JWTT and Commissioner of Taxation (Taxation)
[2015] AATA 587
•12 August 2015
JWTT and Commissioner of Taxation (Taxation) [2015] AATA 587 (12 August 2015)
Division TAXATION & COMMERCIAL DIVISION File Number
2014/6582
Re
JWTT
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President S E Frost
Date 12 August 2015 Place Sydney The Tribunal declines to make orders under s 35 of the Administrative Appeals Tribunal Act 1975.
............................[sgd]............................................
Deputy President S E Frost
CATCHWORDS
PRACTICE AND PROCEDURE – application for confidentiality orders by taxpayer – 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 – allegations of criminal activities by taxpayer and third parties – potential risks to safety of taxpayer and witnesses – no compulsion to give evidence in these proceedings – privilege against self-incrimination – assertions regarding criminal charges speculative only – public interest and interests of administration of justice of greater weight – request for proposed orders declined
LEGISLATION
Taxation Administration Act 1953 ss 14ZZE, 14ZZJ, 14ZZK
Administrative Appeals Tribunal Act 1975 ss 35, 43
CASES
Commissioner of Taxation v Pham [2013] FCA 579
X7 v Australian Crime Commission (2013) 248 CLR 92; [2013] HCA 29
Lee v New South Wales Crime Commission [2013] HCA 39
Lee v The Queen (2014) 88 ALJR 656; [2014] HCA 20A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398
REASONS FOR DECISION
Deputy President S E Frost
12 August 2015
SUMMARY
I have decided not to accede to the taxpayer’s request for confidentiality orders under s 35 of the Administrative Appeals Tribunal Act 1975 (AAT Act).
BACKGROUND
The taxpayer has applied to the Tribunal for review of the Commissioner’s decision to disallow the taxpayer’s objection against assessments of GST and penalty. The application is made under Part IVC of the Taxation Administration Act 1953 (TAA).
The hearing of a proceeding before the Tribunal is normally in public. However, as an exception to that general rule, the hearing of a Part IVC application is to be in private if the taxpayer asks for it to be in private: s 14ZZE of the TAA. The taxpayer asked for a private hearing in this case, and so it is entitled to one as of right. It is also entitled, as a consequence of the private hearing, not to have its identity disclosed when the Tribunal publishes its reasons for decision on the substantive application: s 43 of the AAT Act, as modified by s 14ZZJ of the TAA.
But the taxpayer wants a greater degree of privacy, and non-disclosure, than ss 14ZZE and 14ZZJ provide. It wants the Tribunal to make orders under s 35 of the AAT Act restricting or prohibiting the disclosure of evidence given before the Tribunal, or the content of documents lodged with the Tribunal or received in evidence in the course of the proceedings. The orders it seeks are:
1.Pursuant to s 14ZZE of the Taxation Administration Act 1953 (Cth) and paragraph 35(2)(a) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) that the hearing of these proceedings take place in private.
2.Pursuant to paragraph 35(2)(a) of the AAT Act, that the only persons to be present are the parties, their legal advisors, and any witnesses for the period in which such witnesses are giving evidence.
3.Pursuant to paragraph 35(2)(b) of the AAT Act, that until further order, neither the Commissioner nor the Tribunal shall disclose or publish any evidence given before the Tribunal or filed with the Tribunal in the course of these proceedings, or the identity of any document or any matters contained [in] any of the documents filed with or read to or received by the Tribunal in the course of these proceedings.
4.Pursuant to paragraph 35(2)(aa) of the AAT Act, that until further order, the Applicant’s names and the names of any witnesses called are not to be published or disclosed by the Commissioner or the Tribunal, including any reason given by the Tribunal.
5.Such further and/or other orders as this Tribunal may see fit, including to effect the intent of those sought herein.
Since the filing of the taxpayer’s application for orders in those terms, the AAT Act has been amended by the Tribunals Amalgamation Act 2015 (Cth). The former s 35 was repealed and a new s 35 has now been substituted. There are some changes in expression between the former and the current provisions but no fundamental change in their intent or effect. I have taken the taxpayer’s application for s 35 orders to be an application for orders under the amended provisions, so that the orders are sought as follows:
·Orders 1 and 2 under s 35(2);
·Order 3 under s 35(4); and
·Order 4 under s 35(3).
