Caratti v Morrow

[2001] WASCA 151

CARATTI -v- MORROW [2001] WASCA 151

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2001] WASCA 151
Case No:	SJA:1227/2000	Heard:	3 APRIL 2001
Coram:	SCOTT J	Delivered:	18/05/01
No of pages:	14	Judgment Part:	1 of 1
Result:	Appeals dismissed
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Parties:	MADDELIENE CARATTI GAVIN JOHN MORROW
Catchwords:	Criminal law and procedure Failing to attend inquiry before Income Tax Commissioner Strict or absolute liability offence not decided No defence available to either
Legislation:	Income Tax Assessment Act 1936, s 264 Taxation Administration Act 1953, s 8C(1)(f)
Case References:	Ambrose v Edmonds-Wilson (1988) 48 SASR 514 Briggs & Anor v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4896 Proudman v Dayman (1941) 67 CLR 536 AG of Hong Kong v Ng Yuen Shiu [1983] 2 All ER 346 Alva Natona Pty Ltd v Eric J Unger (Deputy Commissioner of Taxation) S1 ATC 44443 Australian Coal and Shale Employees' Federation v The Commonwealth (1956) 94 CLR 621 Caratti v Federal Commissioner of Taxation 1999 41 ATR 714 Charalambous v Federal Commissioner of Taxation 97 ATC 4358 Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5 (10 February 2000) De Vonk v Deputy Federal Commissioner of Taxation 95 ATC 4538 Deputy Federal Commissioner of Taxation v De Vonk 95 ATC 4820 (FC) Deputy Federal Commissioner of Taxation v Clarke & Kann 84 ATC 4273 Federal Commissioner of Taxation v ANZ Banking Group (1979) 143 CLR 499 Griffin & Elliott v Marsh 94 ATC 4354 Griffin v Marsh (1993) 122 ALR 552 Hawthorn (Dept of Health) v Morcam Pty Ltd (1992) 29 NSWLR 120 He Kaw Teh v R (1984-1985) 157 CLR 523 Iannella v French (1967-1968) 119 CLR 94 Lloyd v McMahon [1987] 1 All ER 1118 McCallum v Federal Commissioner of Taxation 97 ATC 4509 Pickering & Ors v Federal Commissioner of Taxation 97 ATC 4893 Power v Huffa (1976) 14 SASR 337 Powel v Evreniades & Ors 1989 ATC R v Ganke 85 ATC 4044 R v Ganke (No 2) 82 ATC 4474 R v Gank 75 ATC 4097 R v IRC ex parte MFK Ltd [1990] 1 All ER 91 R v IRC ex parte Unilever plc [1996] 681 Re Liverpool Taxi Owners' Association [1972] 2 All ER 589 Re Real Estate & Business Agents Supervisory Board; ex parte Cohen [1999] WASCA 47 Smiles v Federal Commissioner of Taxation & Ors ATC 4203 Smith v Abbott [1994] 1 All ER 673 Strathfield Municipal Council v Elvy [1992] 58 A Crim R 352 Thomas v R (1937) 59 CLR 279 Von Lieven v Stewart (1990) 21 NSWLR 52 Watson v Federal Commissioner of Taxation 99 ATC 5313

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : CARATTI -v- MORROW [2001] WASCA 151 CORAM : SCOTT J HEARD : 3 APRIL 2001 DELIVERED : 18 MAY 2001 FILE NO/S : SJA 1227 of 2000 BETWEEN : MADDELIENE CARATTI

Appellant (Defendant)

AND

GAVIN JOHN MORROW
Respondent (Complainant)

Catchwords:

Criminal law and procedure - Failing to attend inquiry before Income Tax Commissioner - Strict or absolute liability offence not decided - No defence available to either

Legislation:

Income Tax Assessment Act 1936, s 264

Taxation Administration Act 1953, s 8C(1)(f)

Result:

Appeals dismissed

(Page 2)

Representation:

Counsel:

Appellant (Defendant) : Mr E J Power
Respondent (Complainant) : Ms L F Ward

Solicitors:

