JWTT and Commissioner of Taxation (Taxation)
[2017] AATA 1612
•3 October 2017
JWTT and Commissioner of Taxation (Taxation) [2017] AATA 1612 (3 October 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2014/6582
Re:JWTT
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:3 October 2017
Place:Sydney
The Tribunal declines to make the orders sought by the Applicant under s 35 of the Administrative Appeals Tribunal Act 1975 in respect of evidence that may be provided at the hearing.
The parties may make further submissions within 14 days on whether orders should be made with respect to material that has already been filed in these proceedings.
........................[sgd]................................................
Deputy President Bernard J McCabe
CATCHWORDS
PRACTICE AND PROCEDURE – application for confidentiality orders by taxpayer – where private hearing under s14ZZE has been granted – request for further broader orders restricting or prohibiting the disclosure of evidence or the content of documents – allegations of criminal activities by witnesses – where matter has been referred to the Commonwealth Director of Public Prosecutions – privilege against self-incrimination – use immunity – earlier application for confidentiality orders was unsuccessful – request for proposed orders declined
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth), ss 35, 33(1)(c), 37, 43, s 40A, 61, 62
Australian Crime Commission Act 2002, s30
Evidence Act 1995, s 128
New South Wales Crime Commission Act 1985, s 13(9)
Proceeds of Crime Act 2002Taxation Administration Act 1953 (Cth), ss 14ZZE, 14ZZK, 14ZZJ, Schedule 1 – ss 355-25 & 355-70
CASES
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185
Commissioner of Taxation v Pham [2013] FCA 579
Cornwell v R [2007] HCA 12; (2007) 234 ALR 51; 81 ALJR 840
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
JWTT and Commissioner of Taxation (Taxation) [2015] AATA 587
Lee v The Queen; Lee v The Queen [2014] HCA 20
Pochi and Minister for Immigration and Ethnic Affairs (1979) 26 ALR 247; [1979] AATA 64; (1979) 36 FLR 482
Re A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398
Seymour v Commissioner of Taxation [2015] FCA 320
Seymour v Federal Commissioner of Taxation (2016) 241 FCR 361; [2016] FCAFC 18
Visa Cancellation Applicant and Minister for Immigration and Citizenship [2011] AATA 690X7 v Australian Crime Commission (2013) 248 CLR 92
SECONDARY MATERIALS
Brandeis, L. Other People's Money and How the Bankers Use It (Frederick A Stokes Company, 1914)
Administrative Appeals Tribunal, General Practice Direction, issued by President Kerr J on 30 June 2015 at [5.2]-[5.3]
REASONS FOR DECISION
Deputy President Bernard J McCabe
3 October 2017
The taxpayer in these proceedings wishes to obtain documents and lead evidence from what it says are key witnesses. But there is a problem. The taxpayer and its witnesses are concerned the Commissioner of Taxation might reveal that evidence to prosecuting authorities. It turns out the prosecutors are investigating the same factual matters that lie at the heart of the dispute before the Tribunal. I am told the prosecutors would be interested in evidence from the individuals concerned, and may act on it to the witnesses’ detriment. If those witnesses refuse to give evidence – by relying on the privilege to not answer questions that may tend to incriminate them – the taxpayer may have real difficulty discharging its onus of proof under s 14ZZK(b) of the Taxation Administration Act 1953 (the TA Act). It also means the Tribunal will have to make its final decision without access to all the information that might otherwise be available.
The hearing is to be held in private pursuant to s 14ZZE of the TA Act. Members of the public (or, for that matter, prosecutors and investigators employed by other agencies) will not be entitled to attend the hearing or review the transcripts or other evidence on the file. The Commissioner is prevented from agreeing to provide information to anybody else that was:
·contained in s 37 documents,
·obtained under summons, or
·filed in advance of the hearing pursuant to a direction
without leave of the Tribunal in light of the implied undertaking referred to in the Tribunal’s General Practice Direction at [5.2]-[5.3]. The taxpayer is concerned those limitations will not be enough to insulate crucial witnesses from the risk of prosecution if their evidence at the hearing suggests they have engaged in criminal conduct. The taxpayer is also concerned the evidence provided by the witnesses might compromise any defences they might offer at a trial. The Commissioner does not concede the legitimacy of the taxpayer’s fears but argued I should not be concerned about such things in any event.
