Areffco and Commissioner of Taxation [2011] AATA 687
[2011] AATA 687
•4 October 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 687
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/2360-2371
TAXATION APPEALS DIVISION ) Re AREFFCO Applicant
And
Commissioner of Taxation
Respondent
DECISION
Tribunal P W Taylor SC, Senior Member Date4 October 2011
PlaceSydney
Decision The Tribunal accedes to the Applicant’s request in part to amend the Tribunal’s Reasons for Decision as published to the parties on 6 September 2011 and directs that:
1. Publication of the version of the Reasons for Decision published to the parties on 6 September 2011, unless it occurs with the prior written permission of the Applicant, be restricted to the members and staff of the Tribunal, the parties and their legal representatives.
2. The preceding restriction does not apply to the publication of a version of the Reasons for Decision which (i) substitutes the paragraphs in the schedule to these Directions for the correspondingly numbered paragraphs in the Reasons for Decision published on 6 September 2011, (ii) changes the name of the Applicant in the manner referred to in paragraph 17 of these Reasons and (iii) contains a note at the end recording the fact that the substitution has been made in accordance with this direction.
...................[sgd]...........................
P W Taylor SC
Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – judgments, decisions and orders – request to amend Tribunal’s reasons for decision – Tribunal’s obligation to frame its reasons so as not to be likely to enable the identification of the Applicant where matter heard in private pursuant to s 14ZZE of the Taxation Administration Act 1953 – practicability – balancing considerations – request to amend acceded to in part and directions made
Administrative Appeals Tribunal Act 1975 ss 35, 43
Taxation Administration Act 1953 s 14ZZJ
REASONS FOR DECISION
4 October 2011 P W Taylor SC, Senior Member 1. I published my Reasons for Decision in this matter on 6 September 2011. At the same time I made a direction under section 35(2)(b) of the Administrative Appeals Tribunal Act 1975 restricting the general publication of those reasons for a period of 14 days.
2. On 19 September 2011 the Applicant’s solicitors wrote to the Tribunal requesting numerous alterations to the contents of the 6 September 2011 reasons. The Applicant’s solicitors contended that those changes were necessary in order both to protect the commercial interests of the Applicant, and to prevent identification of its identity. The changes requested included a virtually complete modification of the “Reference legend” I had provided to the parties with the Reasons for Decision. They also included further de-identification of various entities and witnesses, including expert witnesses, to whom I had referred in the Reasons for Decision.
3. I addressed the Applicant's solicitors request at a directions hearing on 22 September 2011. In the course of oral reasons I gave at that time I indicated my disinclination to accede to the request to change the contents of the Reasons for Decision. I gave four principal reasons for my disinclination. They were:
(a)that the Applicant’s solicitors’ request, in so far as it sought to protect the Applicant’s commercial interests was requesting a significantly wider level of nondisclosure than what was required of the Tribunal under s 14ZZJ of the Taxation Administration Act 1953;
(b)that the Tribunal’s obligations under s 14ZZJ of the Taxation Administration Act were limited to framing its reasons “so as not to be likely to enable the identification of the person who applied for the review” and were, in any event, subject to a qualification of practicability;
(c)that any request for more restricted publication than that required by the Taxation Administration Act had to be reconciled with the Tribunal’s other obligations and, in particular, the considerations mandated in s 35(3) of the Administrative Appeals Tribunal Act 1975;
(d)that whilst an Applicant and non-voluntary lay witnesses may have reasonably justifiable privacy reasons for Reasons for Decision being expressed so as to minimise the likelihood of their identification, privacy considerations of that kind were of much less force in relation to expert witnesses who gave evidence in Tribunal proceedings. I expressed the view that expert witnesses gave evidence to the Tribunal professing a willingness to adhere to impartiality and to contribute their expertise to the Tribunal’s deliberations against a background of appropriate skill, knowledge and proper standards of impartiality. I expressed the view that for witnesses of this kind, and continued confidence in the utility of their contribution to the work of the Tribunal, restricted publication of either their identity or the content of their evidence was generally not desirable.
4. Notwithstanding the views I expressed on 22 September 2011, I extended the restricted publication order I had made on 6 September 2011 for a limited time. I did so to provide the Applicant with a further opportunity to consider its position. At the directions hearing on 22 September 2011 the Respondent indicated his indifference to the Applicant’s request.
5. On 28 September 2011 the Applicant’s solicitors wrote to the Tribunal with an ostensibly more restricted request. The letter sought three categories of change:
(a)less detailed reference to the location of Erb’s office;
(b)less detailed reference to the location of the shopping centre investments;
(c)generic references categorising all of the Israeli entities as merely “overseas”.
6. The Applicant’s solicitors’ 28 September 2011 letter was accompanied by hand annotated copies of (i) the Reference legend I had previously provided to the parties, and (ii) my 78 page Reasons for Decision. I have reviewed the annotated version of the Reasons for Decision. The changes requested affect almost every paragraph. In many instances the annotations proposed include multiple changes within the same paragraph.