The Commissioner notes that, in light of s 14ZZE of the TAA, the taxpayer is entitled, as of right, for the hearing to be held in private. On that basis the Commissioner has consented to the making of Order 1. For my own part, however, I consider an order under the former s 35(2)(a), now s 35(2), in a case such as this, to be inappropriate. There is no point asking Tribunal to consider whether to make an order under s 35(2) because s 14ZZE of the TAA has already mandated a private hearing. I decline to make Order 1.
The Commissioner opposes Order 2 as it is said to be otiose. That seems an apt description. A private hearing is a hearing that is not a public hearing. It is a hearing that excludes the public. The hearing of the taxpayer’s application for review will be conducted in the orthodox way, with a sign outside the hearing room notifying people that it is a “Private Hearing”. It will be for the parties to monitor whether there are any people in the hearing room from time to time who should not be there. It will be for the presiding member of the Tribunal to ensure the private nature of the hearing. An order in the nature of Order 2 would make things more complicated than they need to be. I decline to make Order 2.
The Commissioner opposes Orders 3 and 4 for reasons I will discuss below.
THE GST AND PENALTY ASSESSMENTS
In 2012 and 2013 the taxpayer lodged Business Activity Statements (BASs) in which it claimed GST input tax credits of over $40 million. The credits relate to acquisitions of gold from suppliers who were not registered for GST purposes. The credits were claimed under Division 66 of the GST Act[1]. Division 66 allows a purchaser of second-hand goods to claim credits even though the unregistered supplier of those goods did not pay GST to the Commissioner on that supply. To make good the credit claims, the taxpayer must, among other things, succeed in its claim that the gold it acquired was second-hand goods.
[1] A New Tax System (Goods and Services Tax) Act 1999
The Commissioner disallowed the credit claims. He does not accept that the taxpayer acquired the gold from the purported suppliers. Nor does he accept that the gold was second-hand goods. He claims that the taxpayer was involved in the construction of an elaborate façade to disguise the true facts. He believes that what the taxpayer did was dishonest; the imposition of administrative penalty at the rate of 75 per cent (and 90 per cent for repeat behaviour) reflects that belief.
THE SECTION 35 APPLICATION
In support of its application for orders under s 35, the taxpayer relies on two witness statements made by its solicitor.
It is clear from the first of those statements and its annexures, Exhibit A1 that a multi-agency taskforce including officers of the Australian Federal Police (AFP), the Australian Taxation Office (ATO) and the Australian Crime Commission (ACC) has been investigating the taxpayer and two individuals, to whom I will refer as “J” (a director of the taxpayer) and “C”, in relation to alleged criminal activities and that an officer of the taskforce has formed the suspicion that, among other things:
·each of J and C has conspired with the other, and with the taxpayer, with the intention of dishonestly causing a loss to the Commissioner contrary to s 135.4(3) of the Criminal Code; and
·each of J and C has dealt with money or other property reasonably suspected of being the proceeds of crime, contrary to s 400.9(1) of the Criminal Code.
The alleged facts that led to the formation of that suspicion are, broadly, the same as the alleged facts that led the Commissioner to make the GST and penalty assessments in respect of the taxpayer.
On the basis of the second statement and its annexures, Exhibit A2, I find that the Commissioner is considering referring the activities of J, C and the taxpayer (which led to the claiming of the GST input tax credits) to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution.
The taxpayer acknowledges through its solicitor that it bears the burden, under s 14ZZK of the TAA, of proving the GST and penalty assessments excessive. It says that to discharge that burden it will be necessary to call, at least, both J and C to give evidence.
It is in that context that the orders under s 35 are sought. The taxpayer raises three bases for the making of the orders[2]:
(a)the subject matter of the proceedings involves the management, storage and transport of substantial amounts of gold and cash. Publicising those activities may give rise to security risks, including the risk of armed robbery, kidnapping, hostage taking, blackmail and the like, particularly if, at the end of the proceedings, the taxpayer resumes its business activities;
(b)because serious criminal charges had been foreshadowed, there is an inherent unfairness in having evidence in these proceedings being made at large, and put in the hands of prosecutors – particularly because the taxpayer, “in a practical sense … has been forced to bring proceedings, which are, essentially, of a defensive nature”;
(c)if the orders are not made, the taxpayer will find it difficult to obtain and marshal evidence in support of its application. Witnesses, it is claimed, will be reluctant to give evidence where that evidence could then be made available to prosecution authorities and others. And if the witnesses were to decline to answer questions on the basis of an assertion of a self-incrimination privilege, “that, of itself, will have the effect of restricting the nature, extent, and quality of evidence made available to the Tribunal in these proceedings”.