The matter has been set down for hearing before the Tribunal. In the course of preparing its case, the taxpayer has asked the Tribunal to make confidentiality orders under s 35(4) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) with respect to evidence given by two witnesses it wishes to call at the hearing. It also seeks orders under s 35(3) that will suppress the identity of those witnesses. The taxpayer says the orders will provide a form of use immunity to the taxpayer and witnesses that ensures the Tribunal has access to the best evidence available. It says the concept of use immunity is well established and orders tailored to that end are appropriate. In the absence of such orders, the taxpayer says its ability to prepare and argue its case will be significantly impaired because the witnesses in question will invoke privilege.
I am not persuaded it is appropriate to make the orders sought by the taxpayer. I explain my reasons below.
Background to the proceedings
The Commissioner has issued amended assessments to the taxpayer in respect of a number of periods. The Commissioner also imposed administrative penalties on the taxation shortfall he identified. The base penalties were imposed at the rate of 75 per cent because the Commissioner concluded the taxpayer exhibited intentional disregard for a taxation law. Taken together, the tax shortfall and the penalties (which are also subject to uplift) run into tens of millions of dollars.
In essence, the Commissioner suspects the underlying transactions were part of a scam designed to generate taxation benefits. If the evidence bears out that belief, criminal liability may attach to individuals whose actions and intentions were integral to the taxpayer’s business. Some of those individuals are prepared to give evidence before the Tribunal – but only if their evidence can be effectively quarantined from investigators and prosecution authorities.
The taxpayer approached the Tribunal for confidentiality orders at an early stage in these proceedings. That initial request was rejected, but the Tribunal said on that occasion it might entertain an application for orders at a later stage, especially if there were developments in the criminal investigation or if the orders could be tailored more precisely.
The taxpayer says there have been recent developments that justify revisiting the issue. It points out the Commissioner has now referred a brief to the Commonwealth Director of Public Prosecutions (“the DPP”). Ms Seiden SC, who appeared for the applicant, said the brief addresses the same sub-stratum of facts that give rise to these proceedings, and encompasses the role of persons to be called as witnesses at the hearing.[1] Ms Seiden added the investigation was still in an active phase.
[1] Transcript at p 3
Mr O’Brien, counsel for the Commissioner, did not demur from that evidence given from the bar table – although he did suggest the witnesses had not done enough to articulate the risk they believed they faced. Mr O’Brien argued there had not been a change in substance from the situation that prevailed at the time of the earlier application in any event.[2] The referral of a brief to the DPP changed little, he said.[3] The Tribunal was aware of that possibility when it declined to make the orders the first time; he argued the fact of a referral is unremarkable for present purposes.[4] He suggested the taxpayer’s fresh application was an abuse of process.[5] I was told the taxpayer was seeking essentially the same broad-ranging orders on the same basis as before. Mr O’Brien conceded the scope of the orders sought had narrowed to the extent they now referred to the evidence of particular individuals. [6] But Mr O’Brien said those orders were unlikely to be the end of the matter. Once orders were made in respect of the two witnesses already identified, orders might be sought in respect of others. The end result would be no different to that which the taxpayer sought – and the (differently constituted) Tribunal rejected – in the first place: blanket confidentiality orders.[7]
[2] Transcript at p 38
[3] Transcript at p 41
[4] Transcript at p 40
[5] Respondent’s outline of submissions at [11]ff
[6] Respondent’s outline of submissions at [16]; Transcript at p 38
[7] Transcript at p 38
Are the witnesses at risk if they give evidence?
Ms Seiden argued there was ample evidence tending to suggest the witnesses to be called by the taxpayer are in peril if they give evidence without the protection of confidentiality orders. She referred to affidavits from the two witnesses detailing steps in the investigation which have been directed to those individuals, including police raids, proceedings under the Proceeds of Crime Act 2002 and statements by investigators outlining their suspicions.[8] I understand charges have not yet been laid against these individuals but Ms Seiden argued in her written outline of submissions that charges against those key witnesses were probable, even likely.[9]
[8] Applicant’s outline of submissions at [17]-[19] and the affidavits referred to there
[9] Applicant’s outline of submissions at [27]
Mr O’Brien said the witnesses had not done enough to articulate their concerns. However, Ms Seiden pointed out a witness should not be expected to articulate his fears in such detail that he inevitably discloses the very matters he may be entitled to suppress. In her written submissions in reply, she suggested the real peril for the witnesses lay in the possibility they might disclose defences available to them.[10] That disclosure might tip the proper balance that exists between the prosecution and defence in criminal proceedings.