Appellant (Defendant) : Tottle Christensen
Respondent (Complainant) : Commonwealth Director of Public Prosecutions

Case(s) referred to in judgment(s):

Ambrose v Edmonds-Wilson (1988) 48 SASR 514
Briggs & Anor v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4896
Proudman v Dayman (1941) 67 CLR 536

Case(s) also cited:

AG of Hong Kong v Ng Yuen Shiu [1983] 2 All ER 346
Alva Natona Pty Ltd v Eric J Unger (Deputy Commissioner of Taxation) S1 ATC 44443
Australian Coal and Shale Employees' Federation v The Commonwealth (1956) 94 CLR 621
Caratti v Federal Commissioner of Taxation 1999 41 ATR 714
Charalambous v Federal Commissioner of Taxation 97 ATC 4358
Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5 (10 February 2000)
De Vonk v Deputy Federal Commissioner of Taxation 95 ATC 4538
Deputy Federal Commissioner of Taxation v De Vonk 95 ATC 4820 (FC)
Deputy Federal Commissioner of Taxation v Clarke & Kann 84 ATC 4273
Federal Commissioner of Taxation v ANZ Banking Group (1979) 143 CLR 499
Griffin & Elliott v Marsh 94 ATC 4354
Griffin v Marsh (1993) 122 ALR 552
Hawthorn (Dept of Health) v Morcam Pty Ltd (1992) 29 NSWLR 120
He Kaw Teh v R (1984-1985) 157 CLR 523


(Page 3)

Iannella v French (1967-1968) 119 CLR 94
Lloyd v McMahon [1987] 1 All ER 1118
McCallum v Federal Commissioner of Taxation 97 ATC 4509
Pickering & Ors v Federal Commissioner of Taxation 97 ATC 4893
Power v Huffa (1976) 14 SASR 337
Powel v Evreniades & Ors 1989 ATC
R v Ganke 85 ATC 4044
R v Ganke (No 2) 82 ATC 4474
R v Gank 75 ATC 4097
R v IRC ex parte MFK Ltd [1990] 1 All ER 91
R v IRC ex parte Unilever plc [1996] 681
Re Liverpool Taxi Owners' Association [1972] 2 All ER 589
Re Real Estate & Business Agents Supervisory Board; ex parte Cohen [1999] WASCA 47
Smiles v Federal Commissioner of Taxation & Ors ATC 4203
Smith v Abbott [1994] 1 All ER 673
Strathfield Municipal Council v Elvy [1992] 58 A Crim R 352
Thomas v R (1937) 59 CLR 279
Von Lieven v Stewart (1990) 21 NSWLR 52
Watson v Federal Commissioner of Taxation 99 ATC 5313

(Page 4)

1 SCOTT J: The appellant was convicted after trial in the Court of Petty Sessions of five matters joined in the one complaint. The separate matters related to each of a number of companies as well as to the appellant herself. The complaints allege that the appellant failed to attend before the Income Tax Commissioner or some other person to the extent that she was capable of doing so in contravention of s 8C(1)(f) of the Taxation Administration Act 1953.

2 The requirement that gave rise to the charges is contained in s 264 of the Income Tax Assessment Act 1936:

264 Commissioner may require information and evidence

(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority:


(a) to furnish him with such information as he may require; and

(b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.


(2) The Commissioner may require the information or evidence to be given on oath or affirmation and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath or affirmation.

(3) The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend."

The offence provision is contained is s 8C:

"8C Failure to comply with requirements under taxation law
(1) A person who refuses or fails, when and as required under or pursuant to a taxation law to do so:

(Page 5)

…

(f) to attend before the Commissioner or another person; …

to the extent that the person is capable of doing so is guilty of an offence."

3 The appellant was served with notices under s 264 of the Income Tax Assessment Act in relation to each of the companies named in the complaints and was required to attend at the Australian Taxation Office at a nominated place on 22 March 2000 at 10.00 am. The appellant was required to produce documents described in a schedule to the notice relating to each of the companies.

