Sunchen Pty Ltd v Commissioner of Taxation

GENERAL DIVISION NSD 1643 of 2008

1. The questions should be answered "No".
2. The application is dismissed. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION NSD 1643 of 2008

REASONS FOR JUDGMENT 1 The applicant taxpayer purchased land at Port Macquarie upon which was erected a house dwelled in by a residential tenant. The contract for the sale of the land included as a component of the purchase price to be paid by the taxpayer an amount of $47,727.00 which was said to be for goods and services tax ("GST"). 2 The taxpayer, being registered for GST, then claimed an input tax credit for that amount in its activity statement for the relevant quarter. The claim was disallowed by the Commissioner who also disallowed a subsequent objection lodged by the taxpayer. A further external review by the Administrative Appeals Tribunal ("the Tribunal") upheld the Commissioner's objection decision: Sunchen Pty Ltd v Commissioner of Taxation [2008] AATA 838. The taxpayer then commenced these proceedings by which it has sought both to appeal the Tribunal's decision (presumably pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act")), and to seek judicial review of the same decision pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"). 3 For reasons shortly to be given the outcome of these proceedings largely turns upon whether the land in question can be described as being "premises to be used predominantly for residential accommodation". The issues to be determined are as follows: (a) The construction issue. The taxpayer contended that those words required an assessment of the likely future use to which the premises might be put and that that inquiry could be aided by a consideration of a taxpayer's intentions for the property. The Commissioner, on the other hand, submitted that the expression was concerned only with an assessment of the physical characteristics of the premises without regard to any particular person's intentions. (b) The relevance issue. In the Tribunal the taxpayer was successful on the construction issue. The Tribunal, therefore, embarked upon an assessment of the likely future use of the premises by the taxpayer. It concluded that it was likely that the premises would continue to be used as residential accommodation for the foreseeable future. The taxpayer submitted that in carrying out that task the Tribunal had erred. This was because, whilst it was true that that which was to be assessed was the likely future use of the premises, that assessment was to be carried out on the basis of what was known at the time of the purchase. The taxpayer submitted that the Tribunal had inappropriately taken into account several matters which post-dated the purchase. The Commissioner, on the other hand, submitted that the reasons of the Tribunal made clear, when read as a whole, that no impermissible use of such matters had occurred. (c) The onus issue. It was the taxpayer's position that the premises in question did not answer the description of being "premises to be used predominantly for residential accommodation". It submitted that the consequence was that it was obliged to prove that the likely future use of the premises would not be predominantly residential accommodation. The Tribunal, so the taxpayer submitted, erred by concluding that the taxpayer had failed to discharge the burden of proving that the premises would be used for property development. Put another way, the taxpayer was obliged to prove a negative and not a positive. The Commissioner, on the other hand, submitted that this was an excessively technical reading of the Tribunal's reasons. (d) The no evidence issues. The Tribunal concluded that the taxpayer did not intend to develop the property as it had argued. The reasoning which led the Tribunal to that conclusion included findings by the Tribunal that the development was not feasible, that there was no evidence that the taxpayer had undertaken any estimate of the costs of the development and that there was no evidence that there was any genuine attempt to pre-sell the proposed apartments. The taxpayer argued that the finding that the development was not feasible was made in the absence of any evidence to that effect. Further, there was evidence before the Tribunal that the cost of the development had been estimated and that there had been attempts at pre-sales. The Tribunal's finding that there was no evidence of either of those matters was itself unsupported by any evidence. The Commissioner submitted that these matters amounted to no more than an impermissible attack on the merits of the decision together with an unacceptably technical reading of the Tribunal's reasons. (e) The irrelevant consideration issues. The Tribunal's reasoning on the issue of the development's feasibility turned, in part, on its observation that the taxpayer had not applied for bank finance or for a construction certificate. The taxpayer contended that these were irrelevant to the Tribunal's decision. (f) The relevant consideration issues. The Tribunal concluded that the taxpayer had not intended to proceed with the development. Its process of reasoning did not disclose that it had taken into account a number of matters said by the taxpayer to support the contrary conclusion. These included evidence of a number of inquiries made by the taxpayer of an architect and a builder which were, so it was submitted, inconsistent with the idea that no development was proposed. The taxpayer submitted that, as a matter of law, these matters were considerations that the Tribunal was bound to take into account so that the ground set out in s 5(2)(b) of the ADJR Act was made good. 4 It is convenient to deal with these issues in the order set out above.

