Kunz, Leslaw Francescek v The Commissioner of Taxation of the Commonwealth of Australia

[1996] FCA 90

CATCHWORDS

Administrative Law - Rules of natural justice and breach thereof - Right of party affected to be heard - Opportunity to present case - Document containing statements of fact received as evidence of the existence of the facts in review by the Administrative Appeals Tribunal - Later decision by Tribunal not to consider statements as having evidentiary significance - Opportunity not afforded party tendering document to essay proof of the facts by other means - Denial of natural justice.

Administrative Appeals Tribunal Act 1975 - ss 39, 44

LESLAW FRANCESCEK KUNZ v. THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

VG235 of 1993
VG236 of 1993
VG237 of 1993

Jenkinson J.
Melbourne
27 February, 1996

IN THE FEDERAL COURT OF AUSTRALIA   ) 
VICTORIA DISTRICT REGISTRY         )  No. VG235 of 1993
GENERAL DIVISION                   ) 

On appeal from the Administrative Appeals Tribunal constituted by Deputy President Gerber

BETWEEN:LESLAW FRANCESCEK KUNZ

Applicant

AND:    THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent   

CORAM:    Jenkinson J.

PLACE;    Melbourne

DATE:     27 February, 1996    

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

1. The decision of the Administrative Appeals Tribunal be set aside.

1. The matter of the review of the respondent's decision be remitted to the Administrative Appeals Tribunal to be heard by the Tribunal constituted otherwise than as heretofore and decided again according to law.

1. The respondent pay the applicants costs (including reserved costs) of the appeal.

(Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)

IN THE FEDERAL COURT OF AUSTRALIA   ) 
VICTORIA DISTRICT REGISTRY         )  No. VG236 of 1993
GENERAL DIVISION                   ) 

On appeal from the Administrative Appeals Tribunal constituted by Deputy President Gerber

BETWEEN:LESLAW FRANCESCEK KUNZ

Applicant

AND:    THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent   

CORAM:    Jenkinson J.

PLACE;    Melbourne

DATE:     27 February, 1996    

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

1. The decision of the Administrative Appeals Tribunal be set aside.

1. The matter of the review of the respondent's decision be remitted to the Administrative Appeals Tribunal to be heard by the Tribunal constituted otherwise than as heretofore and decided again according to law.

1. The respondent pay the applicants costs (including reserved costs) of the appeal.

(Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)

IN THE FEDERAL COURT OF AUSTRALIA   ) 
VICTORIA DISTRICT REGISTRY         )  No. VG237 of 1993
GENERAL DIVISION                   ) 

On appeal from the Administrative Appeals Tribunal constituted by Deputy President Gerber

BETWEEN:LESLAW FRANCESCEK KUNZ

Applicant

AND:    THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent   

CORAM:    Jenkinson J.

PLACE;    Melbourne

DATE:     27 February, 1996    

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

1. The decision of the Administrative Appeals Tribunal be set aside.

1. The matter of the review of the respondent's decision be remitted to the Administrative Appeals Tribunal to be heard by the Tribunal constituted otherwise than as heretofore and decided again according to law.

1. The respondent pay the applicants costs (including reserved costs) of the appeal.

(Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)

IN THE FEDERAL COURT OF AUSTRALIA   )  No. VG235 of 1993
VICTORIA DISTRICT REGISTRY         )  No. VG236 of 1993
GENERAL DIVISION                   )  No. VG237 of 1993

On appeal from the Administrative Appeals Tribunal constituted by Deputy President Gerber

BETWEEN:LESLAW FRANCESCEK KUNZ

Applicant

AND:    THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent   

CORAM:    Jenkinson J.

PLACE;    Melbourne

DATE:     27 February, 1996    

REASONS FOR JUDGMENT

Appeals against decisions of the Administrative Appeals Tribunal.