[10] Applicant’s outline of submissions in reply at [25]
Ms Seiden is right about this. I am satisfied the evidence I have referred to above together with the Statements of Facts, Issues and Contentions establish the witnesses have good reason for concern that evidence they might provide in the course of these proceedings (a) could be used against them in criminal proceedings, or (b) might disclose matters that affect defences that are legitimately open to them.
The legislation and issues of public policy
Section 14ZZE of the TA Act says the taxpayer is entitled to a hearing in private upon request. The taxpayer has made that request. As a consequence, its name will not be published in the daily list, the hearing will be closed to spectators and third parties, and records of the evidence provided at the hearing or in connection with the proceedings will not be made available to the public. When the time comes to publish any reasons for decision, the Tribunal will be required to comply with the requirements inserted into s 43 of the AAT Act by s 14ZZJ of the TA Act. The effect of the interaction of those two provisions is that, in taxation cases like this, s 43 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.
Each of ss 14ZZE and 14ZZJ are principally concerned with protecting the taxpayer’s privacy. These rules afford taxpayers a greater degree of privacy than other users of the Tribunal are entitled to expect in the ordinary course. In most other cases, an applicant before the Tribunal would have to justify why it was appropriate to conduct the review in private, or to suppress the identity of an adult applicant or witness in the reasons for decision.
The application before me is not about protecting privacy. The taxpayer is concerned instead with protecting confidentiality. More precisely, the application is intended to ensure evidence provided by key witnesses is not disclosed to other government agencies. If I am to accommodate the taxpayer, I must be satisfied it is appropriate in all the circumstances to make orders under ss 35(3) and (4) of the AAT Act.[11]
[11] (4) The Tribunal may, by order, give directions prohibiting or restricting the publication or other disclosure, including to some or all of the parties, of information that:
The discretion to make orders is not open-ended. Sub-section 35(5) expressly requires certain matters be taken into account. Indeed, it requires the Tribunal 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. [Emphasis added]
The words I have underlined make clear the importance which the Tribunal must attach to transparency in its processes. That commitment to transparency can come as an uncomfortable surprise to applicants and witnesses who assume they could deal with the Tribunal in the same way they dealt with the original decision-maker where privacy is the order of the day. Applicants do not necessarily appreciate that, to the extent the Tribunal is an instrument of justice, it is important that justice be done and be seen to be done. Confidentiality orders force justice behind closed doors, which can undermine public confidence: see Pochi and Minister for Immigration and Ethnic Affairs [1979] AATA 64; (1979) 36 FLR 482 at 510 per Brennan J; see also Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185 per Downes and Jagot JJ at [74]-[75]. Of course, the Tribunal is not simply – or even primarily – a means of ensuring individual justice. The Tribunal also has a normative role. It is concerned with promoting good government: Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 598 per Smithers J; see also Visa Cancellation Applicant and Minister for Immigration and Citizenship [2011] AATA 690 at [58] per Downes J. The Tribunal uses its decisions in individual cases to model behaviour that promotes the integrity and quality of government decision-making more generally. The normative role becomes much harder if those decisions are not accessible. It is difficult to communicate lessons for future decision-makers if the reasons for decision are censored or suppressed.
Sub-section 35(5) expresses in legislative form at least part of what Louis D Brandeis meant when he wrote (albeit in a slightly different context):[12]
Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman. [Emphasis added]
[12] Brandeis, L. Other People's Money and How the Bankers Use It (Frederick A Stokes Company, 1914)
While s 35(5) requires that the Tribunal start from the principle that openness is desirable, the sub-section recognises other considerations may point in a different direction. After weighing all the relevant considerations in the balance, the Tribunal may be justified in making confidentiality orders under sub-sections 35(3) or (4).
Sub-section (5) refers to “the confidential nature (if applicable) of the information” as one such consideration. The sub-section understandably does not specify what the other considerations might be. The Tribunal is left to identify what is relevant in each case with the assistance of the parties. I must then perform the balancing exercise required by the sub-section.
Information about a taxpayer’s internal operational processes and transactions might be inherently confidential. The taxpayer’s evidence does not clearly make out this argument although it is obvious information about aspects of the business is likely to be sensitive. (The taxpayer is dealing in raw materials with considerable value; it is probably reluctant to disclose the arrangements for dealing in and securing the raw material in question.) The taxpayer also argued in its written submissions in reply that evidence which might disclose evidence of criminal misconduct is inherently confidential.[13] That may not be a proper consideration, but if it is it would attract little weight. What of the other considerations?
