Peter Greensill Family Co Pty Ltd (trustee) v Commissioner of Taxation

1. The interlocutory application is dismissed.
2. The applicant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 Judgment in this proceeding was delivered on 28 April 2020: Peter Greensill Family Co Pty Ltd (trustee) v Commissioner of Taxation [2020] FCA 559 (Greensill No 1). The Court dismissed the appeal. 2 By an interlocutory application dated 1 May 2020, the applicant sought the following order: Before the Court makes orders in final disposition of these proceedings, the Court exercise its power to review and reconsider its orders made and reasons for decision in the judgment delivered in these proceedings on 28 April 2020, Peter Greensill Family Co Pty Ltd (trustee) v Commissioner of Taxation [2020] FCA 559 ("Judgment"), on the grounds that the Court has overlooked material matters and points in the Judgment, namely, the applicant's submissions in the proceedings set out in paragraphs [1] to [17] of its Outline of Submissions in Reply (Amended) filed 3 April 2020 as supplemented by oral argument on 8 April 2020, and it is in the interests of justice for the Court to exercise such power. 3 The interlocutory application was listed for hearing today. 4 The interlocutory application is misconceived for two reasons. First, the Court has made orders finally disposing of the proceedings. Those orders were entered at 10.48am on 28 April 2020. Without fault on its part, the applicant was not aware that the orders had been entered when it filed its interlocutory application on 1 May 2020. None of the circumstances in rule 39.05 of the Federal Court Rules 2011 (Cth) apply. Whilst the applicant submitted that there was an accidental omission which could be corrected under paragraph (h) of rule 39.05, that rule does not apply to allow the Court to correct mistakes which are the consequence of a deliberate decision or where the amendment is a matter of controversy as it is here - see: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at 389-391, particularly at 391A. Nor does s 23 of the Federal Court Act 1976 (Cth) provide power to review and reconsider orders in circumstances such as the present. The applicant does not seek a supplemental order or a correction of an order which does not reflect what the Court intended; rather, it seeks an order that its appeal be allowed rather than dismissed. An implied power to correct an injustice should not be permitted to usurp the role of an appeal. The interests of justice involve different considerations for an order made by a trial judge in the Federal Court, from which an appeal to the Full Court lies, as opposed to an order of the High Court, from which no appeal lies. 5 Secondly, contrary to the statement in the interlocutory application, the Court took into account the submissions made by the applicant at [1] to [17] of its written outline of submissions in reply as well as those made orally at the hearing on 8 April 2020. The reasons for decision dealt with the applicant's primary and alternative cases. The Court concluded that: (1) section 855-10(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) did "not operate to disregard any capital gain in the calculation of the amounts required to be calculated under ss 115-215 and 115-220" of the ITAA 1997: Greensill No 1 at [40]; (2) sections 115-215 and 115-220 require an amount to be calculated under s 115-225 which in turn requires the identification of "your share of the capital gain" under s 115-227: Greensill No 1 at [39] to [45], [47]; (3) "[t]he reference to 'your share of the capital gain' in s 115-225(1)(b) is a reference, inter alia, to 'the amount of the capital gain to which the [beneficiary] is specifically entitled': s 115-227(a)": Greensill No 1 at [43]. The "amount of the capital gain to which the [beneficiary] is specifically entitled" is plainly a reference to the amount of the trust's capital gain to which the beneficiary is specifically entitled. No other construction is open; (4) the resulting capital gain, treated by s 115-215(3) as a capital gain of the beneficiary, is then included in the calculation of the beneficiary's net capital gain under s 102-5 of the ITAA 1997: Greensill No 1 at [48]. 6 As was noted at [39(4)] and [48] of Greensill No 1, the purpose of s 115-215 "is to ensure that appropriate amounts of the trust estate's net income attributable to the trust estate's capital gains are treated as a beneficiary's capital gains when assessing the beneficiary" so that the beneficiary can apply any available capital losses or discount percentage against those gains: s 115-215(1) (emphasis added). 7 The Court intended to reject the applicant's primary and alternative arguments. The reasons just mentioned involved a rejection of the primary and alternative arguments. The alternative argument was also rejected at [60] of Greensill No 1. 8 The applicant filed thirteen pages of written submissions (AS) on this application. The main misconception of relevance contained in those submissions is the proposition that s 115-227 "does not share out amounts of the trust's net capital gain" (AS[34(b)]) but that it creates a capital gain in the beneficiary on which s 855-10(1) operates. The applicant submitted that Mr Greensill "made" capital gains under s 115-227: AS[34(h)]. The relevant provisions operate in the manner described in Greensill No 1 at [39]. The trust made capital gains. Mr Greensill did not. As was stated in Greensill No 1 at [40], s 855-10(1) "has no relevant application to the present facts". As was stated at [45], "[t]he function of s 115-225(1) is to apportion the capital gain of the trust estate among the trustee and beneficiaries of the trust estate according to their 'share' as determined under s 115-227": at [45]. The applicant's argument was capable of being dealt with concisely: Mr Greensill did not make a capital gain to which s 855-10(1) could apply whether under s 115-227 or any other provision. 9 Much of [1] to [17] of the written reply submissions which were said to have been overlooked was devoted to pointing out that, if the construction preferred by the applicant was not accepted, this would mean that Mr Greensill would be taxed differently as a non-resident beneficiary than he would have been as a non-resident owning the CGT assets directly. That submission is little more than a statement of the obvious, reflecting the competing constructions put forward by the parties. 10 In oral submissions at the hearing, Senior Counsel for the applicant submitted that, if his construction were not accepted, this would give rise to an "absurd" outcome because the assets were "exempt". For the reasons given in Greensill No 1 at [70], the outcome is only "absurd" and the assets are only "exempt" if one is to accept the underlying assumption that capital gains distributed to an indirect owner through a resident non-fixed trust were intended to be taxed in the same way as capital gains made by a direct foreign resident owner. For the reasons given in Greensill No 1, on the proper construction of the provisions read in context, and as confirmed by the legislative history and extrinsic material, the legislation does not reveal an intention not to tax specifically entitled foreign beneficiaries of resident non-fixed trusts in respect of CGT events happening to CGT assets which are not taxable Australian property. 11 The Court accepted the obvious proposition that, if the Commissioner's construction were correct, Mr Greensill would be taxed differently than he would have been if he owned the assets directly: Greensill No 1 at [61]. That is the consequence of the legislative scheme even if, as a matter of taxation policy, different views might be held as to whether that is an appropriate outcome. Those are issues for the legislature, not the Court. The legislature was apparently cognisant of the fact that there would be different treatment of non-resident beneficiaries of fixed and non-fixed trusts; it apparently considered that different treatment to be justified for integrity reasons - see: Greensill No 1 at [67]. 12 None of the applicant's submissions were overlooked. The applicant's primary case and alternative case have been addressed. Accordingly, even if orders finally disposing of the proceedings had not been entered, the basis which the applicant puts forward as enlivening the power to "review and reconsider its orders" has not been made out. 13 The applicant no doubt considers that its construction of the relevant provisions is preferable. The applicant's remedy lies in appeal, not in seeking to reargue the matter after entry of orders dismissing its case. 14 The interlocutory application is dismissed with costs. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley .