HSJW and Commissioner of Taxation (Taxation)
[2017] AATA 1906
•25 October 2017
HSJW and Commissioner of Taxation (Taxation) [2017] AATA 1906 (25 October 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s):[Redacted]
Re:HSJW and GJRD
APPLICANTS
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:25 October 2017
Place:Sydney
1.The Tribunal directs that redacted reasons for decision in the substantive matter be published in accordance with these reasons within 14 days of the date of this decision.
2.The Tribunal declines to make the confidentiality orders requested by the parties under s 35(4) of the Administrative Appeals Tribunal Act 1975.
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Deputy President Bernard J McCabe
Catchwords
PRACTICE AND PROCEDURE – application for confidentiality orders – Part IVC review application – request for private hearing under s14ZZE – request for further broader orders restricting or prohibiting the disclosure of evidence or the content of documents – retrospective claim for privilege – interests of witness primarily affected – no compulsion to give evidence in these proceedings – privilege against self-incrimination – application seeking to suppress material that may amount to criminal conduct – request for proposed orders declined
Legislation
Administrative Appeals Tribunal Act 1975 ss 35 & 43
Taxation Administration Act 1953 ss 14ZZE, 14ZZJ & 14ZZKCases
Brown v Federal Commissioner of Taxation [2001] FCA 276
Investrix Pty Ltd v Commissioner of Taxation [2015] FCA 1427
Lee v The Queen [2014] HCA 20
Pochi and Minister for Immigration and Ethnic Affairs (1979) 26 ALR 247
Re A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398X7 v Australian Crime Commission (2013) 248 CLR 92
REASONS FOR DECISION
Deputy President Bernard J McCabe
25 October 2017
The taxpayers in these proceedings objected to decisions made by the Commissioner of Taxation. Another member of the Tribunal has completed that review and made a decision. The decision has not been appealed but an application has now been made for confidentiality orders that would supress evidence given by a witness in those proceedings. The witness is represented by the same counsel as the taxpayers. For the sake of convenience, I will refer to the taxpayers and the witnesses collectively as the applicants for the purposes of these proceedings except where it is important to identify them individually.
The use of pseudonyms in the published reasons for decision
The taxpayers asked that the substantive proceedings be heard in private pursuant to s 14ZZE of the Taxation Administration Act 1953 (the TAA). They were entitled to a private hearing as of right. In practice, a private hearing means strangers to the proceedings are not entitled to attend the hearing or access transcripts of evidence or documents generated in connection with the hearing. The daily press list does not refer to the taxpayers by name, and the doors to the hearing room are closed to exclude spectators.
Section 14ZZJ (which technically operates by modifying the operation of s 43 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) in appropriate cases) says the Tribunal is permitted to publish its decision and reasons for decision following a private hearing. If a notice of appeal has not been lodged, sub-section (2D) provides:
The Tribunal must ensure, as far as practicable, that its reasons for the decision are framed so as not to be likely to enable the identification of the person who applied for the review.
Section 14ZZJ of the TAA refers to the identity of the taxpayer. It has nothing to say about the identity of a witness except, by implication, where revealing the identity of the witness would also tend to reveal the identity of the taxpayer.
The reasons for decision in the substantive matter were published to the parties without redaction. The presiding member invited the parties to make submissions about what redactions ought to be made so the reasons would comply with the requirements of s 14ZZJ of the TAA. The Commissioner argued a good deal of information about the taxpayers and their case has already been published in the course of various interlocutory steps and in related proceedings before the Federal Court. A diligent bystander may be in a position to join the dots that would enable identification of the taxpayers even if they were referred to using pseudonyms.
The applicants argue the taxpayers should be referred to using pseudonyms, and that those pseudonyms be different from pseudonyms that were used in any of the earlier proceedings.
