Kais and Commissioner of Taxation (Taxation)

[2021] AATA 16

Kais and Commissioner of Taxation (Taxation) [2021] AATA 16 (15 January 2021)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:          2018/5854

Re:Ali Kais

APPLICANT

AndCommissioner of Taxation

RESPONDENT

File Number:          2018/5853

Re:Kais Jewellery (Syd) Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member R J Olding

Date:15 January 2021

Place:Sydney

The witness statement of Antoine Ibrahim dated 16 May 2020 is to be admitted into evidence in these proceedings.

............................[sgd].................................

Senior Member R J Olding

Catchwords

PRACTICE AND PROCEDURE – EVIDENCE – where witness statement filed on behalf of Applicants but witness passed away before the hearing – where Respondent opposed admission of the statement into evidence – where Respondent conceded the statement was relevant to issues for determination but submitted relevance outweighed by the statement’s unfairly prejudicial nature – Tribunal not bound by rules of evidence – consideration of principles underpinning rules of evidence and provisions of Evidence Act 1995 (Cth) –statement admitted into evidence

Legislation

Administrative Appeals Tribunal Act 1975 (Cth), s 33(1)(c)


Evidence Act 1995 (Cth), ss 63, 135


Taxation Administration Act 1953 (Cth), s 14ZZK

Cases

Audio-Visual Copyright Society Ltd v Foxtel Management Pty Ltd & Ors (No 3) [2005] ACopyT 1
Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715
N.V. Sumatra Tobacco Trading Company v British American Tobacco Services Limited [2011] FCA 1051
Ordukaya v Hicks [2000] NSWCA 180
Queensland College of Teachers v El-Sayed [2017] QCAT 330
Re Applicant and Commissioner of Taxation [2013] AATA 112

Short v Crawley [2003] NSWSC 1158

REASONS FOR DECISION

Senior Member R J Olding

1. In support of their applications for review of objection decisions made by the Commissioner of Taxation (“Commissioner”), the Applicants seek to have admitted into evidence a witness statement (including annexures) by Mr Antoine Ibrahim dated 16 May 2020 (“the Statement”).

2. Regrettably, Mr Ibrahim passed away before the applications for review were heard.  Consequently, if the Statement were to be admitted, it would not be possible for it to be tested by cross-examination of Mr Ibrahim. The Commissioner opposes the admission of the Statement on the basis that it is hearsay which cannot be tested in cross-examination and its admission would be unfairly prejudicial.

3. I have decided the Statement should be admitted into evidence.

4. Neither my researches nor those of counsel for the Applicants and the Commissioner have revealed any previous case in this Tribunal in which a party sought to have admitted into evidence a written statement made by a witness who passed away before that statement could be tested in cross-examination. In those circumstances, it is appropriate that I provide written reasons for admitting the Statement, which I set out below.

5. I will decide the weight to be given to the Statement with the benefit of submissions of counsel.[1]

   [1] The applications for review were part heard over the period 14-18 December 2020 but had to be adjourned when a key witness fell ill and could not make himself available for continued cross-examination on the final day scheduled for the hearing. The hearing is to resume on 20 January 2021.

   BACKGROUND

6. The application for review filed by Kais Jewellery (Syd) Pty Ltd (“Kais Jewellery (Syd)”) concerns whether Kais Jewellery (Syd) is entitled to GST input tax credits (“ITCs”) on purported acquisitions of scrap gold from two companies.

7. The Applicants assert that Kais Jewellery (Syd) made the contested acquisitions which it paid for in cash withdrawn from its bank account.  The Commissioner asserts that the purported acquisitions are fictitious and a cover for acquisitions of gold bullion by the other applicant for review, Mr Ali Kais. On that basis, the Commissioner says Kais Jewellery (Syd) is not entitled to the ITCs and also that the cash withdrawals were ordinary income in the hands of Mr Kais which the Commissioner treated as assessible income. The Commissioner’s decision mainly disallowing Mr Kais’ objection to the relevant income tax assessment is also before the Tribunal, along with objection decisions in respect of associated penalty assessments.  The amounts involved are substantial.