The construction issue 5 The link between the entitlement of the taxpayer to claim an input tax credit for GST included in the purchase price and the meaning of the words "premises to be used predominantly for residential accommodation" is less than obvious. It arises this way: a taxpayer may claim an input tax credit in respect of any "creditable acquisition": s 11.20 A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the Act"). A "creditable acquisition" is made by a taxpayer when the supply to the taxpayer is a "taxable supply": s 11.5(b). A supply will not be a "taxable supply" if it is input taxed: see s 9.5. Section 40.65(1) provides: A sale of real property is input taxed but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). (emphasis added; asterisks omitted) 6 If the house purchased by the taxpayer can be said to be "residential premises to be used predominantly for residential accommodation" then the supply will be input taxed, so that there will neither be a "taxable supply" nor a "creditable acquisition". Without a creditable acquisition there can be no entitlement to an input tax credit. Conversely, the conclusion that the premises are not residential premises to be used "predominantly for residential accommodation" leads to the taxpayer being entitled to claim an input tax credit. 7 It is convenient to say something of this confusing terminology. The Act endeavours to relieve some supplies from the imposition of the GST. It does so in two ways. First, certain supplies are said to be GST free. On such a supply no GST is collected by the revenue. The supplier is not obliged to collect GST from the consumer but is entitled to claim input tax credits on supplies leading to that supply. Thus, a doctor is entitled to claim input tax credits for all of the supplies relating to his or her ultimate provision of medical services to a patient although that is a supply which is GST free. The practical consequence of the tax not being collected from the consumer and the supplier being entitled to claim an input tax credit is that none of the inputs into the ultimate supply are taxed - GST is not collected from the ultimate consumer and each intermediate supplier obtains input tax credits which neutralise their own liability to GST. 8 Secondly, certain supplies are said to be input taxed. In such a case the supply is not subject to GST but the supplier cannot claim an input tax credit for supplies made to it which were inputs into the supply to the consumer. The practical effect of this is to cast the ultimate economic burden of the tax not on the end user but on the immediately preceding supplier. 9 The provision of residential premises under a residential lease is input taxed under the Act. This means that no GST is due on the supply by the landlord to the tenant of such premises but the landlord is not entitled to claim input tax credits for supplies which are themselves input into the premises. The practical effect of denying an input tax credit to the supplier on supplies which are input into the premises is to render those supplies subject to GST in the hands of the supplier. Put another way, the inputs into the supply of the premises are taxed which gives rise, no doubt, to the otherwise rather obscure expression "input taxed". Both the sale and, as just indicated, the supply by lease of residential premises are input taxed. Section 40-65 of the Act, which is set out above, deals with the sale of residential premises. Section 40-35 deals with the leasing of residential premises in the same terms. 10 The concept of residential premises has a feature lacking from most other goods and services, in that one set of premises may at one time be residential but may lose that quality at a later time. For example, a house might be sold to a practice of doctors and be used by them as surgeries and waiting-rooms; or, a warehouse might be sold to a person intending to convert it into a residence. The Act seeks to exempt residential premises, but ascertaining where the threshold between the residential and non-residential lies can be difficult in some circumstances. The somewhat obscure language of s 40-65(1) is the Parliament's attempt to bring clarity to these issues. 11 It is useful then to turn to the meaning of the expression "premises to be used predominantly for residential accommodation". The taxpayer submitted that it required a prediction to be made as to the future use of the premises, and that the most important factor in that prediction was the intentions of the future owner. Reliance was placed upon the decision of White J in Toyama Pty Limited v Landmark Building and Developments Pty Ltd (2006) 197 FLR 74 at 92 [92]: The construction of both provisions should be approached in the same way. They require a prediction as to the future use of the premises. The most important factor in such a prediction is the intention of the future owner or lessee of the property. In the case of a lease, the question of how the property is to be used in the future will usually be determined by the terms of the lease. In the case of a sale, the likely future use of the property will probably depend on the purchaser's intentions, to be assessed having regard to objective circumstances such as the physical condition of the premises, the zoning or any restrictive covenants. 