7. Notwithstanding the multiplicity of the changes that have been requested, I have reviewed them with the intention of paying careful regard to the reasons expressed in the Applicant’s solicitors’ letter of 28 September 2011. Nevertheless, I have done so adhering to the basic reasoning approach outlined in paragraph 3 above. I have been encouraged to adhere to that approach because no contradiction of it was offered either at the directions hearing on 22 September 2011 or in the subsequent letter of 28 September 2011.
8. I remain of the view that the obligation imposed by s 14ZZJ of the Taxation Administration Act 1953, in so far as it includes criteria of practicability and likelihood of identification, requires an impressionistic judgment. That impressionistic judgment must be made against criteria that have not been exhaustively expressed. Certainly one criterion is the object of ensuring the non-identification of the applicant for review. But another criterion must be that of retaining clarity, cogency and confidence in the rationality, adequacy and thoroughness of the Tribunal’s deliberative process. As it seems to me, that second criterion can only be promoted by the presentation of a level of detail which provides confidence that the Tribunal’s deliberative process has been carried out at an appropriate level of real regard to the underlying detail. This necessarily produces an element of tension both with an Applicant’s qualified statutory entitlement to anonymity and with its understandable commercial interest in maintaining the privacy of aspects of its commercial affairs.
9. In resolving that potential tension judgments must be made. Some of them will be made with complete confidence. Others will be made with marginal confidence. In both cases the nature of the exercise is such that minds may reasonably differ. The differences will often be the result of perspectives dictated by different interests and objectives.
10. Against that background I have formed a clear view that I should reject the requested changes to which I referred in paragraph 5(c) above. I do so for three reasons. First of all I do not accept that there is any real likelihood that the references to Israel, and the characterisation of the unnamed entities to which I have referred as Israeli banks, is at all likely to enable the identification of the Applicant. The suggestion made in the letter of 28 September 2011 is that the Applicant’s identity could be revealed “by way of a simple search”. On the one hand I accept that a minimally informed potential inquisitor could surmise the name of the Israeli banks. But I do not understand how that information would be of any real practical utility in assisting an inquisitor to identify the Applicant.
11. The second reason why I reject the changes requested in paragraph 5(c) is the impression I have formed about the effect of substituting general references to “overseas”, for the specific attention I have paid in the Reasons for Decision to Israeli banking practice, the various Israeli banks and to my evaluation of the quality of the respective expert witnesses. My impression is that the substitution would present my reasoning process as having been carried out at a level of generality which is far less than the care that I in fact attempted to apply.
12. The third reason why I would reject the changes requested in paragraph 5(c) is somewhat more general. It is dictated by the “basis of consideration” principle in s 35(3) of the Administrative Appeals Tribunal Act 1975. Part of the contest in the decision under review in the present proceedings was the likelihood of a scenario in which one or more of the Israeli banks (or at least some of their personnel) may have been willing to lend their aid to create the appearance of transactions which were in fact disingenuous, and had little purpose other than to disguise the true character of income and expenses. In my Reasons for Decision, and relying substantially on the evidence of the various Israeli banking expert witnesses, I formed the view that such a scenario was unlikely. It seems to me that the very nature of such a scenario, potentially involving apparently reputable and substantial financial institutions, is a matter of at least potential public interest.
13. Neither do I propose to accept the request to make the changes to which I have referred in paragraph 5(b) above. My decision on these changes is a matter of marginal impression. It is related to the satisfaction I reached in the course of preparing my Reasons for Decision about the likelihood that the contentious loan funds were in fact genuine and that the asserted application served genuine purposes within the entities related to Erb. I have looked at the paragraphs of the Reasons for Decision where the proposed changes, if they were made, would occur. Having done so I remain concerned that the changes proposed would again retreat to a level of generality that would be undesirable. It would tend to deflect confidence from the attention I had paid to assessing the probability that Erb had progressively developed a degree of confidence in Ayb, and would likely have disclosed to him the hypothesised “overseas assets” whose existence Ayb disavowed.
14. I will make some limited changes to the Reasons for Decision in response to the request referred to in paragraph 5(a) above. Those changes will disguise the location of Erb’s office and substitute for the existing descriptions a reference to Botany. These changes will affect paragraphs 11(c), 19, 20, 122 and 160. Those paragraphs in their altered form are set out in the schedule to these reasons.
15. I do not propose to make the change requested in relation to the description of Ayb’s business. Again this is a decision based upon a marginal impression. It is influenced by essentially the same considerations as those I referred to in paragraph 13 above. The description of the business, and the fact that it appeared to have been communicated by Erb to ES, was a matter Ayb particularly remarked upon when he gave evidence about the contents of the conversation in March 2004 when he went to Israel and met ES for the first time. That detail, though small, was of some importance. The concerns expressed in the Applicant’s solicitors’ letter of 28 September 2011 will be at least partly met by the changes I do propose to make.