Section 14ZZJ(2D) only requires the Tribunal to take steps that are practicable. I am not satisfied it would be possible to frame the reasons in a way that would expunge or disguise all of the factual references that might otherwise lead a diligent reader to identify the taxpayers. The reasons have to be coherent, after all. But it is practicable to use pseudonyms to disguise the identity of the taxpayers. I am also satisfied I should use pseudonyms to disguise the identity of any business entities and funds in which the taxpayers play a role. (There would be no point disguising the name of the taxpayers but identifying the businesses within which they operate if their names were searchable on a register.) To that end, I also propose that the taxpayers and any businesses be referred to by different pseudonyms to the ones used in earlier proceedings, and that these reasons for decision bear a different pseudonym to the substantive reasons.
That leaves the question of the witness who is subject to criminal charges. Most of the submissions were directed to this issue. The Commissioner says his identity should not be disguised in the reasons for decision because s 14ZZJ is concerned with the privacy of taxpayers, not witnesses. The taxpayers say the witness has already been connected with the taxpayers and that any reference to him by name would enable the reader who was aware of that connection to identify the taxpayers. The Commissioner pointed out the witness’s name has been publicly disclosed in the past.
As it happens, the witness is a professional adviser who has more than one client. I do not accept the diligent reader would inevitably discern the identity of the taxpayers if the advisor’s name was disclosed. But again, I am satisfied it would be practicable at this point to use a pseudonym in the reasons for decision, even if it may ultimately prove futile. It seems to me it is necessary to err on the side of caution if one is to give effect to the spirit of s 14ZZJ(2D). In those circumstances, I think it would be appropriate to make directions that pseudonyms be used when referring to the particular witness in order to protect the taxpayer’s privacy.
Making confidentiality orders to quarantine evidence given by a witness
Section 35 of the AAT Act provides an independent source of power to make confidentiality orders where it is appropriate to do so. Indeed, it is the usual source of power for applications of this nature.
There is nothing common about this application, though, Counsel for the applicants argued in written submissions that the taxpayers are concerned about their privacy being compromised if the witness’s evidence were released, but the interests most obviously affected are those of the witness.
The witness provided two statements and gave oral evidence at the hearing that he fears may tend to incriminate him. He wants confidentiality orders under s 35 of the AAT Act that will prevent the Commissioner from referring that evidence to investigators who have now preferred criminal charges against him. Counsel for the applicants referred me (at paragraph [6] of his written submissions) to a number of documents and other evidence; I accept for the purposes of the exercise that evidence the witness gave in these proceedings may indeed be relevant to the prosecution.
The sequence of events in the proceedings is as follows. The witness established a professional relationship with the taxpayers over a number of years. Then the taxpayers got into trouble with the Commissioner. At about that time, the witness was charged with certain offences but those charges were subsequently withdrawn. The witness then provided a statement for use by the taxpayers in proceedings before the Tribunal. The witness was subsequently notified fresh charges had been laid against him. He then signed a further witness statement which was provided to the taxpayers but shortly after indicated through his lawyers that he would not voluntarily appear and give evidence in the Tribunal proceedings involving the taxpayers. A summons was issued that required the witness to attend and give evidence. His lawyers advised he would assert the privilege against self-incrimination.
The witness attended the hearing and gave evidence. He had separate legal representation at the hearing. He relied on the privilege in refusing to answer some questions but he provided answers in response to other questions – in other words, he did not assert the privilege in response to every question put to him in the witness box. Some of the evidence he provided revealed personal details about the taxpayers. He also gave evidence touching on the affairs of other clients of his firm who have no connection with the proceedings before the Tribunal. The applicants now want all that evidence supressed, along with the witness’s statements – including the statement that was provided in the interregnum between charges.
The power to make confidentiality orders pursuant to s 35 of the AAT Act
The applicants have asked the Tribunal to make orders under ss 35(3) and (4) of the AAT Act. The discretion in each of those provisions is subject to the matters referred to in s 35(5). Section 35(5) provides:
(5) In considering whether to give directions under subsection (2), (3) or (4), the Tribunal is to take as the basis of its consideration the principle that it is desirable:
(a)that hearings of proceedings before the Tribunal should be held in public; and
(b)that evidence given before the Tribunal and the contents of documents received in evidence by the Tribunal should be made available to the public and to all the parties; and
(c)that the contents of documents lodged with the Tribunal should be made available to all the parties.