4 In response to the notice, the appellant's accountants, Ernst & Young, wrote to the Deputy Commissioner of Taxation by letter dated 10 March 2000. That letter was central to the evidence in the court below and was central to the arguments in this Court and so is set out in full hereunder:

"Dear Sir

Section 264 Notices - Mrs Maddeliene Caratti; Larkslock Pty Ltd; Milinda Pty Ltd; Kelena Nominees Pty Ltd; Zel Nominees Pty Ltd

1 We act on behalf of Mrs Maddeliene Caratti ('Mrs Caratti') and the abovenamed entities in relation to the above Notices ('the notices'), issued by the Commissioner of Taxation ('the Commissioner') pursuant to section 264 of the Income Tax Assessment Act 1936 ('the Act').

2 The Notices undated and addressed to Mrs Caratti C/- Ernst & Young, GPO Box M939, Perth WA 6001, were forwarded with a covering letter dated 16 February 2000 and seek the attendance of Mrs Caratti at Cannington ATO at 10.00 am on 23 March 2000 before either or both Colin Shawcross and Ann Marilyn Gear to give evidence concerning the income and assessment of herself and the abovenamed entities ('the taxpayers') for the period 1 July 1988 to 30 June 1997.

(Page 6)

3 The second paragraph of your letter invites our advice in writing setting out our concerns in relation to Mrs Caratti's compliance with the notices.

4 After discussing the notices and relevant issues with legal counsel for Mrs Caratti, we state our concerns with the notices as follows:


i) S264 Notices were previously issued to Mrs Caratti and the abovenamed entities on 9 June 1998 and despite our protests that Mrs Caratti and her two sons were facing criminal charges in relation to PAYE matters you stated by letter dated 12 August 1998 that your inquiries would continue.

ii) By letter, dated 20 September 1999, these notices were subsequently withdrawn and to our knowledge no further inquiries were made by the Commissioner in the intervening period between 12 August 1998 and 20 September 1999.

iii) On 4 June 1999, Mrs Caratti was acquitted of criminal charges of conspiring to defraud the Commonwealth of which she was wrongly accused but her son, John Caratti, was found guilty and his appeal process is presently continuing before the Court of Criminal Appeal and, on our instructions, there is a real likelihood that these criminal proceedings will continue into the near future.

iv) In our opinion, there is no doubt that the subject matter of the notices is inexorably linked to the subject matter of her son's present criminal proceedings and therefore Mrs Caratti is unable at this time to attend and answer questions which may be said to either implicate her or in any way prejudice her son in relation to his continuing criminal proceedings. This would appear to be the only reason for the said notices and as such they would not have been issued for a proper purpose.

(Page 7)

v) Further, we note that the notices that have now been issued are in the same form as the earlier notices issued two years ago which were withdrawn on 20 September last year. In our opinion, to now proceed with the same inquiries after recently withdrawing the notices constitutes harassment of Mrs Caratti.

5 Further, Mrs Caratti is over 70 years of age and over the period commencing from July 1988 she has relied on proper legal and accounting advice in relation to her affairs and the related entities. Her knowledge of technical matters is naturally limited and beyond the mental capacity of an elderly person.

6 All the required tax returns referred to the Notices for Mrs Caratti and related entities have already been lodged with the Commissioner for the period of the notices.

7 In relation to the Notices issues to Mrs Caratti and the abovenamed entities, could you please supply reasons pursuant to Section 13 of the Administrative Decisions (Judicial Review) Act 1977 within fourteen (14) days in relation to the following:


a) The reasons and purpose for the issue of the Notices to Mrs Caratti and the abovenamed entities.

b) The reasons and purpose for the withdrawal of the Section 264 Notices issued on 9 June 1998.

c) The reasons and purpose for the Commissioner in requesting documentation, copies of which are already in the Commissioner's possession or have previously been supplied to him by other Government Departments.

d) The reasons why the Commissioner states that the subject matter of the notices is not related to the criminal proceedings of her son Mr John Caratti which are presently before the Court of Criminal Appeal.

