Optus Vision Pty Ltd v Commissioner of Taxation

…………………… these cables can be viewed as electrical accessories for the same reason as for optical fibre." Professor Pak Lim Chu was referring there to fibre optic cables which do not contain electrical wire if they are used inside a building. 5 Those observations and further work in the preparation of the case for hearing apparently prompted those advising the applicant to consider the applicability of another item in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth). Item 43(1) relevantly provides as follows: "The following goods, if they are of a kind ordinarily used as part of fixed electrical installations in consumers' premises: (a) electrical fittings (including electronically operated electrical fittings); (b) electrical accessories (including electronically operated electrical accessories); …………………………" 6 In correspondence between the solicitors in the middle of last year the possibility of amendment of the application to seek declarations that the optical fibre cable was exempt under item 43 was foreshadowed. However, at the same time a proposal for compromise of the claim for a refund of sales tax was submitted to the Commissioner. On 5 August 1999 the applicant wrote to the Australian Taxation Office ('the ATO') proposing a resolution on the basis that the proceedings be withdrawn in consideration of the ATO agreeing to make certain refunds in respect of cable purchased between 20 February 1995 and 7 November 1996. 7 Those dates are dictated by two circumstances. First, a letter claiming a refund was first written on 20 February 1998. Under the terms of the legislation a refund could only be claimed for up to three years prior to the claim, hence 20 February 1995. However, item 43 was amended with effect from 7 November 1996. Item 43(4) provides as follows: "This Item does not cover goods of a kind ordinarily used in the provision of telecommunications or audio visual services." It is common ground that the cable in question falls within that description and, accordingly, it is common ground that no exemption would be available in respect of dealings with goods on or after 7 November 1996. There is thus a closed period in respect of which the parties are at issue as to entitlement to exemption. That fact has some significance for reasons which will appear shortly. 8 On 19 August 1999, the ATO responded to the applicant's letter of 5 August 1992, saying that the Commissioner had decided not to accept the terms proposed in that letter. The reason advanced for not accepting the proposal was the Commissioner's view that the goods do not fall within item 43. 9 On 24 September 1999, I fixed the proceedings for hearing before me on 13 and 14 March 2000. Notwithstanding the unequivocal rejection of the proposal in the Commissioner's letter and notwithstanding that the matter was fixed for hearing as long ago as September, no attempt appears to have been made by the applicant prior to 18 February 2000 to alter the basis upon which the exemption is claimed in the proceedings. On that day the applicant wrote again to the ATO proposing a resolution of the proceedings but indicating that if the matter was not able to be settled it would be necessary to amend the application. 10 There was apparently further communication between the parties which led to an approach being made informally through my associate last week to raise the question of adjournment of the proceedings and amendment of the application. On Friday last, I gave leave to the applicant to file a motion returnable before me today seeking orders that the applicant have leave to amend the application. I was informed on Friday that if the leave to amend were granted and the Commissioner sought an adjournment, that adjournment would not be opposed. I was also informed that if the leave to amend were refused, then it would be inevitable that the application be dismissed. 11 I have now heard argument concerning the question of amendment. The proposed amendment is to seek declarations that the goods that were the subject of the transactions referred to in the earlier amended application would be exempt from sales tax pursuant to item 43(1)(a) or item 43(1)(b) in Schedule 1. 12 Senior counsel for the applicant indicated that while no good reason could be advanced for the failure to make the amendment earlier, the apparent explanation is simply that there was some hope for a compromise. That hope seems to have been without foundation in the light of the correspondence. Nevertheless, hope springs eternal in the hearts even of corporations in their dealings with the Commissioner of Taxation. 13 If the application to amend is refused, then there is at least a significant argument that the applicant would be precluded from raising the question of the taxability of the transactions in question in fresh proceedings. As I have indicated, the dispute relates to a closed period during which goods were the subject of transactions involving the applicant. There is therefore, a significant prejudice to the applicant if leave were refused. On the other hand, the Commissioner does not advance any basis upon which it is said that there would be any prejudice that could not be remedied by an appropriate order for costs. 14 Senior counsel for the Commissioner did raise the question of a tactical prejudice, in that the amendment appears to have been prompted by the observations made by the respondent's witnesses. However, he accepted that had the application to amend been made in a timely manner, that would not have been a reason for refusing the amendment. In many cases the question of amendment at a late stage can create unfairness. A late amendment may not only be unfair as to the incurring of costs and the tactical conduct of proceedings, but can have psychological consequences where parties to the proceedings may well have some emotional involvement in their outcome. 15 Senior counsel for the Commissioner does not suggest that such considerations apply here, although one could imagine circumstances where the Commissioner of Taxation or his staff might be involved in such a position. Where, however, the issue is simply one of liability for tax, an adjournment to ensure that the real issue between the parties is raised and litigated ought to be allowed. 16 Another consideration, of course, is the inconvenience to the court of late vacation of hearing dates. Today and tomorrow were set aside last September, thereby, in effect, depriving other litigants of the opportunity of having their cases heard. It is now almost certainly too late now to fix another hearing for today or for tomorrow. Nevertheless, the convenience of the court, while it is a consideration, is not to be decisive of these matters. It is only two days and no doubt some use can be made out of tomorrow. 17 In the circumstances I consider that it is appropriate to grant the leave to amend sought in the motion which I gave leave to file. I am informed by senior counsel for the Commissioner that if the leave is granted an adjournment is required and that is not opposed. However, costs will be thrown away by reason of the amendment and the adjournment. In the absence of any satisfactory explanation as to why the question of amendment was not brought on earlier, it seems to me to be appropriate to order the costs thrown away to be borne by the applicant on an indemnity basis. That, of course, is an unusual order but the absence of any satisfactory explanation as to why nothing was done between September and February seems to me to be a justification for making the order that the applicant bear the Commissioner's costs on that basis. 18 Accordingly, I grant leave for the applicant to file a second further amended application in the form which I have initialled and dated with today's date. I vacate the fixture for the hearing of the proceeding today and tomorrow. I order the applicant to pay on an indemnity basis all reasonable costs incurred by the Commissioner and which have been thrown away or which will be thrown away as a consequence of the amendment and the vacation of the hearing date. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Counsel for the Applicant: Mr R A Conti QC & Mr D K L Raphael

Counsel for the Respondent: Mr R Edmonds SC & Mr D McGovern

Solicitor for the Respondent: Australian Government Solicitor