[13] Applicant’s outline of submissions in reply at [28]
The taxpayer in this case says there is one important consideration which weighs decisively in favour of making the orders sought. The taxpayer says the orders are required in order to preserve the integrity of the accusatorial process.
The expression accusatorial process was discussed by the High Court in X7 v Australian Crime Commission (2013) 248 CLR 92. In that case, the unnamed plaintiff was arrested and charged with three indictable offences. He was also called to give evidence before an examiner from the Australian Crime Commission. That examination took place before the trial. When questions were put to him at the examination, the plaintiff declined to answer. He was told he would be charged with an offence under ss 30(2)(b) and (6) of the Australian Crime Commission Act 2002. Those sub-sections make it an offence to refuse to answer questions put by an examiner. But sub-sections 30(4) and (5) say evidence (including documents) extracted from a witness will not be admissible and cannot be referred to prosecutors if the witness invokes the privilege before answering the question or providing the document. The plaintiff in X7 invoked the privilege but then refused to answer questions. He challenged the examiner’s decision to refer him for prosecution under ss 30(2)(b) and (6).
The High Court concluded an examiner could not require a person charged with a Commonwealth indictable offence to answer questions about the subject matter of the charged offence. In the course of reaching that conclusion, Hayne and Bell JJ explained (at [101]):
…the whole of the process for the investigation, prosecution and trial of an indictable Commonwealth offence is accusatorial. It is accusatorial in the sense that an accused person is not called on to make any answer to an allegation of wrong-doing, or to any charge that is laid, until the prosecuting authorities have made available to the accused particulars of the evidence on which it is proposed to rely in proof of the accusation that is made. And even after that information has been provided, the accused person need say or do nothing more than enter a plea of guilty or not guilty to the charge. If the accused person chooses to plead not guilty at trial, he or she is entitled to put the prosecution to proof of the charge and, as part of that process, to test the strength of the evidence which the prosecution adduces at trial. The only relevant limit on the accused person's testing of the strength of the prosecution's case is provided by the accused person's instructions to his or her lawyer. The lawyer cannot test the prosecution case in a manner inconsistent with the accused person's instructions.
Hayne and Bell JJ went on to explore the relationship between the privilege against self-incrimination and the separate but related concept of a ‘right to silence’. They explained (at [104]):
The accusatorial process of criminal justice and the privilege against self-incrimination both reflect and assume the proposition that an accused person need never make any answer to any allegation of wrong-doing.
Hayne and Bell JJ added (at [105]):
The notion of an accused person's "right to silence" encompasses more than the rights that the accused has at trial. It includes the rights (more accurately described as privileges) of a person suspected of, but not charged with, an offence, and the rights and privileges which that person has between the laying of charges and the commencement of the trial. [Emphasis added]
The taxpayer says the High Court’s decision in X7 underlines the importance of maintaining the integrity of the accusatorial process. That process begins long before the accused makes it to trial. Ms Seiden explained investigators, prosecutors and other agents of the state should be sensitive to that overriding requirement in their dealings with the individual. Where necessary, accommodations should be made.
To illustrate the point of how such an accommodation might be made in a practical sense, Ms Seiden referred to the High Court’s decision in Lee v The Queen [2014] HCA 20. In that case, the Court dealt with the exercise of compulsory examination powers under the New South Wales Crime Commission Act 1985 (NSWCC Act). Sub-section 13(9) of the Act permitted the Commission to make orders limiting publication of evidence given under compulsion and required that it make orders “if the failure to do so might prejudice the safety or reputation of a person or prejudice the fair trial of a person who has been or may be charged with an offence.” One of the accused was compulsorily examined, prior to being charged with an offence. A non-publication order was made but the Commission subsequently released material to prosecutors that had been obtained in the course of the examination. While the prosecutors accepted the material could not be introduced as direct evidence against the witness or anybody else, the prosecutors relied on the material to anticipate defences the accused might raise. When the accused’s representatives became aware the prosecutors had access to the material from the Commission, it was decided the accused would not give evidence. The High Court quashed the convictions on appeal. The Court’s ratio was neatly encapsulated at [51] where it explained:
What occurred in this case affected this criminal trial in a fundamental respect, because it altered the position of the prosecution vis-à-vis the accused. There was no legislative authority for that alteration. Indeed, it occurred contrary to the evident purpose of s 13(9) of the NSWCC Act, directed to protecting the fair trial of examined persons.