[2] Applicant’s written submissions, at [20]
The taxpayer’s solicitor had also expressed the opinion in one of his witness statements that if the orders were not made, then the reputations of the taxpayer and J and C may be damaged, but that ground was not pressed by the taxpayer’s counsel.
SECTION 35
Orders of the kind sought by the taxpayer are clearly capable of being made by the Tribunal. The Tribunal has extensive powers under s 35 – for example, to hold private hearings (subsection (2)), to prohibit or restrict publication of information that could identify parties or witnesses (subsection (3)), or to prohibit or restrict publication of information that is lodged with the Tribunal or becomes evidence in Tribunal proceedings (subsection (4)).
Those powers, however, are to be exercised in accordance with s 35(5), which provides as follows:
(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.
The general principle in s 35(1) that hearings are to be in public has already been displaced in this case by s 14ZZE of the TAA. But the Part IVC modifications of the AAT Act take the privacy and confidentiality issues no further, with one exception – s 14ZZJ requires the Tribunal to do its best not to allow its reasons for decision to enable identification of the taxpayer. Whether there are to be any further restrictions depends on a weighing of the principle that it is desirable that there should be openness and public access to the hearing and all information before the Tribunal (a principle that the Tribunal must take as the basis of its consideration) and the reasons, if any, in favour of the restrictions sought (to which the Tribunal is to pay due regard).
DISCUSSION
In Commissioner of Taxation v Pham [2013] FCA 579, Katzmann J quashed an order made by the Tribunal under the then s 35(2)(b) of the AAT Act in circumstances broadly similar to those here. There were two reasons for quashing the order – first, the Tribunal did not take into account the fact that the taxpayers in the taxation review proceeding were entitled to claim the privilege against self-incrimination; and second, there was no evidence to support the Tribunal’s finding that aspects of the taxpayers’ defence in the criminal proceedings would be compromised if the taxation proceeding continued without the protection of a non-publication order.
The taxpayer submits, correctly in my view, that Pham is not an authority that necessarily lies against the making of orders of the kind sought here. And the taxpayer has also made sure to put on evidence dealing with the second of Katzmann J’s reasons for quashing the order in that case. That, it hopes, will at least take that issue, or any like it, out of the equation here.
But in any event, the taxpayer submits that the landscape has changed since Pham, with the decisions of the High Court in X7 v Australian Crime Commission (2013) 248 CLR 92; [2013] HCA 29 and the associated cases Lee v New South Wales Crime Commission [2013] HCA 39 and Lee v The Queen (2014) 88 ALJR 656; [2014] HCA 20.
In X7, the plaintiff had been charged with three indictable Commonwealth offences, two of which carried a maximum sentence of life imprisonment. Before being tried, the plaintiff was summoned to be examined by an examiner appointed under the Australian Crime Commission Act 2002 (Cth) (ACC Act). Before the examination commenced, the examiner explained to the plaintiff that he could not refuse to answer questions or produce documents sought by the examiner, but that he could claim that his answers to questions, or production of documents sought, might tend to incriminate him. If he made that claim then the answer given or the document produced would not be admissible in evidence against him in a criminal proceeding.
On the first day of the examination the plaintiff was asked, and answered, questions including questions about the subject matter of the offences with which he had been charged. When the examination resumed the next day he refused to answer questions about the subject matter of the offences with which he had been charged despite being required by the examiner to do so. He was subsequently charged with the offence of failing to answer questions.
One of the questions for the High Court arising out of that set of circumstances was whether under the ACC Act the plaintiff could be lawfully required to answer questions about the subject matter of the offences with which he had been charged but for which he had not been tried. The Court held by majority (Hayne and Bell JJ, Kiefel J agreeing; French CJ and Crennan J dissenting) that he could not.
Hayne and Bell JJ summarised their conclusion as follows, at 127 [70]-[71]:
Permitting the Executive to ask, and requiring an accused person to answer, questions about the subject matter of a pending charge would alter the process of criminal justice to a marked degree, whether or not the answers given by the accused are admissible at trial or kept secret from those investigating or prosecuting the pending charge.
Requiring the accused to answer questions about the subject matter of a pending charge prejudices the accused in his or her defence of the pending charge (whatever answer is given). Even if the answer cannot be used in any way at the trial, any admission made in the examination will hinder, even prevent, the accused from challenging at trial that aspect of the prosecution case. And what would otherwise be a wholly accusatorial process, in which the accused may choose to offer no account of events, but simply test the sufficiency of the prosecution evidence, is radically altered. An alteration of that kind is not made by a statute cast in general terms. If an alteration of that kind is to be made, it must be made by express words or necessary intendment.
