Baker, R.E. v The Commissioner of Taxation of the Commonwealth of Australia; Hughes, P.A. v The Commissioner of Taxation of the Commonwealth of Australia - [1987] FCA 323

. ,	. J
. . ,

CATCHWORDS

Taxation - unpaid company tax - promoters tax - appeals aqalnst assessments of promoters tax pendinq in Court's list

- appellants

threatened with possibility

of criminal proceedings involving

similar questions to those which would arise in the appeals

applications for adjournment of appeals

pending

outcome

criminal proceedings

- relevant princlples -

matters taken into

account in exercise

of discretion.

Taxation (Unpaid ComDanv

Tax - Promoters) Act 1982

Taxation (Unpaid ComDanyTax) Assessment Act; 1982. S . 4

Income Tax Assessment Act_ 1936. s s . 177. 190, 201.

RICHARD EDWARD BAKER: RE FLXWASH PTY LIMITED v. THE COMMISSIOfiB

.OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

No. G447 of 1986

PETER ANTHONY HUGHES: RE J.F. POWELL INVESTMENTS FTY LIMITED v.

No. G458 of 1986

Coram: Sheppard S. Date : 13 May 1987 Place: Sydney

IN THE FEDERAL COURT OF ATJSTRALIA	)	. .
)	I '
NEbl SOUTH WALES DISTRICT REGISTRY )	:'
)	:,

DIVISION

GENERAL

)

No. G447 of 1986

BETWEEN :

THE COMMISSIONER OF TAXATION OF THE

COMMONWEllLTH OF AUSTRALIA

Resuondent

No. G458 of 1986

BETWXES :

L :

PETER AN'IIHONY__.HLJGHES : RE-J.F..POFIELL	I I.
INVESTMENTS PTP LIMITED	'- r
!

Pmpellant

THE COMMISSIONER OF TAXATION OF THE

I	COMMONWEALTH OF AUSTRALIA

l '

CORAM: SHEPPARD J.

PLACE: SYDNEY

n m	: 13 MAY 1987	.	I
!

MINUTES OF ORDER

IN EACH CASE

THE COURT ORDERS THA2:-

l. The Notlce of Motion of 24 February 1987 be dismissed.

2 .

--	2.	The applicant (appellant) pap the	respondent's costs of the
Notice of Motion.

I	, .
i

N m : Settlement and entry

of orders i s dealt with in Order

!	of the Federal Court Rules.	..
!	:

i ,'

1 I .

No. G447 of 1986

B m T N

THE COMMISSIONER OF TAX%TION OF THE	: .
pJMM0NWEALE-I OF AUSTRALIA	!

Respondent_

No. G458 n€ 1986

CORAM:

SHEPPARD J.

: l3 MAY 1987

2 .

brouaht by

Mr. Richard Baker and Mr. Peter Huqhes.

The appeals

are aaainst assessments made by the Commissioner

of Taxation of

tax said

to be payable pursuant to

the Taxation (Unpaid Comwanv

x&x - Promoters) Act 1982. Relevant

to that leqislation are the

provisions of other taxinu

Acts, namely, the Taxation (Unpaid

Companv Tax - Ilendors) Act	1982 and the Taxation (Unpaid Companv
Tax) Assessment Act 1982.	It is for what I map call promoters

tax that Messrs. Baker

and Huqhes have been assessed and it is

against those assessments that they have appealed.

Section 4 of che Taxation (TJnRaid Cnmwanv Tax ssessment) k t applies the provisions of Parts

TV and V of the

Incnme Tax

Assessment Act 1936 to assessments. inter alia.

of promoters tax.

Those Parts deal respectively

with returns and assessments and

objections and appeals. Sectlon 177. which is in Part IV. provides in effect that the production of a notice of assessment

or of

a document under the hand of

the Commissioner. the Second

Commissioner

Deputy

C n m t r t i , 7 5 i n r l - - r - .

plrporting

a copy of

a notice OL assessment. shall be conclusive evidence of the due makinu of the assessment and. except in proceedinas

appeal

aaainst the

assessment, that the amount and all the particulars

of the assessment are

correct.

