R v Tang
[2007] SADC 74
•18 July 2007
DISTRICT COURT OF SOUTH AUSTRALIA
(Criminal: Application)
R v TANG
[2007] SADC 74
Reasons for Ruling of His Honour Judge Clayton
18 July 2007
CRIMINAL LAW - EVIDENCE - JUDICIAL DISCRETION TO ADMIT OR EXCLUDE EVIDENCE - ILLEGALLY OBTAINED EVIDENCE
Search warrants issued under Crimes Act 1914 (Cth) Part 1AA, Division 2 held invalid.
Exercise of discretion to exclude things seized pursuant to warrants.
Crimes Act 1914 (Cth) Part 1AA, Division 2; s29D; Income Tax Assessment Act 1936 (Cth) ss 263 & 264, referred to.
Baker v Campbell (1983) 153 CLR 52; George v Rockett (1990) 170 CLR 104; Crowley v Murphy (1981) 52 FLR 123 at 152 and 155; Ghani v Jones (1970) 1 QB 693; Bartlett v Weir & Others (1994) 70 A Crim R 511; Malone v Commissioner of Police of the Metropolis (1979) 1 All ER 256; Esso Australia Ltd v Curran (1989) 39 A Crim R 157; Trimboli v Onley (No 3) (1981) 56 FLR 321; Williams v Keelty (2000) 111 FCR 175; Applebee (1995) 79 A Crim R 554; Australian Securities and Investments Commission v Rich & Ors (2005) ACSR 374; Bunning v Cross (1978) 141 CLR 54 at 78-80; R v Ireland (1970) 126 CLR 321 at 335; Pressler & Ors v Holzberger & Ors (1989) 44 A Crim R 261 at 271; Hart v Commissioner; Australian Federal Police (2002) 124 FCR 175; 196 ALR 1; Carter: The Law Relating to Search Warrants page 69, considered.
R v TANG
[2007] SADC 74
The accused is charged with the offence of defrauding the Commonwealth contrary to section 29D of the Crimes Act 1914 (Cth).
The Particulars of Offence stated on the Information are that the accused between about 1 July 1997 and 31 January 2000 at Adelaide or elsewhere in the State of South Australia defrauded the Commonwealth by causing Avay and Leong Pty Ltd, as trustee for the Bui and Tang Family Trust, to declare to the Commissioner of Taxation that in the financial year ended 30 June 1998 the Trust had earned $932,896, when in fact the Trust had earned more.
Further particulars were provided by a letter dated 2 March 2006 which confirmed that the declaration to the Commissioner of Taxation referred to in the Information is the declaration of the total business income of Avay and Leong Pty Ltd in the taxation return lodged by the company as trustee for Bui and Tang Family Trust in respect of the financial year ending 30 June 1998, which return was lodged with the Commissioner on or about 31 January 2000.
The Director advised that:
...at the trial of this action, the prosecution will allege that, in respect of cash received by the company during the financial year ending 30 June 1998 from its restaurant' business, there was a scheme in which the company systematically skimmed cash from the restaurant’s cash register takings and kept two sets of records - the first, a record of the true takings, and the second, a false set setting up daily sales figures which were understated by the amount skimmed. The false records were provided by the company:
1.to the Australian Taxation Office ("the ATO") during the Australian Taxation Office's restaurant project audit, with a view to the ATO being misled as to the true takings:
2.to the company’s tax agent, Ms Leow, with a view to Ms Leow preparing the declaration of the company's total business income in the return based upon the understated income.
The letter alleges that weekly reports containing the true sales figures were prepared and delivered to beneficiaries of the Trust for the purpose of advising those persons of the true sales figures and their share of the amount skimmed.
The prosecution alleges that the accused knew of the scheme, participated in it, and:
In particular, the respects in which the accused caused or was directly or indirectly knowingly concerned in or party to the company making the declaration to the Commissioner are as follows:
1.by providing the false records and otherwise giving instructions in relation to the company's income and expenses on behalf of the company and Ms Leow;
2.by being the keeper of the company’s (true and false) books;
3.by preparing or otherwise participating in the preparation of weekly reports to beneficiaries of the trust; and
4.by performing or otherwise participating in the daily reconciliations of the company's cash register takings.
The period to which the offence relates is the declaration of income for the financial year ended 30 June 1998.
The accused has made application for the exclusion from evidence of all documents and other evidentiary material seized pursuant to six search warrants. The accused also applied for a ruling that the documents and records provided to Suzanne Dreyer, an officer of the ATO, by Rebecca Tang be excluded from evidence.