16. I do not propose to make the numerous additional changes in the handwritten annotations to the 6 September 2011 Reasons for Decision. Those changes characteristically retreat to vague and general expressions from the specific details I have included in my Reasons. The combined effect of these numerous repetitive changes was to leave me with the impression that the care and attention which I had sought to display in my Reasons had been displaced by a level of generality that actually tended to obscure the reasoning process and undermine confidence in it.
17. I will make one further change to the 6 September 2011 Reasons for Decision. In writing the Reasons, and in the Legend I provided to the parties, I identified the Applicant simply as Areffco. The title in the Reasons of 6 September 2011 should refer to the Applicant in this way, without the addition of any further words. In this respect the Reasons I previously published to the parties do not reflect my actual intention. Accordingly, I propose to direct the Registrar to alter the 6 September 2011 Reasons to reflect my intention, and to alter the title to delete the name that presently there appears, and to substitute the word Areffco as the sole identifier of the Applicant. .
18. I consider it is appropriate to make the following directions:
(1)Publication of the version of the Reasons for Decision published to the parties on 6 September 2011, unless it occurs with the prior written permission of the Applicant, be restricted to the members and staff of the Tribunal, the parties and their legal representatives.
(2)The preceding restriction does not apply to the publication of a version of the Reasons for Decision which (i) substitutes the paragraphs in the schedule to these Directions for the correspondingly numbered paragraphs in the Reasons for Decision published on 6 September 2011, (ii) changes the name of the Applicant in the manner referred to in paragraph 17 of these Reasons and (iii) contains a note at the end recording the fact that the substitution has been made in accordance with this direction.
I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of P W Taylor SC
Signed: .......[sgd].............................................................................
AssociateDate of Decision 4 October 2011
Schedule of substituted paragraphs
[11] The evidence Areffco tendered in the present proceedings included a detailed narration, with much supporting documentary evidence, of the approximately four decades of the two brothers’ substantially successful dealings. A broad but credible assessment of that evidence is that Erb and his related entities had the following asset values (after taking into account the liability for the contentious MDB loans):
(a)as at 30 June 1997: total assets of about $41m and net assets of about $26m;
(b)as at December 2002: total assets of about $37m and net assets of about $12m. (The difference from 1997 appears to relate principally to (i) the sale of an interest in the shopping centre referred to in paragraph 158 below) and (ii) a substantial increase in borrowings from an Israeli bank.)
(c)as at 30 December 2004: total assets of about $53m and net assets of about $21m. (The difference from 2002 appears to relate principally to (i) the development and consequential revaluation of the Botany property and (ii) the sale of a substantial interest in the fruit juice business. These assets are referred to in paragraphs 19 and 160 below.)
[19] For many years before 2004 Erb had maintained a personal business office in factory premises at Botany. Ayb operated a fruit juice company from these premises. He and Erb were both directors of the company. Erb’s role was limited to that of a, somewhat stern, fatherly mentor and a facilitator of finance for the business. But they saw each other daily at the premises and Ayb had many occasions to go to Erb’s office and form an impression of the extent of the records that Erb kept there. According to Ayb’s observation, by about 1994 or 1995, Erb’s factory office had become the place where he kept most of his business records.
[20] In late May 2004 the factory premises, including Erb’s office, were badly fire damaged. Not long after the fire, Ayb discovered stacks of unopened correspondence at Erb’s home office. This unopened correspondence included letters from the ATO. Some of this correspondence went back as far as June 2002.
[122] Ayb’s version of this conversation did not include any detail of the cash flow constraints or pressure which supposedly underlay his father’s request. Ayb said that he neither enquired nor knew what those constraints were at the time. The interest payment obligations, though significant, were modest in comparison to an objective assessment of the probable net worth of Erb and his related entities at the time - as indicated in paragraph 11 above. Ayb said that in hindsight there was probably no real reason why his father could not have met the interest obligations in a timely fashion. Nevertheless, it may not be irrelevant to note that it was approximately in the period from 2001 to about 2003 that Erb and Ayb were involved in the development of both the Auburn shopping centre and the Botany properties. (I refer to these matters in paragraph 160 below.)
[160] In the period from about 2000 to 2003 Erb actively involved Ayb in the development of a shopping centre at Auburn. Ell158 (and a company associated with Emb) had a significant partial interest in that project, with other investors. At about the same time, Erb conceived the idea of developing the Botany property. Ayb engaged consultants, and worked closely with his father in developing the design, and ultimately obtaining development approval, for the project. Erb also involved him in meetings and discussions with a financial institution to obtain funding for the project. Ayb regarded his father’s inclusion of him in the funding arrangements for the development project as a significant endorsement by his father. It was the first time that he had been actively included in that aspect of his father’s business activities.
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