12 This undoubtedly erects a test in which the intentions of the purchaser are relevant and important. The Commissioner accepted that the above statement represented the ratio decidendi of the decision and that, unless convinced that it was plainly wrong, should be followed. It was, however, submitted that it was plainly wrong and should not be followed because it was inconsistent with the approach adopted by the Full Court in Marana Holdings Pty Ltd v Commissioner of Taxation (2004) 141 FCR 299 to a related issue. In Marana the Full Court held that the expression "intended to be occupied … as a residence" did not require or permit an inquiry into the intentions of the parties. This was because: 62. In our view the word "intended" in the definition is used in a different sense. The relevant meaning of the verb "intend is, according to Shorter Oxford, "[h]ave as one's purpose (an action etc.)". The verb may also be used in the passive form to describe the object of an intention. In the present case, the passive verbal form "is intended" has as its grammatical subject the connective "that", standing in place of the words "land or a building". The person having the relevant intention is not identified. This sentence structure is commonly used to describe characteristics of the subject of the sentence, which subject is the object of the relevant intention. To say that a building is "intended" to be occupied as a residence implicitly describes the intention with which it was designed, built or modified, which intention will be reflected, to greater or lesser extent, in its suitability for that purpose. It is true that this meaning may overlap with the further requirement that the building be capable of occupation as a residence. However, as we have pointed out, the 1999 amendment appears to have been concerned primarily with land. It may not be surprising that it is a little awkward in its application to buildings. In any event para 1.167 of the explanatory memorandum which accompanied the amending legislation suggests that the draftsman may have thought that "intended" meant "permissible" and "capable" meant "having necessary qualities". 13 See also South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCAFC 155. The expression being interpreted in Marana is not the same as that appearing in s 40-65(1) of the Act and, in particular, includes the word "intended", which does not appear in the latter provision. It is clear, however, that the approach in Marana to the question of whether premises are residential is one based on the physical nature of the premises rather than the intentions of any particular person. 14 The Commissioner's argument was that it would be anomalous if the question of whether premises were residential was to be considered objectively but the question of whether they were "to be used predominantly for residential accommodation" was to be determined by reference to the intentions of a putative purchaser. 15 It is useful in the first instance to observe that the phrase "premises to be used" consists of a noun - "premises" - qualified by the verbal passive adjective "to be used". It bears useful comparison with phrases such as: "food to be eaten" "a goal to be achieved" "a consummation devoutly to be wished". 16 Each of those examples illustrates that what is involved is not a verb in its infinitive form with an unarticulated subject. To say that there is food to be eaten is to say nothing about the eater and is purely a description of the purpose which the food has. So, too, that a consummation is devoutly to be wished tells one nothing about the wisher and everything about the consummation. 17 Uninstructed by authority I would conclude, therefore, that the expression "to be used predominantly for residential accommodation" directs attention to the objective circumstances of the premises and the use which can be divined therefrom. That conclusion is contrary to the approach of White J in Toyamawhich proceeds on the basis that "to be used" has some element of futurity to it, as if it meant "will or might be used". It is consistent with, but not required by, the approach of the Full Court in Marana. Although it is not presently material I would respectfully differ from the Full Court's conclusion that "intended" in the definition of "residential" premises is a passive verb. The conclusion which flows from the absence of an expressed subject is not that there is present a verb whose subject is unexpressed; rather, it is that what is present is not a verb at all. Phrases such as "clothing designed for wear and tear", "homes built to last" and "planes intended for flying" are all examples of adjectival, rather than verbal, constructions. They do not involve passive verbs. However, that observation has no impact on the soundness of the reasoning in Marana. On the contrary, the conclusion that a passive verbal adjective is involved only emphasises the arid nature of seeking to divine the mental states of the "intender"; there is no intender. 18 I take, therefore, the thrust of Marana to be that one should not search for the motives of any particular person in considering the questions raised by the definition of "residential premises". That question is, as already noted, not the question which presently arises. 