ALYSSA TREASURY SERVICES LTD and COMMISSIONER OF TAXATION
[2011] AATA 578
•22 August 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 578
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/4046
TAXATION APPEALS DIVISION ) Re Alyssa Treasury Services Ltd Applicant
And
Commissioner of Taxation
Respondent
DECISION
Tribunal P W Taylor SC, Senior Member Date22 August 2011
PlaceSydney
Decision The Tribunal refuses the Applicant’s request for an advance indication that the Tribunal will not have regard to the transcript of the 7 March 2008 conversation. ..................[sgd]............................
P W Taylor SC
Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – proceedings – admissibility – transcript of conversation – application by Applicant for Tribunal to make ruling prior to the hearing of the substantive matter – application refused
Evidence Act 1995 (Cth) s 138
Invasion of Privacy Act 1971 (Qld) ss 43, 44, 45, 46
REASONS FOR DECISION
22 August 2011 P W Taylor SC, Senior Member 1.The Respondent proposes to tender a 15 page transcript of a conversation between AWL, WAL and NP at the forthcoming hearing of this application. The conversation occurred during a 7 March 2008 meeting at the Brisbane office of WAL’s accountancy practice. AWL was an employee of the practice. The capacity in which NP participated in the conversation is a matter of contention.
2.AWL recorded the conversation on a digital dictaphone, which he had in his pocket during the meeting. Subsequently an investigator firm retained by WAL copied the dictaphone’s memory card onto a compact disc. The recording was then transcribed. AWL and WAL reviewed the transcription. Where parts of the recording were not clear, and the transcription consequently incomplete or inaccurate, AWL and WAL caused corrections to be made. AWL claims the corrections accord with his recollection of the conversation.
3.The Applicant, who is represented by NP in these proceedings, objects to the tender of the transcript. It has requested the Tribunal to rule on its objection in advance of the hearing. The purpose of the request for an advance ruling is said to be to obviate (or confirm) the need for the Applicant to adduce other testimonial evidence it contends would rebut or minimise the apprehended significance of the contents of the conversation.
The Applicant’s admissibility grounds of objection
4.The Applicant’s grounds of objection to the conversation transcript are numerous. They are:
(a)that the conversation was illegally recorded, or alternatively that the recording was illegally copied;
(b)that the conversation was expressly characterised as having been conducted on a “without prejudice” basis;
(c)that key aspects of the recording are “inaudible” and that the conversation transcript has been reconstructed by AWL;
(d)that statements made by NP during the course of the conversation cannot be attributed to the Applicant, because he was not its representative at the time;
(e)that the contents of the conversation reveal they were exclusively concerned with NP’s personal perspective, and do not relevantly relate to the Applicant;
(f)that the conversation provides no grounds for, and actually contradicts, the Respondent’s contentions about its relevance and probative value;
(g)that the conversation has not been shown to be relevant to the validity of the underlying transactions, especially because none of the transactions involving AWL’s clients are the subject of the present proceedings;
(h)that the proposed tender is an abuse of process, because it deprives the Applicant of the opportunity of cross examining WAL who, the Applicant asserts, is likely to have direct knowledge of the underlying transactions.
5.The substantive proceedings involve the Commissioner’s special assessment (under s 168 of the Income Tax Assessment Act 1936) of the Applicant’s taxable income for the year ended 30 June 2008. At this stage of the proceedings, notwithstanding the parties’ respective statements of facts, issues and contentions, I am not satisfied that all of the issues have been sufficiently clearly defined that it is possible to recognise all the factual nuances it may ultimately be necessary to consider. This lack of satisfaction is relevant to the Applicant’s grounds of objection about the likely immateriality of the conversation.
6.My current understanding of the substantive review proceedings is that the Commissioner’s contentious assessment:
(a)characterised as income payments the Applicant received in discharge, or compromise, of debts it contends were assigned to it by ABN;
(b)disallowed as deductions payments the Applicant asserts it made to ABN, either as consideration for the debt assignments or as amounts it had received on ABN’s behalf;
(c)reflects the Commissioner’s view that the underlying debts, and consequently the purported assignments, were illusory.
7.An aspect of the contentious underlying debts, or at least some of them, is the character of purported bills of exchange which, the Applicant apparently contends, are related to the contentious debts. At the present stage of the proceedings I am unsure about the precise character of these bill obligations. Some parts of the submissions and contentions suggest variously that the bills were provided:
(a)(either by the putative debtors or associated entities) as unconditional primary obligations that, in practical terms, ran in parallel with the debt obligations but were not dependent on the enforceability of the debts themselves, or
(b)(in some ill explained way) to ensure that entities that participated in the contentious loan and assignment transactions were not exposed to the risk of incurring tax liabilities without recourse to assets sufficient to discharge them.