By amended assessments, issued in February 1990 by the respondent Commissioner, increases of the applicant's assessable income of $402,062 in respect of the year of income ended 30 June 1987 and of $313,775 in respect of the following year of income were assessed.  At the same time an assessment issued in respect of the year of income ended 30 June 1989 in which the applicant's taxable income was stated to be $272,205.  The bases of the three assessments were asset betterment statements.  The applicant's objections to the assessments having been wholly disallowed, those decisions were at the applicant's request referred to the Administrative Appeals Tribunal.  The Tribunal's reviews of the decisions were heard together.  The decisions in respect of the first two years were affirmed.  The taxable income of the applicant in respect of the third year was reduced by $2,000.  The applicant appealed against each of the Tribunal's decisions to this court, by which the three appeals were heard together.

The applicant's case was that the increase in the amount of his assets resulted principally from large receipts of money from gambling and from the sale of chattels left to him by his mother, who had died in February 1983.  The Tribunal found the applicant's testimony to be "virtually worthless", for reasons stated at length in its reasons for the decisions.  It was a ground of appeal that procedural fairness had been denied the applicant by the Tribunal's refusal to grant an adjournment of the hearing of the reviews until one Boris Beljajev should be available to give evidence corroborative of the applicant's testimony.  Mr. Beljajev was, before and during the hearing, attending his trial on indictment in Melbourne, where the Tribunal's hearing also took place.  There was evidence that during and before the three years in question the applicant and Mr. Beljajev had been close friends and had been engaged together in business and recreational activities, in particular in the ownership of race horses and in gambling.  Mr. Beljajev was said to have conducted a jewelry business in Melbourne and to have conducted on the applicant's behalf the sale of many of the chattels left to the applicant by his mother.  Some of those chattels were said to have been jewelry, others paintings, fur coats, antiques, coins, stamps and books.  Mr. Beljajev was said to have accounted to the applicant, for the most part in cash, for money received by Mr. Beljajev in respect of the sales.  There was evidence also of loans of money by the applicant to Mr. Beljajev and of other financial transactions during the relevant years.  On the day fixed for the hearing of the Tribunal's review, 27 July 1992, application was made by counsel for the applicant that the hearing be adjourned until Mr. Beljajev's trial had concluded, so that he could give evidence in support of the applicant's case.  Tendered in support of the application for adjournment was a letter dated 27 July 1992, from Mr. Beljajev's solicitors to the applicant's solicitors, in these terms:

"Re: L. Kunz- Tax Appeals

We note your request for our client Mr. Boris Beljajev to be available to give evidence in the Tax Appeals for Mr. L. Kunz.

We confirm our oral advice that Mr. Beljajev is unavailable to attend to give evidence because -

1.He is presently required to attend his Criminal Trial Before His Honour Judge Kelly in the County Court.

2.We have advised Mr. Beljajev that in any event it would be inappropriate for him to be open to cross-examination in respect of financial dealings during the period which is the subject of charges against him.

Mr. Beljajev has accepted this advice and will decline to give evidence even if a Subpoena is issued.

However he will be willing to attend and give evidence when his criminal trials are completed."

The hearing was adjourned until 2 November 1992. Deputy President Gerber, who constituted the Tribunal, indicated during the hearing of the application for adjournment that he would be prepared to hear evidence by Mr. Beljajev on a Saturday, when the trial of Mr. Beljajev would not be proceeding. He also indicated that s.35 of the Administrative Appeals Tribunal Act 1975 empowered the Tribunal to prevent the disclosure of evidence given by Mr. Beljajev to persons who might cause or permit the evidence to be used to the prejudice of Mr. Beljajev's defence at his trial. On 27 October 1992 application was made on behalf of the applicant to Deputy President Gerber for a further adjournment of the hearing, on the ground that Mr. Beljajev's trial was still proceeding. The application was refused and the hearing commenced on 2 November 1992. On that day the expected duration of the hearing was discussed by counsel for each party and Deputy President Gerber. The following dialogue occurred:

"THE D.PRESIDENT:  Yes.  I do not wish to cramp your style but I anticipate you may wish to make an application at the end of your case for an adjournment or not?

MR SEARLE:  No, sir.

THE D.PRESIDENT:  No?

MR SEARLE:  No, sir.
THE D.PRESIDENT:  I see.  Are you happy to proceed without corroborative evidence of Mr Beljajev?

MR SEARLE:  Yes, sir."

Shortly before the applicant's case was closed on 5 November 1992 the following discussion occurred:

"MR SEARLE:  Thank you Mrs Kunz.  Now, I tender the statement - discover document number 60 - statement of Boris Beljajev dated 4.3.1992.