The appeal procedure is provided

for In Part

V, as I have indicated. Amongst the sections which

are contained in that Part

1 s

S. 190 which in para.

f b ) provides

Char; upon every reference

appeal the burden ,of pcov1m? Coat

the assessment 1 s excessive shall l i e upon the ta:ireysr.

z?lso In

Part V is

S. 1131 which wrovldes Lhat rhe fact that an appsal or

reference is penainu. shall not in the meantime intecfere

with gr

affect the assessment che

subject of the appeal or reference and

l
I	I

i	A
I

3 .

1	income tax may be recovered on the assessment as	if no appeal or
I

reference was

wendmu.

I I

There

have

been

directlons

hearmqs in

relation

the

various appeals.

From time

to time it has

been mentioned that

!	the Director of Public Prosecutions, throuuh one	or other of his
I

officers or members of the

Australian

Federal

Police.

has

indicated, either to Messrs. Baker and Hughes themselves.

or to

persons who represent them. that criminal proceedings will

or may

be instituted aaainst them apparently in relation

to matters

which

raise

issues

similar

those

which

will

arise

for

determination in the appeals.

The

solicitors for Messrs. Baker

and Hughes have souuht the aTreement of the Commissioner of

Taxation

CO the adiournment

of the appeals pendinu either the

outcome of any criminal proceedinus

or the provision by the

Director of Public Prosecutions of a clear statement that no criminal proceedinss Gill be instituted. The Director is

apparently

unwillinu

provide

such a stat5ment

and

the

possibility.

perhaps

even

che

probability,

criminal

proceedings remalns.

It should be said at this point, that alt.houqh the Director

oL Public Prosecutions and th? rnmmissintl*r n f Tauation are both emanations 01 the Coaurlonweal th, pach has his own area of responsibility and the Cornmissloner of 'Taxation is not tu be

identified with the Director of Public Prosecutlons.

The two

offices are separate and distinct and the Commissioner certainly

has no

control or abllicy to influence the Dlrector in decidincr

vhe%her or not there should be any criminal prnsecuclon.

a .

I .

l	Eventually, the solicitors for Messrs. Baker and Hushes took

out motions seekinq

an adjournment of the appeals in matters

number G447 of

1986 and G458 of 1986 , the first beinq an appeal

brouuht by Mr. Baker and the second

appeal brouuht by Mr.

Huuhe

S .

It is aqreed that

the determination of these motions

will determine not only whether the proceedinus

No. G447 of 1986

and G458

of 1986 should be adiourned, but a l s o

whether each of

i :

the appeals in the other similar matters will be adiourned. The	I .	.,
i
motions were fixed for hearinu for today. In support Qf each there has been sworn an affidavit by the sollcitor for Messrs. Baker and Huahes In which he sets out the relevant matters. No ob7ection was taken to any part of the affidavxts except in one

minor respect

which I

need not refer.

There has been no

cross-examination and the Commissioner has not led any evidence

opposition

the

applications.

The

basis

for

the

applications for adlournment

is that. in accordance with proper

principles, the civil proceedings, being the appeals auainst the

assessments

of promoters tax. should await the outcome

the

criminal proceedings

if thev

.-tre tau

be i n s l - ih td , U L

L+

cle..tr

indication from

the Dlrector

of Public Prosecutions

kha t there

are to be no criminal proceedings.

The prmciples which apply, in

what

I mlcrht call a

conventional case, are propounded by Wilcox

.J. in Cameron's

Un&

Services Ptv Limiced v . bheluton & Associates Ptv Llmited (1984) 59 A.L.R. 754. His Honour there made a useful collection of the relevant authorities includlna Jefferson Limited v. Bhetcha C19797 1 W.L.R. 898. Fshfort v. John Fairfax & Sons Limlted

C19723 1 N.S.W.L.R. 16. McMahon v. Gould ( 1 9 8 2 ) 1 A.C.L.C.: 7

A.C.L.R. 202, Re

Saltercrate

Insurance

Co. Limited (1580) 4

A.C.L.R. 732 and Beecee Group-L-lmir;_cfl.v_. Rarton

(1980) 5

A . C . G . R .

