MERCANTILE CREDITS LIMITED v THE COMMISSIONER OF

Income Tax Assessment Act 1936, ss. 128G, 128H, 128P

MERCANTILE CREDITS LIMITED v THE COMMISSIONER OF TAXATION FOR THE COMMCNWEALTH OF AUSTRALIA

MERCANTILE CREDITS LIMITED v THE COMMISSIONER OF TAXATION FOR THE COMMONKEALTH OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY

BETWEEN MEPCANTILE CREDITS LIMITED Applicant No. G 60 of 1935 AND: THE COMMISSIONER OF TAMATION FOR THE COMMONWEALTH OF AUSTRALIA Respondent BETWEEN : MERCANTILE CREDITS LIMITED Applicant No. G 61 of 1985 AND: THE COMMISSIONER OF TAXATION FOR . THE COMMONWEALTH OF AUSTRALTA Respondent MINUTE OF ORDER JUDGE MAKING ORDER Morling J. DATE OF ORDER 29 August 1985 WHERE MADE sydney THE COURT ORDERS AS FOLLOWS: l. Objections to competency overruled. 2. Costs reserved. NOTE: Settlement and entry cr orders 13 dealt

THE COMMISSTONER OF TAYATION FOR THE COMMONWEALTH OF AUSTRALIA

PEASONS FOR JUDGMENT in these applications under Decisions (Judicial Sevisiy Act 1277 the

Commissioner sf Taxation 2r applicant on loans made tc The Commissicner asserts

velstion to interest payable Sy the it by non-residents of Australia. Chat the loans were raised in

loans is not interest to which s$.128G of the Income Tax

Assessment Act, 1936 applies. For that reason he has refused

to issue certificates under 5s. 128H of that Act. In the absence of such certificates withholding tax is payable on the

interest on the loans paid to the non-residents (5s. 128G(7)).

alleged to have made are decisions to which the Judicial Review Act applies. As to some of the decisions, he claims that they are not decisions of an administrative character and that, in any event, the applications to review those decisions are made out of time. The principal decisions which the applicant seeks to have reviewed are decisions by the Commissioner refusing to issue certificates that the loans comply with the requirements of 3,128H(2) of the Insome Taz

Assessment Act. The Commissioner concedes that these

decisions would be reviewable under the Cudicial Feview Act

were it not for the fact that they are decisions wh

applies" when read with para. (3) as to exclude from the speration of the Act decisions forming part of the process of making, or leading up to the making of, assessments or

The Commissioner has therefore filed a notice of ebyection to the competency of the applications. He also asserts that adequate provision is made in the Income Taz

Assessment Act for the applicant to seek a review by the

Supreme Court ocr by a Board of Review of his decisions to

refuse to issue the certificates, Accordingly he submits

jurisdiction to determine the applications, it should refuse to grant them in the exercise of the discretion vested in 1t by

I have been invited by counsel for the Commissioner to determine at,this stage of the proceadings only the question of

'the competency of the applications and whether, whatever the oO

rits of the applicant's argument as to the correctness of the

Commissioner's decisions, relief should be refused in the exercise of tne court's discretion. I have agreed to take

this course anc have therefore heard argument cnly on those

During the courses of argument 1c apreared that the questicns which presently arise for ccnsideratzon can be conveniently determined having regard only tc the fasts concerning the making of the Commissioner's decisicns to refuse to issue the certificates. If it is held that those decisicns do not fall within para. (2) and that the court ought nct to

cling to daverminé whether chay ars corrs:t because of the

availability of alternative appellate procedures, it will ke unnecessary to consider whether the other decisions which the

Australia as a finance company. In the course of its business

it borrows money from lenders who are not residents o«

Australia. In 1982, in the course of its business, the company agreed to borrow substantial moneys from Samuel Montagu & Co, Limited and Mellon Bank N.A.. Both these corpanies are non-residents of Australia. There being no relevant difference, for present purposes, in the facts surrounding each

loan, I shal] make further reference only to the Montagu loan.