Ms Seiden pointed out the Court explained the steps a body exercising powers of this nature should take in order to preserve the accusatorial process.[14] The Court said (at [34]):
The purpose of s 13(9) of the NSWCC Act was to protect the fair trial of a person who might be charged with offences. It supported the maintenance of the system of criminal justice referred to in X7 and the trial for which that system provides, in which the prosecution has a defined role and the accused does not. The protective purpose of s 13(9) would usually require that the Commission quarantine evidence given by a person to be charged from persons involved in the prosecution of those charges. It would require the Commission to make a direction having that effect and to maintain the prohibition in the face of requests for access to the evidence. That purpose was not met in the present case, with the consequence that the appellants' trial differed in a fundamental respect from that which our criminal justice system seeks to provide.
[14] Transcript at p 28
The taxpayer says, in effect, I should take my cue from the High Court in X7 and Lee and fashion orders under s 35 of the AAT Act that would permit evidence to be quarantined from prosecutors. I was told those orders were necessary to preserve the accusatorial process against the witnesses.
There is an important difference between these proceedings and the examination processes considered in X7 and Lee, of course. In each of those cases, the examining bodies were provided with extraordinary coercive investigative powers that could be used to compel a person to give evidence that was against his or her interest, and which might tend to incriminate. The powers were apparently created to assist law enforcement authorities to gather intelligence and conduct investigations. But the statute in each case included safeguards designed to preserve the integrity of the accusatorial process. The examiner was entitled – or might even be required – to take the extraordinary step of quarantining information gathered through exercise of the powers in order to preserve the integrity of the accusatorial process. In that sense, the introduction of extraordinary powers was balanced with the introduction of extraordinary safeguards.
Are such extraordinary steps appropriate in the Tribunal?
The Tribunal’s information-gathering powers do not extend nearly so far as those of the bodies in X7 and Lee. It is true the Tribunal has the power in s 40A of the AAT Act to summons a person to attend and give evidence or provide documents. While it is an offence to refuse to comply with a summons[15] or refuse to answer questions when required to do so by the presiding member,[16] a person cannot be prosecuted for their refusal if complying with the summons or answering the question might tend to incriminate.[17]
[15] AAT Act, s 61(1)
[16] AAT Act, s 62(3)
[17] AAT Act, ss 61(2) & 62(4)
The AAT Act does not include extraordinary coercive powers so there must be some doubt over whether it would be justified in taking the extraordinary steps contemplated by the taxpayer. Orders under s 35 of the AAT Act that quarantined relevant information from prosecutors are clearly extraordinary in that the Commissioner would ordinarily be expected to refer evidence of serious criminal misconduct to police. I note that while the secrecy provision in s 355-25 of Schedule 1 to the TA Act might have the effect of permitting or even requiring the Commissioner to turn a blind eye to minor infractions of the law, evidence of a serious offence is treated differently. Section 355-70 permits disclosure of protected information to a law enforcement agency:
·for the purposes of investigating a serious offence or enforcing a law where the contravention of that law is a serious offence; or
·in connection with a proceeds of crime order.
The taxpayer says the absence of extraordinary coercive powers in the AAT Act is not decisive for present purposes because the taxpayer is practically compelled to provide the evidence.[18] The compulsion arises out of the likely economic consequences of failing to provide evidence that may be essential to the taxpayer’s case. The taxpayer’s argument goes on to assert that, in those circumstances, the orders are necessary to avoid compromise of the accusatorial process. But the taxpayer is a body corporate. It is not the entity that risks being condemned out of if its own mouth. The individual witnesses who may provide important evidence on behalf of the taxpayer are the intended beneficiaries of the use immunity.
[18] Applicant’s outline of submissions at [53]
Are those witnesses subject to any sort of compulsion to give evidence? Does the evidence suggest the witnesses are grimly determined to provide evidence because they feel they have no practical alternative, or do they have a genuine choice to invoke the privilege?
I will deal firstly with the witness who is also an officer and shareholder in the taxpayer. As I understood the argument, the adverse consequences that flow from affirming the decision are likely to be visited (at least indirectly) upon that individual. His economic interests may be impacted if the assessment is affirmed and the monies claimed by the Commissioner are recovered from the taxpayer. Yet his statement dated 21 August 2017 does not clearly articulate his interest or the extent of his exposure to the fate of the company. More importantly, the statement does not make clear he feels obliged to provide evidence in these proceedings even if doing so prejudices the accusatorial process. He says (at [14]):
I wish to maintain my right to silence for any criminal prosecution. As its sole director and shareholder, I am the only one who can speak for the Applicant has in these proceedings [sic]. I do not wish to be forced to choose between the Applicant pursuing its case in these proceedings and waiving my right to silence or the Applicant effectively abandoning its case in these proceedings and maintaining my right to silence.