19 There is great force in the notion that the kinds of questions generated by s 40-65 of the Act about residential accommodation should be considered by reference only to the premises themselves and what their apparent purpose and use is. Once one moves away from what the premises are at the time of supply to what, as is explicit in Toyama, they will be, questions emerge which cannot readily be answered by reference to any part of the text of s 40-65. For example, how far into the future is the prediction required? If the purchaser intends to use the premises as a home for two years and then to convert them permanently thereafter into a car yard are they "premises to be used predominantly for residential accommodation"? So too, what happens if there is no information at all about the likely future use of the premises, for example, where land is acquired under a put option. Finally, the person who bears the tax liability is the vendor as supplier. It is a curious result indeed that leaves the liability of the vendor as a function of the intentions of the purchaser. My conclusions, therefore, are that: (a) the reading of "to be used" in Toyama is grammatically unsound. "To be used" connotes present objectively determined fitness for use not likely future use; (b) the requirement of prediction in Toyamagives rise to issues which the text of s 40-65 is not apt to answer; (c) the requirement of prediction leaves the liability of the vendor to tax as a function of the purchaser's intentions; (d) the reading of "to be used" in s 40-65 should, in principle, be similar to the reading of "intended" in the definition of "residential premises" in Marana and derives some support therefrom. Marana does not, however, actually govern the matter one way or the other. 20 In all of those circumstances, I do not agree, with respect, with the approach taken by White J in Toyama. However, as with most difficult questions of statutory interpretation it is difficult to be dogmatic about this conclusion. I should only depart from Toyama if of the view that it is plainly wrong. In Nezovic v Minister for Immigration and Multicultural Affairs (No. 2) (2003) 133 FCR 190 French J said (at 206): Where questions of law and in particular statutory construction are concerned, the view that a judge who has taken one view of the law or a statute is "clearly wrong" is not lightly to be adopted having regard to the choices that so often confront the courts particularly in the area of statutory construction. 21 Although I do not, with respect, agree with White J's conclusion I am not persuaded that it is clearly wrong. It is not directly inconsistent with Marana. Although I regard my own conclusion as preferable to that in Toyama I am by no means persuaded that that result is inevitable. It follows that I should not depart from Toyama and that I should conclude that the provision calls for a prediction as to future use and that intention is a significant element in that enterprise.

The relevance issues 22 Granted then that the Tribunal was permitted to embark upon an investigation as to the likely future use of the premises, the taxpayer submitted that events postdating the supply were usually irrelevant to that assessment. Whilst accepting that later events could be used to cast light on the circumstances existing at the time of the supply, the taxpayer submitted that the Tribunal had gone further and had given certain post-supply circumstances determinative weight. The matters complained of were at [80]-[81] of the Tribunal's reasons: 80. The Property since being purchased, has been rented out as residential accommodation and it is highly likely that this will be so for the foreseeable future. In Toyama the bulldozers required for demolishment were in effect in place; this is not so in respect of this case. 81. The Tribunal does not accept that there are in fact and at present genuine attempts to sell units off the plan. It is not conceivable that anyone would contract to buy a unit which might, if it is ever built at all, be built at some unspecified future time. (emphasis added) 23 I do not regard these statements as inappropriate. The issue was the intention of the taxpayer at the time of the supply. The Tribunal's reasoning on that question was at [78]: 78. The Applicant is involved in real property and there can be no doubt that it purchased the Property in the hope of making a profit. There are a number of ways in which its profit objective could be achieved. A profitable resale was one such method and in fact it was not long before the Applicant took steps to this end, but they were not successful. Development was another possibility but all of the actions of the Applicant (or to be more exact failure to take such actions by the Applicant) indicate that it was not by any means regarded either as the only or even the predominant method; on the contrary the evidence in this context indicates that it was nothing of the sort. The Applicant in effect contends that the Property was bought for development but that the market fell at the time of acquisition and that development will take place in the future when the market recovers; that contention cannot suffice more particularly where the Applicant took virtually no steps of any kind in order to proceed with the development. 24 It was legitimate to look at what the taxpayer did after completion to test whether the asserted intention existed. Although the conclusions which the Tribunal drew about the fact of the letting of the premises and the absence of arrangements to sell off the plan are by no means inevitable, there was nothing objectionable about such matters being used to negative the taxpayer's intentions as at the time of the supply.

