WESTPAC BANKING CORPORATION V COMMISSIONER OF INLAND REVENUE HC AK CIV 2004-404-006444

WESTPAC BANKING CORPORATION V COMMISSIONER OF INLAND REVENUE HC AK CIV 2004- 404-006444 9 May 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2004-404-006444IN THE MATTER OF the Tax Administration Act 1994 and the Income Tax Act 1994 BETWEEN WESTPAC BANKING CORPORATION Plaintiff AND THE COMMISSIONER OF INLAND REVENUE Defendant Hearing: 15 February and 7 March 2008 Appearances: Jim Farmer QC, Richard Green and Richard Lange for Plaintiff Brendan Brown QC and Rebecca Ellis for Defendant Judgment: 9 May 2008JUDGMENT OF HARRISON JIn accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 3.30 pm on 9 May 2008_________________________________________________________________________________ SOLICITORS Simpson Grierson (Auckland) for Plaintiff Crown Law Office (Wellington) for Defendant COUNSEL JA Farmer QC; BWF Brown QCIntroduction[1] Westpac Banking Corporation through its wholly owned subsidiaries entered into nine structured financing transactions with overseas counterparties after 1998. Westpac's income tax returns filed for subsequent years record that the bank 'took appropriate account' of its profits on all transactions. However, the Commissioner has since reassessed the bank to taxation liability of $580m. He says that the transactions were entered into for the purposes of avoiding tax. [2] Westpac challenges the Commissioner's amended assessment. The bank has issued 33 separate proceedings in this Court between 2004 and 2007 relating to the tax treatment of each transaction in each relevant tax year. The Commissioner has applied for an order consolidating all proceedings. The bank opposes and has applied for an order staying its own proceedings issued in 2005, 2006 and 2007 until its three 2004 proceedings are finally determined. Both applications now fall for determination. [3] A fixture for trial of Westpac's proceedings of eight weeks duration is scheduled to commence on 9 June 2009.Background[4] The relevant transactions with their dates of entry and termination are as follows:Name Entry Closure(1) Koch September 1998 August 2000 (2) GE May 1999 June 2004 (3) CSFB June 1999 August 2001 (4) Rabo 1 January 2000 July 2002 (5) Rabo 2 May 2000 July 2002 (6) HSBC March 2001 December 2002 (7) BANA 1 September 2001 April 2005 (8) Citibank June 2002 May 2005 (9) BANA 2 July 2002 May 2005[5] The nature of the transactions and the Commissioner's approach to them was summarised in my earlier judgment on another interlocutory application as follows:Westpac Banking Corporation v The Commissioner of Inland Revenue (2008) 23 NZTC 21,694:[10] Westpac is incorporated as a company in Australia and is registered as a company under the Companies Act 1993 as an overseas company carrying on business in New Zealand. The transactions affect its wholly owned indirect subsidiary, TBNZ Ltd, and its wholly owned subsidiaries including TBNZ Developments Ltd, TBNZ Capital Ltd and TBNZ Equity Ltd; and TBNZ Developments' wholly owned subsidiary, TBNZ Investments Ltd. All of the TBNZ group are tax residents in New Zealand: s OE2 Income Tax Act 1994 (the ITA); Westpac has never been tax resident in New Zealand. Furthermore, each member of the TBNZ group was a 'conduit tax relief company': s OB1. [11] The essence of the structure of the four transactions is as follows: (1) A TBNZ subsidiary would acquire from a counterparty an equity or trust interest in an overseas entity (the issuer). The counterparty would agree to repurchase that interest at the same price, subject to adjustments, at a specified time (usually five years). The counterparty's parent company guaranteed performance. In economic substance, the TBNZ subsidiary was providing funding to the counterparty. The subsidiary's initial return was in the form of distributions from the issuer. So, for example, in the Koch transaction, TBNZ Investments invested in preference shares in a United States incorporated company and received dividend income in return. It also agreed to sell those shares to a member of the Koch group at a later date; (2) The return to the TBNZ group and the overall advantage between the bank and the counterparty is a function of the agreed distribution to be made by the issuer to the TBNZ subsidiary, a currency and interest rate swap between the subsidiary and the buyer within the Koch group of companies, a guarantee procurement fee of 2.95% of the purchase price paid by the subsidiary to another member of the Koch group, and the bank's borrowing costs; (3) Westpac would deduct its cost of borrowing, the procurement fee and the net cost of the interest rate swap and treat distributions from the issuer either as— (a) being exempt from tax on the basis that the distributions were received by an overseas owned company (as the Westpac subsidiary) from the overseas company (as the issuer would be) under the conduit tax relief rules; or (b) being relieved from tax under the foreign tax credit rules on the basis that a foreign tax credit was available for foreign tax paid by an overseas