The witness clearly accepts he has a choice about giving evidence. Even if I accept his economic interests could be impacted if the taxpayer cannot mount a positive case, his statement does not persuade me he feels compelled in any practical sense to make a choice that would compromise the accusatorial process.
The position of the other witness is more straightforward. A statement from the taxpayer’s solicitor dated 21 August 2017 records the witness saying he will not give evidence in the absence of appropriate confidentiality orders: solicitor’s statement dated 21 August 2017 at [7]. The witness confirms that position in his own statement dated 21 August 2017 at paragraph [11]. Those statements make clear the individual in question does not feel compelled to provide evidence that might be provided to prosecutors.
In the circumstances, I am not persuaded the individual witnesses feel compelled to give evidence at the hearing whether I make the orders or not. While it is likely the officer faces a more difficult choice given his economic interests, the evidence (including the earlier statements provided in the taxpayer’s materials lodged in support of the application) does not satisfy me the witnesses are prepared to put the interests of the taxpayer ahead of their own and risk giving evidence that will impact on the integrity of the accusatorial process in the absence of a workable use immunity.
It follows the orders are not required to prevent compromise of the accusatorial process. With the possible exception of some material that has already been provided by one of the witnesses, it is clear the witnesses have it within their own power to preserve their right to a fair trial. While I accept the taxpayer may be disadvantaged if the witnesses refuse to provide evidence, the fact the witnesses retain the practical option of invoking the privilege distinguishes this case from X7, Lee and other cases that refer to witnesses being practically compelled to run from the cover afforded by privilege.
The taxpayer points out the concept of use immunity has been recognised in cases where the witness is not otherwise compellable. A statutory form of use immunity is available in appropriate cases under s 128 of the Evidence Act 1995. That section acknowledges the privilege against self-incrimination[19] but permits the Court to require that the evidence be provided if the Court is satisfied:
(a)the evidence does not suggest the witness has contravened a foreign law; and
(b)it is in the interests of justice that the evidence be provided.[20]
[19] Evidence Act 1995, s 128(3)
[20] Evidence Act 1995, s 128(4)
If the Court requires the witness to provide the evidence, or if the evidence is voluntarily provided notwithstanding a claim of privilege, the Court gives a certificate under s 128(5). Evidence that is subject to a certificate cannot be used against the applicant in other proceedings before an Australian court: Evidence Act, s 128(7).
Section 128 certificates are not available in the Tribunal because it is not a Court for the purposes of the Evidence Act, and because the Tribunal is not bound by the formal rules of evidence: AAT Act, s 33(1)(c). But the taxpayer says the availability of s 128 certificates in the courts confirms there is no reason in principle why the Tribunal should not use its powers under s 35 to create a use immunity in these proceedings. The taxpayer argues, in effect, that “the interests of justice require that the witness give the evidence”[21] and that evidence cannot be made available in a way that preserves the integrity of the accusatorial process without using s 35 orders to create use immunity. Ms Seiden argued courts have occasionally considered using their power to make confidentiality orders to create, extend or supplement use immunity in circumstances where s 128 certificates would not be adequate. (She noted the High Court decided in Cornwell v R [2007] HCA 12; (2007) 234 ALR 51; 81 ALJR 840 that s 128 certificates were not necessarily available with respect to the evidence-in-chief of witnesses.)
[21] Evidence Act, s 128(4)(b)
That brings me back to the role of the Tribunal. I should make two points. Firstly, the fact parliament did not give the Tribunal the power to issue certificates under s 128 of the Evidence Act is presumably the result of a conscious choice. If parliament wanted the Tribunal to have this power, it could have made clear that s 128 applied in Tribunal proceedings even though the formal rules of evidence do not apply. While it is problematic to speculate on why parliament did not do something, one must acknowledge the possibility that the Tribunal’s constitutional status as a creature of the executive could be relevant. It may be that parliament intended only judicial bodies should have the power to provide use immunity. If that is so, there must be a question over whether the Tribunal can properly use its powers under s 35 to achieve an outcome that would ordinarily be achieved, or substantially achieved, through the operation of the Evidence Act. The fact the courts might use their confidentiality powers to fill in any gaps in the coverage of s 128 does not inevitably mean the Tribunal has the power to do the same: cf Commissioner of Taxation v Pham [2013] FCA 579 per Katzmann J at [34] (see below).
