REASONS FOR JUDGMENT
1 Application has been made by the applicant in each of the following taxation appeals for the determination of separate questions. The appeals concerned are those of:
QUD 388 of 2011 - Blues Proprietary Limited;
QUD 402 of 2011 - Jeffrey Pascoe;
QUD 403 of 2011 - Adrian Pascoe;
QUD 404 of 2011 - the Executor of the Estate of Anne Pascoe; and
QUD 416 of 2011 - the Trustee of the Ferry Family Trust.
2 Those applicants and the Commissioner are agreed that in any event the taxation appeals concerned ought to he heard together. What is controversial is whether, in hearing those appeals together, there ought to be separate questions determined prior to hearing all of the issues raised by the grounds of objection? Those separate questions have come to be refined in a letter sent by the solicitors for the various applicants to the Commissioner on 1 February 2012.
3 The applicants have proceeded on the basis that the interlocutory application, as originally filed, should be read as if the separate questions sought for determination are these:
1. Whether any of the following notices of assessment for the 2000 year of income was an original assessment or an amended assessment:
(a) Blues Proprietary Limited, issued 3 December 2010;
(b) Trustee of the ferry Family Trust, issued 3 December 2010;
(c) Jeffrey Pascoe, issued 12 December 2010;
(d) Adrian M Pascoe, issued 14 December 2010; or
(e) Executor of estate of Anne Pascoe, issued 23 February 2011?
2. If an original assessment, was it issued within the time under s 171A(1) of the Income Tax Assessment Act 1936 (Cth) (1936 Act)?
3. If not issued within time, was an opinion formed under s 171A(2) before the issue of the assessment?
4. If so, was the s 171A(2) opinion properly formed in the absence of consideration of Lawrence v Federal Commissioner of Taxation (2008) 70 ATR 376 per Jessup J?
5. If not, could an opinion formed in August 2011 be relied upon under s 169A(3);
6. If an amended assessment, questions 3, 4 and 5 arise in relation to an opinion under s 170(2).
4 Upon the hearing of the applications those separate questions were further refined to the extent that it was not contested that there had been an opinion formed but rather the issue was whether the opinion was one formed under s 171A(2)?
5 There is power under the Federal Court Rules 2011 (Cth) (Federal Court Rules) to order that a question arising in a proceeding be heard separately from any other questions: see r 30.01 of the Federal Court Rules. That rule had earlier analogues, both in the rules at this Court and in the rules of other courts. In respect of such a rule, Kirby and Callinan JJ observed in Tepko Pty Limited v Water Board (2001) 206 CLR 1 at paragraphs 168 to 170:
168 … In Perre v Apand Pty Ltd [(1999) 198 CLR 180], attention was drawn to difficulties that can be caused when that course [determination of a separate question] is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.
169 The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests.
170 Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question.
6 In this Court, Branson J in Reading Australian Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 collected together various authorities and sets in a helpfully comprehensive, summary considerations which are taken into account in deciding whether or not a separate question should be tried.
7 For all the cautionary notes, it is certainly possible to find examples, and examples in revenue law for that matter, where the Court has been moved to order the determination of separate questions. Thus, in Darrell Lea Chocolate Shops Pty Ltd v Federal Commissioner of Taxation (1995) 30 ATR 361, Hill J, though adverting to the caution that ought to attend the determination of separate questions, nonetheless decided that there ought to be a separate trial in a sales tax appeal on the issue of whether a document which was before the Court was indeed an assessment validly made pursuant to the provisions of the Sales Tax Assessment Act (No 1) 1930 (Cth).
8 More recently, in Denlay v Commissioner of Taxation (2010) 276 ALR 675 (Denlay), I determined as a separate question whether an assessment had been lawfully made. That particular determination was the subject of a discrete appeal to a Full Court of this Court albeit an unsuccessful one: see Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412. The point of mentioning Denlay is that it exemplifies how the determination of a separate question can elongate rather than truncate the time within which all of the issues in a taxation appeal are determined; and that even though good reason existed at the time in the particular circumstances of that case for determining a separate question.
9 Here, the determination of separate questions is likely, in my opinion, to have about it the vice, at least potentially, of elongating rather than truncating the determination of the controversies as between the various applicants and the Commissioner as raised by the various objections. The question of whether or not there was fraud or evasion and occasion for the formation of an opinion in that regard intrudes upon many, if not most, of the taxation appeals in one way or another. That is not to say that all issues are common to all appeals.