company (the issuer) resulting in a full credit claimed under the foreign tax credit provisions. [12] The Commissioner's view of these transactions is set out comprehensively in his Notice of Proposed Adjustment (NOPA) issued on29 September 2004, the day before he formally reassessed Westpac to tax on Koch, GE and CSFB (he was working against a time bar); the bank's position in response is set out in its Notice of Response (NOR) dated 12 November 2004. Extensive but inconclusive correspondence has also passed between the parties. [13] In essence, the Commissioner considers the transactions are structured to provide flexibility as to the rate of distribution back to Westpac – the terms on which the interest swap took place and the level of the guarantee procurement fee thereby provide a mechanism for spreading between the bank and the counterparty the tax benefits associated with the tax asymmetry between deductible expenses and exempt receipts; and that each transaction is unprofitable (in the sense of being cashflow negative) absent the tax savings arising from the tax shelter it creates against other taxable income of the bank. Against this, Mr Farmer says that moneys were genuinely advanced from Westpac held deposits to an American company to be used for its own commercial purposes for five years; Westpac took real risks on the borrower, the interest rate and the currency; the interest and currency swap arrangements designed to reduce that risk are commercially commonplace; and the transactions were consistent with the conduit tax regime providing for exemption of foreign company dividends.Consolidation[6] Mr Brendan Brown QC for the Commissioner relies on the grounds provided by r 382 High Court Rules to justify consolidation of all 33 proceedings. In particular he says that the commonality of fact and law between all is much closer than in any other case where consolidation has been ordered. [7] R382 expressly provides for three alternatives where one or more of the three qualifying criteria are established. The Court has a discretion to: (1) consolidate the proceedings on such terms as it thinks just; (2) order them to be tried at the same time or one immediately after another; or (3) order any one proceeding to be stayed until any other is determined. [8] Mr Brown submits that the parties to all proceedings are effectively the same, given the same ultimate beneficial ownership of all the Westpac subsidiaries and the Commissioner as defendant. Mr Jim Farmer QC for Westpac accepts that all proceedings involve an overlap of parties, transactions, events and questions of law and fact. But he says each proceeding has been commenced by an individual taxpayer which is entitled to challenge separately each amended assessment and the nine transactions are all independent, involving different counterparties and theirown specific facts. I do not regard that as a compelling ground to oppose consolidation if it is otherwise appropriate. [9] Mr Brown also submits that the core of the factual issues is the same in each transaction: that is the use of template features to create the financing structure which exploits the asymmetry of exempt or foreign income tax paid on the one hand and deductible expenses on the other in transactions that could never be profitable pre-tax for Westpac, are where the viability of these readily repeated transactions depends on the existence of other income against which to offset the tax deductions they create. The Commissioner regards the design which enables creation of these deductions as critical to the purpose for the bank's entry into the transactions. [10] In answer Mr Farmer submits the questions of fact involved in the different proceedings are substantially similar rather than identical. To highlight this distinction he refers to an affidavit filed for the Commissioner on 14 February 2007 identifying about seven differences between various transactions in the forms of SPVs, credit ratings across the counterparties involved, credit enhancement arrangements used, approaches to negotiation and determination of the share of tax benefits generated by transactions, different internal structures and arrangements used within the Westpac group (internal swaps, withdrawal of deposits held with Westpac, term loans, back-to-back sale and repurchase agreements) and contractual provisions relating to guarantee procurement fees and restrictions on investments, and different swap arrangements. [11] I will return to this point. It is fair to observe at this stage that throughout argument counsel shifted their ground on whether there was an identity of issues or something less depending upon the positions they were espousing on the competing remedies of consolidation or stay; and that each attempted to exploit the inconsistencies in the other's position. For now, it is sufficient to state that a distinction between substantial similarity and identity of issues is not of itself a sufficient reason for resisting consolidation if it is otherwise appropriate. But equally, subject to its degree or extent, the same ground may favour a stay.