In the second Lee case, one of the appellants had been required to give evidence to an examiner under the New South Wales Crime Commission Act 1985 (NSW) (NSWCC Act). He was subsequently charged with offences. The second appellant was also required to give evidence to an examiner and at the time he was examined he had been charged with one offence and a second charge was imminent. Despite directions under s 13(9) of the NSWCC Act prohibiting the publication of the appellants’ evidence, transcripts of their evidence were made available to the Director of Public Prosecutions prior to their joint trial. They were convicted. They appealed on the ground that the possession of the evidence from the Commission had occasioned a miscarriage of justice.
Their appeal to the Supreme Court of New South Wales (Court of Criminal Appeal) was unsuccessful but they appealed to the High Court. The High Court unanimously allowed the appeal. The Court said this, at [46] (footnote omitted):
In X7, it was held that the compulsory examination of a person with respect to an offence with which the person stands charged would be a departure, in a fundamental respect, from that principle. X7 was ultimately concerned with questions of statutory construction. Nevertheless, the point it makes about what may amount to a fundamental departure from a criminal trial as it is comprehended by our system of criminal justice is relevant to this case. It is a breach of the principle of the common law, and a departure in a fundamental respect from a criminal trial which the system of criminal justice requires an accused person to have, for the prosecution to be armed with the evidence of an accused person obtained under compulsion concerning matters the subject of the charges. It cannot be said that the appellants had a trial for which our system of criminal justice provides and which s 13(9) of the NSWCC Act sought to protect. Rather, their trial was one where the balance of power shifted to the prosecution.
As I see it, the problem with the taxpayer’s reliance on X7 and Lee is that those cases concerned the exercise of what Hayne and Bell JJ referred to in X7 at [147] as the “extraordinary processes of compulsory examination”. This case does not. Despite the taxpayer’s counsel’s valiant attempt to characterise things differently, neither J nor C is under any compulsion to give evidence in these proceedings, to expose themselves to the rigours of cross-examination, or to answer questions if they reasonably apprehend that the answers may tend to incriminate them. If they are confronted with that circumstance, and their claim to the privilege against self-incrimination is upheld, they will not be required to answer. Neither X7 nor Lee had that opportunity.
That fundamental distinction between this case on the one hand, and X7 and Lee on the other, removes all the oxygen from the taxpayer’s submission that the accusatorial nature of the criminal justice system will be undermined if the orders sought are not granted. Both J and C are entitled to maintain their so-called “right to silence”. If they do, rather than, as in X7 and Lee, placing the authorities in an unfairly advantageous position through the compulsory examination process, they will be arming the authorities with precisely nothing that can be used against them.
Order 3
The Commissioner in the first instance takes issue with the breadth of the proposed order, identifying a number of practical difficulties if an order were to be cast as widely as is sought. The difficulties include a prohibition against the use by the Commissioner, for any purpose, of any information obtained in the course of preparation for the hearing; an inability to show the evidence to potential lay or expert witnesses; restrictions in relation to documents that are already in the public domain; the Commissioner being prevented from investigating or assessing a third party shown by the evidence to warrant investigation; and that the restrictions are expressed to apply only to the Commissioner and to the Tribunal, not to the taxpayer or anyone else.
There is undoubtedly some force in that general complaint but the problems can be eased or removed with judicious drafting. I prefer to approach the issue as a matter of principle, and to address the substantive reasons for the taxpayer’s application and the Commissioner’s substantive objections to it.
Security issues; risk to safety of witnesses
The taxpayer’s solicitor asserts in his first statement, Exhibit A1, at [19], that publication or disclosure of the taxpayer’s activities “could give rise to obvious security risks to all those involved, including the risk of armed robbery, kidnapping, hostage taking, blackmail, and the like, all of which can give rise to a danger of personal injury and/or death”. Despite the generality of the assertion, I accept that publication of the location, timing or frequency of any of those activities, or the names of any of the people involved, could jeopardise the safety of the individuals. There is no need for any of that information to be published beyond the taxpayer and its representatives, the Commissioner’s officers and representatives, the Tribunal and its staff assisting at the hearing, and the Tribunal’s transcript service provider. However, I agree with the Commissioner’s submission that this issue can be adequately managed by appropriate, but specific, orders or directions when the relevant material is taken into evidence at the hearing. An all-encompassing order of the kind sought is not justified.