The onus issue 25 The taxpayer bore the onus of establishing that the premises were not "to be used predominantly as residential accommodation". It sought to do this by proving that it intended to develop the site. The Tribunal concluded that this was not its purpose and that its intended purpose was profitable resale. The taxpayer submitted that that latter conclusion did not imply that the premises were not "to be used predominantly as residential accommodation". 26 It is true that, in the abstract, to say that the taxpayer had the intention to profit by resale tells one nothing about whether the premises were to be used for one purpose or another. A purchaser may intend to purchase premises for profitable resale and use them for residential purposes or some other purpose. However, this issue does not arise in the abstract. It arises on the taxpayer making an affirmative case that it intended to redevelop the site. The Tribunal considered two possibilities: an intention to redevelop the site; or, failing that, an intention to hold the premises and to sell them at a later time. The Tribunal embraced the latter view. There was no reversal of the onus of proof; there was simply a rejection of the taxpayer's case.

No evidence issues 27 The Tribunal found that the taxpayer did not, at completion, have a rough estimate of the cost of the redevelopment. That conclusion formed, it is tolerably plain, an element in a factual mosaic which showed that however much the taxpayer subjectively intended to undertake the redevelopment, the chances of that occurring were low. This was encapsulated in the Tribunal's reasons in these terms: 83. Even on the basis that Toyama is binding on the Tribunal, the judgment of His Honour White J makes it clear that the subjective intentions of the Applicant are not to be considered in isolation and must be considered in the light of the prevailing objective circumstances, nearly all of which are against the Applicant. It is clear also that the facts in Toyamaare, in important respects, distinguishable. (emphasis added) 28 The taxpayer submits that the Tribunal's finding that it did not have a rough estimate of the costs at the time of completion is incorrect. It says that the evidence before the Tribunal was that such a rough estimate had indeed been obtained. There was in that circumstance - and this is the controversial step - no evidence that the taxpayer had not obtained any form of rough estimate. 29 There was evidence before the Tribunal that a rough estimate had indeed been obtained. The affidavit of Mr Jian Wei Sun, sworn 29 February 2008, contained evidence that he had asked Mr Mark Yacoub, a builder, what he thought the construction costs would be and Mr Yacoub had responded that it would likely be between $200,000 and $220,000 per unit. Further, Mr Sun also gave evidence that he had asked an architect, Mr Ian Bassett, to provide him with a quotation for engineering plans. That quotation was in fact in evidence before the Tribunal. It follows, I think, that the Tribunal's statement that the taxpayer "did not at the time of completion even have any form of rough estimate" is problematic. Elsewhere in its reasons for judgment the Tribunal found Mr Sun to be lacking in credit. It is possible that the Tribunal's statement is capable of being construed as a rejection of Mr Sun's evidence about the quotes, although this is very difficult to reconcile with the objective fact that Mr Bassett's bill did exist. On balance, the better view is that the Tribunal overlooked the material in reaching the conclusion that it did. 30 I would add that it is not evident that the Tribunal's decision would have been different if these matters had been adverted to. On the other hand it is not obvious that the conclusion would necessarily have been the same either. The Tribunal might have arrived at the same conclusion - perhaps by discounting Mr Sun's account of his conversations with Mr Yacoub. On the other hand, the Tribunal may well have changed its mind on that matter but concluded that, over all, the other objective circumstances, such as the lack of finance, still lead to the same result under the test in Toyama. 31 The claim made in this Court was initially put only on the basis of s 5(1)(h) of the ADJR Act which provides: (1) A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the decision on any one or more of the following grounds: …. (h) that there was no evidence or other material to justify the making of the decision; 32 However, s 5(1)(h) is to be read in light of s 5(3) which provides: (3) The ground specified in paragraph (1)(h) shall not be taken to be made out unless: (a) the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or (b) the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist. 33 I do not think that s 5(3)(a) is capable of applying. The Act did not require the Tribunal to be satisfied that no rough estimate had been obtained so that that finding of fact - if that be what it was - is not one to which sub-section (a) could attach. 