(Page 8)

e) The reason and purpose for Mrs Caratti to attend before either or both Colin Shawcross and Ann Marilyn Gear of your office.

7 Mrs Caratti has informed us that she wishes to fully co-operate with the Commissioner in his inquiries but is presently constrained by the concerns expressed above in relation to her affairs and the abovenamed entities. In this regard it may be in the best interests of all parties if the Commissioner sets out the questions which he desires to ask Mrs Caratti in relation to her affairs and the abovenamed entities and Mrs Caratti will undertake to provide answers to those questions (as long as they do not prejudice the present criminal proceedings) within fourteen (14) days of receipt and will do so while the Commissioner considers the other concerns listed above.

8 In our further opinion, the Notices are wide in nature, invalid and in their present form would not be upheld by a Court.

9 Further, having regard to the length of time involved and the history between the Commissioner and the Caratti family we doubt that the present notices would fulfil this criterion of having been issued for the purposes of the Act.

10 Finally, it you have any further queries in relation to the above could you please contact Mr Bruce McKenzie of this office on 9429 2215.

Yours faithfully


Bruce McKenzie
Director of Taxation\Entrepreneurial Services"

5 It is to be noted that in par 4(iv) of that letter, Ernst & Young make it clear that the appellant was "unable at this time to attend and answer questions which may be said to either implicate her or in any way prejudice her son in relation to his continuing criminal proceedings".

6 In my view, it is quite clear from the Ernst & Young letter that the appellant had no intention of attending the inquiry on the date specified in the notice.

(Page 9)

7 In the Court of Petty Sessions, the learned Magistrate concluded that the notices were validly issued against the appellant and that the appellant had the capacity to attend the scheduled meeting, notwithstanding the fact that she was said to be over the age of 70 years.

8 It is common ground that the appellant did not attend as required on 22 March 2000, nor did anybody appear on her behalf on that date.

9 As part of the background to these complaints, the appellant, together with two of her sons, had been charged with criminal offences heard before a judge and jury in the Supreme Court. The appellant was acquitted in those proceedings and one of her sons convicted. That son was in the process of appealing his conviction when this inquiry was to take place. Significantly, the matters on which that son was convicted related to his failure to remit group tax to the Australian Taxation Office. It is not in dispute, that the inquiry to which the appellant was summoned, concerned the taxation affairs of the same companies.

10 It is common ground that the Australian Taxation Office did not respond to the letter from Ernst & Young set out earlier in these reasons prior to the date fixed for the inquiry and that neither the appellant nor anyone on her behalf attended the scheduled meeting.

11 Following an unsuccessful submission of no case to answer in the court below, counsel for the appellant called evidence from Bruce McKenzie, an accountant with Ernst & Young, who testified that the letter set out earlier was his response to the notices issues against the appellant. His evidence made it clear that the appellant did not attend and had no intention of attending the inquiry on 22 March 2000 as required by the notice. Mr McKenzie gave evidence that the decision not to attend was made after, and as a result of, the dispatch of that letter. In cross-examination, Mr McKenzie said that his firm did not seek an extension of time for the meeting and that he was aware that the appellant was supposed to attend on that date.

12 In his decision to convict the appellant, the learned Magistrate relied upon the decision of Bollen J in Ambrose v Edmonds-Wilson (1988) 48 SASR 514 at 519:

"We can easily understand the object of the Taxation Administration Act. More pointedly the object of s 8C is to compel compliance with things lawfully required of taxpayers pursuant to a taxation law. It is a section intended to promote and facilitate the assessment and collection of the right amount

(Page 10)

of income tax from taxpayers. The Commissioner must have quite extensive powers to enable him and his officers so as to assess and collect. It is, of course, a very unattractive idea that any person can be convicted without his or her having any intention to break the relevant law or event to take a chance about breaking it. But sometimes it must happen. Road traffic offences and offences under the legislation to provide for the sale of unadulterated food are examples. The interest of the community demands that in some class of statutory offence absolute liability should attach to people who are subjectively innocent. That is necessary for the operation of the legislation which in turn is seen by the legislature to be for the good of the general populace. The robust mind initially fights against penalties without guilty intention. But in the end it must be resigned to some areas, perhaps correctly called social issues, in which such penalties must regretfully obtain.

