McDonald's Australia Ltd v Commissioner of Taxation (No. 2)

• Jurisdiction: Australia Federal only
• Judgment Date: 27 March 2008
• Neutral Citation: [2008] FCA 395
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

McDonald’s Australia Ltd v Commissioner of Taxation (No. 2) [2008] FCA 395

PRACTICE AND PROCEDURE – applications for leave to appeal an interlocutory judgment – onus in proceedings borne by applicant for leave to appeal – tests for the grant of leave not made out – purported election to have applications dealt by the Full Court of the Federal Court – no right of election exists under the Federal Court Rules – applications dismissed with costs

Federal Court of Australia Act 1976 (Cth) s 25(2), s 31A, s 31A(1)(b), s 31A(3)

Federal Court Rules O 1 r 4, O 52 r 2AA,O 52B r 5, O 52B r 5(3)

BAE Systems Australia (NSW) Pty Limited v Commissioner of Taxation for the Commonwealth of Australia [2008] FCA 48

Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397

Ex parte Bucknell (1936) 56 CLR 221

Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401

Hicks v Ruddock (2007) 156 FCR 574

McDonald’s Australia Ltd v Commissioner of Taxation [2008] FCA 37

Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCA 47

Rio Tinto Ltd v Federal Commissioner of Taxation (Cth) (2004) 55 ATR 321

Rogers v Asset Loan Co Pty Limited [2007] FCA 195

WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (Cth) (2006) 234 ALR 451

Yap v Granich and Associates [2001] FCA 1735

MCDONALD'S AUSTRALIA LTD v COMMISSIONER OF TAXATION

NSD 153 OF 2008

NSD 154 OF 2008

NSD 155 OF 2008

BUCHANAN J

27 march 2008

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 153 OF 2008

BETWEEN:	MCDONALD'S AUSTRALIA LTD Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGE:	BUCHANAN J
DATE OF ORDER:	27 march 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application for leave to appeal is dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 154 OF 2008

BETWEEN:	MCDONALD'S AUSTRALIA LTD Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGE:	BUCHANAN J
DATE OF ORDER:	27 March 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application for leave to appeal is dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 155 OF 2008

BETWEEN:	MCDONALD'S AUSTRALIA LTD Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGE:	BUCHANAN J
DATE OF ORDER:	27 march 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application for leave to appeal is dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 153 OF 2008 NSD 154 OF 2008 NSD 155 OF 2008

BETWEEN:	MCDONALD'S AUSTRALIA LTD Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGE:	BUCHANAN J
DATE:	27 march 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

BUCHANAN J:

1 These are applications for leave to appeal against an interlocutory judgment (McDonald’s Australia Ltd v Commissioner of Taxation [2008] FCA 37) where the applicant (‘McDonald’s’) sought relief at first instance that the primary judge described as novel. The proceedings at first instance are, in each case, an appeal against a decision made by the Commissioner adverse to McDonald’s. Each proceeding is at an early stage – no evidence has been filed and there has been no discovery. Nevertheless, in each case, McDonald’s sought summary judgment. It relied on s 31A of the Federal Court of Australia Act 1976 (Cth) (‘the Act). Section 31A provides, so far as is here relevant:

‘(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a) the first party is prosecuting the proceeding or that part of the proceeding; and

(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

…

(3) For the purposes of this section, a defence … need not be:

(a) hopeless; or

(b) bound to fail;

for it to have no reasonable prospect of success.’

2 The term ‘defence’ where used in s 31A(3) does not appear to be used in any technical sense. It clearly refers back to s 31A(1)(b). The assessment required, in a case of the present kind, is whether a party has no reasonable prospect of successfully defending a proceeding.

3 It is undoubted that s 31A, which also permits summary dismissal of claims, introduced a lower and more flexible standard for summary disposal of proceedings than earlier existed under the general law but it is not to be seen as an avenue to avoid the need to resolve the real issues on which the rights of parties depend (see Hicks v Ruddock (2007) 156 FCR 574 at [13]).

4 Furthermore, as Greenwood J pointed out in Rogers v Asset Loan Co Pty Limited [2007] FCA 195 (at [59] – [60]), s 31A is not directed to striking out pleadings but proceedings as a whole. He referred to the judgment of French J in Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401. Greenwood J said that the necessary state of satisfaction ‘will rarely be achieved (except in the most transparent of cases) on the strength of a conclusion that the applicant’s statement of claim is deficient either in whole or in part’ because of the facility for leave to replead.

5 The principles to be applied to determine the present applications are stated in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (‘Décor’). Without limiting the Court’s overall discretion, the question to be addressed is whether, in all the circumstances, the decision under challenge is attended with sufficient doubt to warrant its being reconsidered and whether substantial injustice would result if leave to appeal was refused, supposing the decision to be wrong. A matter relevant to the second aspect is whether the interlocutory decision under challenge is one that ‘has the practical effect of finally determining the rights of the parties’ (see Ex parte Bucknell (1936) 56 CLR 221 at 225; see also Yap v Granich and Associates [2001] FCA 1735 at [6]).

6 Before the primary judge, McDonald’s relied, for its contention that a defence to its applications was bound to fail, upon the contents of appeal statements filed by the respondent Commissioner pursuant to O 52B r 5 of the Federal Court Rules. The requirement imposed by that rule is to file a statement which is described by O 52B r 5(3) as ‘a statement outlining succinctly the Commissioner’s contentions and the facts and issues in the appeal as the Commissioner perceives them’. An appeal statement is not a pleading (see the definition of ‘pleading’ in O 1 r 4; see also WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (Cth) (2006) 234 ALR 451). Even if it was, it would not be sufficient to rely simply upon pleading points to satisfy s 31A where there was any prospect that leave might be granted to state a respectable basis for defending proceedings (see also Rio Tinto Ltd v Federal Commissioner of Taxation (Cth) (2004) 55 ATR 321; BAE Systems Australia (NSW) Pty Limited v Commissioner of Taxation for the Commonwealth of Australia [2008] FCA 48).

7 At the time of the judgment under challenge the appeal statements had already been amended once. The amended appeal statements which were before the primary judge were, in each case, prefaced by the following:

‘Preamble

The Commissioner was not a party to any of the transactions relevant to this application and his knowledge of the facts is primarily derived from documents and information supplied by the Applicant, the Applicant’s representatives and other parties involved in the transactions.

The Commissioner relies on section 14ZZO of the Taxation Administration Act 1953 (TAA 1953), and save for any facts expressly agreed or admitted in writing, puts the Applicant to proof on all facts upon which the Applicant seeks to rely to establish that the assessment the subject of this proceeding is excessive. None of the facts contained in this statement constitute an admission of proof by the Commissioner.

The Commissioner states that on the information currently available to him, the facts, issues and contentions are as set out below. In light of the onus of proof referred to above, and the fact that this statement is filed before any such statement on behalf of the Applicant, and before discovery and the filing of evidence, the Commissioner reserves his right to add to or otherwise vary this statement.’

(Emphasis added.)

8 In my view there is no substance in the suggestion that the appeal statements which had been filed necessarily fixed the respondent Commissioner’s answer to McDonald’s case or foreclosed the Court’s ability to look in more detail at the facts and circumstances disclosed by the evidence. In fact, since the judgment under challenge was delivered, further amended appeal statements have been filed by consent. That circumstance emphasises that the position of the respondent Commissioner was not to be regarded necessarily as final or incapable of adjustment. McDonald’s could only succeed in its applications for summary judgment if it was clear that any resistance to its appeals against the Commissioner’s...