Pacific Exchange Corporation Pty Ltd v Commissioner of Taxation [2009] FCA 1155 | Case summary

REASONS FOR JUDGMENT 1 Pacific Exchange Corporation Proprietary Limited (Pacific Exchange) is the Applicant in a taxation appeal. It has applied for an order that the Commissioner of Taxation's (the Commissioner) amended appeal statement be struck out. 2 A document entitled Amended Appeal Statement was filed on behalf of the Commissioner on 15 September 2009. No leave was obtained by the Commissioner for the filing of such a document. The practice of this Court in relation to taxation appeals is set out in O 52B. Rule 5(2) provides for the filing by the Commissioner of, inter alia, an appeal statement within 28 days after a sealed copy of an application initiating the taxation appeal is served upon the Commissioner. 3 It has been observed in prior authority that the purpose of the appeal statement is one of informing a taxpayer of the Commissioner's view, at that time, of the bases of the Commissioner's rejection of an assessment objection. In this regard, it has been said that its purpose is a practical one: see BAE Systems Australia (New South Wales) Pty Ltd v Commissioner of Taxation (2008) 69 ATR 567. It has also been observed that the appeal statement is not a pleading: McDonald's Australia Limited v Commissioner of Taxation (No 2) (2008) 69 ATR 898. So much may be accepted. It is nonetheless a feature of an appeal statement that it forms part of an obligation which the Court has to afford the parties to a proceeding procedural fairness. One of the ways in which that particular obligation is fulfilled is by ensuring that a party to a proceeding knows the case it has to meet. 4 The Commissioner has, belatedly, sought leave for the amendment of the appeal statement in the terms set out in the document filed on 15 September 2009. 5 Before addressing the question of whether or not to grant leave, it is helpful to reflect upon the history of this matter, both in its revenue law administration phase and since it has become a matter before the Court. 6 In September 2007, the Commissioner issued amended assessments to Pacific Exchange, in respect of the income years ended 30 June 1997, 30 June 1999, and 30 June 2001. In November 2007, objection was made to these assessments. In the result, for reasons which are set out in the Notice of Appellable Objection Decision dated 28 November 2008, the Commissioner disallowed in full the objections to each of the assessments. It is not necessary to make reference to the fate of the separate, but not unrelated, assessments as to penalty. 7 In the appeal statement which the Commissioner lodged in accordance with O 52B r 5, the Commissioner identified the following as issues for determination, at para 32: 32.1 Whether PEC was entitled to claim deductions under section 51(1) of the ITAA 1936 or section 8-1 of the ITAA 1997 in respect of "participation fees"; 32.2 Whether the assessment of income tax for the year ended 30 June 2002 is excessive. 8 Under the heading "Contentions" in that document, the Commissioner stated inter alia, at para 33: 33: PEC did not incur a loss or an outgoing in respect of participation fees, or did not incur an outgoing in the amounts claimed. 34: If PEC did incur an outgoing in respect of participation fees, which is not admitted, the PEC cannot prove that the outgoings were incurred in gaining its assessable income or were necessarily incurred in carrying on a business for the gaining of such income. 35: To the extent that PEC made payments to BFC, which is not admitted, such payments were not payments of participation fees under the Participation Agreement. 9 In the recitation of facts in the appeal statement as the Commissioner perceives those facts, the Commissioner makes reference to the following at para 4: On 8 December 1992, PEC and Beauchamp Food Corporation (BFC) purportedly entered into a contract under a "Deed of Projects Participation Agreement" ("the Participation Agreement"). 10 At para 7, the Commissioner further states: On 11 April 1994 PEC purportedly entered into a deed of appointment with PEDC. Under the said deed, Pacific Exchange Development Corporation was appointed to provide project management services to PEC. 11 At para 10, the Commissioner states: In December 1997 BFC purported to transfer its rights and obligations under the participation agreement to 8A Industries Incorporated (8AI). Another company which was incorporated in the Philippines and which was controlled by Phillip and Catherine Cea. 12 In its statement of facts, issues, and contention, also filed by reference to an obligation which reposes in O 52B, on 16 March 2009, Pacific Exchange for its part identified a series of issues under the general rubric of an acceptance on its part that it had to satisfy the Court on the balance of probabilities that it carried on business to produce assessable income, and that the participation agreement bore a sufficient relationship with its business within s 51(1) of the Income Tax Assessment Act 1936 (Cth)(1936 Act) and s 8-1 of the Income Tax Assessment Act 1997 (Cth). It further stated, at para 33: The Commissioner does not suggest that the Participation Agreement bore any other relationship; he merely puts PEC to proof on its case. If, however, he intends to present an alternative case, then PEC and the Court are entitled to be made aware of that case immediately. 