Unfairness in the context of possible criminal proceedings
The evidence does not establish that criminal charges are likely. Indeed, it seems that although the Commonwealth’s multi-agency taskforce has had, since middle to late 2013, sufficient information to make a successful application to the Supreme Court of New South Wales under the Proceeds of Crime Act 2002 (Cth), leading to freezing orders in relation to several categories of assets of the taxpayer and others, no charges have yet been laid against anyone. They may never be. Having regard to that timeframe, I agree with the Commissioner’s submission that an assertion that charges will or are likely to be laid is speculative.
But even if charges had been laid, on what basis should it be thought proper for the Tribunal to make the orders sought? Orders prohibiting the use by the Commissioner or his officers of material or information provided to the Tribunal (such as by referring it, if thought appropriate, to the CDPP) would permit the taxpayer and its witnesses to tell their story, including those parts of the story that they think might have involved criminal activity, but with complete immunity from any criminal action against them. The Commissioner submits, and I agree, that an outcome like that is not in the public interest or in the interests of the administration of justice.
In Pham, Katzmann J said at [37]:
It therefore seems to me that in deciding whether it is desirable to make a non-publication order under s 35, the Tribunal is obliged to take into account the extent to which such an order may interfere with the exercise of the functions and responsibilities of the Commissioner and his staff. One of those responsibilities is to provide information to the DPP relevant to court proceedings for offences relating to defrauding the revenue: Caratti v Federal Commissioner (1999) 42 ATR 714; [1999] FCA 1296 at [25] per French J. The Phams accepted that a non-publication order would frustrate the Commissioner in the fulfilment of this responsibility.
An order of the kind sought has the potential to interfere significantly with the exercise of the functions and responsibilities of the Commissioner and his staff. If information were provided in these proceedings that someone (whether J or C or someone else) had been involved in criminal activities, or that the liability currently assessed to the taxpayer is actually the liability of someone else, or that someone (whether J or C, or the purported suppliers, or anyone else) has incurred a previously undiscovered taxation liability, but the Commissioner were prevented from acting on that knowledge, then both the Commonwealth’s revenue base and the community generally would be significantly disadvantaged. That weighs heavily against making an order of the kind sought.
Finally, in A Taxpayer and Commissioner of Taxation (2004) 81 ALD 473; [2004] AATA 398, Senior Member McCabe refused to make orders under s 35 of the AAT Act in circumstances where a potential witness indicated an unwillingness to give evidence on the grounds of self-incrimination. The Senior Member said at [34]:
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.
I echo those sentiments.
Best information not available to the Tribunal
There is a further argument advanced on behalf of the taxpayer, and that is that unless the orders are made, the Tribunal will not be told the full story and will be forced to make its decision in ignorance of important factual material.
Such an outcome is in the hands of the taxpayer and its witnesses. It may be that the witnesses weigh up the potential advantage to the taxpayer’s taxation proceedings from their giving evidence, against the potential disadvantage to their own personal circumstances from doing so, and decide that the disadvantage outweighs the advantage. Or they may decide the opposite. That is a matter for them.
The Tribunal will make the correct or preferable decision, based on the information available to it. What that information comprises will, as is commonly the case, be determined largely by the taxpayer. It is, after all, the taxpayer’s case.
I decline to make Order 3.
Order 4
The Commissioner opposes Order 4 for much the same reasons as Order 3.
The protection sought by Order 4 can be adequately provided in the course of the proceeding, by the Tribunal as constituted to hear the matter.
I decline to make Order 4.
Order 5
In the circumstances in which it was raised, I took the thrust of the application for Order 5 to be a “further order” application – an application for further orders to enable proper effect to be given to Orders 1 to 4 – rather than an application for orders fundamentally different from the specific ones applied for.
It follows from what I have said that there is no reason to make Order 5, and I decline to do so.
CONCLUSION
I decline to make the orders sought.
However, this decision is not intended to indicate that some narrower confidentiality orders might not be justified in relation to specific information or evidence. As indicated in [34] of these reasons, that question can be dealt with, if necessary, at a later time.
I certify that the preceding 51 (fifty -one) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost ..............................[sgd]..........................................
Associate
Dated 12 August 2015
Dates of hearing 13 May and 19 June 2015 Counsel for the Applicant Mr P Bambagiotti Solicitors for the Applicant Ganz Legal Pty Ltd Counsel for the Respondent Mr A J O'Brien Solicitors for the Respondent Australian Government Solicitor
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