On 16 January 2006 I ruled that the search warrants were invalid. It then became necessary for the accused to satisfy me that I should exercise the discretion to exclude the evidence in her favour. During the course of the hearing for that purpose a dispute arose as to subpoenas directed to the Australian Taxation Office and the Australian Federal Police. An application for judicial review was made to the Supreme Court and the hearing as to the exercise of the discretion has thereby been delayed. The evidence and argument resumed on Monday, 2 July 2007 and concluded on Friday, 6 July 2007.
On Monday, 9 July 2007 I exercised the discretion and ruled that the documents and other evidentiary material seized pursuant to the search warrants should be excluded from evidence. I also rejected the application that the documents and records provided to Suzanne Dreyer by Rebecca Tang be excluded from evidence. That application raised different issues from the application with respect to the search warrants. These are the reasons for my ruling that all documents and other evidentiary material seized pursuant to search warrants numbered 98092, 98091, 98095, 98098, 98105 and 98108 be excluded from evidence.
The search warrants were issued and executed pursuant to Part 1AA, Division 2 of the Crimes Act 1914 (Cth). Section 3C defines "evidential material" to mean "a thing relevant to an indictable offence". "Executing officer" in relation to a warrant is defined to mean "the constable named in the warrant by the issuing officer as being responsible for executing the warrant".
The circumstances in which search warrants can be issued are described in section 3E which provides:
(1) An issuing officer may issue a warrant to search premises if the officer is satisfied by information on oath that there are reasonable grounds for suspecting that there is, or there will be within the next 72 hours, any evidential material at the premises.
…
(5) If an issuing officer issues a warrant, the officer is to state in the warrant:
(a) the offence to which the warrant relates;
(b) a description of the premises to which the warrant relates or the name or description of the person to whom it relates; and
(c) the kinds of evidential material that are to be searched for under the warrant; and
(d) the name of the constable who, unless he or she inserts the name of another concert in the warrant, is to be responsible for executing the warrant; and
(e) the period for which the warrant remains in force, which must not be more than seven days; and
(f) whether the warrant may be executed at any time or only during particular hours.
Section 3F of the Crimes Act 1914 sets out the activities that are authorised by search warrants. The executing officer and assisting constables are authorised to enter the warrant premises, to search the premises for the kinds of evidential material specified in the warrant, to seize things of that kind found at the premises and to seize other things found at the premises in the course of the search that the executing officer or an assisting constable believe on reasonable grounds to be evidential material in relation to an offence to which the warrant relates or evidential material in relation to another offence that is an indictable offence.
Section 3F(5) provides:
If things are seized under a warrant, the warrant authorises the executing officer to make those things available to officers of other agencies if it is necessary to do so for the purpose of investigating or prosecuting an offence to which the things relate.
In this case the documents which were seized on 29 June 1998 were transferred from the possession of the Australian Federal Police to the Australian Taxation Office on 16 August 1999. There is a question as to whether that transfer was authorised by section 3F(5). The resolution of that question requires a consideration of the circumstance and the purpose for which the documents were made available to the officers of the ATO. In addition officers of the ATO, since about October 1998, had been permitted to make and retain copies of some of the documents.
The retention of things which are seized is dealt with in section 3ZV of the Crimes Act1914 which provides:
(1) subject to any contrary order of the court, if a Constable seizes a thing under this part, the Constable must return it if:
(a) the reason for its seizure no longer exists or it is decided that it is not to be used in evidence; or
(b) (irrelevant)
unless the thing is forfeited or forfeitable to the Commonwealth or is the subject of the dispute as to ownership.
One of the questions which arises on this application is whether there was an obligation to return the documents once a determination was made that offences nominated in the warrants could not be sustained. A question also arises as to whether the retention of the documents was illegal if the ATO wished to retain them for purposes outside those comprehended by the warrants.
For the sake of completeness I mention that the ATO had available to it the provisions in sections 263 and 264 of the Income Tax Assessment Act 1936 (Cth). Section 263 provides:
(1) The Commissioner, or any officer authorised by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers.
Section 264 provides that the Commissioner may by notice in writing require any person to furnish him with such information as he may require and to attend, give evidence and produce all books documents and other papers in his custody or under his control.
Sections 263 and 264 were referred to in the course of the events which are discussed below and during this hearing as the "coercive powers". It was acknowledged that if the Commissioner obtained information using the coercive powers that information could not be used for the purpose of the prosecution, whereas information obtained via a search warrant could be used as evidence in a prosecution.