[12] Mr Brown submits also that the Commissioner will argue all the Westpac transactions are to be seen as components of a course of conduct. Thus the bank's transactions will be relevant even if only some component parts of the dispute fall to be determined at the first opportunity. The Supreme Court has since endorsed that intention. But I do not regard it as decisive in this context. [13] Other trading banks entered into structured finance transactions at about the same time as Westpac. The Commissioner says they accord with the same template used by Westpac. He has reassessed all banks to the same taxation liability. The other banks have also mounted challenges in the High Court. The proceedings brought by the Bank of New Zealand in the Wellington Registry of this Court have generated considerable interlocutory activity. [14] Mr Brown draws analogies with the BNZ litigation. BNZ has issued only three proceedings (CIV 2004-485-1059, CIV 2005-485-1045 and CIV 2006-485- 108) – one composite proceeding for each year incorporating the Commissioner's reassessment on all transactions for that year. By contrast, Westpac has issued 33 separate proceedings relating to that part of each reassessment applicable to each transaction in each year. A more informative comparison is between the number of transactions at issue; six for the BNZ and nine for Westpac. [15] Mr Brown relies principally upon Wild J's decision to order consolidation of the three BNZ proceedings: BNZ Investments Ltd v Commissioner of Inland Revenue (No 2) (2007) 23 NZTC 21,069. In the same judgment the Judge dismissed the BNZ's competing application to stay the 2006 proceeding. BNZ apparently accepted that the 2004 and 2005 proceedings should be heard together. The only contest was whether the 2006 proceeding should be added. [16] Wild J's judgment was one of three delivered on the same date in the BNZ litigation. The bank's appeals against all three were dismissed including the consolidation appeal: see BNZ Investments Ltd v Commissioner of Inland Revenue[2008] 1 NZLR 598 (CA) at [22], [98], [99] and [100]. [17] Wild J was in no doubt that the three proceedings: at [31]: should be consolidated on terms that they are heard together and that the evidence of all parties in each proceeding, to the extent that it is relevant and admissible, be evidence in the other proceedings.[18] Wild J succinctly summarised the reasons for his conclusion in order of importance as follows: at [32]:a) Best use of resources: Consolidation is the most economic and efficient use of resources, both those of the parties and those of the Court. While a judgment in 2004 and 2005 may 'likely' resolve the overall dispute between the BNZ and the CIR, that is not a certainty. The CIR acknowledges the BNZ's ability to challenge his assessments of the Rabo 1, Rabo 2 and Lehmans transactions separately and subsequently. Although the BNZ maintains that outcome is unlikely, if it transpired it would involve a highly duplicitous and inefficient use of the resources of the parties and the Court alike. It is thus one to be avoided. b) Delays: The possibility just referred to would involve delays far exceeding any consequent upon consolidation. When I refer to delays, I refer to the lapse of time until final determination of the overall tax dispute between the parties. I thus include the time required for appeals from the judgments of this Court. Such appeals appear to be inevitable rather than likely, both from the interlocutory judgments and from the substantive judgment of this Court. c) Prejudice: I accept [counsel's] argument that a refusal of consolidation prejudicially affects the CIR's ability to defend the proceedings 'in the manner which he considers most appropriate' (to adopt the Court of Appeal's wording in AHI v CIR). But I accept that the converse is not true. Consolidation does not affect the BNZ's ability to argue effectively every aspect of its challenge to the assessments. Indeed, I have pondered whether having the full picture before the Court might not assist the BNZ in at least some respects. Further, I accept [counsel's] argument that refusal of consolidation now would be a less well informed decision than would a decision by the Court at trial, for example that other bank transaction documents did not assist the Court on the issue of whether each of the BNZ transactions in question was a tax avoidance arrangement.