In June 1982 Montagu agreed to lend up to U.S. $5 million to Mercantile Credits. The entire amount of the loan was drawn down in ome amount on 7 September 1982. The

Australian dollar equivalent of the loan was cn-lent by

Commissioner for a certificate under 3s. i28H(2) of the Income

Tax Assessment Act in respect of the tiontagu loan, 30 as to

ensure that withhclding tax would not be payable on "he

interest on the loan py reason of the provisions of s.1286.

"1286 (1) This section applies to interes in respect of a loan where -

(b) if the loan was raised by the issue of bearer debantures, the debentures were issued outside Australia by a company, the loan was raised ina currency other than the currency of Australia and the interest is or was paid outside Australia in a currency other than the currency of Australia; and

(c) the Commissioner has issued a certificate under section 128H in respect of the loan.

court only after at has been exariné3 in the Supreme Court. Otherwise, sc it was sukmitted, this court wall ke deprived of

the assistance which it would otherwis2 iotain from the Surcsere

S S co a [an rt) a bv. ur ps QaHH ur 1) cn) fag Tr ct) Fn Qa y a ra) Q my) ow am B un uw c be pay te ur wm te uoi by fa. ed o) fu u

persuasive tc lead the court ta decline jurisdicticn and leave

the applicant to pursue the alternative remedies spen to hi.

refuse to issue the certificates were based upon the opinicn

formed on a nice question of law arising under s. 128G(3 the Income Tax Assessment Act. The answer to the que will depend upcen the application of the Act to the Montagu Mellon Bank loan documents. It is agreed by counsel that

question can be argued within the space of a morning.

material necessary to determine the point 215 already before the

applicant to follow the procedures laid down in 3.128P would

l2ad te unnecessary delay and increased expense. The onu showing that the court should not exercise its jurisdi

under the Jydicial Review Act lies upon the respsndent

Kelly v Coats (1981) 35 ALR 93 at 94) and I do not think onus has been discharged. The court will therefore hear

I certify ih. v vais and the sixteen (1b) precedi: ¢ p.gus are 2 true copy of the Reasceus lus oto "seat herein of his Honour Mr. Justice Morling.

Administrative Law - Judicial Review - Commissioner of Taxation - withholding tax - decisions of Commissioner to refuse to issue certificates under $.128H of Income

Tax Assessment Act - whether decisions are reviewable

under Judicial Review Act - whether decisions excluded

from review by para. (e) of First Schedule - altern- ative remedy available - discretion of court to refuse

Administrative Decisions (Judicial Review) Act 1977, 5. 10(2)(b) (ii), Schedule 1, para. (e)

Income Tax Assessment Act 1936, ss. 128G, 128H, 129P

MERCANTILE CREDITS LIMITED v THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

MERCANTILE CREDITS LIMITED v THE COMMTSSTONER GF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN: MEPCANTILE CREDITS LIMITED Applicant ' No. G 60 of 1985 AND: THE COMMISSIONER OF TAMATTON FOR THE COMMONWEALTH OF AUCSTRALIX ' Respondent ee eee BETWEEN : MERCANTILE CREDITS LIMITED Applicant No. G 61 of 3985 AND: THE COMMISSTONER OF TAYATION FOR THE COMMONWEALTH OF AUSTRALIA Respondent MORLING J. 29 August 19°95 PESCONS FOR JUDGMENT In these applications under the Simianistrative Decisicns 'Judiczral Review) Act 1977 the aprlicant seexns the review of a number of decisions said to have been made by the Commissiones of Taxation in velaticn to interest payable by the applicant on loans made ta it by non-residents of Austraiia. The Commission2r asserts that the loans were raised an Pursuance of contractual ebligations eéntered into cn or after 20 May 1982 and 'that therefore the interest payable on the

loans is not anterest to which 3.128G of the Income Tax Assessment Act, 1936 applies. For that reason he has' refused to issue certificates under s. 128H of that Act. In the absence of such certificates withholding tax is payable on the

interest on the loans paid to the non-residents (5s. 128G6(2)).