10 The Commissioner's contention is that the questions of the validity of the assessment concerned are attended, or so he submits are attended, with subtle differences:
(a) As to proceedings QUD 388 of 2011, it is submitted it is not necessary to consider whether any opinions were formed under s 170 of the 1936 Act in relation to the 2000 and 2003 years because the Commissioner was authorised to issue the disputed assessments under s 171A(1) of that Act and those assessments are original rather than amended assessments. That may or may not be correct. There is a further question as well which is, in the event that the Commissioner did in fact form an opinion as to fraud or evasion, as to whether, in light of s 171A(2) of the Act, properly construed, s 171A(1) had no application?
(b) As to QUD 416 of 2011, the Ferry Family Trust proceeding, the Commissioner's submission is that it is likewise not necessary to consider whether any opinion was formed under s 170 as he was authorised to issue the disputed assessment under s 171A(1) and that assessment, too, was an original rather than an amended assessment. Once again, a question as to the meaning and effect of s 171A(2) may intrude in light of submissions, made on behalf of the applicants, in the event the Commissioner, in fact, formed an opinion as to fraud or evasion.
(c) The Commissioner's alternative submission was that he was entitled under s 171A(2) to issue these assessments as an opinion in respect of fraud or evasion was formed as a matter of fact in each case. The Commissioner's position is that the applicant's material does not demonstrate any relevant error in the formation of the opinions.
(d) As to Blues Proprietary Limited's appeal in relation to the 2004 year, in each of the other proceedings the Commissioner's position is that the disputed assessments are amended assessments in each instance. His submission is that he was entitled to issue those assessments as an opinion as to fraud or evasion was formed in each case as required by s 170(2)(a).
11 The Commissioner's further position is that here, too, there is no demonstrated basis for any error in relation to the formation of those opinions.
12 It is not necessary to consider for the purposes of today's application the Commissioner's further submission as to the foundation of the application being grounded in part in inadmissible and argumentative assertions found in the affidavit of Mr Collie relied upon by the applicants.
13 In relation to the formation of an opinion by the Commissioner, an applicant in a taxation appeal carries the onus of proving that an assessment is excessive. One way of so doing is to show that a necessary precondition for the making of an amended assessment did not exist. Excluded from that type of challenge, having regard to the High Court's judgment in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 would be a ground of challenge on the basis of maladministration or absence of good faith. That aside though, in relation to an amended assessment which is grounded upon the formation of an opinion as to fraud or evasion, the Commissioner's opinion is not incontestable in a taxation appeal: see Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 (Avon Downs); Federal Commissioner of Taxation v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 at pp 57, 58 and 59 and Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation (1975) 132 CLR 535. It falls on a taxpayer in respect of such an opinion first to demonstrate that the formation of the opinion was attended by an error of law such as the taking into account of an irrelevant consideration, the failure to take into account a relevant consideration or a misconception as to the true meaning of the statutory touchstone which is fraud or evasion. In the event that an error of this kind is established and as was stated in Avon Downs, the appellate court may exercise its own discretion in substitution for his, that is, the Commissioner's, if it has the materials for doing so.
14 Unlike the first step in a challenged formation of an opinion, the Court's formation of an opinion may be formed by reference to the whole of the evidence before the Court, as opposed to just the evidence which was before the Commissioner. Apart from the authorities mentioned, Drummond J made just this point in applying them in Kajewski v Commissioner of Taxation (2003) 52 ATR 455 at [107].
15 There are certainly a number of discrete questions both of fact and law raised by the grounds of objection, highlighted in the application made today, which will fall for the determination of the Court in the taxation appeals. When one recalls though that, even if it is demonstrated in particular cases that some error attended the Commissioner's formation of the opinion, the Court may, and has been submitted on behalf of the Commissioner today will, be urged to form its own opinion by reference to the whole of the material, the absence of utility in the determination of separate questions becomes apparent. That is so, even though, in respect of particular taxation appeals, these are discrete statutory construction questions.
16 As I have already observed, the parties are at one that the appeals are most economically heard together. It seems to me that the interests of justice are such that all of the questions in the taxation appeals concerned should be heard together. I have the very strong impression that a piecemeal determination in these appeals will confer benefits that are more apparent than real. For these reasons the applications are dismissed.
17 I do not see any particular reason why I should reserve the costs. It may or may not be the case that it transpires that I hear the appeals, as opposed to another judge hearing them. Were it the case that another judge were to hear them that judge might quite justifiably form the view that the judge who determined today's interlocutory application was in the best position to determine how the costs of those applications should be determined. In my view there is no reason why costs of the interlocutory applications should not follow the event.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.