Consideration
17 A moving party has a prima facie right to have his or her action tried in the ordinary course of the procedure and business of the Court and, consequently, the burden is on the party seeking a stay to show that it is just and convenient that the Court interfere with those rights. Any grant of stay must be in the interests of justice overall, with each application for a stay being determined on its own merits.
18 There is a legislative policy in favour of the protection of the revenue: Deputy Commissioner of Taxation (Cth) v Gergis (1991) 22 ATR 1 per Cummins J (at 3 and the authorities therein cited). That policy is reflected in part by the legislative provisions which require payment of the tax before the appeal is pursued. It also reflects a number of presumptions in favour of the Commissioner and dictates an entitlement on the part of the Commissioner to put the taxpayer to proof on every aspect of its claim or appeal. All these legislative tools, quite properly, work in favour of the revenue and the Commissioner. Nonetheless, once the Court process of an appeal has commenced, the interests of justice require taking into account the position of all parties.
19 An application for a stay by the Commissioner does appear to be unusual. Stay applications are, from time to time, pursued by taxpayers. The prejudice to Newmont, if a stay is granted, is, of course, the delay. In reality, it is quite possible that a Full Court decision will not be known until early next year and then there will be the further distinct possibility of a High Court appeal. With the way I propose dealing with the matters, the Commissioner will incur no expense in this period of time because Newmont will be preparing its appeal case. It is common ground that to do so will be a very extensive task and the Commissioner does not challenge the fact that Newmont will need until the end of the year to put on its evidence. As I say, during that period of time, there is no reason to think that the Commissioner will incur any substantial cost. This is particularly likely the case with the sensible negotiation which I am confident the parties can embrace, such that hopefully certain areas of evidence preparation can be avoided or minimised. Further, the Court can assist, where necessary or sought by the parties, in intervening to confine the categories of dispute.
20 Newmont expresses the following prejudice it would suffer if the appeal is stayed for the period contemplated by the Commissioner:
(a) the income tax liabilities assessed by the Commissioner in respect of the 2011 year to which these proceedings relate were due and payable on 1 December 2011 (s 5-5(4) of the ITAA 1997) and were paid by Newmont on 28 February 2012;
(b) Newmont will not be fully compensated if they succeed in these proceedings by the payment of the statutory interest. Although it is true that Newmont's payments of income tax will be refunded and they will be paid interest calculated under the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) (IOOP Act), the interest paid under the IOOP Act is not a commercial rate of interest. Rather, under the IOOP Act, interest is calculated on a simple basis without any uplift above the base interest rate. The base rate is currently 1.77% (until 30 June 2018), which on any reasonable view is low and is deposed to being lower than Newmont's internal rate of return on capital invested in their businesses;
(c) Newmont are expending significant internal and external resources on these proceedings and the longer the proceedings take to resolve, the more resources Newmont will expend. Additionally, efficiencies will be lost through the need to 'put down' and 'pick up' activities because of an adjournment;
(d) further, if Newmont succeeds in these proceedings, it necessarily follows that the further amended assessments of income tax and assessments of shortfall penalty in respect of the year ended 30 June 2011, that were issued by the Commissioner on 23 October 2017, are also excessive and should be reduced to nil. The additional liabilities notified by these assessments were due and payable on:
(i) 16 November 2017 in respect of Newmont's increased liability to pay income tax (a further $24,425,809.50 in respect of NCFN and $56,651,363.40 in respect of NCL) and shortfall interest charge ($6,120,197.83 in respect of NCFN and $14,194,721.41 in respect of NCL); and
(ii) 13 November 2017 in respect of Newmont's liability to pay a penalty or ($1,221,290.45 in respect of NCFN and $2,832,568.15 in respect of NCL);
(e) these liabilities must be disclosed in the consolidated accounts of Newmont's parent company, Newmont Mining Corporation, a company listed on the New York Stock Exchange. This is notwithstanding that the liabilities are disputed;
(f) to the extent that any of the tax liabilities of Newmont have remained unpaid after they were due to be paid, General Interest Charge (GIC) has accrued daily by operation of the statute on those unpaid amounts on a compounding basis at a rate that is seven percentage points higher than the base interest rate for the day (s 5-15 of the ITAA 1997, s 298-25 of Sch 1 to the TAA and Pt IIA of the TAA). GIC will continue to accrue for as long as any amounts that are due and payable remain unpaid. For instance, the GIC that accrued in just one month in December 2017 in respect of NCL was $391,886.37 and in respect of NCFN was $165,951.01;