MR NETTLE:  I object.

THE D.PRESIDENT:  Yes, before accepting this tender - and I note your objection, Mr Nettle - I just want to make it quite clear so that we are ad idem on this.  You foreshadowed last week that you would be seeking an adjournment and I indicated to you in chambers that I would refuse it.

MR SEARLE:  Yes, sir.

THE D.PRESIDENT:  I did not indicate to you that you would not be in a position to renew that application at the end of your case.

MR SEARLE:  Yes, sir.

THE D.PRESIDENT:  Now, I take it you do not wish to adjourn the proceedings awaiting the availability of Mr Beljajev?

MR SEARLE:  Well, no sir.

THE D.PRESIDENT:  Well, in those circumstances, I propose to accept this tender."

The statement was received in evidence as exhibit AK, which reads:

"I, Boris Beljajev, of 6/105 Grovenor Street, Balaclava, state that:

1.I have known Leslaw Kunz of 39 Tennyson Street, Elwood for 20 years, in which time we have become close friends.  Our families have also known each other over this period.  We are like relatives.

Our relationship has extended into business ventures, and in providing mutual financial assistance whenever necessary.

We had joint interests in the ownership of racehorses, and in sharing any gambling wins on horse racing.  This practice has continued over many, many years, to our mutual benefit.

One instance of our large gambling wins, which we shared the proceeds of, was on 13th December, 1988, where we bet $100,000 to win $250,000 on Washington State.  The horse won and the report of the win was covered by the Sun Newspaper.

Other large wins we shared in were numerous, including In Wonderland, Warned, Northern Copy, etc..

2.I have also sold, on Les Kunzs' behalf, the jewellery, fur coats and other valuable possessions inherited by him following his Mothers' death.  Included in the estate was a valuable painting by A. Durer, which I sold for him.  I have estimated that the proceeds of these sales totalled in excess of $300,000.  This was received in cash and given to Les Kunz in the form of cash over a period of 2 years. 

Les would also lend me money to support my business when buying gold, jewellery, antiques, coins, etc., and I would repay him when I sold the items.

3.Because of the special relationship we had, payments to each other were in cash, and no detailed records were needed to be kept, as we both had an accurate idea of who owed who how much.

4.I stress that Les often assisted me in financing my business transactions of buying and selling gold, etc. and also was my partner in gambling on horses.  This relationship has existed for well over 10 years.

SIGNED THIS 4TH DAY OF MARCH, 1992"

A signature purporting to be that of Mr. Beljajev was subscribed.

In so far as the denial of procedural fairness was said to have arisen at or before the commencement of the hearing, the ground of appeal is in my opinion not made out.  During that period counsel for the applicant could give the Tribunal no more precise estimate of the time when Mr. Beljajev's trial would conclude than that it was months in the future.  There was not advanced to the Tribunal, nor to this court, any good reason why the applicant might be prejudiced in the presentation of his case by deferment of a decision as to whether the hearing should be adjourned until the applicant's case, except for the evidence of Mr. Beljajev, had been completed.  Until the Tribunal heard the rest of that case, or at least the evidence of the applicant, it had no reliable means of assessing the importance of Mr. Beljajev's testimony.

After the hearing had commenced the Tribunal made clear to the applicant's counsel its willingness to entertain a renewed application, before the applicants' case closed, for an adjournment of the hearing until Mr. Beljajev should be able to appear to be sworn as a witness in that case.  Counsel for the applicant chose not to renew the application.  The applicant cannot in those circumstances show denial of procedural fairness during the course of the hearing, in my opinion.