However (and without being required to seek the views of the parties), the Tribunal is to pay due regard to any reasons in favour of giving such a direction, including, for the purposes of subsection (3) or (4), the confidential nature (if applicable) of the information.
Section 35 makes clear the Tribunal is expected to conduct its business in an open and transparent way in the ordinary course. The Tribunal has the power to make confidentiality orders where it is appropriate to do so, but that discretion must be exercised carefully having regard to the principle in s 35(5) and any other relevant circumstances.
The operation of s 35(5) is obviously impacted by the private hearing provision in s 14ZZE of the TAA, and the rule on publication in s 14ZZJ. But the principle in s 35(5) is not displaced entirely in taxation reviews. While accepting the TAA affords a certain level of privacy to taxpayers, the question whether further orders should be made under ss 35(3) and (4) of the AAT Act still requires a balancing process that includes proper consideration of the principle in s 35(5): see Investrix Pty Ltd v Commissioner of Taxation [2015] FCA 1427 at [17] per Robertson J.
Counsel for the witness argued the fact the hearing was held in private was of itself a good reason for making the orders sought. He relied in particular on the reasoning of Emmett J in Brown v Federal Commissioner of Taxation [2001] FCA 276. In that case, his Honour said (at [10]):
…having regard to the terms of s 14ZZE, it would be a most unusual case where the Tribunal, if asked, did not give the directions that are contemplated by [s 35(3) and (4)] in a proceeding to which s 14ZZE applies. The Tribunal is empowered to give such directions for any reason, where it is satisfied that it is desirable to do so. Where a party exercised the right, under s 14ZZE, to have a hearing in private, that would be a very cogent reason for the Tribunal to make an order under s 35(2)(b).
I acknowledge the force of those comments, but they should not be applied uncritically. I must still conduct the balancing exercise required under s 35(5). I do so below.
The taxpayers and the witnesses say it is appropriate to make further orders under s 35 of the AAT Act in this case
I will deal with the arguments offered by the taxpayers and the witness in support of the application for further orders under s 35.
(a) Preserving the privacy of the taxpayers and third parties not involved in the proceedings
Counsel for the applicants argued the evidence provided by the witness included a good deal of confidential material relating to the taxpayers and other clients of the witness. I was told that information might be disclosed in circumstances which impacted on their privacy. I was told their interest in maintaining privacy – an interest which is already recognised by the provisions in the TAA – should outweigh the public interest in transparency.
I do not apprehend that the affairs of the taxpayers or anyone else will be disclosed to the world at large except in so far as the reasons for decision mention those matters. The reasons for decision are not the subject of this application for confidentiality orders: applicant’s written submissions at [1]. The application expressly relates to the transcript of evidence and statements of the witness. Members of the public cannot access transcripts of evidence or other material because the hearing was in private. The real objective of this application is to prevent potentially incriminating material falling into the hands of authorities who may be interested in the conduct disclosed in the evidence. It follows the application is not about securing the privacy of taxpayers from the prying eyes of the public. The public interest in transparency is not engaged. This application is concerned with quarantining what may amount to evidence of criminal conduct from the proper authorities.
Even if it is correct to say the fact the hearing was held in private would ordinarily provide cogent reasons for making confidentiality orders, I do not think that consideration weighs heavily in a case such as this where the Tribunal is being asked to quarantine evidence from prosecutors: cf Brown. Requiring the Commissioner to quarantine evidence in these circumstances complicates his administration of the taxation laws: see generally Re A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398. At a minimum, those issues suggest the obiter remarks in Brown carry limited weight in this case.
(b) It would be unfair to the witness to permit disclosure of his evidence to the authorities
Counsel for the applicants said the witness supplied two statements when he was not legally represented. The first of those statements was filed after the initial charges were withdrawn; I was told in submissions that the second statement was filed after further charges were laid: applicant’s submissions in reply at [20]. Counsel for the applicants said the witness was not in a position to make an informed decision about whether he should assert the privilege when he filed the statements. It would be unfair to permit the Commissioner to disclose the statements to prosecutors in those circumstances, I was told, so confidentiality orders should be made.