I accept the submission of the accused that in this case the search warrants did not purport to apply to the seizure of evidentiary material in respect of an offence that it was suspected would be committed at some future time. Indeed warrants cannot be issued for that purpose.
The warrants referred to offences of defrauding the Commonwealth by failing to declare income for the financial years from 1994 to 1997. The offences specified in the warrants did not relate to the 1998 financial year and it was not chronologically possible for the offences charged in the Information to have been committed at the date of the execution of the warrants. However, that does not mean that the requirements for the issue of the warrants were not satisfied.
At relevant times the accused was involved in the operation of the Red Rock Noodle Bar and Restaurant in Rundle Street Adelaide. That was one of a number of restaurant business operated by the family and associates of the accused. The business had commenced in about August 1996. In around February 1988 the name was changed to Rundle Noodle Bar and Restaurant. The restaurant was operated by the Bui and Tang Family Trust of which the trustee was Red Rock Noodle Bar and Restaurant Pty Ltd. The accused was a director of that company. She was also a director of another company called Avay and Leong Pty Ltd from 13 February 1998 to 30 June 1998 which became the trustee in the latter part of that financial year. The accused was also a beneficiary of the Bui and Tang Family Trust.
In 1997 and 1998 the Australian Taxation Office reviewed a large number of businesses in the restaurant and cafe industry for compliance with taxation laws. The businesses reviewed included Red Rock Noodle Bar and Restaurant and other restaurants operated by family groups. For reasons which it is not necessary to dwell upon at the moment all of the restaurants in the group with which the accused was associated attracted the attention of the ATO.
On 16 December 1997 Ms Dreyer wrote to the Red Rock Noodle Bar and Restaurant advising that the business had been selected to be part of the review of the industry and that an interview would take place on 20 January 1998. The letter which is annexed to her statement advised:
Your co-operation in voluntarily providing the stocktake figures and the business records will be appreciated.
Please note that the Commissioner of Taxation is empowered to formally require the disclosure of information if it is not provided. The exercise of this power may include any or all of the following: …
On 22 December 1997 the Deputy Commissioner Small Business Income wrote to the Australian Federal Police advising that as part of the cash economy project reviewing the level of compliance within the restaurant industry in South Australia the activities of David (Hung) Bui and his wife Rebecca Tang had come to notice. The matter was referred for investigation of possible offences of fraud against the Commonwealth.
On 23 December 1997 the investigation was allocated to Mr Boonstoppel of the Australian Federal Police as team leader. He was required to determine resource requirements and submit an investigation plan, which he did on 24 December.
On 21 January 1998 Ms Dreyer attended at the Red Rock Noodle Bar and Restaurant and spoke with Ms Rebecca Tang who completed a questionnaire and provided certain information and records relating to the business. Those records were photocopied and returned. The copies were later used by Ms Dreyer to complete an analysis of the business for the previous three months. Rebecca Tang provided some further records, employee time books, to Ms Dreyer in April 1998. They were also photocopied and returned.
On 21 January 1998 Ms Dreyer advised Ms Phillips of the ATO Prosecution Investigation Unit that she had visited two of the businesses and had records and that she suspected there were undeclared sales and cash wages to employees.
On 19 February 1998 the Prosecution Investigation Unit carried out what was described as “covert surveillance” of the Red Rock Noodle Bar. That involved a number of officers attending at the restaurant to make observations.
On 19 March 1998 officers of the ATO met with officers of the AFP to provide an update. On 23 March 1998 a plan was made to conduct covert surveillance at two of the restaurants.
At a meeting between officers of the ATO and the AFP on 19 March 1998 the ATO was requested to locate taxation returns. On 23 March 1998 Mr Kay telephoned Mr Boonstoppel and advised that no taxation returns for the 1997 year had been received by the Australian Taxation Office for any of the restaurants but they were due by 30 April 1998.
A decision was made that the section in which Ms Dreyer worked should no longer be involved and on 17 April 1998 Ms Dreyer wrote to Red Rock Noodle Bar and Restaurant advising that the audit had been completed.
The ATO received further information relating to the Red Rock Noodle Bar and Restaurant and associated restaurants by what were referred to as "dob ins". Officers of the ATO formed the belief that offences were being committed. In particular they believed that tax was not deducted from wages paid in cash and that two sets of records were being maintained. A decision was made to search the homes of five persons associated with the group and the Red Rock Noodle Bar and restaurant. In all six warrants were issued. In each case there was a separate warrant holder, a separate property officer and a separate team of searchers. One of the homes searched was that of the accused.