After narrating in the Tribunal's reasons for its decision the reception of exhibit AK, notwithstanding objection by counsel for the respondent Commissioner, and after setting out the transcript of the discussion with counsel for the applicant which immediately preceded reception of the document, the Tribunal continued:

"65.  During the heat of battle, I decided to accept the tender, mindful that I am not strictly bound by the rules of evidence and that `Hamlet's ghost' may shed some light on the events.  On more mature reflection, I believe I should have rejected it.  Right or wrong, having now looked at this exhibit, I am satisfied that, in any event, I can give no weight to its contents, if only because it contains matters which, as a matter of procedural fairness, should be subjected to cross-examination.  For good measure, the statement contains critical allegations which were not raised in evidence.  Thus, it is stated that the proceeds from the sale of mother's estate, estimated at $300,000, was allegedly paid in cash `over a period of 2 years' and that the racing partnership between Joseph K and T resulted in a win of some $250,000 at odds of 5/2 on a horse called Washington State.  This major win was not mentioned by T in his evidence, despite the fact that he must have had access to Joseph K's statement for some months prior to the hearing."

In the reasons for decision the identities of the applicant and Mr. Beljajev were cloaked by "T" and "Joseph K" respectively.  That passage was the subject of the following two grounds of appeal:

"(3)The Tribunal erred in law, failed to take into account a relevant consideration or made a decision which was manifestly unreasonable in giving `no weight' to the statement of Mr  Beljajev on the stated ground that, as a matter of procedural fairness, it should be subjected to cross-examination (at paragraph 65), when, at the time of tender of the statement, the statement was tendered and accepted on the basis that Mr Beljajev would not be available for cross-examination.

(4)Alternatively the Appellant did not receive a fair hearing in that the Tribunal, having accepted the tender of the statement of Mr Beljajev at the hearing, subsequently decided, without giving the Appellant an opportunity to reopen his case, that it `should have rejected' the tender and would give `no weight' to its contents (paragraph 65)."

Counsel for the Commissioner submitted that paragraph 65 is correctly to be understood as stating two independent reasons for the conclusion expressed by the Tribunal in the words "I can give no weight to its contents".  The first reason, according to the submission, is that "it contains matters which, as a matter of procedural fairness, should be subjected to cross-examination".  The second reason, introduced by the phrase, "For good measure", is expressed in what follows that phrase, and amounts to a statement that exhibit AK, considered as evidence of the truth of what is stated in the document, is not corroborative of the applicant's evidence and has "no weight" in advancing the applicant's case, according to the submission.  The second, independent reason was free of any error of law, it was submitted : it was for the Tribunal to assess the evidentiary significance of that unsworn statement.
         In forming a judgment as to whether a second, independent reason for according exhibit AK no weight is intended to be expressed I have considered the whole of paragraph 65, which has been set out above, but also the rest of the Tribunal's reasons, which are discursive and not free of inconsequent asides.  I am not able to conclude that what follows the phrase, "For good measure", is intended as a statement of a reason, or reasons, why the Tribunal will give "no weight" to the statement of Mr. Deljajev.

It seems likely, but I am not certain, that the "procedural fairness" the Tribunal had in mind was fairness to the respondent.  Whether that be so or not, to deny exhibit AK evidentiary significance because the statements it contains should have been, in the Tribunal's opinion, the subject of cross-examination, and not to reconvene the hearing and inform the applicant's counsel of that conclusion, was in my opinion to deny the applicant procedural fairness in the circumstances of this case.  When the document was received in evidence no application was made by counsel for the Commissioner that the maker of the statement by made available for cross-examination.  The applicant and his counsel were in those circumstances entitled to expect that exhibit AK would not be denied evidentiary significance for the reason stated by the Tribunal.  If the Tribunal considered that for that reason the document should be denied evidentiary significance, procedural fairness to the applicant required that the hearing be reconvened and the applicant's counsel informed of that conclusion, so that the applicant could consider whether to apply for leave to re-open his case, in order to adduce other evidence, tending to establish the existence of the facts stated in the exhibit, whether by Mr. Beljajev or by another or others.

The extent of what procedural fairness would have required of the Tribunal would not in my opinion have enabled the applicant to adduce evidence of facts not comprehended by the statements in exhibit AK.  The applicant by his counsel had made his case, and was not entitled to expect that, because of the opinion which the Tribunal had formed, he would be free to enlarge or vary that case.  What he could expect - as he could have expected if tender of the document had been rejected - was that he would be entitled to essay proof of the statements of fact contained in the document by the oral testimony of Mr. Beljajev or of other witnesses.  (That is of course not to deny the existence of a discretionary power in the Tribunal, if the hearing had been reconvened for the purpose for which I have held that it should have been reconvened, to permit the applicant to essay proof of other facts, nor to deny the existence of a discretionary power to set a limit to the time within which Mr. Beljajev must be available to give evidence.)

