Coshott v Commissioner of Taxation

[2015] FCAFC 71

FEDERAL COURT OF AUSTRALIA

Coshott v Commissioner of Taxation [2015] FCAFC 71

Citation:	Coshott v Commissioner of Taxation [2015] FCAFC 71
Appeal from:	Ljiljana Coshott v Commissioner of Taxation [2014] AATA 622
Parties:	LJILJANA COSHOTT v COMMISSIONER OF TAXATION
File number:	NSD 958 of 2014
Judges:	ALLSOP CJ, KENNY AND BESANKO JJ
Date of judgment:	22 May 2015
Legislation:	Administrative Appeals Tribunal Act1975 (Cth) Income Tax Assessment Act 1997 (Cth) Taxation Administration Act 1953 (Cth)
Date of hearing:	22 May 2015
Place:	Sydney
Division:	GENERAL DIVISION
Category:	No Catchwords
Number of paragraphs:	12
Counsel for the Applicant:	Ms CT Ensor
Solicitor for the Applicant:	Martin Place Lawyers
Counsel for the Respondent:	Mr S Lloyd SC with Ms M Hirschhorn
Solicitor for the Respondent:	ATO Legal Services, Review and Dispute Resolution

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 958 of 2014

ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	LJILJANA COSHOTT Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGES:	ALLSOP CJ, KENNY AND BESANKO JJ
DATE OF ORDER:	22 MAY 2015
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The decision made by the Administrative Appeals Tribunal on 2 September 2014 in proceedings 2013/3778 be set aside, and the matter be remitted to the Tribunal to be determined according to law by determining, with the hearing of any further evidence, the second element of the cost base of the CGT assets of the applicant (pursuant to s 110-25(3) of the Income Tax Assessment Act 1997 (Cth)) that were the subject of CGT event C2 on 6 September 2007.

2.There be no order as to costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 958 of 2014

ON APPEAL FROM THE TAXATION APPEALS DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	LJILJANA COSHOTT Applicant
AND:	COMMISSIONER OF TAXATION Respondent

JUDGES:	ALLSOP CJ, KENNY AND BESANKO JJ
DATE:	22 MAY 2015
PLACE:	SYDNEY

REASONS FOR JUDGMENT

ALLSOP CJ DELIVERING THE REASONS OF THE COURT

1. This is an appeal under s 44 of the Administrative Appeals Tribunal Act1975 (Cth) (the Act) from a decision of the Administrative Appeals Tribunal (the Tribunal) on 2 September 2014. These are the reasons of the Court for the order proposed by the parties in the circumstances set out below.  

2. The dispute concerned a CGT event said to have occurred in the settlement of proceedings brought by the taxpayer and her husband against a solicitor. It is unnecessary to recount in any detail, or, indeed, even in outline, the nature of the dispute. A number of issues were raised before the Tribunal that were evident in the transcript before the Tribunal, and in early versions of the Notice of Appeal to this Court under s 44 of the Act. The Tribunal dismissed the review to it on a number of bases, which included, at [57] of its reasons, a view that the taxpayer had failed to discharge her onus of proof because of a lack of proper records.

3. The Court raised with Mr Lloyd, senior counsel for the Commissioner, its concerns about the reasons of the Tribunal and the apparent standard of review that had been exercised in relation to the issues before it, and, in particular, the issue of the determination of the second element of the cost base, assuming there to have been a CGT event and a CGT asset.  After giving Mr Lloyd and the Commissioner an opportunity to consider the concerns that the Court expressed, Mr Lloyd, on behalf of the Commissioner, accepted that there had been an error of law in relation to the approach of the Tribunal concerning the relationship between onus and records, as exhibited in [57] of the Tribunal’s reasons. 

4. Mr Lloyd also indicated that his client would consent to the matter being remitted in a precise form for re-hearing and review.  I will come to the form of that agreed remitter in a moment.  By way of antecedent question, Mr Lloyd submitted that it was necessary to state a question of law for the Court’s jurisdiction to be invoked.  He posited this question: “...whether a failure to maintain adequate records in accordance with s 121-20 of the Income Tax Assessment Act 1997 (Cth) necessarily constitutes a failure to meet the onus of proof imposed on the taxpayer under s 14ZZK of the Taxation Administration Act 1953 (Cth).”

5. It is unnecessary to delay today’s matter by dealing with the propositions involved in Mr Lloyd’s submissions.  There are other questions of law that could be posed, and the question as to whether that is a question of jurisdiction in the conditional sense, or a question of power, is a question for another day and another case.  One could equally identify a question here as to whether, on the material placed before the Tribunal, and in the light of the reasons of the Tribunal, the Tribunal can be seen to have lawfully exercised its function of review. 

6. I should add at this point that Ms Ensor, who only came into the case recently, yesterday sought to amend the Notice of Appeal by narrowing the issues, and I will come to that in a moment. 

7. The parties have agreed on an order, which I will read out in a moment.  We accept that there is a basis to remit the matter by reason of the error identified.  Whilst we have not heard the parties orally, the Court has read the reasons of the Tribunal, the papers before the Tribunal, and the transcript, and the very helpful submissions of counsel previously retained for the taxpayer, and the submissions of counsel for the Commissioner. 

8. With the utmost respect to the Tribunal, on the basis of that material, we consider that there is a prima facie failure to discharge its review function in relation to the assessment of the incidental costs incurred by the taxpayer in the second element of the costs base of a CGT event, that is, in the determining a cost base.  This question is the subject of review on the remitter.  We are of this view because, with respect, the Tribunal appeared to fail to consider material before it, such as the retainer letter, exhibit 4, and the evidence of legal costs that was clear. 

9. It may be that there was a degree of lack of clarity in the full identification of the costs by way of overlap and otherwise, but this did not relieve the Tribunal of a responsibility to examine and consider the material that had been put before it, and to deal with that matter in its reasons, including whether the material established at least a minimum figure for costs. 

10. As I have said, the Court has noted that there has been a refining of issues and an acceptance by the applicant that there was a CGT event C2, and that the limits of the legitimate dispute are the establishment and calculation of the second element of the cost base of a CGT event, and that the limit of the debate before us included the standard of review and the reasons.

11. In that light, it is appropriate, in all the circumstances, to complete this Court’s record to grant leave to the applicant to amend the Notice of Appeal in the form of the document provided to this Court last evening.  Lest there be any debate about its terms and its width, we understand it to be as I have identified, which includes the complaint as to the legitimate standard of review.  With that background, the Court is prepared to make the following order: the decision made by the Administrative Appeals Tribunal on 2 September 2014 in proceedings 2013/3778 be set aside, and the matter be remitted to the Tribunal to be determined according to law by determining, with the hearing of any further evidence, the second element of the cost base of the CGT assets of the applicant (pursuant to s 110-25(3) of the Income Tax Assessment Act 1997 (Cth)) that were the subject of CGT event C2 on 6 September 2007.

12. There will be no order as to costs.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, Justice Kenny and Justice Besanko.

Associate:

Dated:        25 May 2015