Each warrant records that the issuing officer, a magistrate, was satisfied by information on oath that there were reasonable grounds for suspecting that there was at the relevant premises evidentiary material as defined in the Crimes Act 1914 which satisfied each of the three conditions described in the warrants. The first condition was that there was at the named premises "things" which were originals or copies of any one or more of the types of records described in the warrant in detail. The second condition was that the "things" related to ten identified restaurants, which included Red Rock Noodle Bar and Restaurant Pty Ltd (287 Rundle St Adelaide) and to 16 persons including the accused. The third condition was that there were at the named premises:
Things as to which there are reasonable grounds for suspecting that they will afford evidence as to the following offence(s) against the laws of the Commonwealth:
That between 3 June 1996 and the date of issue of this warrant Red Rock Noodle Bar & Restaurant Pty Ltd located at 287 Rundle St, North Adelaide, South Australia, did defraud the Commonwealth, namely the Commissioner of Taxation; contrary to Section 29D of the Crimes Act 1914 by;
(a) Failing to declare to the Commissioner of Taxation all of the income from the Red Rock Noodle Bar Pty Ltd (sic) and,
(b) Failing to make Tax Instalment Deductions from the wages paid to employees of the Red Rock Noodle Bar Pty Ltd, as required by Section 221C(1A) of the Income Tax Assessment Act 1936.
That between 3 June 1996 and the date of issue of this warrant David Quang Hung BUI- KENSINGTON, Laura TANG and Rebecca TANG, directors of Red Rock Noodle Bar & Restaurant Pty Ltd did aid and abet Red Rock Noodle Bar & Restaurant Pty Ltd in the commission of the said offence and are by virtue of Section 5(1) of the Crimes Act 1914 deemed to have committed the said offence.
The warrants continued to describe thirteen other categories of offences, which related to other entities or persons. For present purposes it is unnecessary to list all the offences.
The six warrants were executed on 29 June 1998 and "things" were seized at five different residential properties. Documents found at the home of the accused included cash register tapes and food order documents relating to sales run-up on a cash register tape during trading at the restaurant and daily duplicates of credit card transactions, which it is alleged support the prosecution assertion that the accused was the bookkeeper for the business.
It is the prosecution case that the business had two sets of records. Some of the documents alleged to comprise the false records were seized at the home of the accused. The prosecution case is that the material which was seized shows that during the 1998 tax year there were 49 days in respect of which there was another set of records which show higher sales figures. On three documents the word "splitting" had been written followed by a number which is alleged to be the amount to be split between the owners. The amount to be split between the owners is not reflected in the other records. The prosecution alleges that amount would not be declared in the tax return. Whether that allegation is correct or not must depend upon opinion evidence as to the conclusions that can be drawn from records relating to only 49 of the 365 days in the year. Till slips for the period from 22 June to 28 June 1998 were found in a plastic bag at the accused’s home. The prosecution allege that the sales figures shown on the slips are higher than the sales figures shown in the cash register tapes for the matching days but equal the sales figures shown on handwritten sheets showing real income and other expenses for the relevant week.
After the warrants had been executed officers of the ATO inspected the documents and made copies of some of the documents at the premises of the AFP. That seems to have been done in the period between August and October 1998. The precise circumstances in which the documents were made available to the ATO were not the subject of evidence. However, there is nothing which suggests that the warrant holders or executing officers played any part in the decision to make the documents available to the ATO.
The submission of the prosecution was that the documents came under the control of Mr Boonstoppel and that the individual warrant holders ceased to play any role in the preservation or use of the documents. This is a topic to which I return later.
On 26 August 1998 a meeting was held between the Director of Public Prosecutions (Cth), the AFP and the ATO. There was a recommendation that further employee statements be obtained by the AFP to determine the extent of the available evidence of understatement of wages by employees.
The Quarterly Case Management Reports of the AFP are contemporaneous and objective records of events that occurred. The reports record the execution of the warrants on 29 June 1998.
The report for the period ended 31 July 1998 records that the documents which had been seized were in the process of being sorted through and numbered.
Reports for the periods ending 25 January 1999 and 31 March 1999 summarise activities and conclude:
No further resources will be directed towards investigating group tax offences. The ATO are continuing with their audit of the restaurants and if offences are detected a brief of evidence will be submitted.