34 The narrowness of the operation of s 5(3) has been often enough remarked upon: see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 357 per Mason CJ. Thus, s 5(3)(b) will only apply where the decision is "based" upon the existence of the particular fact. In Curragh Queensland Mining Ltd v Daniel (1992) 34 FCR 212 at 220-221 Black CJ (with whom Spender and Gummow JJ agreed) said: Section 5(3)(b) does not require the identification of some single particular fact that may be said to be the foundation of the decision. A decision may be based upon the existence of many particular facts; it will be based on the existence of each particular fact that is critical to the making of the decision. A small factual link in a chain of reasoning, if it is truly a link in a chain and there are no parallel links, may be just as critical to the decision, and just as much a fact upon which the decision is based, as a fact that is of more obvious immediate importance. A decision may also be based on a finding of fact that, critically, leads the decision-maker to take one path in the process of reasoning rather than another and so to come to a different conclusion. 35 It is a difficult question indeed whether the finding that no rough estimate had been obtained fits within this rubric. This is because, whilst one can discern from the Tribunal's reasons that other matters were taken into account, one cannot tell whether those matters were independently sufficient. In the language of Curragh, one simply cannot tell whether any of the objective circumstances constituted "parallel paths" to the same conclusion. 36 It is the taxpayer who bears the onus of proof in showing that the requirements of s 5(3)(b) have been made out. In an equivocal situation such as the present the matter may be disposed of by observing that the taxpayer has not demonstrated at the civil standard that the finding was one upon which the decision was based within the meaning of s 5(3)(b). 37 Independently of that conclusion, however, the s 5(3)(b) argument should be rejected for another reason. Failure to satisfy either of s 5(3)(a) or (b) necessarily spells failure under s 5(1)(h); however, the converse is not true. That s 5(3)(a) or (b) is satisfied as a matter of text merely prevents the negative deeming provided for in s 5(3) from coming into effect. When the negative deeming in s 5(3) is not enlivened, the question raised by s 5(1)(h) still needs to be answered: Curragh at 221, 226. 38 The High Court's decision in Minister for Immigration and Multicultural Affairs v Rajamanikkam (2002) 210 CLR 222 does not alter that conclusion. The approach that non-satisfaction of the deeming provision still left the substantial issue to be determined was adopted in relation to essentially equivalent provisions of the Migration Act 1958 (Cth) by Gleeson CJ at 236 [41] and Callinan J at 270-271 [151]. McHugh and Gaudron JJ took the opposite position at 240 [53]. Kirby J appears to have adopted the same position as McHugh and Gaudron JJ in his reasons: cf. 255 [111]. The learned authors of Judicial Review of Administrative Action (4th ed, 2009) are of the view that because Kirby J agreed with the position of Gaudron and McHugh JJ the consequence is that Curragh has been overturned. 39 Whilst I can follow the logic of that argument I am not disposed to agree with it. This is because such an overturning could happen only if the ratio decidendi of Rajamanikkan was inconsistent with Curragh. However, it is apparent that the result in the case - that the appeal was allowed - was one in which Gleeson CJ, Gaudron, McHugh and Callinan JJ joined but from which Kirby J dissented. The necessary process of reasoning leading to the appeal being allowed did not, therefore, include the reasoning of Kirby J. Amongst the justices in the majority the issue was split two-two. In that circumstance the ratio decidendi of Rajamanikkan contains no statement about either position since the justices were equally divided. 40 It is true that some Full Courts of this Court have suggested that the position articulated by Gleeson CJ is the prevailing view: see, for example, VAAW of 2001 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 202 at [32]-[37]: SGFB v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 422 at [17]-[21]; see also Dunstan v Human Rights and Equal Opportunities Commission (No 2) [2005] FCA 1885 at [248] per Mansfield J. A less tortuous path to the same conclusion may be to observe that the absence of a ratio decidendi in Rajamanikkan leaves Curragh's precedential effect in place. 