(g) to secure the Commissioner's consent to defer the recovery action in respect of the increased tax liabilities notified in the assessments issued on 23 October 2017, Newmont have entered into a '50/50 agreement' with the Commissioner. Although these agreements typically require payment of 50% of the income tax in dispute in exchange for the Commissioner's agreement not to pursue recovery action and to remit 50% of the GIC accruing on the unpaid part of the debt after the date of payment, the Commissioner has in this case also required security in respect of the remaining 50% of the tax in dispute because the Newmont companies are foreign residents;
(h) Newmont arranged for Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ) to provide the financial guarantees required by the Commissioner of $21,580,184.58 in respect of NCFN and $50,962,972.01 in respect of NCL. Newmont have each agreed to pay ANZ a fee of 0.60% per annum on the value of the guarantee in consideration for ANZ providing the required security. Irrespective of the outcome of these proceedings, Newmont will not be able to recover the fee paid to ANZ from the Commissioner;
(i) by reason of the payments made in relation to the original assessments, and the further payments made for the purposes of giving effect to the proposed 50/50 agreements, as at 23 November 2017 NCFN has paid $14,238,696.30 to the Commissioner and NCL has paid $33,935,682.45 to the Commissioner in relation to the transactions that are the subject of these proceedings. This is notwithstanding that Newmont maintains that any gain arising out of the transactions ought to have been wholly disregarded for tax purposes; and
(j) ironically, the Commissioner has requested as a term of the 50/50 agreements that Newmont 'diligently and expeditiously conduct and prosecute any proceedings filed under Part IVC or the TAA' in relation to either the original assessments or the further assessments issued on 23 October 2017. Newmont have agreed to this condition.
21 Some aspects of the evidence set out above is challenged, but broadly speaking I accept that Newmont has established these factors on its affidavit evidence. Insofar as interest is concerned, one fully accepts that the rate of interest at which the Commissioner would be required to make repayment, should the appeals succeed, is that determined by Parliament. Nonetheless, it is relevant to take into account that shareholders in Newmont would feel disappointed if that was the rate of return the company achieved on their capital. One can accept that a better recovery than this statutory interest rate could be achieved by a public company putting those funds to use.
22 It follows in my view, that the interests of justice favour the hearing resolving of these proceedings, rather than a stay of them.
23 Further, having regard to the fact that the Commissioner should not start incurring substantial cost until about the time the Full Court's decision is known tends against the grant of stay.
24 On those grounds alone I would decline to grant the stay.
25 There is a further and separate consideration as to whether this appeal relies only on the issues raised in the appeals from Resource Capital Fund. In that regard, Newmont says:
(1) There is very little overlap between the legal issues arising in these proceedings and in the appeals from Resource Capital Fund. In a broad sense, both cases concern the operation of Div 855 of the ITAA 1997 and whether a Double Tax Agreement prevented the taxation of any gain in Australia. However, this broad description of the similarities between the cases belies the true differences between the cases. The differences between the cases include:
(a) the question of whether the corporate limited partnerships to which assessments had been issued were taxable entities (see Resource Capital Fund at [1]-[23]) does not arise in this case because NCL and NCFN are both companies;
(b) the question of the source of ordinary income (see Resource Capital Fund at [24]-[53]), which depends on the facts and circumstances of each case, does not arise in this case because the Commissioner has not contended that the gain is ordinary income;
(c) the analysis of the United States Convention in Resource Capital Fund (at [54]-[88]) was undertaken from the perspective of a gain on revenue account and in relation to those partners in the partnership that were residents of the United States, meaning that it is of limited relevance to a case dealing with a capital gain, particularly insofar as Newmont are both companies and the United States Convention is only relevant to one of these proceedings as NCFN is domiciled in Canada; and
(d) without limiting the foregoing, issues as to whether Taxation Determination TD 2011/25 was binding on the Commissioner (Resource Capital Fund at [71]-[76)) are irrelevant in this case.
(2) The issues listed above are irrelevant to these proceedings and any one of them may determine the appeal.
(3) The areas of purported commonality identified by the Commissioner relate to the operation of Div 855 of the ITAA 1997. However, the analysis of Div 855 of the ITAA 1997 in Resource Capital Fund (at [89]-[124]) turns on the specific assets of Talison Lithium Limited and the valuation evidence in that case.
