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[2011] FCAFC 18
Federal Court of Australia (Full Court)
2011-02-17
Mr J, Charles J, Edmonds J, Middleton JJ
Original judgment source is linked above.
HEARD IN SYDNEY (VIA VIDEO LINK TO MELBOURNE AND BRISBANE)
REASONS FOR JUDGMENT THE COURT: 1 On 8 October 2010, the Court delivered judgment and reasons for judgment in the appeal in this proceeding. On that date, the Court ordered that: 1. The appeal be allowed; 2. The orders below be varied by adding the following order: That the matter be remitted to the Administrative Appeals Tribunal for further consideration and decision in accordance with law; and 3. Any submissions as to costs should be exchanged and filed within seven days of the publication of these reasons. 2 By notice of motion dated 13 October 2010, the appellants sought to have the Court set aside paragraph [2] of these orders and to replace it with the following: The judgment of Justice Edmonds be set aside and in lieu thereof the decision of the Administrative Appeals Tribunal is affirmed. Since the orders made by the Court on 8 October 2010 had not been entered, there was no dispute that the Court could grant the relief sought: see Federal Court of Australia Act 1976 (Cth), s 23 and Federal Court Rules, O 35 r 7(1). 3 The history of this matter is set forth in our October 2010 reasons for judgment: see Bargwanna (Trustee) v Commissioner of Taxation [2010] FCAFC 126 ('Bargwanna (Trustee)') at [9]-[56]. As we noted in those reasons, the primary judge differed from the Administrative Appeals Tribunal in the approach to be taken to the construction of the introductory words of s 50-60 of the Income Tax Assessment Act 1997 (Cth): see Bargwanna (Trustee) at [64]-[68]. We did not accept his Honour's approach: see [72], observing that the interest set-off question and the trust account question were "to be assessed in the light of the wider conduct of the fund, including the subjective evidence from those who acted in its administration": see [72]. 4 We stated (at [69]) that, in our opinion, "[t]he relevant question seems to be whether, having regard to the whole administration of the relevant fund, it is to be concluded that it 'is applied' to the relevant charitable purpose". We noted (at [70]) that "it is the application of Fund assets, both capital and income, which is to be considered". We concluded (also at [70]) that "the relevant enquiry is not as to individual transactions, but as to the application of the Fund as a whole". An individual transaction was not irrelevant; rather an individual transaction was "to be analysed in the context of the administration of the Fund as a whole": see Bargwanna (Trustee) at [70]-[71]. 5 Having regard to our view of the correct approach to s 50-60, we nonetheless agreed with the primary judge that the Tribunal's decision should be set aside. We said (at [74]) that: As we see it, the Tribunal started with the proposition in para 51 that substantial compliance with the Fund's constituent terms would ordinarily provide some evidence that the Fund was being held for its intended purpose and, at least in the absence of contrary indications, would justify an inference that it "is applied" for its established purpose. That proposition may be substantially true, but it should not be treated as creating a presumption which the Commissioner had to rebut. In our view the Tribunal so treated it. We say that in light of the fact that it then proceeded to examine the various impugned transactions, concluding that each of them could be seen as justified, discounted or otherwise treated as de minimis … There seems to be no point at which the Tribunal addressed all of the evidence to determine whether or not the Fund, as a whole, was being applied to the relevant charitable purpose. As there was no consideration of the proper question, the matter should be remitted to the Tribunal. (Emphasis added) We therefore considered that the Tribunal's decision should be set aside and the matter remitted to the Tribunal for further consideration. 6 The appellants' argument on the motion challenged the statements in bold in the above quotation, upon the basis that the respondent had never made this submission and the appellants had not had occasion to address it. In written submissions and at a subsequent hearing of the motion, the appellants contended that the Tribunal had in fact addressed all of the evidence to determine whether or not the Fund, as a whole, was being applied to the relevant charitable purpose; and that there was, therefore, no utility in remitting the matter to the Tribunal for its further consideration. 7 In the present case, the reasons of the Tribunal were extensive; and its examination of the material before it was apparently thorough. Nonetheless, as we sought to explain in our earlier reasons, we doubted that the Tribunal appreciated that s 50-60 required an enquiry of the kind that we outlined in those reasons. As we sought to explain, the relevant enquiry is not dependent on a concept of substantiality, which apparently informed at least part of the Tribunal's approach. Since we formed the view that, when read fairly and as a whole, the Tribunal had not in fact asked the correct question, we considered that the matter should be remitted to it in order that it might reconsider the evidence by reference to the correct question. 8 On the hearing of the motion, the appellants explained at some length why they should have a further opportunity to support their position that the Tribunal in fact addressed the relevant question. In our opinion, however, the appellants' claim that they did not have this chance at the hearing of the appeal was ill-founded. This was because, on the appeal, the appellants had stated that the question for the Court was whether, on the facts as found, the Tribunal could properly have reached the decision that it did. The appellants' case then was that there was no relevant error in the Tribunal's decision having regard to its factual findings and its reasoning. In this context, it is difficult to see how the appellants were deprived of any relevant opportunity on the hearing of the appeal. 9 As we stated at the conclusion of the hearing of the motion, after hearing the parties, we formed the view that it would not be appropriate for us to allow further submissions as to the merits of our October judgment that the matter be remitted to the Tribunal for further consideration. We did not consider that the circumstances as disclosed to us justified permitting the appellants to reopen and reargue this aspect of their case. Bearing in mind issues raised in argument on the motion, however, we gave leave to the parties to make further submissions as to: (1) whether the Court should remit the matter to the Tribunal for reconsideration on the basis of only the evidence previously before the Tribunal; and (2) the disposition of costs.