A report for the period ending 25 April 1999 recorded that the ATO auditors were continuing with an audit to determine the actual income of David Bui-Kensington and Rebecca Tang and a report for the period ending 30 September 1999 recorded that the ATO were conducting an audit of David Bui and Rebecca Tang and that on 16 July 1999 the ATO had collected the 1998 tax returns for Bui and Tang and ATO officers had arranged to interview them on 29 July 1999 to examine their business procedures. The report stated that after that the matter would be examined to determine if criminal charges were appropriate.
A report for the period from 4 October to 31 December 1999 recorded that the ATO had “seized” all records and were auditing the same to determine if criminal charges could be laid against David Bui and his wife Rebecca Tang in relation to their failing to declare their total income.
A report from 3 January 2000 to 31 March 2000 noted that the matter had been referred to the ATO to conduct an audit on the personal income of David Bui-Kensington and his wife Rebecca Tang and that Mr Ryan of the ATO had advised he believed they had failed to declare significant income and a brief of evidence would be prepared.
A report from 1 February to 30 April 2000 noted that the ATO had conducted a partial audit of the income of Bui-Kensington and Rebecca Tang and believed they had failed to declare all their income and they were preparing a brief of evidence for the DPP.
A report for the period 29 April to 31 July 2000 reported that Mr Body from the ATO had advised they were currently assessing if there was sufficient evidence for a brief to be prepared.
In addition to Quarterly Case Management Reports there are Case Note entries made by officers of the AFP which provide contemporaneous evidence of the events.
An AFP Case Note entry made on 9 December 1998 recorded that statements obtained from various employees had not provided sufficient evidence to continue to attempt to prove group fraud tax and the ATO were continuing with their part of the investigation which was to audit the declared income of the principals and if they found sufficient evidence of fraud then they would submit a brief of evidence. A record of Case Status Change of the same date is to the same effect.
An AFP Case Note entry made on 23 December 1998 recorded:
A number of restaurant staff have been interviewed and to date only seven have stated their time books are incorrect. Asian staff have been reluctant to provide statements. There is insufficient evidence to proceed with group tax offences and no further resources will be directed to this part of the investigation. The ATO are continuing with their audit of the declared income of the restaurant operators. If the ATO discover the restaurant operators have not declared all their income a brief of evidence will be submitted.
On 22 January 1999 Mr Boonstoppel spoke with Mr Ryan of the ATO and informed him that evidence in support of group tax offences had not been forthcoming. He said the group tax investigation had not been successful. Mr Ryan advised that the audit was still ongoing and should reveal undeclared income of at least $200,000. It was noted that when the audit was finalised the AFP would be required to organise statements and interviews and prepare a brief of evidence. The audit that was referred to was an audit of income as revealed by records other than income tax returns.
Mr Salter of the ATO gave a written report to Mr Kay on 25 February 1999. Mr Salter claimed that the report was protected by secrecy provisions and it was never admitted into evidence. However, Mr Salter gave oral evidence of his conclusions and said that the report contained his preliminary findings that he did not think there was sufficient evidence to prosecute. His preliminary findings included the preparation of T-accounts.
On 24 March 1999 Mr Kay telephoned Mr Boonstoppel and advised that an audit had commenced and there were a number of unexplained discrepancies. Mr Kay said that the ATO intended to contact Mr Leow, an accountant, and Mr Bui and to use the ATOs coercive powers to clarify discrepancies. Mr Boonstoppel advised Mr Kay that anything said would not be admissible in a prosecution. Mr Boonstoppel did not know what the audit related to.
The fact that the ATO had been advised that evidence obtained via the use of coercive powers would not be admissible in a prosecution is significant for the purpose of this application.
Case Note entries made on 4 March 1999 and 25 April 1999 noted that the auditors were continuing with their audit.
An AFP Case Note entry records that at a meeting on 13 May 1999:
Salter advises insufficient evidence to prosecute David Bui and Rebecca Tang for "undisclosed income". Only return outstanding at that date was 1998 return. AFP advised that ATO are waiting for Bui and Tang to submit their 97/98 tax returns by late May and ATO will determine the amount of undeclared income. ATO expect their inquiries will be completed by late June 1999.
A handwritten note by Mr Boonstoppel dated 13 May 1999 reads:
Meeting… Australian Taxation Office are waiting for Bui and Tang to submit their 97/98 tax returns as most of the records seized relate to that year. Returns are expected late May and ATO will determine undisclosed income by late June.
