Act nor in general considerations of policy to require that the Commissioner should not inform the appellant prior to the commencement of the hearing of those details so that the case may proceed in an orderly and comprehensible manner. It is not in the interests of the proper administration of justice that, when the matter comes before the court, the appellant should have to speculate about, and adduce evidence to negate, every possible kind of agreement or arrangement and avoidance which the imagination of his advisers can conjure up. Such a process is not merely time-wasting but is likely to obscure the real issues. It is no doubt possible that in the course of the evidence facts may emerge which were not previously known to the Commissioner and which suggest that there was some contract, agreement or arrangement other than that which he had previously supposed existed and which would support the actual assessment, but that is a situation which can readily be cured by amendment and it cannot be doubted that the Commissioner would in those circumstances be permitted to amend his particulars even though he would again have to specify the details of the arrangement which he was then alleging.

An examination of the authorities does not in my opinion suggest that the Supreme Court or this Court has no power to direct the Commissioner to give appropriate particulars of the basis of the assessment. The fact that the Commissioner does not himself have to prove any particular fact and that the onus of proof rests upon the taxpayer by virtue of s. 190 cannot determine this question. There are many situations in which the party who gives a general denial to the pleading of the party on whom the onus rests may none the less be required to give particulars if the general denial really involves some positive allegation. This general principle is well established - see, e.g., Pinson v. Lloyds and National Provincial Foreign Ltd. [11] and George v. Federal Commissioner of Taxation, per Kitto J. [12] . This is exactly the case where s. 260 is relied upon to support an assessment.

1. [1941] 2 K.B. 72. 2. (1952) 86 C.L.R. 183, at p. 190.

The argument which was advanced on behalf of the Commissioner and accepted in the Supreme Court was that particulars could only be obtained from the Commissioner of the basis of his assessment in cases where the assessment was made under a section which made it dependent on the opinion of the Commissioner, or on his being "satisfied", as to some matter. It was said that in such cases the basis of the opinion must be stated by the Commissioner because otherwise the assessment would be unchallengeable in court. There has been a number of such cases in recent years where the matter has been referred to though not in all cases has an order been made. It will be sufficient to refer to them without quoting in full the material passages. See Giris Pty. Ltd. v. Federal Commissioner of Taxation, per Barwick C.J. [13] , and per Windeyer J. [14] ; Federal Commissioner of Taxation v. Brian Hatch Timber Co. (Sales) Pty. Ltd., per Menzies J. [15] , per Windeyer J. [16] and per Owen J. [17] ; Kolotex Hosiery (Australia) Pty. Ltd. v. Federal Commissioner of Taxation, per Barwick C.J. [18] . For a somewhat different approach, see Minister of National Revenue v. Wright's Canadian Ropes Ltd. [19] .

1. (1969) 119 C.L.R., at pp. 373-374. 2. (1969) 119 C.L.R., at p. 384. 3. (1972) 128 C.L.R. 28, at pp. 48-52. 4. (1972) 128 C.L.R., at p. 57. 5. (1972) 128 C.L.R., at p. 59. 6. (1975) 132 C.L.R., at p. 541. 7. [1947] A.C. 109.

It is in my opinion wrong to regard the power of the Court as confined to cases where the assessment depends upon some statutory discretion or opinion of the Commissioner. Such cases are, in my opinion, no more than illustrations of the general proposition that, when particulars are necessary to the proper conduct of litigation, they will be ordered so that the issues may be clearly defined and evidence led and argument advanced directed to those issues.

The earliest case in this Court where the question of particulars with respect to assessments arose was George v. Federal Commissioner of Taxation [20] . That was a case of a default assessment issued under s. 167 in which an endeavour was made to obtain from the Commissioner a statement as to the source of the money which the Commissioner's assessment treated as income. In the result the application failed but the present case is very different from that and there is nothing in the case which throws any light on the question of particulars in cases where the Commissioner states that the assessment is based on s. 260.