The second point arises out of the statutory role of the Tribunal. I have already noted the Tribunal is not simply concerned with the just resolution of individual disputes. It is also an instrument of good government charged with making the correct or preferable decision. That mission should inform the exercise of all the Tribunal’s statutory powers. At a minimum, the Tribunal should be alive to any implications for public administration that might flow from the exercise of powers in the AAT Act.
Happily, the interests of good government and the interests of individual justice will usually coincide. But they will not do so in every case. There are hard cases where the imperatives of public administration and the concerns of individual justice point in different directions. There is a natural temptation to favour the individual in those hard cases. Yet if hard cases make for bad law, they can make for terrible public administration. The Tribunal must be prepared to take a broader view and exercise its powers (or decline to exercise them) in a way that leads to a hard outcome for an individual applicant if that is the correct or preferable decision in all the circumstances.
The correct or preferable decision
The Tribunal needs access to information about the taxpayer’s affairs and other matters if it is to make the correct or preferable decision. The Tribunal’s information gathering processes are generally designed to elicit the best evidence available in all the circumstances. But obstacles to that information gathering process remain. The taxpayer argues the Tribunal can make more creative use of its powers under s 35 of the AAT Act to clear a blockage that will otherwise arise in the circumstances of this case. Orders under s 35 will promote the flow of important and relevant information. I was also told such orders would achieve other important objectives, most obviously protecting the integrity of the accusatorial process.
In Pochi, Brennan J recognised the Tribunal could use its powers under s 35 of the AAT Act to promote or facilitate the flow of information. His Honour explained (at p 272):
Where the publicity which traditionally marks curial proceedings may inhibit the production of evidence or lead to its rejection, the power conferred upon the Tribunal by [s 35] authorizes it to remove those impediments to the receipt of information.
Is it appropriate to do so in this case? I have already explained the taxpayer’s principal argument was that orders were necessary to preserve the integrity of the accusatorial process. I agree that would be an important consideration weighing in favour of the exercise of the power if I were satisfied witnesses felt compelled to give evidence. But I am not satisfied that is so, for reasons I have explained. While there is a residual question in relation to a category of documents that have already been provided by one of the witnesses, I am satisfied the integrity of the accusatorial process can be preserved through the simple expedient of invoking the privilege. Subject to what I say below about the residual category of documents, I am not satisfied this consideration weighs in favour of making orders under s 35.
I accept the proceedings are defensive in nature. I also accept the taxpayer is at a disadvantage if it cannot rely on the witnesses in question in light of s 14ZZK of the TA Act. It is tempting to argue s 35 orders could be used to redress that imbalance in the interests of fairness.
The taxpayer argued the Federal Court has not ruled out the use of s 35 orders for this purpose. I was referred in particular to the decision of Katzmann J in Commissioner of Taxation v Pham [2013] FCA 579. In that case, her Honour set aside a decision of the Tribunal to make orders under s 35 that would have quarantined a witness’s evidence while that witness was involved in related criminal proceedings. The Tribunal’s decision was set aside but Ms Seiden argued her Honour’s judgment contemplated that s 35 orders to similar effect might be made in an appropriate case.
The reasoning in that decision points to a difficulty. The taxpayer is asking for confidentiality orders under s 35, but in substance it wants to achieve something quite different. It wants use immunity. As I have already explained, the powers of an administrative tribunal may not extend that far. The power to give certificates under s 128 of the Evidence Act supplemented by confidentiality orders might be one of the important differences between proceedings in the Tribunal and an application for review in the Federal Court.
I do not need to resolve this issue because the application for s 35 orders is misconceived for other reasons identified by the Commissioner.