[19] Mr Brown submits that Wild J's reasoning applies with equal force in this case. He says the risk of separate and subsequent challenges being pursued by Westpac against a judgment in one or a selection of proceedings cannot be discounted. In this context Mr Brown emphasises the seven factual variations identified in the 14 February 2007 affidavit upon which Mr Farmer relies to oppose consolidation. He says they might provide scope for Westpac to argue that individual transactions should be seen differently. The prospect of 28 proceedings being taken to trial separately from the five 2004 proceedings would involve thesame highly duplicitous and inefficient use of resources of the parties and the Court as was recognised by Wild J. [20] Mr Farmer refutes as fallacious the Commissioner's suggestion that consolidation of all proceedings will prevent unnecessary duplicity of trial. He says there is 'the greatest likelihood' that the issues in the stayed proceedings will be considerably narrowed but even more likely resolved by determination of the 2004 proceedings. [21] In this respect the Commissioner is concerned about the resourcing of such complex litigation being brought by a number of banks. In his view the transactions' tax consequences should only be litigated once. Duplication of trials would involve delays far exceeding any delay consequent upon consolidation. Mr Brown says the amounts of tax at issue renders the prospect of appeals extremely likely. Where cases are so similar it is obviously desirable to deal with them together for economy of appellate consideration. [22] Mr Farmer says that if each transaction other than in the 2004 proceedings is dealt with at the same trial, considerable additional discovery and evidence, both lay and expert, will be required relevant to the specific circumstances of each subsequent transaction. Different Westpac personnel were involved in the various transactions entered into at different times over a period of five years. The Commissioner's allegation of sham relating to each and every transaction means that a number of witnesses representing each counterparty may have to give evidence; all are based in the United Kingdom or the United States. [23] Also, while the evidence of some expert witnesses may relate to all transactions, Mr Farmer says each additional transaction will require extensive extra preparation and evidence from those experts. A full understanding and analysis of the complexities of each transaction will need to be presented and assimilated. Accordingly, consolidation with trial of all proceedings at the same time would lead to greater delays before a hearing could occur and a longer and more complicated trial than would be the case if all but the 2004 proceedings are stayed (the delayargument has been overtaken, however, by the intervening allocation of a fixture for trial). [24] Like Wild J in the BNZ litigation, I am in no doubt that the Commissioner's claim satisfies all the statutory criteria for consolidation. The only question is whether I should exercise my residual discretion to order consolidation or the alternative of a stay of one or more proceedings until another or others are determined. In approaching this task I am mindful that I will reach a different conclusion from Wild J but that does not imply any criticism of his decision. To the contrary, I am of the respectful view that he was correct to order consolidation in the BNZ litigation where the parties had effectively accepted that two of the three proceedings should be consolidated and tried together (there was no appeal against his earlier decision to this effect). My preference for a stay is one of practicality relating specifically to the Westpac litigation.Stay[25] The parties have one principled point of difference on whether a stay is preferable to consolidation. Westpac's focus is on the importance of a judicial determination on the tax effect of a particular transaction or transactions. The Commissioner's concern, on the other hand, is to obtain a determination upon a complete assessment for a particular income tax year. [26] Mr Brown submits that a central issue for determination in each case is the correctness of the particular assessment for the particular taxpayer for the particular income tax year: s 138P Tax Administration Act 1994. Thus the proceedings issued, for example, in CIV 2004-404-6443 and CIV 2004-404-6444 challenge the correctness of the amended assessments issued to Westpac and a subsidiary respectively on 30 March 2004. They contain adjustments to the tax positions of both taxpayers based on the Commissioner's view of the Koch, CSFB and GE transactions. [27] Mr Brown emphasises two relevant consequences. First, the question of whether an assessment is wrong and if so by how much cannot be answered if theCourt considers only two of the three impugned transactions for 2004 (such as only Koch and CSFB, excluding GE). He points to Westpac's own pleading challenging the 1999 assessment on the grounds that all three transactions – Koch, GE and CSFB – are not tax avoidance arrangements and are not void. [28] Second, Mr Brown notes that the other central issue in the proceedings, relating to how the Commissioner has adjusted 'the gross income, allowable deductions and available net losses' in order to counteract the tax advantage allegedly obtained, depends similarly on a determination by the Court on all three transactions covered by the particular yearly assessment. Furthermore, in each year reconstruction of one Westpac entity's liability relating to one transaction is inextricably linked to reconstruction of all the other entities involved in the same transaction. [29] Mr Farmer takes issue with this