I was also told the release of any of the witness’s evidence (i.e. the statements and his answers to questions at the hearings) was inherently unfair and could impact on the witness’s right to a fair trial in subsequent criminal proceedings arising out of the same factual matrix. As I understand the argument, the applicants say a prosecutor should not be able to use evidence gathered in relation to one set of proceedings other than for the purposes of those proceedings. The applicants say such evidence should certainly not be available to prosecutors to make their case in criminal proceedings brought against the witness. There is a danger that defences or other information might be disclosed which affected the proper balance between prosecutors and the defence in a criminal trial: see Lee v The Queen [2014] HCA 20 at [51].
The applicants’ argument is ultimately about the need to preserve the integrity of the accusatorial process. They say that process will be compromised if prosecutors are given access to evidence provided in these proceedings – particularly in circumstances where (some of) that evidence was provided in response to a summons.
Of course the witness was not obliged to provide potentially incriminating information in response to a summons and he was entitled to refuse to provide potentially incriminating answers to questions. The common law privileges apply in the Tribunal because they have not been expressly excluded by statute. Indeed, s 62 of the AAT Act reinforces the privilege against self-incrimination. A person charged with failing to provide a document in response to a summons or who fails to answer a question as directed may rely on the privilege as a defence: s 62(4) of the AAT Act. Tribunal proceedings are not like compulsory examinations, which have been discussed in cases like X7 v Australian Crime Commission (2013) 248 CLR 92 and Lee v The Queen [2014] HCA 20, where a person may be obliged to provide answers notwithstanding the privilege.
Having said all that, Lee and X7 underline the importance of preserving the integrity of the accusatorial process. They also confirm the accusatorial process may commence long before charges are laid. The High Court has emphasised the public interest in preserving a fair trial must be given very serious weight. It is possible this consideration would be relevant in an application for confidentiality orders under the AAT Act in appropriate cases. But what of this case?
I will deal separately with the statements provided in advance of the hearing and the answers to questions asked at the hearing since different considerations arise.
The witness was not put on the spot and forced to answer questions at the hearing. He could – and did – refuse to answer questions by asserting the privilege, albeit that he did so selectively. He had the benefit of legal advice when he decided which questions to answer. He knew charges had been laid, and he presumably discussed with his lawyers the potential consequences of answering any questions in these proceedings. If he did not invoke the privilege and refuse to answer questions at that point, it is unclear why he should be able to do so now his evidence has been put to the Tribunal.
The issue in relation to the earlier statements is not as clear-cut. A witness who participates in Tribunal proceedings without the benefit of legal counsel might not be aware the privilege is available. He might not know how or when to claim the privilege; he might not be aware how the evidence he proposes giving could place him in jeopardy. Counsel for the applicants argues the failure to assert the privilege in those circumstances does not necessarily constitute a waiver. I was told the Tribunal should address any uninformed disclosures by making confidentiality orders that would effectively preserve the witness’s privilege.
The Tribunal is ordinarily cautious in its dealings with unrepresented witnesses. When an unrepresented witness is giving evidence at the hearing, the presiding member of the Tribunal would ordinarily be expected to intervene if the witness were asked questions that invited him to incriminate himself. The member might caution a witness who appeared to be in the process of admitting to conduct that could be an offence. (A model litigant should be alive to this danger as well.) But a lay witness may file documents in advance of the hearing or blurt out answers in the course of oral evidence which are against his interests before anybody can intervene. Nice questions can arise over how to deal with that evidence given it may impact on the integrity of the accusatorial process discussed in X7 and Lee. Do those questions squarely arise in this case?