13 The subsidiary issues identified are then ones of whether "incurred" means paid or discharged, and if there is an affirmative answer to that, when were the participation fees paid. 14 The assessments which the Commissioner came to issue were the product of a lengthy investigative process. 15 Some inkling of that process is provided by the chronology of events which Mr Prescott, the solicitor for Pacific Exchange, sets out in his affidavit. From that, it appears that as long ago as 7 May 1998, an officer of the Australian Taxation Office (ATO) advised Pacific Exchange that the ATO wished to compile a profile of that company, and Mr Phillip Cea. For that purpose, on 14 May 1998, a meeting took place between one of the auditors within the ATO at the time, a Mr Harvey Dolby, and a Mr Mark Dickson, then of PKF Accountants, Gold Coast office, which firm was, at the time, Pacific Exchange's tax agent. At that meeting, Mr Dickson advised Mr Dolby that Pacific Exchange paid participation fees under a participation agreement to Beauchamp Food Corporation. 16 Some five years later, members of the ATO conducted an inspection of the office on the Gold Coast of PKF. At the time, various computer files were downloaded by the attending staff from the ATO. On 27 June 2003, an officer of the ATO notified Pacific Exchange of a taxation audit to be undertaken into the affairs of Pacific Exchange, and Pacific Exchange Development Corporation. 17 The following month, on 10 July, an officer of the ATO requested information from Pacific Exchange by way of a communication to an accountant at PKF. Thereafter, in 2003, correspondence passed between the ATO and PKF, including in relation to the participation agreement. A copy of that agreement was, in the course of this exchange, provided to the ATO. In January 2004, the ATO commenced a series of interviews utilising the power conferred upon the Commissioner by Parliament under s 264 of the 1936 Act. The first interviewee was Mr Dickson. That occurred on 8 January 2004. 18 Some 18 months later Ms Michele King, who is an officer of Pacific Exchange, was interviewed pursuant to s 264. That particular interview was undertaken by the Commissioner's staff with the assistance of senior counsel. In December 2005 a further interview under s 264 was conducted with Mr Daniel King, who is Michele King's younger brother. In that particular interview the Commissioner was assisted by senior and junior counsel. Also in December 2005 the Commissioner, again assisted by senior and junior counsel, interviewed a Ms Melanie Leis. Ms Leis has become a witness in the proceedings. 19 Thereafter, and as I have mentioned, amended assessments were issued in September 2007 with penalty assessments following thereafter. 20 Against this background, and as envisaged by the practice of the Court as presently set out in the Tax List directions which were published by the Chief Justice on 4 April 2008, an initial directions hearing and scheduling conference was held on 20 March 2009. 21 I conducted that particular directions hearing and scheduling conference in my capacity as Tax List Coordinating Judge for the Queensland Registry. At the time the following exchange occurred as between me and Ms Ford who, then as now, appears for the Commissioner: All right. Now, apart from any question about a security for costs, apart from that, and allowing four weeks, is there anything else at the Commissioner's end? It is not a case, as it were, where there is a sham allegation. Is that right? Ms Ford: No, that's right. All right. So what it really is a case where that reference to "purported" in the appeal statement is really a reference to, well, you've got to prove that the expenditure was incurred, and incurred in a way that gives a deduction under section 8(1). But it's not alleged that there are documents that are - that the whole transaction is just a sham. Ms Ford: No. 22 In the amended appeal statement, which was filed on 15 September 2009, the following allegation, materially, is made at para 65: The purported Participation Agreement was not genuine, but merely a sham and an attempt to disguise the true situation. Particulars - … 23 At paras 65.1 - 65.10: 65.1 the purported Participation Agreement was not genuine or true but a pretence of the contractual obligation between PEC and BFC; 65.2 the directors of PEC and BFC, including Philip Cea never intended that the Participation Agreement would take effect and operate according to its tenor; 65.3 the participation agreement never took effect and never operated according to its tenor; 65.4 the directors of PEC and BFC, including Philip Cea never intended the participation agreement to regulate or embody their relationship and transactions; 65.5 the Participation Agreement did not regulate or embody the relationship and transactions between PEC and BFC/8AI; 65.6 PEC and those who advised PEC knew that the purported participation agreement was not created on the date which it bears; 65.7 PEC, and those who advise PEC, intended that the purported Participation Agreement be created and retained to mislead the Commissioner of Taxation; 65.8 the Participation Agreement was not fully executed at any relevant time; 65.9 the Participation Agreement was never implemented; 65.10 no payments were made or calculated pursuant to the Participation Agreement. 