Dexcam Australia Pty Ltd v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT 1 The applicants seek an order under s 25(6) of the Federal Court of Australia Act 1976. That section provides: "The court constituted by a single Judge sitting may state any case or reserve any question concerning a matter with respect to which an appeal would lie from a judgment of the Judge to a Full Court of the Court for the consideration of a Full Court and the Full Court has jurisdiction to hear and determine the case or question." 2 Alternatively, the applicants seek the determination before trial pursuant to Order 29 of the Federal Court Rules certain questions based on facts agreed between the parties. 3 The dispute between the parties arises out of assessments in which the Commissioner set off against tax liabilities certain prescribed payment system (PPS) credits due to the first applicant. 4 The first applicant was in administration and was subject to a deed of company arrangement under Pt 5.3A of the Corporations Law. On 21 August 1996 the Commissioner submitted a proof of debt to the deed administrator claiming an amount for unremitted tax instalments for the period 1 June 1993 to 11 June 1996 together with additional taxes and penalties. 5 During the currency of the deed of arrangement, the first applicant lodged with the Commissioner income tax returns for the 1993 to 1996 income years. Upon assessment the first applicant became entitled to credits for PPS deductions for those financial years. The Commissioner set off the PPS credits, first against tax assessed to be payable by the first applicant for the 1993 to 1996 income years and, second, in part reduction of the pre‑deed debt in reliance on s 221YHG(2) of the Income Tax Assessment Act 1936 (Cth). 6 The question that arises is whether the Commissioner is in the same position as other creditors of the first applicant, with any rights of set-off being provided for by the deed and s 553C of the Corporations Law, or whether he was entitled to rely on s 221YHG(2) of the Income Tax Assessment Act to make the tax set-off. If that question were answered in favour of the applicants, that would substantially dispose of the issues of liability in the present proceedings. 7 In support of an application for an order under s 25(6), counsel for the applicant referred to the decision of the Full Court in Taylor v Commissioner of Taxation (1987) 16 FCR 212. That case concerned a bankrupt taxpayer. The Full Court reached a decision which the Commissioner in the present case would seek to maintain in relation to an insolvent company. The applicants' case is that Taylor's case is distinguishable; alternatively it should be reconsidered. 8 Without going into the matter in too much detail at this stage, counsel said that reliance by the Full Court in Taylor on the earlier High Court decision in Federal Commissioner of Taxation v Official Receiver (1956) 95 CLR 300 at 323 overlooked the change of circumstance which had occurred by the time Taylor was decided in that the Bankruptcy Act had been amended so as to bind the Crown generally and not to the limited extent to which it was bound at the time of the earlier High court case. Thus it is said that the ratio of Taylor is unclear; it may or may not be authority for the proposition that the Income Tax Assessment Act provisions constitute a code to the exclusion of insolvency legislation. 9 Another reason advanced in support of reference to the Full Court was said to be that the Commissioner would appeal an adverse decision in any event and the applicants have limited resources to conduct litigation both at first instance and on appeal. 10 The principles that underlie s 25(6) were discussed by Sheppard J in Barton v Westpac Banking Corporation (1993) 50 ALR 397. That was a case of a prosecution under the Trade Practices Act. The prosecution did not have a right of appeal and asked Sheppard J to state a case or reserve a question for consideration by a Full Court. 11 His Honour considered that a guide to the application of s 25(6) was provided by the decision of the High Court in Point v Federal Commissioner of Taxation (1970) 2 ATR 119. That case concerned the statement of a case pursuant to s 198 of the Income Tax Assessment Act. In Sheppard J's view ss 158 and 25(6) were relevantly indistinguishable. In Point Barwick CJ said (at 120): "The statute affords in my opinion the justice an opportunity, if he decides to avail himself of it, of being advised by a Full Court upon a matter of law arising in the appeal which he is hearing." In Barton Sheppard J went on to say (at 415): "Section 25(6) is a general provision relating to all matters which are before a single judge of the court. The majority of these will be civil and not criminal. Appeals will therefore lie by either party in most cases. It will only be if the judge considers that it is convenient to refer a question, perhaps because it raises unusual difficulties or perhaps because there are conflicting decisions - the list is not exhaustive - that a judge will normally accede to an application. Sometimes he will act of his own motion and not at the behest of the parties. Furthermore, if the request for the reservation of a question is by the parties, or of one of them, the judge will have an obligation to decide whether the question is proper to be referred to a Full Court. In a number of cases I have known the judge has considered it inappropriate to refer a question and has thought it preferable to decide the case himself, leaving it to the appellate processes to correct any error that has been made. These various considerations establish that under section 25(6) of the court's Act the judge has a wide discretion." 12 In exercising this discretion it is necessary to bear in mind the basic framework that the Federal Court of Australia Act enacts for litigation in this Court. Issues of fact and law are to be decided at first instance by a single judge. Generally speaking, in the case of a final order, such as would be made in the present case, the losing party has an appeal as of right to a Full Court. Considerations of orderly administration of the Court and efficient application of its resources indicate that this framework should not be lightly departed from. 13 Although I accept the present case is important not only for the parties, but for the general administration of the Income Tax Assessment Act, it is essentially no different from any case that this Court hears and in which a single judge has to resolve a question of law. There is a Full Court authority at least closely analogous. I will have to decide whether the principle in that case is binding on me. This is a familiar, indeed routine, judicial task and one which it is not appropriate in my opinion to refer to a Full Court. 14 The Commissioner has indicated that if a decision at first instance were adverse to him he would probably appeal. In this event the applicants would be severely disadvantaged in terms of resources. I sympathise with their position, but I think it would be contrary to the spirit of s 25(6) to have the decision as to reference to a Full Court in effect transferred to one of the parties who can by the unilateral declaration of an intent to appeal effectively bypass a trial at first instance. Therefore I decline to refer the matter to a Full Court. 15 The alternative application for a determination before trial under Order 29 seems appropriate. It is not opposed by the Commissioner and I will make such an order.