(4) Broadly speaking, Div 855 of the ITAA 1997 operates to disregard a capital gain made by a foreign resident where the relevant CGT event happens in relation to a CGT asset that is not TARP. Where the CGT asset is shares in a company, as in this case, the shares can only be TARP in circumstances where certain minimum ownership conditions are satisfied and the shares pass the 'principal asset test' in s 855-30 of the ITAA 1997 at the time of the CGT event. The question of whether shares in a company (in this case Newmont Australia Pty Ltd (NAPL)) pass the principal asset test involves a factual enquiry as to whether, at the relevant time, the sum of the market values of that company's assets that are TARP exceeds the sum of the market values of its assets that are not TARP. The term 'taxable Australian real property' (TARP, as previously defined) is defined in s 855-20 of the ITAA 1997 as being real property situated in Australia (including a lease of land situated in Australia) or a 'mining, quarrying or prospecting right', as defined in s 995-1 of the ITAA 1997, if the minerals, petroleum or quarry materials are situated in Australia.
(5) Most of the areas of purported commonality identified by the Commissioner between the appeals in Resource Capital Fund and this case are matters of fact and evidence:
(a) The question whether general purpose leases or miscellaneous licences are 'mining, quarrying or prospecting rights' as defined in s 995-1 of the ITAA 1997 will depend on the terms of those leases and licences in each case, and whether those leases and licences satisfy the statutory description of 'an authority, licence, permit or right under an Australian law to mine, quarry or prospect for minerals, petroleum or quarry materials'. That enquiry will depend on an examination of the particular lease or licence under consideration, and the statute under which the lease or licence was issued.
(b) Even if a particular mining lease, general purpose lease or miscellaneous licence is found to be a 'mining, quarrying or prospecting right', that will not answer the question of whether buildings and improvements on the land subject to that particular lease or licence are also TARP as defined in s 855-20 of the ITAA 1997. The High Court's decision in TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576 per French CJ, Gummow, Heydon, Crennan and Kiefel JJ (at [35]) has the effect that, absent some specific legislative provision, items affixed to personal property such as mining leases and licences do not become 'fixtures' in the technical sense, and therefore cannot be real property belonging to NAPL or its subsidiaries. Under para (d) of the definition of 'mining, quarrying or prospecting rights' in s 995-1 of the ITAA 1997, certain rights to buildings and improvements may be mining, quarrying or prospecting rights. Whether par (d) applies to a particular right will require the clear identification of that right, and of the circumstances and time of its acquisition, and the valuation of that right. Again, this issue involves factual enquiries.
(c) The question of whether Talison Lithium Limited carried on two sets of operations, namely mining and mineral processing, is factual and of no relevance to how the operations of NAPL and its subsidiaries should be characterised.
(d) There is no warrant for inferring that any conclusion reached about the appropriateness of the 'netback' valuation methodology in relation to the assets and operations of Talison Lithium Limited would have any implications for the appropriateness of that methodology for the assets of NAPL and its subsidiaries. The appropriate valuation methodology to be used in these proceedings will be determined based on the expert and other evidence before the Court.
(6) The only issue of construction that arises in the appeals from Resource Capital Fund and in these proceedings concerns the Commissioner's argument that the full value of the relevant company's own plant and equipment located on certain tenements will be included in the value of the assets of that company that are TARP. The Commissioner's argument in Resource Capital Fund was that plant and equipment that can be described as building or improvements will be within para (d) of the definition of 'mining, quarrying or prospecting rights', irrespective of when that plant and equipment was acquired or the circumstances of its acquisition. In Resource Capital Fund, the Commissioner made no attempt to value any rights but simply contended that the value of the rights were equal to value of Talison Lithium Limited's own plant and equipment. On its face, this argument cannot be reconciled with the language of para (d) of the definition of 'mining, quarrying or prospecting right' in s 995-1 of the ITAA 1997, which refers to 'any rights that are in respect of buildings or other improvements' and which requires that those rights 'are acquired with' the relevant mining, quarrying or prospecting right. Paragraph (d) simply requires one to identify the particular right contemplated and value that right. It does not follow that the value of such a right, if any, is equal to the value of the plant and equipment which the company owns and happens to be situated on a particular tenement.
(7) Finally, this is not a case in which there are any common facts between Resource Capital Fund and these proceedings which could give rise to a risk of conflicting findings of fact or the need to consider witnesses who would otherwise be required in both proceedings. There is no scope for the factual findings with respect to the assets in operation of lithium production under consideration in Resource Capital Fund in the present cases which concern the goldmining and exploring assets of a different entity and its subsidiaries.
26 This list of differences between these appeals and Resource Capital Fund was at least partly accepted by the Commissioner as I understand it. Clearly there are also similarities. But the extent of the differences and their potential effect on the outcome is relevant to whether a stay should be ordered. For these further reasons, I would decline to grant a stay.