Section 8C does not expressly say that mens rea and honest and reasonable mistake are excluded but I think that consideration of the subject-matter of the Act, of the object of s 8C and of its language shows that both mens rea and honest and reasonable mistake are excluded by necessary implication. I think the subject-matter of the legislation and the object of s 8C cry out that he who has received a notice at his address for service must comply with it to the extent that he is capable of doing so. Intention, knowledge and mens rea are all irrelevant. The respondent received a notice because it came to his address for service. He, by himself or his agent, had the capacity to comply with it. He did not comply. The offence is complete."

13 Counsel for the appellant contended that this Court should not follow that decision and submitted that the offences with which the appellant was charged were strict and not absolute liability offences. In that respect it was said that the defence of honest and reasonable but mistaken belief of fact was a defence available to the appellant: see Proudman v Dayman (1941) 67 CLR 536. Counsel for the appellant contended that the appellant had an honest and reasonable but mistaken belief that she was not required to attend the inquiry until her accountant's letter of 10 March 2000 had been answered and the details sought therein supplied.

14 The first matter in dealing with that proposition is to note that the appellant did not give evidence in the court below. There was no evidence that she formed a belief one way or the other nor, in my view, is

(Page 11)

any inference open in that respect. In addition, there was no evidence that even if the appellant had any belief that it was honestly held or based upon reasonable grounds. As I have said, the only evidence called on behalf of the appellant in the court below was from Mr McKenzie who testified that the appellant knew of the requirement to attend on 22 March, as required by the notice, and realised the consequences or potential consequences of not attending. In my view, the only conclusion reasonably open to the learned Magistrate on the evidence before him was that the appellant, for reasons known only to her, did not attend on the date required.

15 It is unnecessary in this case to express any concluded view as to whether Ambrose v Edmonds-Wilson is correctly decided as in my opinion, whether these offences are offences of absolute liability or of strict liability, at the end of the day makes no difference. Even if the defence of mistake was applicable to these charges, there was no evidence from which the learned Magistrate could have concluded that the appellant had an honest and reasonable but mistaken belief of such a nature as would constitute a defence to the charges. In reaching that conclusion I am not suggesting that the appellant had any onus of proof in that regard.

16 As can be seen from the nature of the complaints themselves, they also allege that the appellant failed to attend the inquiry "to the extent she was capable of doing so". In that respect it was pointed out that the appellant was over the age of 70 years (see par 5 of the letter of Ernst & Young of 10 March 2000) and that her knowledge of technical matters was limited and beyond the mental capacity of an elderly person. Again, it is to be pointed out that no evidence was given by the appellant in the court below as to either her age or her mental capacity. In addition, there was no evidence to suggest that the appellant's accountants, or anybody else, had sought to have the inquiry adjourned, either because of the pending criminal proceedings, the appellant's age and mental capacity or because of the need to obtain a response to the letter of 10 March, before the inquiry could proceed.

17 The simple fact of the matter is that neither the appellant, Ernst & Young, nor anybody else on her behalf, attended the inquiry on the date specified in the notices and no application was made to adjourn the inquiry.

(Page 12)

18 In Briggs & Anor v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4896, Kennedy J, in the Supreme Court of Western Australia in dealing with s 8C and the meaning of "fails" said at 4900:

"In my view, in the context in which it appears, 'fails' means no more than 'omits' or 'does not', although it is qualified by the ameliorating provision, 'to the extent that the person is capable of doing so'. The latter expression may be compared with the expression formerly to be found in sec 224 of the Income Tax Assessment Act, which created the offence 'unless just cause or excuse for the refusal or neglect (inter alia, to answer any questions put to him or to produce any book) is shown by him'. It was clear, therefore, that under this provision the onus of establishing just cause or excuse lay upon the person concerned, and not upon the Commissioner. It does not appear to me, however, that any inquiry as to the history of all the material legislation is useful in resolving the present problem."