The Commissioner’s argument relied on the decision of the Federal Court in Seymour v Commissioner of Taxation [2015] FCA 320 and on the reasoning in the subsequent appeal. In Seymour, the taxpayers lived overseas. They feared they would be arrested or subjected to a departure prohibition order if they set foot in Australia to give evidence in the Tribunal proceedings. The Tribunal made orders that evidence be given by video-link from overseas to accommodate the applicants. Buchanan J said the applicant’s concerns were not a proper consideration for the Tribunal in the exercise of its discretion to permit a witness to give evidence by video-link. His Honour said the parties to proceedings “cannot….expect assistance to avoid the operation of Australian law”: at [101]. On appeal, Siopis J in the Full Court[22] took a slightly different approach before reaching the same conclusion. His Honour explained (at [23]):
I would…prefer to characterise the Tribunal’s error slightly differently, namely, as the failure by the Tribunal to have regard to the public interest in the proper administration of the Taxation Administration Act 1953 (Cth), in particular, and to the administration of justice, in general.
[22] Seymour v Federal Commissioner of Taxation (2016) 241 FCR 361; [2016] FCAFC 18
His Honour’s analysis is clearly consistent with long-standing authority and commentary that refers to the Tribunal’s role as an instrument of good government. In discharging that role, the Tribunal may be required to have regard to public interests or concerns beyond those of the individual litigant. The Commissioner says this is just such a case. He argues it would be improper for the Tribunal to make orders under s 35 that would facilitate a taxpayer relying upon evidence that may suggest criminal breaches of the revenue laws for one purpose while preventing the Commissioner from referring that evidence to prosecutors who are hot on the witness’s trail. At a minimum, orders would leave the Commissioner in an awkward position. He would know information for one purpose but be required to ignore it for another.
I dealt with a similar scenario in Re A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398. In that case, I described (at [34]) what I took to be:
…the central difficulty with the taxpayer’s request [for orders under s 35 that would quarantine the witness’s evidence from prosecutors]. It is asking the Tribunal to prevent the regulator from doing its job. That would embarrass the Commissioner in the performance of his duties. He cannot be expected to un-know what he may learn in the hearing. I also think reasonable members of the public would be startled by the suggestion the Tribunal should make use of evidence provided in these circumstances. An order in those terms would undermine the confidence of the public in the administration of justice.
It seems to me the same concerns arise in this case. The Commissioner will be placed in a position that will compromise his administration of the legislative scheme for which he is responsible.
I note Ms Seiden argued in her oral submissions that the Commissioner’s role in the administrative process has ended now that the matter is before the Tribunal. In those circumstances, she argued, the Commissioner need not feel any embarrassment or difficulty.[23] I doubt that is so. While the Commissioner’s shoes have now been filled by the Tribunal for the purposes of these proceedings, the Commissioner continues to play a role in the review process. In any event, the Commissioner’s difficulty is not confined to the additional material he learns about this taxpayer. He is effectively being required to quarantine that information when dealing with other cases raising similar facts. While that may be fair enough in relation to material that is subject to the implied undertaking set out in the General Practice Direction, evidence provided in the course of the hearing which sheds light on other cases or investigations might have greater utility.
[23] Transcript at p 30
Conclusion
I am not satisfied in all the circumstances that I should make the orders sought by the taxpayer in relation to evidence that might be provided at or for the purposes of the hearing.
That leaves a question in relation to a residual category of documents that have already been provided by the officer of the taxpayer who is under investigation, most obviously his statement of 18 November 2016 and a further statement dated 21 August 2017 that was filed in support of the application for confidentiality orders.
There is a possibility the balancing process I am required to undertake under s 35 might produce a different outcome in relation to those documents, especially if the November 2016 statement was provided without the benefit of proper legal advice. While I do not think there is any basis for quarantining that material from prosecutors if it is to be used in the Tribunal proceedings, there may yet be an argument for orders that would effectively permit the taxpayer to uplift the material and return it to the witness so he might preserve the privilege.
It may not be necessary to make an interim confidentiality order in relation to those documents because they will presumably be protected for now by the implied undertaking. In those circumstances, my decision to refuse to make confidentiality orders under s 35 should be understood as applying to any additional material from the particular witnesses that may be filed for use in the proceedings, and to any evidence that may be given by those witnesses at the hearing. I will invite the parties to make further submissions in relation to the material that has already been filed.
I certify that the preceding 61 (sixty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe.
..............................[sgd]..........................................
Associate
Dated: 3 October 2017
Date of hearing: 31 August 2017 Counsel for the Applicant: Ms R Seiden SC & Mr R Johnson Solicitors for the Applicant: Ganz Legal Counsel for the Respondent: Mr A J O'Brien Solicitors for the Respondent: Australian Government Solicitor
(a) relates to a proceeding; and
(b) is any of the following:
(i)information that comprises evidence or information about evidence;
(ii)information lodged with or otherwise given to the Tribunal.
8
12
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