There has been a number of other cases where the question of particulars has been referred to but where no question of the Commissioner's satisfaction or opinion has been involved. See, e.g., Federal Commissioner of Taxation v. McClelland, per Windeyer J. [21] ; Spence v. Federal Commissioner of Taxation, per Windeyer J. [22] . The question of particulars in a case involving s. 260 was discussed by Mahoney J. in Master Butchers Ltd. v. Federal Commissioner of Taxation [23] , where he said that he regarded the court as having jurisdiction to order particulars, but made no order because he considered that the taxpayer had already adequate information.

1. (1968) 118 C.L.R. 353, at pp. 361-362. 2. (1969) 121 C.L.R. 273, at p. 282. 3. [1974] 1 N.S.W.L.R. 350, at pp. 357-360.

In L'Estrange v. Federal Commissioner of Taxation [24] , a case of an assessment under s. 167, Menzies J. ordered discovery by the Commissioner of all departmental reports and supporting documents upon which the betterment statements, the foundation of the assessments in question, were based and documents upon which the Commissioner had relied in forming the opinion under s. 170 (2) (a) that in relation to a year of income the taxpayer had avoided tax due to evasion. The order made was not confined to such of the assessments as were dependent upon the opinion of the Commissioner that the avoidance of tax was due to evasion.

In that case Menzies J. followed the decision of Walsh J. in Krew v. Federal Commissioner of Taxation [25] , though the latter case turned primarily upon the Commissioner's claim to privilege in relation to certain documents which were the subject of a subpoena issued on behalf of the taxpayer. Walsh J. took the view that he was entitled to examine the documents himself for the purpose of determining whether the public interest would be adversely affected by production of the documents. Although this was a somewhat different point, it dealt with what was basically the right of the taxpayer to obtain information as to the basis of the Commissioner's assessment.

In Tomlinson v. Federal Commissioner of Taxation [26] Jeffrey J. took the view that the Commissioner was not a party upon whom in an appeal under s. 187 (b) the obligation to make general discovery under O. 32, rr. 9-11 applied, but that the Court did have power under O. 32, r. 18 to order the Commissioner to discover certain particular documents or classes of documents. With respect, there does not appear to be any foundation for such a distinction and in my opinion the propositions set out in his judgment are expressed too narrowly. He did, however, conclude his review of the authorities by stating that in the exercise of its discretion the court will give paramountcy to the principle that the appellant should have the fullest particulars necessary to him to enable him to appraise the case which he has to disapprove and should have access to documents necessary for the proof by him of this case. With a general proposition expressed in those general terms I would respectfully agree.

1. (1974) 23 F.L.R. 314, at p. 322; [1974] 2 N.S.W.L.R. 186, at p. 193.

It was correctly pointed out both before Helsham J. and in this Court by counsel for the Commissioner that s. 260 is a "self-executing" provision, not in any way dependent for its operation on the opinion of the Commissioner.

Helsham J. treated cases where the opinion of the Commissioner, or his state of mind, forms the basis of the assessment as standing in a separate category and treated Giris Pty. Ltd. v. Federal Commissioner of Taxation [27] and Kolotex Hosiery (Australia) Pty. Ltd. v. Federal Commissioner of Taxation [28] as dependent entirely upon those circumstances, and accordingly refused to order the Commissioner to provide particulars. He did say however:

If the facts upon which the appeals will be heard and determined require in the interests of justice particulars to be furnished or discovery ordered then that can be dealt with in due course, as can any problem, if it arises such as that which caused Windeyer J. in the Casuarina Case [29] to seek elucidation of how the Commissioner intended to put his case. 1. (1969) 119 C.L.R. 365. 2. (1975) 132 C.L.R. 535. 3. (1971) 127 C.L.R. 62.