19 In reaching his conclusion in the court below, the learned Magistrate said:

"I conclude that the Australian Taxation Office did invite the expression of concerns about the section 264 notice from Mrs Caratti and that is what lead to the letter from Ernst & Young dated 10 March 2000. However Ms Gear did not make any representation or provide any basis on which Mrs Caratti could legitimately conclude that her attendance in response to the notice would not be necessary. All that was stated was that the Office would consider concerns and the reasons for them.

I conclude that the sending of the Ernst & Young letter dated 10 March 2000 did not provide any basis on which Mrs Caratti could infer that her attendance in compliance with the section 264 notice had become unnecessary. The letter acknowledged that since the earlier withdrawing of other section 264 notices Mrs Caratti had been acquitted of criminal charges and her son convicted. Although it spoke of the son appealing against his conviction the letter effectively acknowledged that the latest section 264 notices had been issued after the substantive criminal proceedings had been concluded. The expression 'therefore Mrs Caratti is unable at this time to attend and answer questions which may be said to either implicate her or in any way prejudice her son in relation

(Page 13)

to his continuing criminal proceedings' was at best a contentious proposition and could not be seen as a legitimate and proper conclusion."

20 The grounds of appeal are:

21 … That the learned Magistrate:

"(a) Erred in law in finding that the Applicant, on 22 March 2000, failed, when and as required by a notice issued to her pursuant to section 264 of the Income Tax Assessment Act, to attend before the Commissioner or some other person, to the extent she was capable of doing so, contrary to sub-section 8C(1)(f) of the Taxation Administration Act.

(b) Erred in law in finding, in the circumstances, that an offence committed pursuant to Section 8C(1)(f) of the Taxation Administration Act 1953 is one of the absolute liability.

(c) Erred in law in finding that as to Section 264(1)(b) of the Income Tax Assessment Act and Section 8C of the Taxation Administration Act there is no scope for the honest and reasonable mistake principle.

(d) Erred in law in finding that the Applicant did not hold, at the relevant time, an honest and reasonable belief in the state of facts which, if they existed, would have made her act in not attending the ATO on 22 March 2000 innocent.

(e) Erred in law in finding that the Section 264 notices were validly issued.

(f) Erred in law and fact in finding that there was sufficient evidence led by the Respondent to prove that the Applicant was capable of complying with the Section 264 notices.

(g) Erred in law and fact in finding that there was sufficient evidence led by the Respondent to prove that the Applicant did not comply with the requirement to the extent that she was capable of so doing.

(Page 14)

(h) Erred in law in not giving proper weight, or alternatively, in giving insufficient or no weight to the representations of the ATO auditor, Ms Gear, to the Applicant in her letter accompanying the Section 264 notice inviting the Applicant to express concerns with the notices.

(i) Erred in law in not finding that the Respondent was bound by the representations made by the ATO auditor to the Applicant in the letter accompanying the Section 264 notices.

(j) Erred in law in not giving proper weight, or alternatively in giving insufficient or no weight, to the grounds of concern of the Applicant expressed in the letter from Ernst & Young to the ATO, dated 10 March 2000.

(k) Erred in law in not finding that the Applicant had a legitimate expectation that her concerns with the Section 264 notices as expressed in the letter from Ernst & Young Accountants, dated 10 March 2000, to the ATO auditor, Ms Gear, would be properly addressed by Ms Gear and before 22 March 2000 if the Applicant's attendance at the ATO was required on that day.

(l) Erred in law in not finding that the Applicant's actions in not attending the ATO on 22 March 2000 were reasonable in the circumstances.

(m) Erred in law and fact in finding, in the circumstances, that the representations of the ATO auditor in the letter accompanying the Section 264 notices did not provide any basis on which the Applicant could legitimately conclude that her attendance in response to the notice would not be necessary."

22 I am of the view that none of the grounds of appeal are made out. As the appeals were argued, there was no challenge to the validity of the s 264 notices and in my view, there is no merit in the other grounds of appeal.

23 These appeals will be dismissed.