8.The Applicant apprehends the Respondent will contend the contents of the conversation, specifically statements that NP made, tend to establish that the bills of exchange (whatever their precise character) were never intended to be enforceable. If they were never intended to be enforceable, that conclusion could inform the proper characterisation of the contentious debts.
9.The Applicant disputes that any of NP’s statements during the 7 March 2008 meeting indicate the intended unenforceability of the bills of exchange. The Applicant says the Commissioner’s contention is actually contradicted by the contents of the transcript. This asserted contradiction is another ground of objection to the tender.
Illegality
10.The Applicant contends s 43 of the Invasion of Privacy Act 1971 (Qld) relevantly prohibited either the original recording of the 7 March 2008 conversation or its reproduction from the dictaphone memory card onto the compact disc. The Applicant also relies on ss 44, 45 and 46 of the Invasion of Privacy Act. Finally, and at least implicitly recognising the jurisdictional limitation of Queensland legislation, the Applicant contends the conversation transcript is inadmissible both under s 138 of the Evidence Act 1995 (Cth) and at common law.
11.The Applicant’s attempt to rely on the prohibitions contained in the Invasion of Privacy Act 1971 (Qld) has no substance.
12.Section 43 of that Act prohibits the use of a listening device (which I accept includes the dictaphone used in the present case) to record a private conversation. Section 44 of that Act prohibits the subsequent disclosure of the substance of a recorded conversation, to the extent that knowledge of the contents of the conversation has been derived from prohibited conduct. Section 46 of the Act prescribes the inadmissibility (subject to various exceptions) of private conversation knowledge that has been acquired from the prohibited use of a listening device. But neither the prohibition in s 43, nor the consequential further prohibition in s 44, applies to a recording made by a person who is a party to the conversation.
13.Section 45(1) of the Invasion of Privacy Act 1971 (Qld) contains a conditional prohibition that does apply to the parties to a private conversation. The subsection prohibits the disclosure of the contents of a conversation that has been prepared from a record created by the use of a listening device. But the prohibition does not apply (i) to disclosures made in the course of legal proceedings, (ii) where the disclosure is no more than is reasonably necessary in (a) the public interest, (b) the performance of a duty by the discloser, or (c) for the protection of the discloser’s lawful interests. For the purpose of the first of these exclusions, legal proceedings are defined to include proceedings before any tribunal in which evidence may be given.
14.There was no prohibition in the Invasion of Privacy Act 1971 (Qld) against AWL using the dictaphone to record a conversation to which he, WAL and NP were parties. Consequently, and for at least that reason, the conditional declaration of inadmissibility contained in s 46 of the Act cannot apply to the proposed tender in the present proceedings.
15.Section 138 of the Evidence Act (Cth) only provides for the inadmissibility of evidence that has been obtained in contravention of an Australian law. There is no evidence of any such contravention. Consequently neither the s 138 prohibition, nor any similar prohibition under common law principles, applies to provide a reason to reject the proposed tender.
16.The Applicant’s further contention was that, even if the original recording was lawful, there was a relevant illegality in the copying of the dictaphone record onto a compact disc. This contention is unlikely to be correct, and it is irrelevant in any event. It is unlikely to be correct for the following reasons.
(a)The lawful record of the conversation was contained in a file on the dictaphone memory card. It was presumably “copied” by using a computer’s file management software to duplicate the electronic file and write it onto a compact disc. Such a procedure does not involve overhearing, monitoring or listening to a private conversation for the purposes of s 43(1) of the Invasion of Privacy Act. Given the element of contemporaneity those verbs suggest, and the strictness with which statutory provisions should be construed when their contravention involves significant criminal offences, such a copying procedure would not readily be regarded as recording a conversation, for the purpose of the prohibition in s 43(1) of the Act.
(b)The mere copying of a lawfully made dictaphone record from a memory card to a compact disc, assuming it is carried out in the manner described above, does not involve the disclosure of the contents of the conversation. It is not conduct prohibited by s 44(1) of the Invasion of Privacy Act.
(c)The provision of a digital sound recording to a typist for its transcription, even if it should be characterised as a relevant “disclosure”, occurred with the consent of AWL and WAL. They were both parties to the conversation. Consequently no disclosure by them to the transcription typist is prohibited. It falls within the permissive disclosures contemplated by ss 44(2)(a) and (b) of the Invasion of Privacy Act. Alternatively, transcription for the purpose of obtaining a printed version of the contents of the digital record is consistent with reasonable necessity for the protection of AWL and WAL’s lawful interests. Disclosure of that kind is permitted by s 45(2)(c)(iii) of the Act.