8. Mr Ibrahim was the sole director and shareholder of one of the companies from which the acquisitions were said to have been made. His witness statement supports the Applicants’ contention that Kais Jewellery (Syd) purchased scrap gold from that company.

9. In summary, whether Kais Jewellery (Syd) in fact acquired scrap gold from the company of which Mr Ibrahim was the sole director and shareholder is both central to the case and hotly contested. Mr Ibrahim’s statement, if accepted, would be directly relevant to that issue.

   CONSIDERATION

10. The Tribunal “is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate”: Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”), ss 33(1)(c).

11. While the rules of evidence are not binding on the Tribunal, the principles underpinning them may provide useful guidance to the Tribunal. Further, it has been said that a statutory provision which provides that an administrative tribunal is not bound by the rules of evidence “does not signify that the tribunal must, over objection, supinely receive any evidence that is tendered before it.”[2]

    [2] Audio-Visual Copyright Society Ltd v Foxtel Management Pty Ltd & Ors (No 3) [2005] ACopyT 1, [6] per Lindgren J (President), Professor Dennis Pearce and Ms Angela Bowne SC (Members).

12. In determining that a prior representation by a deceased complainant should be admitted in a proceeding before the Queensland Civil and Administrative Tribunal (“QCAT”), the learned member in Queensland College of Teachers v El-Sayed[3] adopted relevant procedures set out in the Queensland evidence legislation “to ensure fairness to all the parties and consistency with the procedures of other courts of record.”[4]

    [3] [2017] QCAT 330.

    4 Ibid, [24].

13. Subject to the AAT Act, the procedures of this Tribunal are generally within the discretion of the Tribunal[5] and, as already observed, the Tribunal may inform itself in such manner as it considers appropriate. That may permit the Tribunal to adopt the approach that commended itself to the learned member in the El-Sayed case. However, that approach was evidently informed by s 28(3)(b) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) which, unlike s 33(1)(c) of the AAT Act, qualifies the non-application of the rules of evidence before QCAT with the proviso “other than to the extent the tribunal adopts the rules [of evidence or] practices or procedures [applying to courts of record]”. Additionally, since it was referred to in the QCAT decision and if it be relevant, I note that unlike QCAT this Tribunal is not a court of record.

    [5] AAT Act, s 33(1)(a).

14. I consider it is sufficient for me to look to the provisions of the Evidence Act 1995 (Cth) (“Evidence Act”), and more particularly their underpinning principles, for guidance, without formally adopting the rules and practices set out in those provisions.

15. The rules of evidence are consistent with the approach underlying Ms Hirschhorn’s submission that the Tribunal should weigh the probative value of the Statement against the danger that it would be unfairly prejudicial to the Commissioner in circumstances where Mr Ibrahim is not able to be cross-examined.[6] Under s 63 of the Evidence Act, a hearsay representation is not precluded in a civil proceeding if the person who made the representation is, as here, not available to give evidence. However, under s 135, the court may refuse to admit evidence “if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party, or be misleading or confusing, or cause or result in undue waste of time.”

    [6] This is not a case where the Statement, if accepted, could not be rationally probative of an issue for determination. Ms Hirschhorn, who appeared for the Commissioner, quite properly conceded that the Statement meets the threshold of being relevant to an issue, the central issue in fact, for determination by the Tribunal.

16. In respect of s 135, it has been said that the authorities show that:

    “the mere fact that the maker of the statement is not available for cross-examination may not be reason enough in itself [to exclude the evidence]. In each case, the issue for the Court is whether the probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the opposing party.”[7]

    [7] Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715, [36].

17. Since s 63 provides an express exception to the hearsay rule, which has as its foundation the inability to test a representation said to have been made by a person not giving evidence, it is perhaps not surprising that the absence of an opportunity for cross-examination in a civil matter has not in itself tended to result in exclusion of evidence. Rather, the courts have weighed up all of the surrounding circumstances in determining whether to admit the evidence.

18. As Ms Hirschhorn pointed out, several cases emphasised the difficulty in attributing significant weight to a statement in the absence of an opportunity for cross-examination. That will undoubtedly be a consideration when I turn to determine what weight should be given to the Statement. However, I do not see these cases as of much assistance in determining whether to admit the Statement.