3 3 .

I propose t o accept che

law as it is stated by Flilcox J. in

hls iudqment in the Cameron case and in the cases which

he has

applied and

to which I have

referred.

It was not sugqested by

either counsel that

I should do otherwise.

The facts in relation

to the crlminal proceedings

are meagre.

T h i s is perhaps understandable in the liuht of the fact that the	!
solicitor for Messrs. Baker and Huuhes could not be expected to know the nature. at least in any detail. of what is proposed to be alleaed in the proceedinas. Furthermore. the Commissioner.

although perhaps he mav have some knowledue

of what ma:I be

proposed because of

some liason berween hlmself and the

hrector

of Publlc Prosecutions of which chere is 1s no evidence. will not be a party t o them and LS not directly- concerned or reallv concerned at all. as I have earlier said, n t h their prosecution.

However,

amonqst the documents which are annexed to the

affidavit in each case is	a copy of a search warrant which refers	i
I '

to a number of companies includlnq Halaran

Pt~7

Limlted and

: ,

Timentas Pty Limited.

The first of

chese companles is referred

to in a letter €rom the Australian Taxation Office indlcatina the	!
I

amount and make-up of the promoters tax to be

paid by Mr. Huuhes.

I '

The second company is referred to In

a simllar letter written to

Mr. Baker. The search warranc cloes on eo refer t o the basis w o n

which the search warrant

1s souuht

saying thac documencs

relating to the companles I have mentioned, amonast others, "will

afford evldence of the commission of offences bv

all or some of

the persons aqalnst

laws of the

Commonwealth by entering into

agreements to

strip profits" from taruet companies renderina

those companies Incapable of payinu their	tax liabilities. namely	I
::

(1) offences auainst para.

86(l)(a) of the Crimes Act 1914, that

I I

is to

say conspiracy to commit an offence asainst a

law of the

Commonwealth. to wit

S . 231 of the Income

Tax Assessment G-ct

1936; (2) offences aualnst para. 86(l)(e) of the Crimes	Act, 1914.	i
.
I

that is

to sav conspiracy

to defraud the Commonwealth: and

( 3 )

. I

offences aaainst

S. 231 of the Income Tax Assessment Act 1936. to

wit, by any

wilful act, defaulr; or neulect

o r

by any fraud, art

or contrivance whatever to avoid or attempt to avold assessment

of taxation.

No particulars of the matters of fact relied upon

in support of such charges are given either

in the search warrant

or elsewhere. and the precise nature of the offences which are or	i
I -
map be alleqed can only be the subject of conjecture.	1 -
. .
r,,

This	case is different from the conventional case which

usually concerns the courts

m this

area, such as the Camecon

Unit case to

ghich I have referred. It is different because

here, at

least as a matter of €orm. the movinu parties, Messrs.

Baker and Huahes, are

the persons who seek the adjournment of the

proceedlnas. In the more usual

situation it

is a defendant who

is proceeded aaalnst by

a plaintiff who seeks the exercise of the

:-.

court's discretion to stay or adjourn

groceedmus.

I think,

however. that this difference is not

a difference of substance

or, lf

it be s o . not such

a difference of substance

as t o make

principles question of considerinu what should be done in the overall

inapplicable.

the

end

it is a

the

ordinary

interests

the

administration of justice,

that

is to

say

I I

I	. .
!	9

7 .

justice to the parties to the litiuation. in these cases either

Mr. Baker

or Mr.

Huuhes and the Commissloner

of Taxation. In

i l

addition to beinu referred to the decision of Wilcox S. in the Cameron Unit case and the cases there mentioned.