17.The Applicant’s contention about the illegality of the compact disc version of the conversation record is irrelevant because:
(a)the inadmissibility declaration in s 46 of the Invasion of Privacy Act does not apply where either:
(i)a party to the conversation consents to the tender, or
(ii)a witness has non prohibited knowledge of the contents of the conversation;
(b)the transcript is proposed to be tendered as an annexure to an affidavit of AWL;
(c)AWL was a party to the conversation;
(d)it is at least reasonable, and perhaps necessary, to infer that AWL consents to the tender of the transcript and has direct knowledge of the contents of the conversation.
Without prejudice privilege
18.The Applicant contends the 7 March 2008 conversation occurred in negotiations that were expressly conducted on a “without prejudice” basis. The factual basis for this contention is unclear. At page 7 of the transcript there is a reference to a one page document “headed Settlement Proposal to TL and AL”. It is described as being “just for discussion” and something that NP wants returned to him. At page 14 of the transcript AWL says he has no authority to agree, but would report to his clients. He asks to keep a copy of the proposal document. NP asks, and AWL agrees, that it be marked “without prejudice”.
19.The Applicant provided a copy of the settlement proposal to the Commissioner in April 2008. In its covering letter to the Commissioner, the Applicant described the document as a proposal that it had received from NP. The significant elements of the proposal (to whose tender the Applicant does not object) are as follows:
(a)the absence of any reference to any dispute between NP personally and any of the other parties to the 7 March 2008 conversation;
(b)a dispute between the Applicant and entities against which it has claimed to enforce the contentious debts assigned by ABN;
(c)the asserted difficulty the putative debtors would have in disputing the Applicant’s ability to enforce the debts;
(d)a full value settlement between individual debtors and the Applicant;
(e)a complementary agreement by the Applicant to assign the settlement rights to an entity associated with / controlled by the putative debtors;
(f)a settlement assignment consideration payable to the Applicant and involving:
(i)15% of the settlement value in a cash payment,
(ii)85% of the settlement value contingently payable in the event of the assignee’s ultimate recovery from the putative debtors.
20.It is possible to infer, or more accurately surmise, from the document and parts of the contentious transcript, that the conversation might be characterised as a discussion of a proposed settlement of the Applicant’s contentious debt claims against entities that were clients of AWL. But there is a considerable tension between that proposition and the Applicant’s assertion, emphasised repeatedly in NP’s submissions, that NP did not participate in the conversation as its representative.
21.In paragraphs 15 and 17 of the Applicant’s 8 July 2011 submissions there are positive assertions to the effect that NP participated in the conversation:
(a)on his own behalf and not as a representative of the Applicant,
(b)expressing views for the purpose of advancing his own personal interests, particularly having regard to his pending sentencing hearing.
22.In paragraph 2 of his 8 July 2011 affidavit NP says that he neither represented, nor purported to represent the Applicant at the March 2008 meeting. In paragraph 5 of the same affidavit he says that he was at the meeting to discuss his own personal concerns, and that they were unrelated to the Applicant’s position. In paragraph 9 of the same affidavit he further asserts that his personal interest was not to be seen to be involved in companies that were left with tax liabilities and no means to meet them. He says avoiding that appearance was a “self-evidently legitimate interest” he was pursuing at the time.
23.A similar explicit disavowal of NP’s representation of the Applicant at the March 2008 meeting is contained in the 13 February 2011 affidavit of JRL. The Applicant relied on that affidavit in support of the present application.
24.The Respondent objected to the relevance of the paragraphs of NP’s affidavit to which I have referred in paragraph 22 above. The Respondent’s objection was that NP’s “subjective intentions and beliefs in relation to his discussion” with AWL and WAL were irrelevant. I infer the Respondent’s contention is that NP was in fact participating in the March 2008 conversation as a representative of the Applicant.
25.I do not accept, for the purpose of the present application, the Respondent’s contention that NP’s assertions, about the capacity in which he was acting at the meeting, are irrelevant. In a situation where the Applicant asserts that the conversation was a “without prejudice” settlement discussion, it is necessary to identify who the relevantly disputing parties were in order to make any meaningful assessment of the claim. And if, as I have indicated, the putative negotiator positively disavows any intention or authority to represent the Applicant, that disavowal is directly relevant to the privilege claim.
26.As the evidence relating to the discussion presently stands, the only relevant “dispute” at the time of the 7 March 2008 conversation was between the Applicant (as a potential judgment creditor) and AWL and WAL’s clients (as potential judgment debtors). The contentious conversation touched on that dispute and, on one view of the matter, canvassed a possible mechanism for structuring a settlement arrangement that might be acceptable. But the conversation was not, on the Applicant’s version of the evidence, one to which it was a party. In those circumstances (which I specifically note, do not include any relevant controversy between NP and AWL / WAL) there is no factual basis for the “without prejudice” privilege claim.