The Tribunal's failure to reconvene the hearing for the purpose I have identified was in my opinion an error of law which vitiated the Tribunal's decisions. It also constituted a failure to "ensure that every party .... is given a reasonable opportunity to present his case", in contravention of s.39 of the Administrative Appeals Tribunal Act 1975. The decisions should be set aside and the matters for review remitted to the Tribunal.

Of the other grounds of appeal some raise no question of law relevant to a determination of any of the reviews, some were not the subject of submission by counsel for the applicant, some were of no substance.  Consideration of those grounds would not be of any assistance to the Tribunal in its consideration of the remitted matters.

In Northern New South Wales FM Pty. Ltd. v. Australian Broadcasting Tribunal (1990) 26 F.C.R. 39 at 42-43 Davies and Foster JJ. observed:

"If a decision has been set aside for error and remitted for rehearing, it will generally seem fairer to the parties that the matter be heard and decided again by a differently constituted tribunal.  This is because the member constituting the Tribunal in the original inquiry or hearing will already have expressed a view upon facts which will have to be determined in the rehearing.  The aggrieved party may think that a rehearing before the Tribunal as originally constituted could be worthless, for the member's views have been stated.  Thus, if a decision of the Administrative Appeals Tribunal has been set aside and the matter remitted for rehearing, the President of that Tribunal ordinarily allocates to the rehearing a different member of the Tribunal.  There are, of course, cases where it is convenient for the Tribunal as previously constituted to deal with the matter.  And occasionally the Court itself expresses such a view, so as to make it clear that it would not be improper for the Tribunal as previously constituted to consider the matter again.  See for example Versatile Carpets Pty. Ltd. v. Collector of Customs (unreported, Federal Court of Australia, Sweeney, Woodward and Davies JJ, 21 February 1985) in which the Court remarked, `... subject to questions to availability of members, it would be helpful if the matter were heard by the Tribunal as it has so far been constituted'.

........ ........ ........ ........ ........ .......

The trial judge cited a number of authorities on the subject of bias including the remarks of Dixon CJ, Williams, Webb and Fullagar JJ, in R. v. Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co. Pty. Ltd. (1953) 88 CLR 100 at 116, where their Honours said:

`Bias must be "real".  The officer must so have conducted himself that a high probability arises of a bias inconsistent with the fair performance of his duties, with the result that a substantial distrust of the result must exist in the minds of reasonable persons.'

Remarks such as those are not apposite in the present case for there is no suggestion that Mr. Allen conducted himself otherwise than with due propriety and impartiality.  However, it was not on that basis that the trial judge made the order.  His Honour concluded that as `the Tribunal's consideration of the matter was extensive, far-reaching and lengthy' and as `strong views on the applicant's compliance with the requisite criteria' had been expressed, it would better achieve the object of having the matter heard and decided again that the Tribunal should be differently constituted.  Such a finding imports no criticism whatever of the member who originally constituted the Tribunal but simply recognises that, when decisions in judicial and administrative proceedings are set aside in toto and the matter remitted to be heard and decided again, justice is in general better seen to be done if the court or the Tribunal is reconstituted for the purposes of the rehearing."

In this case the Tribunal's conclusion that the applicant's
testimony was "virtually worthless" found repeated and colourful expression in its reasons for decision.  In my opinion justice will unquestionably be better seen to be done if the Tribunal is reconstituted for the purposes of the rehearing.  An order giving effect to that conclusion will be made.  The respondent must pay the applicant's costs of the appeals.

I certify that this and the 13 preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Jenkinson.

Associate

Dated:  27 February, 1996

Counsel for the Applicant      :    Mr. P.K. Searle

Counsel for the Respondent     :    Mr. G.A.A. Nettle Q.C. and Mrs. A. Richards

Solicitors for the Applicant    :    H.S. Wise, Garshov & Co.

Solicitors for the Respondent   :    Australian Government Solicitor

Dates of Hearing               :    8 and 9 November, 1995

Date of Judgment               :    27 February, 1996