I I

have been

referred CO the decision of

Ryan J. in Ahern v. The Commissioner

of Taxation (14 Aprll 1986. unreported). His Honour did not

approach the matter any differently from the way

has been

approached in more conventional cases.

I propose to take the

same course.

The first matter which counsel f o r

Messrs. Baker and Huuhes

relled upon was the fact that, pursuant

t o S. 201 of the income

Tax Assessment Act as applied by tine Taxation (Unoaid Companv

Tax) Assessment

Act.

the

amounts

the

assessments

were

recoverable and that

the notlces of assessmenr; were. pursuant to

S. 177, conclusive

evidence

the

amount

due

and

payable

thereunder.

The

only

way

the

concluslve

nature

of the

assessments could be challenued was by an appeal under Part

V m

which

the

appellants

carried

the

onus

proof.

But the

Commissioner could proceed to obtain !udgment for the amount notwithstanding that the appeals were pendinu. Althouuh he has

taken no steps in this

reuara. it was

said. that If he did and

recovered iudument, he would not be pre!udiced	because he would
.

have the amount

the assessments with the conseauence that the

appeals

could wait until the positlon in relatlon

criminal

proceedinas became clear.

I appreciate the force of

the matters upon 7dhich roun.je1

relies. But

the appeals are pendinu in the Court's list.

The

I .

i .

8 . I '

I .

fact that the Commissioner may, In recovery proceedinas, recover	:~
the amounts of the assessments relying for evidentiary purposes

on S. 177, does	not seem to me	to	provide a	reason	why	these	7
I ,
._

applications for	adiournment should be aranted.	.	.I
I ':

Counsel then	turned his attention	to	what is known as the	' ,
! '

right of silence of an accused

person. He pointed LO the

difficulty which confronts

a person bound to make

a positlve case

but who is facing

criminal

proceedings.

If he goes

into

evidence. the evidence

he aives may be used in the criminal

proceedinas. This was

a matter discussed

some lenqth by

Wilcox J. in the Cameron case.

It has also been the subject of

discussion in a number of cases to which he referred.

Eventually

his	Honour said (p. 7 6 0 ) : -

"The 'riahc of

sllence' is a rqht whlch a person

has in relation to present

or anticipaced criminal

proceedjnqs. As a matLer of everyday exnsr ipnce,

suspects

or accused persons waive Lhe rluht by

glving an explanation of their conduct durinu the

course of lnterrosation

police

or other

investigating authorities or

in evidence at their

trial.

No doubt

the

riaht

is often

waived

incautlouslp or through ianorance, but	is also
deliberatelv waived by informed persons	who take

the

view that waiver

will

best

serve

their

Interests

overall.

The

conflicts

interest

which ulve rise to waiver already exist: the law does not step in to prevent those confllcts or to

deny

the

ability

waive

the

riuht.

The

existence

a civil action which an accused

person may wlsh to defend provides simply another

example

a conflict

interest

between

maintaininq silence and disclosing the substance

of the defence in

the criminal proceedings".

Counsel submitted that che appellants would be preludiced

l .

because. lf they were compelled. to prosecute their appeals in

9 .

advance of the criminal proceedings, they would be forced to give

evidence at large.

They

could

cross-examined

matters

qermane to the criminal proceedings and their answers might

eventually be used by the prosecution in evidence against them in

the

criminal

proceedinss.

This

a matter

deservinq of

substantial weiaht in the overall consideration

of the matter.

It is thus somethinu which must be weighed in the balance and

propose to treat it

that way. but in doinu

I have taken

very much inco account what was said bv Nilcox

J. in the passaue

which I have cited from

h15 iudqmenr; in the Cameron case.

Counsel for

Messrs. Baker and Huuhes specified

number of

other matters whlch. in his submission, led to the conclusion

that to

direct these appeals to proceed would be to cause

injustice in any criminal proceedings which mluht be instituted.

The particular matters upon

which he relled were:-

(a)

The possible effect of adverse publicity on the mrnds of

potential Iurors who read

of the evidence uiven in the

taxation appeals.