41 That being so, even if s 5(3)(b) had been satisfied it would still have been necessary to satisfy s 5(1)(h) itself. But what that provision requires is an absence of evidence to justify the making of the decision. In this case, however, there was material before the Tribunal which could justify its decision, for there was other circumstantial evidence suggesting that the development might not have proceeded. Accordingly, an attack under s 5(1)(g) must fail. 42 In its written submissions the taxpayer also contended that the same matters constituted an error of law - that is, the error of law constituted by making a finding of fact for which there was no evidence. The ground was put both as a question of law within the meaning of s 44 of the AAT Act, and as an independent ground of review under the ADJR Act. The pleadings did not reflect this contention but no objection was taken by the Commissioner to it being raised. 43 At the level of principle there is a difference between a finding of a positive fact for which there is no evidence, and a finding that something is not the case where there is some evidence to show that it is in fact so. In the former case, it is not rationally possible to justify the finding for there is no material from which it can proceed: ex nihilo nihil fit. Setting aside such a finding does not therefore impermissibly trespass into the arena of fact finding. Rather, it enforces the procedural requirement that fact finding be based on some evidence. 44 The analysis is quite different where a negative finding that something is not the fact is involved. If there exists evidence which contradicts that negative finding - that is, suggests that something is the fact - it remains rationally possible for the decision maker to arrive at the same conclusion simply by rejecting that evidence as not credible. For example, where a decision maker finds that a visa applicant has a criminal record and does so in the absence of any evidence to that effect, it is easy to conclude that the finding is vitiated for, on the material, only the opposite conclusion can rationally be reached. Where, however, a decision maker finds that a pension applicant did not work during a six month period, that conclusion is not logically excluded by evidence from the applicant that she did in fact work, for it is possible for the decision maker to disbelieve the applicant and therefore arrive at the same conclusion. 45 For that reason, the no evidence ground should not be available where the finding challenged is in substance a negative one. The authorities in this Court support, I believe, that approach: see N258/00A v Minister for Immigration and Multicultural Affairs (2000) 101 FCR 478 at [27] per Katz J; Aung v Minister for Immigration and Multicultural Affairs [2000] FCA 1562 at [38] per Katz J; Ordenzia v Minister for Immigration and Multicultural Affairs [2001] FCA 35 [27] per Katz J; He v Minister for Immigration and Multicultural Affairs [2001] FCA 446 at [38] per Ryan J; Abila v Minister for Immigration and Multicultural Affairs [2001] FCA 1186 at [21]-[25] per Tamberlin J; Sarancharkh v Minister for Immigration and Multicultural Affairs [2001] FCA 1461 [43]-[45] per Hill J. I do not regard the Full Court's decision in Guden v Minister for Immigration and Multicultural Affairs (2000) 58 ALD 352 as being to the contrary. It follows that this ground is not made out. 46 I turn then to the Tribunal's statement (at [82]) that it did not accept "that there are at present any genuine intentions to sell off the plan". 47 Here the same issue arises. The Tribunal found that there were no genuine attempts to sell the proposed apartments off plan. The evidence of a real estate agent, Ms Elaine Elsey, was to the contrary. She gave evidence that she was instructed by the taxpayer to prepare for the sale of the apartments off plan. It appears she prepared advertisements and also a marketing plan. Furthermore, the evidence suggested that she received inquiries from interested purchasers. There was also evidence from a Mr Jordan Antonopoulos, a solicitor, that he was instructed by the taxpayer to prepare contracts for the sale of apartments off the plan. Neither Ms Elsey nor Mr Antonopoulos were cross-examined. For reasons I have already given, these matters cannot succeed, at least on the no evidence basis. I say nothing of other grounds such as irrationality or the inadequacy of reasons. 