Remittal to the Tribunal 10 The respondent argued that the Court should not limit the Tribunal's reconsideration to the material previously before it since the administrative appeal to the Tribunal was against the respondent's refusal to endorse the taxpayers as an exempt charity. Thus, so the respondent submitted on the hearing of the motion, "[w]hen the Tribunal reviews the decision of the [respondent], the Tribunal makes its decision on the circumstances as they are at the time the Tribunal makes its decision". On the respondent's case, if the matter were remitted, then there should be a full rehearing before a differently constituted Tribunal. The respondent subsequently augmented these submissions in writing. 11 We would reject the respondent's submission that, on remittal, the Tribunal should conduct a full rehearing, upon additional evidence if the parties so desire. We accept that, as the appellants argued, the question before the Tribunal was whether the Fund was applied for the purposes for which it was established during the relevant years, namely 2000 to 2007. In this regard, we note that, on the hearing of the appeal, the respondent conceded that, in this context, entitlement to tax exemption is worked out on a year-by-year basis, depending on whether the Fund is applied for charitable purposes during the relevant year. Accepting this and in view of the history of the matter, it would be appropriate to limit the Tribunal's task to reconsideration upon the basis of the evidence previously before the Tribunal. As the appellants noted, even if ultimately successful in respect of the 2000-2007 years, it would remain open to the respondent to revoke the Fund's endorsement in respect of any period after 2007 pursuant to s 426-55 of Schedule 1 to the Taxation Administration Act 1953 (Cth) upon grounds relating to the period after 2007. 12 Further, we consider that the Court has the power to make an order that would limit the Tribunal's reconsideration in this way. As the respondent pointed out, the appellate jurisdiction of the Court derives from s 24 of the Federal Court of Australia Act: see Walker v Secretary, Department of Social Security (No. 2) (1997) 75 FCR 493 at 510. By virtue of s 28 of that Act, however, in exercising this appellate jurisdiction, the Court has power "to give such judgment … as, in all the circumstances, it thinks fit". This power extends to substituting for the order of the primary judge the order that in our opinion should have been made by him in the exercise of the power conferred by s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). We accept that, as the appellants submit, subsections 44(4) and (5) of that Act enable the Court to limit a reconsideration on remittal in the way we contemplate, in order to avoid undue delay and expense. 13 In the event that the matter is remitted to the Tribunal, the appellants submitted that the Court should make an order for remittal in the following terms: The proceedings are remitted to the Administrative Appeals Tribunal to determine, in light of all the facts as found in the Tribunal's decision of 7 April 2008, and in light of any further facts which the Tribunal deems necessary to find based upon the evidence already admitted, whether or not the Fund, as a whole, was being applied to the relevant charitable purpose - in accordance with the reasons of the Full Court. We accept that this is an appropriate form of order to give effect to the limitation that we propose to make. 14 Further, we reject the respondent's submission that it would be appropriate to indicate that this matter should be reconsidered by a differently constituted Tribunal. In the circumstances of the case, where no attack is made upon the Tribunal's previous findings of fact, we see no difficulty with the same member reconsidering the remitted matter if this is convenient for the member and the Tribunal. We would leave the constitution of the Tribunal on the rehearing to the President of the Tribunal.
Disposition of Costs 15 The ordinary rule as to costs is that costs follow the event. There is no circumstance in this case that would displace the operation of the ordinary rule. The respondent has unsuccessfully sought to have the appeal dismissed and, accordingly, should pay the appellants' costs of the appeal. The appellants should pay the respondent's costs of the motion, notice of which was dated 13 October 2010, since they were unsuccessful on it. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett, Kenny and Middleton.
Bargwanna
Commissioner of Taxation