(b)

The distinct possibility of there being txo cases runnlna simultaneously involvinu the same documents.

(C)

The possibility of a miscarriaue of 1usr;ice which could be

caused

disclosure

of the

defence to the

criminal

charues

and

which

might

thus

enable

evidence

fabrlcated by prosecution witnesses or

defence witnesses

to be interfered with.

I ,

10.

The last matter comes from one

of the

dicta In one

of the

cases to which 'I: have referred. I regard the possibility in this

case as beins remote in the extreme. There is not the slightesr,

foundation for it.

The possibilitv

running

two

cases

simultaneously may arlse. Undoubtedly there will be vast numbers

of	documents in these cases and there may be a requirement

eventually that the same documents be required

for

the appeals

and any criminal proceedings. But that is a matter which can be

catered

for at

a much later stage. Now is not the time to

attempt to deal with any such problem. It may never arise.

it does. sensible management

both the criminal and civil

proceedings wlll overcome it.

In such a case as 1s supposed by

the submission. it would be almost certain chat the appeals,

they were belnu heard

at the same time or about the same tune as

the criminal proceedlnqs, would be adiourned until after the

criminal proceedinus had been disposed

of.

There remains the question of adverse publicity on the minds

jurors.

T h l s is

a l w a y s 3

matter that must be taken into

account, and again,

it is a matter whirh 7:

weiuh in Lhp

h c t l a r t r t ~

in determining what 1 should dn-

Rut T do not Lhinl; t ha t in I:his

case

it should

afCortIrr1 r u l r h

w ~ i ' ~ r h t

T f

there w e r e

to h-

adverse publicity during Lhe hc,wirly

ut Lhe appeals, or indeed

publication of

extensive extracts from the evidence, the matter

could be raised with the Iudge hearinu the appeals who would have

power to cope with the situation

as he thouuht

fit, bearlng In

mind the circumstances whlch r,hen existed.

In the way that the matters have Droceeded so far. 11; seems

11.

likely that, if there are to be criminal proceedings. the appeals

in these matters will be over and done

with lona

before the

criminal proceedings come on.

I have glven the whole IrLatLer due

consideration.

I think it is alwavs unfortunate for persons

have the possibility of criminal proceedlngs hanging over their

heads.

That possibilitv in this case has exlsted since

1984 and

there is still no resolution of it.

It would be desirable if the

position

could

become

certain

before

lonu.

There

was an

indication at one stage that certainty would be reached by the end of last pear. but we are already well on

the way to half-way

through this year and still there is no certainty.

One realizes that there must be all sorts

difficulties

faced by prosecuting authorities because of shortages of staff

and other limitations on their resources, but

do think there

comes a

time eventually

when, in falrness to chose who may be

affected adversely by criminal proceedings, the position should be made certain. That however is not a matter which concerns me

in these cases.

I must

deal with them as they are. After due

reflection I have declded that In all the circumstances

I should

refuse the appllcations for adjournment which have been made and

I propose therefore to dismlss each of the motions.

in ea-h

I ,

motion I make the followina orders.

The motion is dismissed.

order the appllcant (appellant) to gay the respondent's costs.

Each matter - that 1 s to say each of the appeals

- is stood over

to 21 May next at 9.30a.m. for further dlrections.

1 cerufjl thatthis andthe

preceding

pages are atme COPY O;

I+.?

;:;~i=:%

f G i

pe;~;: f The 2CCtClAXL.S

3,:r ,;xstice S ~ E F ~ W A L	d d	i. CC,?...	-L
Clr. .,	30.7

/ 3 &?W

/%v

12.

Counsel for the	Appellant,:	Mr. P.E. Esler	6 .
r

Solicitors for the Appellant:

Messrs.

Duffield

r '

l .

Duff ield

Counsel for the Respondent:

Mr. S.W. Gibb

Solicitors for the Respondent:

Australian

Government

Solicitor

Date of hearing:

13 Map 1987