27.In expressing that view, I should not be understood to have reached any final conclusion about the actual capacity in which NP participated in the 7 March 2008 conversation. Nor should I be understood to express a view that any relevant inferences about the nature of the underlying transactions can be drawn from the content of NP’s statements (that is, even assuming he was not expressly authorised by the Applicant to participate in the conversation). They are not matters about which it is appropriate to reach any firm conclusion at this stage of the proceedings.
28.The ruling I am presently making is confined to the Applicant’s request for an early indication that I would not have regard to the conversation transcript, and would not permit its tender. In so far as that application relies on the asserted “without prejudice” privilege, it is the Applicant who ought to satisfy me that there is a proper basis for regarding the privilege as applicable. I am not satisfied, at least not on the basis of the material that has so far been identified in the parties’ contentions and submissions.
Reconstruction and fidelity of recording issues
29.Neither of the parties, and certainly not the Applicant, drew attention to any particular aspects of the transcript to elaborate upon the Applicant’s general criticism of the fidelity of the transcript. There are parts of the transcript where words are noted to have been inaudible. There are other parts where ellipsis punctuation ambiguously indicates either silence or speech that was not transcribed.
30.It is conceivable that parts of the transcript may need to be understood against the background of the obviously imperfect recording and transcription. But these are matters that go to the ultimate weight and significance of the contents of the conversation. They do not, at least at this stage of the proceedings, warrant a ruling that would preclude the tender of the transcript.
Attribution to Alyssa
31.The Applicant seeks to characterise NP’s participation in the 7 March 2008 meeting as a statement of his own personal views. It asserts that he had no authority from it at the relevant time. I am not satisfied that this assertion is uncontentious. The assertion itself, even supported by NP and JRL’s untested affidavit evidence, does not afford a proper basis for excluding the proposed tender of the conversation transcript at this stage of the proceedings.
32.In any event, there is a further potential evidentiary enquiry about the extent of NP’s association with the Applicant, his association with ABN, and his knowledge of the underlying debts. The Commissioner’s June 2008 position paper includes an assertion that ABN is not a genuine entity, or at least not a genuine creditor in relation to the underlying debt transactions. The Commissioner’s 26 November 2010 Statement of Facts, Issues and Contentions contains a further contention that ABN acts in accordance with NP’s instructions and directions.
33.The Applicant and (I infer) NP personally, contest the Commissioner’s contentions. The Applicant’s submissions indicate a degree of vehemence in the contest. But this apprehended contest is not appropriate to be fully and properly investigated at this preliminary stage of the proceedings. Consequently, it cannot be resolved at this stage of the proceedings, and it does not afford a basis for now rejecting the proposed tender of the contentious conversation.
Lack of probative force and abuse of process
34.Much of the Applicant’s submissions on these points goes to the contents of the contentious transcript, the characterisation of the transactions to which the conversation related, and the inferences that can properly be drawn from the conversation, having regard to asserted differences from the present proceedings. These are matters that, if accepted at this stage of the proceedings, would risk pre-empting proper assessment of the issues in the proceedings. There is no substantial basis for being, and I am not, comfortably satisfied of the correctness of the Applicant’s contentions about the lack of probative value of the conversation.
35.Those contentions have been forcefully expressed in the Applicant’s submissions. None of those submissions alludes to material practical difficulties the Applicant would encounter at the hearing, but which would be obviated by acceptance of the present application. It does not appear to me that the Applicant would be materially disadvantaged, as distinct from being disappointed, by refusal of the present application. On the other hand, I have reached the firm view that, whatever the ultimately determined merits of the Applicant’s position, rejecting the proposed tender at this stage of the proceedings would not conduce to the proper discharge of the Tribunal’s functions.
36.The Applicant’s characterisation of the proposed transcript tender as an abuse of process, because AWL and not WAL is the witness the Respondent proposes to call, is without substance. Even if it was correct to assume that the Respondent does not wish to call WAL, such a questionably assumed reluctance would afford no basis whatever to impugn the propriety of calling AWL to give evidence of a conversation to which he was a party.
Decision
37.For the reasons I have set out above, I refuse the Applicant’s request for an advance indication that I would not have regard to the transcript of the 7 March 2008 conversation. The Applicant will have to exercise its own judgment about (i) whether it wants to continue to oppose the tender of the transcript at the hearing (this ruling does not preclude the Applicant from objection at that time) and (ii) what evidence, if any, it wishes to adduce in anticipation of the proposed tender and its possible admission at the hearing.
I certify that the 37 preceding paragraphs are a true copy of the reasons for the decision herein of P W Taylor SC Senior Member
Signed: ................[sgd]................................................................
AssociateDate of Hearing Decision on the papers
Date of Decision 22 August 2011
Representative for the Applicant Mr N Petroulias
Counsel for the Respondent Mr J Hmelnitsky
Solicitor for the Respondent Maddocks
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