approach. He accepts that the amended assessments issued by the Commissioner are both taxpayer and tax year specific. But it does not follow that the Court may only hear a challenge proceeding related to an amended assessment covering more than one transaction if the arguments for all subject transactions are considered at the same time. S138P does not impose such a restriction; and adjustments for different transactions within a single amended assessment are plainly separate and divisible (that is, they are not integrated or independent in any way). [30] Westpac's 33 proceedings cover, as noted, nine transactions, falling into four separate groups relating to the Commissioner's amended assessments for the 1999, 2000, 2001 and 2002 income years. The years of commencement of the four separate proceedings for the four separate groups – 2004, 2005, 2006 and 2007 – coincide with the statutory time limits imposed upon Westpac for challenging the Commissioner's amended assessments. All Westpac's proceedings are both taxpayer and tax year specific. Each Westpac taxpayer has commenced a separate proceeding for the year in which that taxpayer received an amended assessment. In this way each proceeding amounts to a separate challenge by each Westpac taxpayer to each amended assessment; and concerns only the particular transaction which is the subject of it.[31] Also, Mr Farmer points to Westpac's challenges in the 2004 proceedings to the 1999 amended assessment for all transactions as being broadly the same – namely, that all three are not tax avoidance arrangements or if they are the general anti-avoidance provisions do not operate in the manner and with the effect which the Commissioner contends. By reference to the Westpac 1999 amended assessment, he notes also that the total assessment of additional tax is broken down into individual adjustments for each transaction – identified as being in terms of specific NOPAs. [32] I agree with Mr Farmer. There is no reason to deal with a challenge to an amended assessment issued to a particular taxpayer covering several transactions on an all or nothing basis. There is no obstacle to the Commissioner dealing separately with the adjustments assessed for each transaction. Mr Farmer's amended primary position is that trial of only the proceedings relating to Koch is necessary. But as a default or alternative position, in accordance with Westpac's stay application, he says one trial could determine three specimen examples of: (1) an equity funded conduit transactions (Koch); (2) a foreign tax credit transaction (CSFB); and (3) a debt funded conduit transaction (Rabo 1). Each was the first in time of its generic type which is the subject of challenge. [33] Mr Farmer says that what is contemplated by a three transaction hearing is no different in practical terms to what would occur if the taxpayer challenged the amended assessment for one or only some of the assessed transactions or if one or more transactions were found to be tax avoidance arrangements and others were not. The Court would then make orders in terms of s 138P(1) limited to any transaction accepted or found to be a tax avoidance arrangement. [34] In my judgment Mr Farmer's argument is correct, and Mr Brown's opposition to a stay based on the inseverability of an assessment fails. However, as a fallback position, Mr Brown suggests determination of a single 2005 proceeding, CIV 2005-404-2843, which embraces Koch, GE, CSFB, Rabo 1 and Rabo 2. All the 2004 and 2005 proceedings would then be resolved (Koch, GE and CSFB constitute the 2004 proceedings). The Commissioner would be able to refer additionally in evidence to HSBC, BANA 1, Citibank and BANA 2. He has apparently agreed on a similar course in the ANZ litigation; four or five transactions will fall fordetermination by the Court in the first instance, allowing for the 2007 cases to be stayed. [35] In answer Mr Farmer says that dealing with three transactions will be much more cost and time efficient than dealing with five. He says each additional transaction dealt with at the same trial will require considerable additional evidence relevant to its specific circumstances. A stay on terms is justified by the scale of every one of the transactions at issue, enabling the minimum number of transactions to be considered in detail by the Court. The detail of each transaction and the need if five are considered together to understand them not only individually but also in terms of their differences and similarities, whether material or not, will lead unnecessarily to an even more complex and document-laden trial. [36] Westpac's original application for a stay was limited to the 2005, 2006 and 2007 proceedings. Implicit within that application was the bank's acceptance that all three 2004 proceedings should go to trial together. As noted, of the three transactions covered by the 2004 proceedings, Koch and GE are equity funded conduit transactions and CSFB is a foreign tax credit transaction. In my judgment it is appropriate that any representative hearing, if not limited to Koch