24 In terms of the progress of the case within the Court, the following additional events should be noted. On 17 March 2009, the Commissioner filed a document entitled Notice of Removal of Solicitor, by which he gave notice that he was no longer represented by the Australian Government Solicitor, but appeared by himself. On 11 May 2009, the District Registrar issued a notice of listing to the parties, which advised that the appeals were listed for hearing before their docket judge, Collier J, on 13 October 2009, for four days' hearing. The affidavits to be relied upon by the applicant on the hearing of the taxation appeals were all filed in mid-June 2009. There was, in July 2009, a consensual extension of such time as remained in the directions which I had made on 20 March 2009. 25 Pacific Exchange submits that the amended appeal statement should be struck out for two reasons: firstly, that there is, on analysis, no arguable case of sham; and secondly, and in any event, because the Commissioner has taken the course of seeking to rely upon sham at too late a stage in the proceedings for it to be fair, procedurally, for the Commissioner to be permitted to do that. In using the term "sham," I refer, in that regard, to the essence of the Commissioner's case under that rubric, as identified in the passage which I have quoted from the amended appeal statement. 26 I do not propose to rule upon the first of the submissions made on behalf of Pacific Exchange in any final way. Pacific Exchange, as I understand it, seeks to rely only upon evidence already filed for the purposes of today's application. It seems to me that if, truly, a case of the kind set out in the amended appeal statement is to be permitted to be advanced, it would necessarily require a detailed examination of the facts, and the assessment of credibility of witnesses after cross-examination. It is not the case that the Commissioner would seek, as I understand it, only to rely upon the material presently on the file without any cross examination. Nor, for that matter, were leave to be granted for the filing of the amended appeal statement, would the taxpayer. Rather, its position in that event is that at the very least, the making of this allegation at this stage would require the taking of quite detailed instructions, and the supplementation, at least potentially, but to quite some extent, of its existing case in chief. Further, there are passages to which I was taken in the course of submissions by Ms Ford, on behalf of the Commissioner, in the affidavits which have been filed, which, on one reading, might be thought to be inconsistent, one with the other, but equally, could amount to nothing more than differing recollections after the passage of anything up to 18 and more years of time since events. 27 The real question, it seems to me, is not one of whether there ought to be any form of summary judgment, but, rather, whether it is permissible at this stage to permit the amended document to be filed at all? If it is permitted to be filed, then questions as to sham would be for trial, rather than summary adjudication. 28 I approach the question as to what amounts to sham by reference to a passage which appears in the joint judgment of Gleeson CJ and Gummow and Crennan JJ in Raftland Pty Ltd v Federal Commissioner of Taxation (2008) 82 ALJR 934 at paras 33 - 36: [33] It was not contended by the appellant that the amounts referred to above were misappropriated. Yet it is central to the argument for the appellant that they were amounts to which the E & M Unit Trust and, through that trust, its beneficiaries were entitled. The apparent discrepancy between the entitlements appearing on the face of the documents and the way in which the funds were applied gave rise to a question whether the documents were to be taken at face value. In various situations, the court may take an agreement or other instrument, such as a settlement on trust, as not fully disclosing the legal rights and entitlements for which it provides on its face. If that be so, the parol evidence rule in Australia identified with Hoyt's Pty Ltd v Spencer does not apply. [34] One such case is where other evidence of the intentions of the relevant actors shows that the document was brought into existence "as a mere piece of machinery" for serving some purpose other than that of constituting the whole of the arrangement. That, in essence, is the respondent's case with respect to the 246 ALR 406 at 417 alleged