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Decision Impact Statement

Elsinora Global Limited & Others v Deputy Commissioner of Taxation & Another

Administrative Treatment (Implication on current Public Rulings and Determinations)

Relevant Rulings/Determinations:

Subject References:
Power to order interest under s51A or alternatively ss22 & 23 of the Federal Court of Australia Act 1976 (Cth)
consideration of 'proceedings for the recovery of any money' for the purposes of s51A
where applicants sought an order for payment of interest from Deputy Commissioner
no action against Deputy Commissioner for recovery of money
consideration of discretion as to rate of interest under s51A.

This document is not a public ruling, but provides a statement of the Commissioner's position in relation to the decision and how the law will be administered as a consequence of the decision. Any proposals for changes in the law are matters for government and it is not appropriate for the Commissioner to comment.

Précis

Outlines the Tax Office's response to this case which concerned an appeal against the trial judge's failure to order payment of interest under the Federal Court of Australia Act 1976 (Cth).

Brief Summary of Facts

At first instance, the applicants challenged the validity of assessments and notices issued by the Commissioner under s255 of the Income Tax Assessment Act 1936 and s260-5 of the Taxation Administration Act 1953 (the "notices") under s39B of the Judiciary Act 1903 .

On 3 February 2006, Edmonds J concluded that the assessments were valid assessments but held that none of the notices imposed any statutory obligation on the recipients in accordance with their terms. His Honour refused to make declarations that the notices were invalid. No cause of action for the recovery of money was raised or established as against the Deputy Commissioner. No judgement for money was entered against the Deputy Commissioner by Edmonds J.

The Deputy Commissioner instituted an appeal from that part of the judgment and orders of Edmonds J where his Honour ordered that the notices did not impose any statutory obligation on the recipients in accordance with their terms.

The applicants filed a Cross-Appeal contending that the trial judge erred by not making an order that the Deputy Commissioner pay interest on the amount withheld by one of the recipients of the notices at the rate of 9%pa from 22 January 2005 (the date the amount was withheld) to the date of payment of the interest, less any interest which in fact had accrued on the sum withheld whilst retained pursuant to the notices.

The Deputy Commissioner's appeal was subsequently discontinued. This left the Cross-Appeal to be resolved by the Full Federal Court.

Issues decided by the Court or Tribunal

There was no error in the judgment at first instance.

Although the Full Federal Court accepted that, in general terms, the proceeding before Edmonds J can be characterised as a proceeding for the recovery of money, s 51A of the Federal Court of Australia Act 1976 (Cth) authorises an award of interest only where there is cause of action against a party for the recovery of money, and the claim for interest is made against the same party. In other words, the statute confers a power to award interest as an incident of a cause of action for the recovery of money that results in a judgment.

In this case, there was no cause of action against the Deputy Commissioner for the recovery of money.

The Full Federal Court also concluded that as the trial judge had accepted that s51A did not apply, there was no issue as to whether the primary judge's discretion under s51A(1) had miscarried.

Neither s22 nor s23 of the Federal Court of Australia Act 1976 (Cth) empowers the Court to make an order for interest when it is not empowered to do so under s51A or under the general law. The applicants did not identify or articulate any legal or equitable claim that would give them an entitlement to an award of interest against the Deputy Commissioner under ss22 or 23.

Tax Office view of Decision

The Tax Office considers that the correct decision was reached by the Full Court of the Federal Court given that there was no error in the judgment at first instance. The decision confirms case law regarding the issue of interest payable under the Federal Court of Australia Act 1976 (Cth).

Administrative Treatment

Implications on current Public Rulings & Determinations:

None

Implications on Law Administration Practice Statements

None

Your comments

We invite you to advise us if you feel this decision has consequences we have not identified, or if a precedential decision such as a Public Ruling or an ATO ID requires reconsideration or amendment. Please forward your comments to the contact officer by the due date.

Date Issued:	5 April 2007
Due Date:	30 May 2007
Contact officer:	Grahame Tanna
Email address:	grahame.tanna@ato.gov.au
Telephone:	(02) 9374 2674
Facsimile:	(02) 9374 2002
Address:	Centrepoint 100 Market Street Sydney NSW 2001

Legislative References:
Federal Court of Australia Act 1976 (Cth)
22
23
51A

Case References:
Elsinora Global Ltd v. Healthscope Ltd (No 2)
(2006) 227 ALR 570
2006 ATC 4061
61 ATR 482

Comptroller-General of Customs v. Kawasaki Motors Pty Ltd (No 1)
(1991) 32 FCR 219

Commonwealth v. SCI Operations Pty Ltd
(1998) 192 CLR 285

Victorian WorkCover Authority v. Esso Australia Ltd
(2001) 207 CLR 520

Thakral Fidelity Pty Ltd v. Commissioner of Stamp Duties (No 2)
[2001] 1 Qd R 428