alone, should cover all three types. [37] In the end the difference between the parties' default positions comes down to this. The Commissioner alleges that GE is a more extreme example of an equity funded conduit transaction than Koch; and that Rabo 2 is a more extreme example of a debt funded conduit transaction than Rabo 1 (because in the Commissioner's view it is unnecessarily and demonstrably inflated by a deposit of NZ$300m made by the counterparty for Westpac's benefit). Otherwise, there is a degree of consensus on the three types of transaction appropriate for representative determination, although Mr Farmer's amended view is that only one type should be tried.Decision[38] In my judgment an order for stay is preferable to consolidation for a number of reasons. First, consolidation of litigation about nine transactions entered into overa four year period between different parties would unnecessarily exhaust Court resources and costs. While, of course, it carries all the uncertainties of a predictive exercise, I accept Mr Farmer's forecast that evidence about the details of a particular transaction might add up to a week to the trial for each transaction. [39] That assessment takes account of both viva voce and documentary evidence (the transactions involve different counterparties, and different Westpac employees and different jurisdictions). Trial on one transaction alone should not take more than six weeks, or more than eight weeks for three transactions. The Court would also have to become familiar with the details of each transaction for the purposes of giving judgment even though, as I shall explain shortly, the ultimate result is unlikely to be affected. Wastage of that type is to be avoided if at all possible. [40] I appreciate that the effect of Wild J's consolidation orders is that the BNZ litigation will go to trial on six transactions (including Rabo 1 and Rabo 2 which may be viewed compositely). The estimate of trial there is 8 to 10 weeks. However, given BNZ's acceptance that its 2004 and 2005 proceedings should go to trial at the same time, the Court would have heard the details of four of those six transactions in any event. And three of the six are subject to all three proceedings. It is difficult to follow the BNZ's rationale in opposing consolidation. [41] It is understandable that in the BNZ litigation Wild J was prepared to extend the trial to include the last two transactions (one being Rabo 2). Thus all BNZ's challenges would be determined. By contrast, a final determination of all Westpac's challenges would require an extension of the trial to all nine transactions and all 33 proceedings. I disagree with Mr Brown that an incremental increase in the evidence will not add materially to the length of the trial. [42] Second, I am satisfied that a determination on one or a selection of transactions will determine Westpac's nine substantive challenges raised in its 33 proceedings. I have conducted a number of conferences and heard one substantive application since 31 July 2007. That involvement has provided a broad familiarity with the Westpac transactions or at least their essential elements and the benefit of familiarity with the approach adopted by the parties and counsel. In my judgment itis likely if not certain that a final decision on Koch (an appeal or appeals from this Court's determination is inevitable given the amounts at stake for the parties) will determine all challenges. [43] Mr Brown says the Commissioner retains a concern that, despite this Court's determination on a transaction or transactions, Westpac might still seek to argue later the existence of material differences between that transaction or transactions and others which are not the subject of a representative determination. The Commissioner raises the spectre of Westpac attempting to rely on one or more of the possible factual variations between transactions listed in the 14 February 2007 affidavit. However, on analysis they appear inconsequential and separately and together they amount to differences of marginal if any materiality. The affidavit seems designed to provide an argument against stay based upon differences that are more apparent than real. [44] I agree with Mr Farmer that the principal focus must be elsewhere. The Commissioner identified the following common issue and features in concluding that each transaction is a tax avoidance arrangement:(1) Whether a transaction is within the scheme and purpose of the particular provisions of the Income Tax legislation, and how and to what extent the underlying scheme and purpose of those specific tax provisions under review, and the legislation as a whole, are to be taken into account in determining whether there is tax avoidance. (2) The use of guarantee procurement fees in a transaction and the pricing of those fees. (3) The sharing of 'tax benefits' in a transaction. (4) The significance of any asymmetry in a transaction between expenses being deductible and receipts being non-assessable or exempt. (5) The fact that a transaction may be pre-tax cash negative but post-tax cash positive. (6) The characterisation of a transaction as 'equity' or 'debt'. (7) The use of swaps in a transaction and the 'circular flows' of funds that result. (8) The use of a formula to determine the return on investment in a transaction.