19. If anything, the outcomes in these cases support the approach of admitting the Statement but with the understanding that the weight to be attributed to it must be affected by the absence of an opportunity for it to be tested in cross-examination.[8] Indeed, it has been said by a Deputy President of this Tribunal that “[i]f evidence is relevant it should generally be admitted even if it has not been tested in cross-examination”.[9] However, that observation, which followed an earlier one that “[f]or the most part, the courts have admitted the evidence where the deponent is not available for cross-examination”,[10] does not in my view suggest automatic admission of such evidence without a proper weighing of the potential for unfair prejudice against its probative value.

    [8] For example, see: Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715, [36]; Short v Crawley [2003] NSWSC 1158, [8]; Ordukaya v Hicks [2000] NSWCA 180; N.V. Sumatra Tobacco Trading Company v British American Tobacco Services Limited [2011] FCA 1051, [318]-[320].

    [9] Re Applicant and Commissioner of Taxation [2013] AATA 112, [549].

    [10] Ibid, [547].

20. Ms Hirschhorn also indicated that, if the Statement were to be admitted, the Commissioner would identify for the Tribunal the various respects in which the Commissioner would be denied an opportunity which, had Mr Ibrahim survived, would have been taken up to test his evidence in cross-examination. I do not doubt that, having regard to the nature of the matter and the cross-examination of various other witnesses by counsel for each of the parties, such cross-examination would have been extensive.

21. However, along with the foreshadowed but at this point unspecified instances of alleged inconsistencies, these matters are more relevant to weight than to whether to admit the evidence. As currently informed, I would not conclude that the Statement should not be admitted because the weight to be given to it would be so slight that it would be irrational to act upon it.  In those circumstances, to refuse to admit the Statement would, as Mr Bolger who appeared for the Applicants submitted, risk the Tribunal falling into the error of failing to have regard to relevant evidence.

22. In addition to referring to the allegedly unfairly prejudicial nature of the Statement, Ms Hirschhorn submitted that the circumstances in which the Statement was made are not entirely clear, since a notation on the Statement indicates that it was given with the assistance of an interpreter. It is not clear to me why this consideration, which can be explored further in relation to the weight to be given to the Statement, should significantly favour not admitting the Statement. It would have been open to the Commissioner, if he considered it significant, to seek further information regarding the circumstances in which the Statement was made from the interpreter and/or the Applicants’ solicitor who witnessed the Statement.

23. I accept that there is obviously potential for unfair prejudice to the Commissioner in admitting the Statement into evidence. The actual prejudice will depend on the weight to be attributed to it. However, there may be similar prejudice to the Applicants if the Statement were to be excluded. It is patently of considerable importance to the Applicants’ prospects of discharging their burden of proving the assessments are excessive.[11]

    [11] Taxation Administration Act 1953 (Cth), s 14ZZK.

24. Given the direct relevance of the Statement to the central issue in this case, and that Mr Ibrahim was the sole director and shareholder of the company at the relevant time such that it is not possible to obtain evidence of the matters to which Mr Ibrahim deposed from other witnesses, I am not persuaded that the potential prejudice  identified by the Commissioner outweighs the probative value of the Statement. The Commissioner has not pointed to any significant concrete considerations beyond the inability to cross-examine Mr Ibrahim to support exclusion of the Statement.

25. For these reasons, I consider that the better course is to admit the Statement into evidence. The Tribunal can determine the weight, if any, to be given to the Statement or parts of the Statement with the benefit of counsel’s foreshadowed submissions. It is to be expected those submissions will identify any alleged connections or inconsistencies between the Statement and other evidence and any alleged internal inconsistencies or any other relevant factors.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for the decision herein of Senior Member R J Olding

.............................[sgd]..................................

Associate

Dated: 15 January 2021

Date of hearing:

14-18 December 2020

Counsel for the Applicant:

Solicitors for the Applicant:

C Bolger

Husseini Lawyers

Counsel for the Respondent:

M Hirschhorn

Solicitors for the Respondent:

Australian Government Solicitor