If they do arise in relation to the two statements provided in advance of the hearing before the applicant was legally represented, I think they admit of an easy answer in the circumstances. I will explain why. As I understand the chronology, the witness can have been in no doubt he was subject to investigation when he made the first statement. Charges had already been laid, albeit that they were withdrawn before he provided the statement. But he was still likely to be keenly aware his evidence would be of interest to prosecutors. Fresh charges were laid when he provided the second statement. He must have known by that point that his evidence could place him in jeopardy.
I do not have any direct evidence about the witness’s state of mind. He was not legally qualified. But he was also an experienced professional. He had worked for the taxpayers for a long period of time. He worked for other clients as well. He is no stranger to litigation. He was aware that investigators were actively working to charge him when he became involved in these proceedings; they had already done so once, even if those charges were subsequently withdrawn. I have no reason to doubt the witness knew exactly what he was doing, and the risk he was running, from the outset of his involvement.
Even if I were to assume in the witness’s favour that he was not properly informed of his rights when he decided to provide the statements, I note he was legally represented at the hearing. If his representatives were concerned about admissions in the statements, they had the opportunity to at least try and retrieve the situation by asking the presiding member for confidentiality orders that would effectively permit them to uplift the statements in question. That did not happen; at any rate, no orders were made, and the statements remained part of the case which the taxpayers advanced at the hearing.
The Commissioner says the witness is seeking to make a retrospective claim for privilege. I agree with that characterisation of what the witness is asking me to do. He had the opportunity to claim privilege, and I am satisfied he was adequately informed about his right to do so by the time of the hearing (if not before), and about the circumstances which might have made a claim for privilege advisable. He now seeks to widen his claim of privilege and effectively take back information he freely provided at a time when he thought it would benefit the taxpayers. At a minimum, the fact the claim is made so late in the day reduces the weight I should give to this consideration.
(c) The integrity of the Tribunal’s processes
The Tribunal does not ordinarily refer to a party’s burden of proof but there is an exception in taxation proceedings. Section 14ZZK of the TAA requires the taxpayer to prove the Commissioner was wrong and identify what the correct answer should be. Taxpayers must run a positive case and they will invariably need to provide cogent evidence in order to discharge their evidentiary burden. That is appropriate because the Commissioner starts from a disadvantage. The Commissioner is inevitably making a guess about a taxpayer’s affairs, whereas the taxpayer presumably knows their own affairs in intimate detail. A taxpayer that fails to call cogent evidence is unlikely to discharge his burden of proof.
Taxpayers who are serious about Tribunal proceedings will make every effort to put the best evidence before the Tribunal. The best evidence may not be available for a variety of reasons. Where the evidence is unavailable for a good reason, the absence of the evidence would not count against the taxpayer. But evidence which is not given can hardly count in the taxpayer’s favour. It is therefore understandable the taxpayers in this case would be keen to obtain evidence from the witness. It is also understandable they would be sensitive to his concerns.
The Tribunal wants the best evidence available. I accept there may be circumstances where the evidence-gathering process would be facilitated by making confidentiality orders under s 35: see, for example Pochi and Minister for Immigration and Ethnic Affairs (1979) 26 ALR 247 at 272 per Brennan J. The taxpayers say this is such a case. But the fact remains the witness has already given evidence and provided statements without an assurance that confidentiality orders would be made. The Tribunal’s processes appeared to work well enough in this case without the incentive of confidentiality orders. There is no good reason for making those orders now.
Conclusion
I am not satisfied I should make further orders under s 35 of the AAT Act in relation to the statements or transcript of evidence given by the witness. The material is not likely to be publicly disclosed (except perhaps as a consequence of criminal proceedings) so the privacy concerns of the taxpayers are only engaged to a limited extent. I am not satisfied the other matters referred to by the taxpayers and the witness suggest it would be appropriate to make orders that would prevent prosecutors obtaining access to the material.
I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe.
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Associate
Dated: 25 October 2017
Date of hearing on the papers: 25 October 2017 Counsel for the Applicant: Mr J Hyde Page Counsel for the Respondent: Ms R Graycar Solicitors for the Respondent: Australian Government Solicitor
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