existence of the "present entitlement" of the trustee of the E & M Unit Trust to the income of the Raftland Trust. [35] The term "sham" may be employed here, but as Lockhart J emphasised in Sharrment Pty Ltd v Official Trustee in Bankruptcy the term is ambiguous and uncertainty surrounds its meaning and application. With reference to remarks of Diplock LJ in Snook v London and West Riding Investments Ltd, Mistily LJ later identified as one of several situations where an agreement may be taken otherwise than at its face value, that where there was a "sham", the term, when "[c]orrectly employed", denoted an objective of deliberate deception of third parties. [36] The presence of an objective of deliberate deception indicates fraud. This suggests the need for caution in adoption of the description "sham". However, in the present litigation it may be used in a sense which is less pejorative but still apt to deny the critical step in the appellant's case. The absence of a present entitlement within the meaning of s 100A(1)(a) of the Act may appear from an examination of the whole of the relevant circumstances, and these are not confined to the terms of the Raftland Trust instrument. 29 One of the cases to which their Honours refer, at para 33 in the passage quoted, is Hadjiloucas v Crean [1988] 1 WLR 1006. In particular, their Honours draw attention in their joint judgment to remarks made by Mustill LJ at page 1019, with reference to earlier remarks as to sham, made by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802. What Mustill LJ had to say was this: [I]t is necessary to distinguish between three situations in which, aside from any question of rectification, the court may take an agreement otherwise than at its face value. The first exists where the surrounding circumstances show that the arrangement between the parties was never intended to create any legally enforceable obligation. The second is the case of the "sham", in the sense in which that word has been used in numerous cases, including Snook v London and West Riding Investments Limited (1967) 2 QB 786 at 802. Correctly employed, this term denotes an agreement or series of agreements which are deliberately framed with the object of deceiving third parties as to the true nature and effect of the legal relations between the parties. The third situation is one in which the document does precisely reflect the true agreement between the parties, but where the language of the document (and in particular its title or description) superficially indicates that it falls into one legal category, whereas when properly analysed in light of the surrounding circumstances it can be seen to fall into another. 30 His Lordship goes on to caution that these three situations must be carefully distinguished. 31 It is axiomatic, flowing from s 14ZZO of the Taxation Administration Act 1953 (Cth), that, unless leave is granted, a taxpayer who appeals to this Court against an appellable objection decision is confined on the appeal to the grounds in the objection, and, further the burden of proving the assessment to be excessive lies upon the appellant taxpayer. 32 There is a line of authority, the origins of which may be traced to remarks made by Kitto J in Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117, which stands for this proposition: No conduct on the part of the commissioner could operate as an estoppel against the operation of the Act. 33 Later in time, in Commissioner of Taxation v ANZ Savings Bank (1994) 181 CLR 466 at 479, Brennan, Deane, Dawson and Toohey JJ remarked, in their joint judgment: In several decisions it has been held that the Commissioner may support the amount of the assessment on a ground not taken into account at the time the assessment was made. The Commissioner will be required to give proper notice to the taxpayer and, where appropriate, will be directed to furnish particulars. But, as Kitto J observed in Federal Commissioner of Taxation v Wade: "No conduct on the part of the commissioner could operate as an estoppel against the operation of the Act." [emphasis added] 34 Much may well lie behind the adjective "proper" in relation to the giving of notice to a taxpayer, once the judicial power of the Commonwealth has been engaged by the institution of a taxation appeal. 35 In Bailey v Commissioner of Taxation (1977) 136 CLR 214, commencing at 216, Barwick CJ observed that the assessment of income tax is the process of applying the Act to a state of fact. His Honour continued that: [T]he process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner. He must of necessity, as part of that process, adopt a view of the relevant facts. 36 And then, a little later: Quite clearly, the taxpayer is entitled to know the basis on which the assessment has been made. An adjustment sheet supplied with the notice of assessment can be expected to state and should state that basis. The taxpayer should be told the taxable facts. 