Cerche v Commissioner of Taxation

REASONS FOR JUDGMENT 1 On 13 August 2001, the applicants filed three applications in the form of Form 55D in the Federal Court Rules ("the Rules"), pursuant to O 52B r 4(3) of the Rules. In each application, the applicants appealed to the Court against appealable objection decisions of the respondent ("the Commissioner") disallowing the objection of each of them against an assessment issued to each of them for the years ended 30 June 1990, 30 June 1991 and 30 June 1992. Each application related to a separate year of income. 2 There were eleven applicants in each application, nine of whom were partners in the firm Arthur Robinson & Hedderwicks at the relevant times, and two of whom were the wives of two of those partners who were assignees of part of the interest of their husbands in the payment to which I shall refer. 3 The application in each proceeding was filed in reliance on O 6 r 2(a) of the Rules. Order 6 r 2 provides: "Two or more persons may be joined as applicants or respondents in any proceeding - (a) where - (i) if a separate proceeding were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and (ii) all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or (b) where the Court gives leave so to do. 4 The applicants contended that the claims made in each application fell within O 6 r 2(a) but, because of the time limit imposed on the lodging of an appeal against an appealable objection decision of the Commissioner: s 14ZZN of the Taxation Administration Act 1953 (Cth), they wished to ensure that there was no doubt that the applications in which there were a number of persons joined as applicants were properly constituted. 5 On 17 August 2001, the applicants filed a notice of motion in each proceeding in which they sought leave to have the proceeding continue in its present form. The more appropriate order to seek was the leave of the Court pursuant to O 6 r 2(b) of the Rules to have each of the applicants in each application joined as applicants in each proceeding. It is not a bar to the granting of such leave that it is sought after the application has been filed. Order 6 r 4 of the Rules provides: "(1) The Court may grant leave under rule 2 before or after the joinder and may grant leave under sub‑rule 3(2) before or after the non‑joinder. (2) An applicant may apply for leave under rule 2 or sub‑rule 3(2) either before or after the filing of his originating process and may apply without serving notice of the motion on any person on whom the application has been served." 6 The Commissioner did not oppose the orders sought. 7 In Carter v Commissioner of Taxation [2001] FCA 575, I held that the requirement in s 14ZZN of the Taxation Administration Actthat: "An appeal to the Federal Court against an appealable objection decision must be lodged with the Court within 60 days after the person appealing is served with notice of the decision", was not satisfied by a person wishing to appeal being given leave to be joined in an existing appeal which had been lodged prior to the application for joinder. It was not necessary in that case to consider the situation where appeals by a number of taxpayers were joined in the one application which was lodged with the Court. 8 In Krampel Newman Partners Pty Ltd v Commissioner of Taxation [2001] FCA 976, Ryan J dismissed a motion by the Commissioner seeking the dismissal of the proceeding in which nine persons had been joined as applicants in an application in which each of them objected against an appealable objection decision of the Commissioner applying to each of them disallowing each applicant's objection to an amended assessment issued to that applicant. His Honour rejected the proposition that the application was a nullity and that the jurisdiction of the Court was not attracted by any of the applicants, and held that more than one objecting taxpayer could be an applicant in a single application filed in the form of Form 55D to the Rules. His Honour was only called upon to consider whether a proceeding by way of appeal against a decision on an objection to an assessment by the Commission had to be confined to a single decision on an objection taken by a single taxpayer. His Honour was not called upon to determine whether the application by the applicants fell within O 6 r 2(a) of the Rules. Accordingly, his Honour did not consider the construction placed on a similar High Court rule by the High Court in Payne v Young (1980) 145 CLR 609. 9 Each of the appeals lodged by each of the applicants in the three applications in which they were joined as applicants arises out of an agreement made on 28 November 1989 between Dinias Pty Ltd ("Dinias"), a wholly‑owned subsidiary of Australian and New Zealand Banking Group Limited, the owner of the premises at 530 Collins Street, Melbourne, and the partners of Arthur Robinson & Hedderwicks (as the firm was then known) whereby Dinias paid $14,948,000 to the partners and the partners agreed that they would cause a company, which acted solely as a nominee or trustee of the partners, to enter into an agreement to lease premises at 530 Collins Street, Melbourne as nominee for the partners. The amount of $14,948,000 was distributed to each of the partners in various amounts. 10 Each of the applicants has claimed that the amount he or she received as a share of the amount of $14,948,000 is not assessable income under the provisions of the Income Tax Assessment Act 1936 (Cth). Issues also arise in relation to the payment such as whether the payment is assessable under s 160M(6) or s 160M(7) of the Income Tax Assessment Act and in relation to the expenses incurred by the partners in fitting‑out the premises and their former premises. Each of the applicants contends that the payment of $14,948,000 was not received by the partners of Arthur Robinson & Hedderwicks as part of their assessable income and that the specific amount which each partner received was not received as part of his or her assessable income. In particular, each applicant contends, inter alia, that: · the entry into the agreement on 28 November 1989, whereby the payment was made and the agreement to lease the premises was entered into, was not undertaken by the partners in the ordinary course of any business activity of the partners or of their firm; · the receipt of the payment was not an ordinary incident of a transaction carried out in the ordinary course of any of the business activities of the partners or of their firm; · the partners did not enter into the agreement with the intention or purpose of making a profit or gain from the transaction and the payment was not such a profit or gain. The applicants have indicated that their statement of facts, issues and contentions will be in substance the same, allowing for different dates of joining the partnership, the difference in the amount received and the difference in their respective taxable incomes. 11 I am satisfied that the Court should give leave to the applicants to be joined as applicants in each proceeding as it is appropriate that each appeal by each applicant be determined in the one proceeding. I am satisfied that each proceeding comes within the terms of O 6 r 2(a) of the Rules, as in relation to each applicant, common questions of law and fact will arise out of the agreement entered into on 28 November 1989. It is also clear that the rights claimed by each applicant in relation to relief in each proceeding are in respect of, and arise out of, the same transaction, namely the agreement entered into on or about 28 November 1989 in relation to the payment of $14,948,000 and the agreement on behalf of the partners in Arthur Robinson & Hedderwicks to lease the premises at 530 Collins Street, Melbourne. Putting the matter another way, there is a transaction to which all the applicants are a party: see Payne v Young (supra) at 614. 12 I am satisfied that granting leave will not result in unfairness to the Commissioner, who does not oppose the application, and that the applications in their present form will bring about an efficient use of the resources of the parties and the Court and are conducive to a just resolution of the issues between the parties: see Bishop v Bridgelands Securities (1990) 25 FCR 311 at 314‑315. 13 The effect of an order granting leave for the joinder of the various applicants pursuant to O 6 r 2(b), albeit after the filing of each application in accordance with O 6 r 4, is that an order is made validating the joinder of the applicants which has effect from the filing of each application on 13 August 2001: see Emanuele v Australian Securities Commission (1997) 188 CLR 114. 14 The leave which is granted pursuant to the motions filed will relate to the joinder which occurred upon the filing of each of the applications so that each of the applicants will have lodged his or her appeal, as required by s 14ZZN of the Taxation Administration Act, on 13 August 2001. 15 The order in each application will be that the applicants have leave to be joined as applicants in the proceeding, and that such leave have effect from the date of the filing of each application. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.