48 The taxpayer submits that there was no evidence to support a conclusion that, at the time of the purchase of the land, the development was not a feasible prospect. The actual finding of the Tribunal is at [79] in these terms: Mr. Sun's evidence was, as I have indicated, and in a number of respects not worthy of credit. He said that the Applicant bought the Property at a time when the market was falling. On this basis the Applicant bought the Property at a time when at least for the foreseeable future the development was not a feasible proposition at all. That this must be so is borne out by the Applicant's own failure to take any of the necessary steps. 49 That the taxpayer bought the property at a time when the market was falling was evidence capable of supporting the conclusion that the project would not be feasible for sometime. Whether it should support that conclusion and what weight it ought to be given are different questions. However, as a no evidence submission the argument is without merit. It might not be correct but that is not, in context of judicial review, the correct question. I would, therefore, reject this argument.

The irrelevant consideration issues 50 The Tribunal reasoned, in part, that the project was not feasible because the taxpayer had not sought bank finance or a construction certificate. 51 The taxpayer submitted that that a failure to apply for these things could have no rational bearing on whether it had the requisite intention. This was because the failure to obtain them could be adequately explained by other matters such as the decline in the property market. It is possible that those other matters could explain the failure but the key aspect of the argument to be emphasised is its dependence upon the word "could". It is also possible that they could be explained by an absence of intention to proceed with the project. That being so, it is not possible to say that they were necessarily irrelevant. Even if that were not so, such matters could not fall within the notion of an irrelevant consideration as explained in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39 per Mason J. In particular, there is nothing in the subject matter, scope or purpose of the Act that would indicate that they were forbidden considerations. 52 These two arguments were also put by the taxpayer under the equivalent ground in s 5(2)(a) of the ADJR Act. The decision of the Deane J in Sean Investments Pty Ltd v Mackellar (1981) 38 ALR 363 at 375 demonstrates that this ground is not, in substance, different to the common law ground. It follows that it is not made out either.

The relevant consideration issues 53 The taxpayer submits that the Tribunal failed to take into account inquiries which were made by it of a builder and an architect. Those inquiries showed, as the argument was developed, that the thesis that the taxpayer did intend to carry out the development was more likely. Were the issue before this Court whether I agreed with the Tribunal's process of fact finding I might well be inclined to see the force of the point. However, what is involved in these proceedings is not merits review. Accepting this, the taxpayer seeks to characterise the error involved as a failure to take into account a relevant consideration. However, that ground is available only if the consideration said to have been overlooked was required by law to be examined. That question is to be answered by reference to the scope, purpose and ambit of the Act. So viewed, the taxpayer's inquiries of the builder and the architect cannot be characterised as statutorily mandated. Accordingly, neither this ground nor the ground in s 5(2)(b) of the ADJR Act is made out.

Conclusion 54 The Tribunal was correct to apply Toyama. No basis is shown for disturbing its findings. The questions posed on the appeal were as follows: (a) Did the Tribunal misconstrue the requirement in s. 40-65(1) of the Act that the premises be "residential premises for use as residential accommodation" by: (a) determining that the premises were residential premises for use as residential accommodation because the property would be used as residential accommodation for the foreseeable future; and (b) failing to ask whether as at the date of supply the likely future predominant use of the property was use as residential accommodation; (c) determining that the property was for use as residential accommodation where on the facts as fount it was not open to it so to decide. 55 They should all be answered "No" and the application otherwise dismissed. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.