decisions to which the Judicial Review Act applies. As to some of the decisions, he claims that they are not decisions of an administrative character and that, in any event, the applications to review those decisions are made out of time. The principal decisions which the applicant seeks to have reviewed are decisions by the Commissioner refusing to issue certificates that he loans comply with the requirements of 5.128H(2) of the Income ax Assessment Act. The Commissioner concedes that these decisions would be reviewable under the Judicial Review Act were it not for the fact that they are decisicns which, he

operation of the Act decisions forming part of the ecocess of making, or leading up to the making of, assessments of

The Commissioner has therefore filed a notice of objection to the competency of the applications. He alzo asserts that adequate provision is made inthe Income Tax

Assessment Act for the applicant to seek a revisw by the

Supreme Court or by a Board of Review of his decisicns to refuse to issue the certificates. Accordingly he submits that, even if the court is of the opinion that it has qurisdiction to determine the applications, it should refuse to grant them in the exercise of the discretion vested init by;

I have been invited by counsel for the Commissioner to determine at, this stage of the proceedings only the question of

'the competency of the applications and whether, what

It is trues that the consequence of holding that the Commissioner''s decisions are reviewable under the Judicisl feview Act ais that the applicant has the alternative of challencing them under that Act or under 3,.128P of the Intime

Tax Assessment Act. However, as Fisher J. soints out in

Domaine Finance, this 13 not a reason for holding that the

decisions are within para. (4). Section 10(2)(o)(ai) of the Judicial Review Act expressly contemplates that ther2 will ke

objections to competency must be dismissed. I therefore turn to consider whether, in tne ¢@xerciss of its discretion, th court should decline tc grant relier to the applicant even if it is demonstrated that the Commissioner's decision

section 19(2)(b) (ii) provides that the court may, in

mercise oF its discreticn, refuse to grant an application made under ss. 5, 6 and 7 in respect of a decision icr 'the reason that adequate provision 15 made otherwise than under the

Judicial Review Act under which the applicant 1s entitled to

seek a review by another tribunal of that decisicn. Notwith-

standing a suggesticn to the contrary in some of che

Commissioner's correspondence with the apolicant, it 1s plain that 5s. 12S8P 1s applicable in the present case. Indeed, the

sioner's counsel did not contend otherwise. Neverthe-

less, I do not think the court should refuse to entertain the applications because of the availability of an alternatives remedy. Counsel for the Commissioner argued that the avsail-

ability of the review procedures in 5s. 128P was a powerful

reason for this court to decline to exercise jurisdiction. He submitted that the question of substance which will arises fer

consideration in the present cases should be consiizered by this

pEne assistance which 10 would otherwise cb5cain from the iucrare Court's decision I see the force of this submission ani I can well understand that, in some cases, it would be surficzrently

persuasive to lead the court ts decline jurisdiction and leave ct GoO ow DS re] a a a w is) ct ct fa) ra Cc th) U Cc fat) cr rv ii) ry

refuse to issue the certificates were based upon the opinion he formed on a nice question of law arising under s. 128G(3) of

the Income Tax Assessment Act. Tne answer to the question

will depend upon the application of the Act to the Montagu and Mellon Bank loan documents. It 15 agreed by counsel that the question can be argued within the space of a morning. The

Material necessary to determine the point is already before the

court and the court is able to decide the question expeditiously. In these circumstances to require the

applicant to follow the procedures laid down in s.128P weuld lead to unnecessary delay and increased expense. The onus cr showing that the court should not exercise its jurisdicticn under the Jydiczal Review Act lies upon the respondent (see Kelliv v Coats (1981) 25 ALR 93 at 94) and I do not think che

onus has been discharged. The court will therefore hear the

I certify thet this and the sixteen (it) precudiotd foges are a trie copy of the Reescus 1-2 Judcvent herein of his Honour