It does not appear to me to be a satisfactory resolution of the problem of the need for particulars to say that it can if necessary be dealt with when the appeals are heard because that is to deprive the taxpayer of an opportunity to prepare and conduct his case so as to meet what is said against him. That course has the practical defect that it is only after the evidence is all before the court that the question as to whether particulars should be given by the Commissioner could come up for decision. It appears to me that such a view involves a risk that the case may then have to be reopened and moreover in a case involving s. 260 the argument could not properly proceed without it being known what the Commissioner contended was the relevant contract, agreement or arrangement and what it was that the Commissioner relied upon as being void as against him. Such a course appears to me to be unjust to the taxpayer and inconvenient to the court.

Whatever the position may be before the appeal reaches a court of law there is no doubt that the court has power, if not directly under its rules, then under its inherent jurisdiction, to order the Commissioner to provide such particulars of the process of assessment as are necessary to enable the real issues to be ascertained before the case comes on for hearing.

There are many aspects of the Act in which the inclusion of an item of income or the disallowance of an objection by the Commissioner in a manner which departs from the return cannot be satisfactorily litigated without particulars being given by the Commissioner of the basis of his assessment. It is enough to give two illustrations in relation to assessments under s. 166. If the Commissioner were to disallow a deduction claimed by indicating merely an increase in the amount of taxable income without indicating what the relevant deduction disallowed was, it would be impossible for the appeal to proceed in the court without the Commissioner providing such particulars. Again if the Commissioner were to increase the taxable income by an addition to the amount of income without identifying the nature of the income included a challenge to such an assessment in the court could not proceed without particulars being given.

The situation therefore is in my opinion clear that the court does have power to order the Commissioner to give particulars of his assessment sufficient to enable the issues before the court to be ascertained and the proceedings conducted in an orderly and just manner. The two illustrations which I have given and s. 260 provide straightforward examples of cases where such particulars would be necessary to the proper functioning of the court and to enable the taxpayer effectively to exercise his right of appeal to the court. It is of course a matter for the court to decide in each case whether particulars should be ordered, but this is clearly a proper case for the making of an order so that the basis of the assessment and in particular the manner in which the Commissioner contends that s. 260 has operated may be understood. That knowledge is necessary to enable the taxpayer to conduct his case.

I am therefore of opinion that this appeal should be allowed and that the order below should be set aside.

In the circumstances of this case it will be appropriate for this Court, in lieu of the order set aside, to order that the Commissioner should supply to the appellants such particulars as appear appropriate at this stage, rather than refer the matter back to the Supreme Court. The nature and extent of the particulars required or which may properly be ordered will necessarily vary according to the circumstances of individual cases. Moreover in some cases it may happen that the particulars supplied are inadequate or suggest other matters in respect of which further particulars may properly be required and, if it be necessary, ordered. In the light of the material placed before Helsham J. in this case, it appears to me that this Court should, in lieu of his order, order that the respondent within fourteen days furnish to the appellants particulars of the basis of the assessments including:

(a) Particulars as to the distribution of $411,920 alleged to have been made by Bailey Holdings Pty. Ltd. on 28th April 1969 which is referred to in the adjustment sheets accompanying each of the notices of assessment of the appellants in respect of the year of income ended 30th June 1969 - (i) the form or nature the distribution is alleged to have taken; (ii) to whom and by what means the distribution is alleged to have been made; (iii) whether the distribution is alleged to be a distribution of - (a) money; or (b) other, and if so what other, property.

(b) In so far as the respondent relies on s. 260 of the Income Tax Assessment Act, the following particulars - (i) identify the contract, agreement or arrangement alleged to be void as against the Commissioner; and, in so far as the same is not in writing, state the terms thereof; and if to be inferred from circumstances; what are those circumstances; and in each case indicating the part or parts thereof and the steps taken thereunder which are alleged to be void under s. 260; (ii) identify the parties to or participants in it; and if participation is said to be by, or through, agents, identify those agents.

In addition the appellant should have general liberty to apply to the Supreme Court for such further orders as may be appropriate.