Calder v Commissioner of Taxation

[2004] FCA 1770

FEDERAL COURT OF AUSTRALIA

Calder v Commissioner of Taxation [2004] FCA 1770

PRACTICE AND PROCEDURE – application for leave to issue subpoena – trial progressed substantially – extreme lateness – discretionary factors – leave granted

Federal Court Rules O 27A

Dunstan v Human Rights and Equal Opportunity Commission [2004] FCA 1137 distinguished

MICHAEL CALDER v COMMISSIONER OF TAXATION
W13 of 2003

MICHAEL CALDER v COMMISSIONER OF TAXATION
W14 of 2003

RD NICHOLSON J
8 OCTOBER 2004
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W13 OF 2003 W14 OF 2003

BETWEEN:	MICHAEL CALDER APPLICANT
AND:	COMMISSIONER OF TAXATION RESPONDENT
JUDGE:	RD NICHOLSON J
DATE OF ORDER:	8 OCTOBER 2004
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

Leave be granted for the issue of the subpoena to Australian Securities and Investments Commission subject to the amendment to the scope of the subpoena.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W13 OF 2003 W14 OF 2003

BETWEEN:	MICHAEL CALDER APPLICANT
AND:	COMMISSIONER OF TAXATION RESPONDENT

JUDGE:	RD NICHOLSON J
DATE:	8 OCTOBER 2004
PLACE:	PERTH

REASONS FOR JUDGMENT

1. The respondent seeks leave of the Court for issue of a subpoena to the proper officer of the Australian Securities and Investments Commission (‘ASIC’).  The subpoena is in the character of a subpoena to produce documents.  The documents sought are all accounting materials and primary records of four companies utilised in carrying out and formulating any report of the investigation by ASIC of four elements relating to two of those companies and the project in which they were involved generally.

2. This formulation of the subpoena reflects a narrowing of its focus as a consequence of oral submissions.  The subpoena does not seek to have produced to the Court the reports or resulting investigations by ASIC; rather it seeks the production of the accounting materials and primary records utilised.  Counsel for the applicant has suggested that the subpoena would be clarified in that respect by qualifying by the opening words the scope of the material sought to the accounting materials and primary records utilised.  If leave is granted for the subpoena, I would favour its recasting in that form.

3. The provision for the Court to give leave is contained in Federal Court Rules (‘FCR’) O 27A.  The power of the Court or a judge is to give leave to issue a subpoena generally or in relation to a particular subpoena or subpoenas and subject to conditions.  There are no issues that arise in terms of the Rule itself.  What is raised by the application is how the discretion provided for in the Rule should be exercised.

4. That issue arises because, at the time this leave is sought, there is in progress a hearing of the application which has now run for four days and in relation to which the only issue delaying the closing of the respondent's case is the question as to whether this subpoena would issue and, if so, whether it yields anything that the respondent would seek to place before the Court.

5. This is not a case, such as arose in Dunstan v Human Rights and Equal Opportunity Commission [2004] FCA 1137, where there is any issue of relevance of the material sought. It is not disputed that the formulation of the subpoena encompasses relevant issues. The question is whether the leave should not be granted because the leave is sought at an extremely late stage of the trial.

6. The circumstances in which attention was directed to the existence of the primary records sought are as follows.  It is said by the respondent to have arisen from the receipt on 29 September 2004 of a copy of a letter dated 22 October 1998 addressed by ASIC to a firm of chartered accountants, Lord and Brown.  This is in summary the terms of the engagement of that firm to report to ASIC.  It makes apparent that there do exist in ASIC's control primary accounting records of the nature now sought to be subpoenaed.

7. The applicant, however, directs attention to the letter of 23 July 1999 from Lord and Brown to ASIC setting out the results of their investigation which is already in evidence at p 893 of the Agreed Bundle of Documents.  It is submitted for the applicant that it should have been apparent to the respondent from reading this letter, and in particular the reference to the initial letter of engagement, that the primary accounting records were held by ASIC and should then have been subpoenaed.  Therefore, it is said, there is no proper basis on which the application for leave to issue a subpoena can now be brought.  It is submitted that the references in that letter to certain schedules involving accounting matters should have alerted the respondent to the existence of those materials at that time.

8. The applicant also states that to grant leave at this time would be, as it were, to sanction some form of fishing expedition by the respondent.  I think, however, a distinction can be drawn between fishing in order to establish a case and the search for evidence where there is already a case or a defence and it is sought to in fact expose to the Court the full range of that evidence. 

9. Here the evidence sought really falls into two potential categories.  The first is that which relates to 1994.  In relation to that, the respondent has already, in the form of agreed documents with the applicant, brought to the Court the evidence which the respondent claims will establish conclusively the existence of a round robin arrangement in that tax year.  The second category is in relation to 1995.  The evidence there brought by the respondent is evidence to the maximum extent of the current availability of primary accounting records, but is ultimately inferential in character.  The inference which the respondent urges on the Court is said to derive from those records which it has brought to the Court in that year and, in addition, continuity of the arrangement from the 1994 year.  The result is that in the event that there was a response to the subpoena, it is possible that a more complete record of 1995 may be yielded for the consideration of the Court and that the 1994 evidentiary record would be supplemented by such, if any, of the evidence which was not already before the Court; that is of course, if any of it was received by the Court.  I will return to that point in a moment.

10. The reason that the accounting records themselves are not before the Court from the corporate entities involved in this proceeding is that none of them, so I am told, has retained a complete record.  Therefore the possibility of the existence of a complete record in the hands of ASIC represents the first opportunity for any of the parties to be informed by the existence of a copy of the primary record.

11. It is important that the issue of the subpoena does not at this stage produce any prejudice to the applicant.  If the respondent, after leave is granted and the subpoena is answered, decides to seek to bring any documents from that yield to the Court, then the Court will need to be addressed on any issue that might prejudice the applicant.  The Court is also very aware of the undesirability of extending the trial late in the piece.  However, it seems that any yield from the subpoena would, at the most, supplement the evidence in relation to 1994 and place the Court in a position to fully understand the arrangements, if any, for 1995.

12. In all those circumstances I am of the view that the balance favours the grant of leave for the issue of the subpoena.  When I say the balance, I am referring to the interests of justice weighed against the potential prejudice to the applicant and, indeed, to the trial. 

13. Despite the lateness, indeed the extreme lateness, of the application I consider that the yield from the subpoena has the potential to contribute to the justice of the resolution of the case and that prejudice to the applicant could be, if any documents are ultimately to come to Court, addressed by opportunity to consider and address that evidence in a proper time frame and, indeed, by a costs order or both.  In those circumstances, therefore, I consider that leave should be granted despite the unusual circumstances in which the application is made.  That will of course entail a further sitting of the Court or submissions from the parties to deal with the issues which will then arise if it is sought to bring any of the resulting documents into the trial.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Associate:

Dated:            25 January 2005

Counsel for the Applicant:	MJ McCusker QC with FC Wilson
Solicitor for the Applicant:	Wilson and Atkinson
Counsel for the Respondent:	H Symon with LB Price
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	8 October 2004
Date of Judgment:	8 October 2004