37 In a separate judgment in that case, Mason J stated, at pages 220 to 221: There is therefore no foundation for the notion that the Commissioner stands apart from ordinary litigants in some special position in relation to the giving of particulars … To conclude otherwise would result not merely in injustice to the taxpayer, who will remain in doubt as to the Commissioner's case until it is presented at the hearing, but also in unnecessary preparations and in a hearing of unnecessary length as the taxpayer endeavours to deal with matters on which, as it may subsequently transpire, the Commissioner is placing no reliance whatsoever … Although, speaking generally, the taxpayer knows or should know the facts relevant to a correct assessment of his income, there are other facts which will be relevant on the hearing of an appeal. Under s 190 [the then equivalent of s 14ZZO] the taxpayer bears the onus of showing that the Commissioner's assessment is excessive. Consequently the relevant facts in the appeal include the view of the facts on which the Commissioner has based his assessment, the manner in which he has arrived at his assessment. These facts are not within the knowledge of the taxpayer; they are within the knowledge of the Commissioner. Indeed, there is very much to be said for the view that fairness to the taxpayer demands that the Commissioner should be compelled to give particulars of his assessment when it issues so that the taxpayer is adequately informed as to the manner in which the assessment has been arrived at and may then determine whether he will object to the assessment and subsequently appeal. 38 It is not difficult to see that sentiments in relation to fairness to a taxpayer informed the making of O 52B and, in particular, r 5, in its provision for an appeal statement; nor is it difficult to see that those same sentiments of fairness attend the provision found in the Tax List Directions at para 5.4 that, at the scheduling conference, the parties will be expected to address the following: (a) Narrowing of issues. In clear outline, the issues and facts that appear to be in dispute. 39 None of this is to suggest that in any way an appeal statement rule, or for that matter, a practice direction can be a substitute for the statutory obligation which falls on an appellant to prove an assessment to be excessive. That is not to say, though, that when a taxpayer, by filing an appeal, engages judicial power, the respondent Commissioner is in some special privileged position in relation to the affording of procedural fairness to a taxpayer. The statement that was given in response to what was a very deliberate question at the scheduling conference was a statement made on instructions. It is true to say there had been some earlier informal correspondence between counsel acting respectively for the Commissioner and the taxpayer. Whatever might be the tenor of that correspondence, it was not known to the Court, nor for that matter, did it have the formality of a statement made in open court by counsel on behalf of, in this case, the Commissioner. 40 The affidavits which have come to be filed on behalf of the applicant, Pacific Exchange, were cast, unsurprisingly, with the benefit of, not only the Commissioner's appeal statement, but also the statement made in open court. 41 As I have mentioned by reference to Mustill LJ's observations in Hadjiloucas, there are three situations in which a court might take an agreement otherwise than at its face value. A fair reading of the Commissioner's appeal statement, as originally cast, takes one to the position, confirmed in open court by the statement on the Commissioner's behalf, that a sham in the sense described by Mustill LJ was not being relied upon, as opposed to one or perhaps both of the other bases upon which a court might choose to take an agreement otherwise than at its face value. 42 It was submitted on behalf of the Commissioner that the amended appeal statement was merely an extension of sentiments already apparent in the appeal statement as filed in February. It is true to say that the use of the word "purported" raised or might be thought to raise an interrogative note as to exactly the case the Commissioner was seeking to have a taxpayer meet by way of discharging the burden of proving an assessment to be excessive. Whatever interrogative note there may be in that word was answered on 20 March. 43 Mr Prescott deposes in his affidavit to the particular consequences which he apprehends would fall upon Pacific Exchange in the event that leave to amend were granted. These statements are not challenged: If the new allegations are allowed to be pressed, then I believe that the trial dates will have to be vacated. We will need to seek particulars of the allegations, apply for limited discovery, prepare affidavits in reply, including an affidavit for Mrs Catherine Cea against whom the allegation of sham has been made in and because of her absence as a witness, and prepare an amended appeal statement. Having regard to the time taken to date in preparing the case to date, this will take a significant amount of time. It is further relevant to note that both Mr Philip Cea and Ms Michelle King have