(9) The use of 'tax capacity' and the consequent lower 'effective tax rate' than would have been the case had a transaction not been entered into. (10) The alleged 'over-funding' of the relevant counterparty entity by its parent in a transaction. (11) Determining whether or not an arrangement has a more than merely incidental purpose of tax avoidance.[45] As Mr Farmer says, the common issue and features represent fundamental planks of the Commissioner's characterisation of all transactions as tax avoidance arrangements. Koch was the first in time and its salient features are materially the same as those present in all other transactions. Indeed it is the Commissioner who has described the transactions entered into by Westpac and other trading banks as being enacted according to a template – that is, a prototype or pattern incorporating the features specified above. [46] Third, the only possible avenue for arguing a difference between Koch and the others would relate to the nature of the taxation benefits claimed by Westpac when submitting its original returns. I regard that possibility as remote. The Commissioner's concerns can be accommodated by two additional safeguards. One is by determining challenges to CSFB and Rabo 1 and Rabo 2 (the parties are the same in both) at the substantive trial of Koch; the other is by imposing a condition on an order, to which Mr Farmer consents, to the effect that all other proceedings are stayed unless and until following a final determination of the proceedings for trial a party is able to establish to the satisfaction of this Court the existence of a material difference in a transaction which is the subject of a stayed proceeding or proceedings, such that the final determination will not be determinative of all proceedings. [47] Fourth, there will be no prejudice to the Commissioner from a trial of challenges to one or a small number of transactions. The Supreme Court has recently affirmed the Court of Appeal that documents relating to all transactions, to the extent that they are relevant and thus admissible, can be produced at such a trial. And I agree with Mr Farmer that s 138P presents no obstacles to a transactional approach.[48] Finally, some degree of commercial reality or perspective is required. Westpac has paid the Commissioner's amended assessment. Its decision was based no doubt on the prospect of a penal rate of interest running in the Commissioner's favour if it was unsuccessful. It is plainly committing all its resources and expenditure to next year's trial and the inevitable appeal or appeals. That process is unlikely to end until 2011 if the parties exercise rights of appeal to the Supreme Court. [49] Westpac is hardly likely to have the commercial appetite to embark on another round of litigation if it is unsuccessful on the first round. Its refusal to give an absolute undertaking at this stage is understandable. But I take particular note of the fact that the bank's counsel have not so far identified any material difference between Koch and the other transactions, let alone Koch, CSFB and Rabo 1 and Rabo 2 compositely and the other transactions, that might possibly lead to a resumption of litigation after next year's trial. [50] I have balanced the competing considerations. I am in no doubt that the final decision on Koch will determine all Westpac's challenges. The prospect of further litigation on any other transactions is remote. However, out of an abundance of caution and to meet the Commissioner's residual concerns about the contingency of further litigation I am prepared to extend the scope of trial to CSFB and Rabo, which are no more than variants on the same transactional theme exemplified by Koch (with the direct effect of disposing of 15 proceedings).Orders[51] I order as follows: (1) The Commissioner's application for consolidation of all proceedings is dismissed; (2) The following three proceedings relating to the Koch, CSFB and Rabo 1 and Rabo 2 transactions are set down for trial commencing in this Court on 9 June 2009:(1) CIV 2004-404-6445 (Koch); (2) CIV 2005-404-2850 (CSFB); (3) CIV 2005-404-2846 (Rabo 1 and Rabo 2); (3) All other proceedings are stayed until further order of the Court, leave to be granted to proceed only if a party to a stayed proceeding or proceedings is able to establish to the satisfaction of this Court that it has a reasonable ground for arguing that it is not estopped from following that course by the final judgment either of this Court or on appeal following trial on the proceedings referred to in (1); (4) Leave is granted to either party to apply on seven days notice; (5) Each party is to bear its own costs of and incidental to the relevant applications. [52] I wish to express my appreciation for the assistance given by counsel. ______________________________________ Rhys Harrison J