Steele v Deputy Commissioner of Taxation P16/1997 [1998] HCATrans 243 (19 June 1998)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P16 of 1997

B e t w e e n -

KATHLEEN FAYE STEELE

Applicant

and

DEPUTY COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

GUMMOW J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 19 JUNE 1998, AT 1.13 PM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC: May it please the Court, I appear with my learned friend, MR C.T. GOLLOW, for the applicant. (instructed by Ilbery Barblett)

MR R.L. Le MIERE, QC: If the Court pleases, I appear with my learned friend, MS L.B. PRICE, for the respondent Commissioner. (instructed by the Australian Government Solicitor)

MR G.T. PAGONE, QC: May it please the Court, I appear with my learned friend MS J.J. BATROUNEY, for the intervener, the Law Council of Australia. (instructed by Arnold Bloch Leibler)

MR McCUSKER: I understand Mr Pagone has a motion before the Court.

GUMMOW J: Yes, he does.

MR McCUSKER: Do your Honours wish to hear that?

GUMMOW J: Yes. Mr Pagone, it may not be necessary to deal with this until we have seen what course emerges but, if special leave were to be granted, would the body for whom you appear be minded to renew an application for intervention on the hearing of the appeal?

MR PAGONE: We thought not, your Honour.

GUMMOW J: I see. Thank you. Yes, Mr McCusker.

MR McCUSKER: Your Honours, the respondent in this matter, the Commissioner, has taken the perhaps unusual course of filing a supplementary submission and proposes that this is a matter in which special leave should be granted but subject to certain conditions.

GUMMOW J: Can I just say this to you, Mr McCusker. This matter got to the Federal Court from the Administrative Appeals Tribunal under section 44 of the AAT Act as questions of law, the facts having been fixed by what happened in the AAT. There is no real room for fresh fact-finding activities.

MR McCUSKER: I accept that, your Honour. I think your Honour is just about to pre-empt what I was going to say, and that is that, having reviewed the matter, we accept that, if special leave is granted, it should be granted essentially on the conditions proposed by the Commissioner. That is, that the question of the taxpayer's purpose in borrowing the money is limited, as the court below has found, to a dominant purpose of purchasing the land and constructing a motel thereon for profit-making purposes and a subsidiary purpose of agistment. That being so, we accept that there would need to be an amendment to the proposed notice of appeal in order to reflect that.

GUMMOW J: Yes. Is there any real ground of difference between you as to the suggested special leave questions as they are now formulated in your revised document, which I think came in very recently, in response to the Commissioner's document, I think, dated 10 June? In paragraph 2 of your - - -

MR McCUSKER: In our reply, your Honour, paragraph 2 proposes a slight reformulation of what appears in the Commissioner's outline of submissions in paragraph 5(a).

GUMMOW J: Do you see any difference in substance between the two?

MR McCUSKER: In substance, no, your Honour. It is a slight reformulation. The only difference, I suppose, is that ie the motel complex is the creation of a capital asset on that land. Whether the motel complex needs to be there is a moot point, but we see no difference in substance. Essentially we are in concurrence with the Commissioner's contention that we are limited on the special leave, if special leave is granted, to the facts as found as to the dominant and subsidiary purpose.

GUMMOW J: Thank you, Mr McCusker. I will just ask Mr Le Miere if he shares that view as to the insubstantiality of any difference between those two formulations.

MR Le MIERE: We do see a difference, your Honour, if the formulation of the applicant in paragraph 2(a) of the reply refers to the purpose being acquiring:

land purchased for the purpose of developing the land and producing assessable income -

We have read that as having an essential difference from that put by the Commissioner in that the applicant's formulation is wide enough to permit it to be argued that the purpose was something in addition to the acquiring of the land to develop it by building a motel and operating it for the purpose of deriving income from the operation of the motel. We see the applicant's formulation as permitting the proposition which essentially found favour with his Honour Justice Carr, that being that the purpose was to turn the land to profitable account in whatever way the taxpayer saw fit. So we see that there is a distinction between the two, that the - - -

GUMMOW J: And there being a distinction, what do you say about the distinction?

MR Le MIERE: As we understand it, what my learned friend Mr McCusker has just said to the Court is an acceptance that the Commissioner's formulation is the appropriate one and that the question ought not to go forward in the wider - - -

GUMMOW J: You say "incurred" and he says "paid".

MR Le MIERE: I am sorry, we do not see any significance in that. The significance is in the words "purchased for the purpose of developing the land and producing assessable income", the relevant words being "producing assessable income". We say that the courts below found that the production of assessable income was to be from the operation of the motel.

GUMMOW J: It is a question of what the AAT found.

MR Le MIERE: We say that is what the AAT found. I can take your Honours to the relevant passages if your Honours wish but, as I understand, my learned friend Mr McCusker accepts that proposition and hence it ought to be confined to a wording that it was "to develop the land and produce assessable income by the operation of a motel", or words to that effect.

GUMMOW J: Do you have any resistance to 2(a) if it was "developing the land and producing assessable income as found by the AAT"? You say it was not found.

MR Le MIERE: We do not have objection, although we would seek to head off there being a subsequent argument about what was found by the AAT. As I understand from what my learned friend Mr McCusker is saying, it is now accepted that the AAT found that the land was purchased for the purpose of developing it and producing assessable income by the operation of a motel or some other development there, the essential point being that it ought not to be open to the taxpayer to argue that the purpose was in part to gain or produce assessable income from the development and sale of the land. The essential point is that that ought not to be part of the argument.

GUMMOW J: Yes. Let us ask Mr McCusker how he responds to that. Is there any real difficulty on your part with accepting the Commissioner's formulation in 5?

MR McCUSKER: No, your Honour. I was going to say it is a distinction without a difference. We intended to formulate it in terms which gave a broad special leave issue rather than confine it to the particular facts. I would be happy to interpolate in our formulation after "assessable income" in 2(a) "from the operation of a motel complex".

GUMMOW J: I am sorry, how would you amend 5(a)?

MR McCUSKER: Under 2(a) of our reply we have slightly reformulated it. We would simply put "producing assessable income" and then interpolate "from the operation of a motel complex". We certainly do not intend those words to give rise to an argument about profit making by sale.

GUMMOW J: Thank you, Mr McCusker. Mr Le Miere, that seems to deal with the matter.

MR Le MIERE: Yes, if it please your Honour.

GUMMOW J: Very well. There will be a grant of special leave in so far as the decision below raises the issues formulated in paragraphs 2(a) and (b) of the applicant's document - what is its date, Mr McCusker - - -

MR McCUSKER: It is at the foot of the first page, your Honour, 18 June 1998.

GUMMOW J: - - -document of 18 June 1998 as amended by insertion of the words "from the operation of a motel complex" after the words "and producing assessable income" in paragraph 2(a).

MR McCUSKER: May it please the Court.

GUMMOW J: Thank you, gentlemen. Now I do not think anything needs to be done on your motion, Mr Pagone.

MR PAGONE: No, your Honour. I seem to be developing a practice of saying little in this Court.

HAYNE J: Hundreds would envy you.

GUMMOW J: Thank you, gentlemen.

AT 1.23 PM THE MATTER WAS CONCLUDED