finalised their travel arrangements to attend before the Court in three weeks time. Having discussed the issue with Mr Robertson of counsel, my reasons for deciding not to produce an affidavit from Mrs Catherine Cea were two-fold: (a) Counsel was satisfied that the material provided and evidence sworn by Mr Phillip Cea and Ms Michelle King was, when read in conjunction with the other affidavit material and evidence provided, sufficient to adequately address the issues which I believed, at the time were to be resolved by the Court, and (b) More importantly, Mrs Catherin Cea's medical condition was such that she was house-bound and would not be able to travel to Australia to give evidence on medical advice. [sic] 44 Mr Prescott annexes a copy of a certificate given by a medical practitioner in the Philippines dated 23 September 2009 which attests to his having a specialty in plastic and reconstructive surgery, and to his having treated Mrs Catherine Cea since early January this year in respect of severe facial burns and burns to her arms, body and legs which it seems and unfortunately was caused by the sudden release of steam from a pressurised cooker. That medical practitioner also attests to Mrs Catherine Cea being under the care of other practitioners whose specialty is in ophthalmology. He attests in his certificate to his opinion that until Mrs Catherine Cea's skin is fully healed, and complete dermatologic recovery has been obtained, exposure to sunlight would not be advisable. His advice to her apparently is to omit sun exposure and to stay indoors. 45 It is by no means impossible to see how, as the Commissioner's appeal statement was originally cast, and having regard to the particular basis upon which an absence of Mrs Cea might be explained, a forensic decision was taken not to call her. Nor is it in any way impossible to see how, were the Commissioner to be granted leave, a different forensic decision would have to be taken. That different decision, unsurprisingly, would extend not only to Mrs Cea, but also to a revisiting of the nature and extent of the case in chief of the appellant taxpayer. 46 One of the submissions made on behalf of the Commissioner as to why it was not procedurally unfair for the appeal statement in its amended form to be the subject of a grant of leave was put in these terms: The fact the Commissioner had not alleged sham or relied upon the tax avoidance provisions of the legislation prior to the filing of the applicant's material does not mean that the Court is obliged to accept PEC had completely subjected itself to an obligation under the purported "Participation Agreement" or that the alleged payments had the characterisation of an outgoing for the purposes of ss 51(1)/8-1. Goldberg J, with whom the other members of the Full Court agreed, dismissed a similar proposition by the taxpayer in Star City [2009] FCAFC 19 by reference, inter alia, to Jupiters Limited v Deputy Commissioner of Taxation (2001) 148 ATR 511. 47 Jupiters Limited v Deputy Commissioner of Taxation (2002) ATC 4022 though, was not a case in which "sham", as that term was used by Mustill LJ, was in any way a feature. Rather, it was a case where, against wider surrounding circumstances, a conclusion was able to be reached that a particular outgoing was one of capital rather than on revenue account. It is quite irrelevant to the present case. 48 When an allegation of sham is made, it is tantamount to an allegation of fraud. As it is made in this case, it is certainly such an allegation, and a serious one indeed. It has been made at a time when, having regard to the ordinary residence of key witnesses or potential witnesses in the Philippines, it is difficult to see how the granting of leave would do other than carry with it, as a corollary, an adjournment of the hearing of a taxation appeal, the trial of which has been fixed for many months. 49 Recently, the High Court has had occasion to reflect upon the amendment of pleadings and case management principles in the context of litigation: see Aon Risk Services Australia Limited v Australian National University (2009) 83 ALJR 951 (Aon Risk Services). One factor which, in my opinion, emerges from the judgments delivered in that case is that decisions in relation to whether or not to permit amendments ought to be informed not merely by the interests of the parties but also by a wider public interest. For example, at para 25, French CJ observed: Recognition of the public interest in the administration of civil justice procedures in Australia and the United Kingdom pre-dates the Woolf Report and its attendant reforms. In Dawson v Deputy Commissioner of Taxation, King CJ acknowledge the responsibility of judges to ensure, "so far as possible and subject to overriding considerations of justice", that the limited resources which the State commits to the administration of justice are not wasted by the failure of parties to adhere to trial dates of which they have had proper notice. In a late amendment case considered by the House of Lords in 1987, there was a marked departure from the approach of Bowen LJ in Cropper v Smith. Lord Griffiths required that judges considering amendments weigh in the balance: the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. 50 French CJ continued: The same indulgence could not be shown towards the negligent conduct of litigation as might have been possible in a "more leisured age". That approach was followed by Sheppard J in a revenue case heard in the Federal Court. And in the New South Wales Court of Appeal in GSA Industries, Samuels JA said that: the emollient effect of an order for costs as a panacea may now be consigned to the Aladdin's cave which Lord Reid rejected as one of the fairy tales in which we no longer believe. 51 French CJ further observed: The approach reflected in these authorities was applied by a majority of the Full Court of the Federal Court in Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd. 52 The taxation case to which French CJ referred is Commissioner of Taxation v Brambles Holdings Limited trading as Brambles Holdings Australia Limited (1991) 28 FCR 451 at pages 455 and 456. 53 Accepting, as I do, that an appeal statement is not a pleading document, its purpose nonetheless is to serve the ends of justice by ensuring procedural fairness. At this late stage of a proceeding, and having regard to sentiments evident in Aon Risk Services, the purpose of Tax List directions and of case management generally, it seems to me that it would be procedurally unfair to permit the Commissioner to rely upon the appeal statement in its amended form. Especially that is so in light of the deliberate statement made in open court six months ago by reference to which the appellant taxpayer has cast its case. 54 There is a further observation which I feel constrained to make, and that is in relation to the Commissioner's utilisation of, or attempted utilisation of, s 15 of the Taxation Administration Act 1953 (Cth) in relation to the conduct of serious revenue law litigation in this Court. 55 Like any litigant, the Commissioner is entitled to appear in person. Section 15 also makes it plain that the intention is that the Commissioner may in writing authorise one of his officers to appear. In so doing, though, that officer is not clothed with all that a court is entitled to expect from a person on the roll of legal practitioners. 56 In the conduct of federal litigation the Parliament has given the Commissioner a right of appearance, either personally or by a person authorised in writing. What the Parliament has not done is to confer the rights to practise, which are given to those whose names appear on the roll of practitioners kept by the Registrar of the High Court pursuant to the Judiciary Act (Cth) (Judiciary Act), s 55B. It is that section which enables a person who is, for the time being, entitled to practice as a barrister or solicitor or both of the Supreme Court of a State or Territory, an entitlement to practise in any Federal Court. Parliament has also envisaged that certain officers of the Commonwealth will enjoy like rights if they are either an Attorney-General's lawyer as defined, or an AGS lawyer as defined: see s 55E and s 55Q of the Judiciary Act. 57 A litigant in person is entitled fully to present his or her case. That is not to say that the same degree of trust and confidence will repose as between the Court and a litigant in person in relation to matters of practice, procedure and ethical conduct, as ordinarily will repose as between the Court and those who are on a roll of practitioners kept for the purposes of the Judiciary Act. One example which comes to mind in relation to taxation litigation is whether or not any contact, as between Judges' Associates and those are not entitled to practise in the court, ought to be countenanced. In the ordinary course it is not a practice that in any way I tolerate in relation to other litigants in person, directing attempts at such communication to the registry. 58 It seems to me that like sentiments ought necessarily to attend those cases where, for his own reasons, the Commissioner chooses not be represented by a solicitor on the record. In modern times the Bar Rules have been relaxed in a way which permits the direct briefing by a lay client of a member of the Bar. That practice is fraught, though, with the potential of not having a necessary distance that a responsible instructing solicitor introduces into the conduct of litigation. 59 I cannot help but reflect on whether or not the late filing of a document without leave, which radically changes the complexion of the basis upon which the Commissioner seeks to defend an assessment, was related in some way to the absence of a solicitor on the record. That is not in any way to deprecate the conduct of Ms Ford as counsel, but merely an observation in passing as to the hazards which are entailed when persons choose to act for themselves.

Pacific Exchange Corporation Pty Ltd v Commissioner of Taxation

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Judgment (5 paragraphs)

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