Mr Salter of the ATO prepared the following file note:
Attended AFP at approximately 2pm along with John Ryan. We met with Bob Boonstoppel and Gerry Hamm to discuss the progress of operation Toxin and specifically the retention of documents seized under the warrant.
Bob said that the accountant has been requesting that the documents be returned as they are under pressure from us to lodge the 1998 year returns. I explained that I had spoken with the agent requesting that the returns be lodged by the end of the month so we can interview the taxpayers involved. As the records, especially the source documents, related to the 1998 year we don't want to see them handed back until we have interviewed the taxpayers.
When asked if we are still looking at a prosecution I indicated that this will depend on what is in the 1998 returns....
We agreed that Bob can return the accountant records including all their working papers. He can also return any personal documents from individual homes that were searched. However, at this stage Bob will hold onto the source documents, i.e. Til tapes, Sales dockets, handwritten reconciliations, etc. (emphasis added)
That note establishes that the investigation of the offences listed in the warrants was no longer the reason for holding the documents. The vague suggestion that a prosecution was still a possibility was not a reason for the ATO to hold the documents indefinitely. The "source documents” which were referred to related to a period of 49 days in the 1998 tax year. The possibility of prosecution which was implied must have been a prosecution for the 1998 financial year, not the periods referred to in search warrants. It is clear from those documents that the intention of the ATO was to wait and see whether an offence would be committed when the returns for the 1998 year were lodged.
There is no reason to suspect that the Case Notes did not correctly record the position at that time. They are evidence that the ATO was waiting for the tax returns for the year ended 1998 to be lodged. At that time the AFP had already decided that there was insufficient evidence to prosecute for group tax offences. The inquiries of the AFP had been completed. The ATO was waiting for 1998 tax returns to be lodged. The note records that most of the documents seized related to the 1997/98 tax year.
The note made by Mr Salter is evidence that the ATO wanted the documents to be retained pending the lodgement of the 1998 return. Ms Fuller who appeared for the accused argued that the documents were not retained in connection with the offences described in the third condition of the warrants, but were retained to see whether an offence would be committed when the taxation returns were lodged. As I have mentioned, the Information charges an alleged under-declaration of income for the year ended 30 June 1998. That financial year had not expired at the time the warrants were executed. The offence charged on the Information was not committed until the returns were eventually lodged the following year.
On 28 May 1999 Mr Boonstoppel made the following Case Note entry which supports the argument of the accused:
14 May 1999. A meeting was held by AFP and ATO to determine present status. ATO awaiting 1997/98 tax returns from the restaurant owners to determine the amount of undeclared income. ATO expect their inquiries to be completed by late June 1999.
Another AFP Case Note entry made on 9 June 1999 also records "ATO are awaiting restaurant owners to submit their 97/98 tax returns. They expect their inquiries to be completed by 30 June 1999".
An AFP Case Note entry made on 15 July 1999 records that on 14 July 1999 Mr Boonstoppel spoke with Bill Kay of the ATO and:
They advised they were collecting the 1998 tax returns 15/9/99 and they have arranged to interview David Bui and Rebecca Tang on 29/7/99 in relation to their tax procedures. After this they should be in a position to determine the most suitable way to proceed i.e. criminally or by assessment. (emphasis added).
The note is evidence that the documents were being held pending lodgement of the 1998 tax returns.
On 16 July 1999 tax returns for the 1998 financial year for David Bui and Rebecca Tang were lodged with the Australian Taxation Office.
On 27 July 1999 Mr Kay advised Mr Boonstoppel that he proposed to speak with David Bui, Rebecca Tang and their accountant on 29 July 1999 to ask for explanations about discrepancies in the returns between 1996 and 1998. Mr Kay advised Mr Boonstoppel that their answers would determine the course of action to be taken. The amount involved in the discrepancies was said to be about $150,000.
On 28 July 1999 there was a meeting of Mr Kay, Mr Salter, Mr Ryan and Ms Phillips of the ATO. Ms Phillips file note records the topics discussed but throws little light on the actual discussion. In evidence Ms Phillips said that it was around that time that she learnt that the AFP were not proceeding or were proposing not to proceed with their investigation.
By reference to her file note Ms Phillips said that Bill Kay, Jamie Salter and/or John Ryan explained that from their analysis sales were being made but were not included in the record of sales for the day’s trading, that time books were not correct, that the employees were receiving untaxed cash wages "and it was estimated to be in the vicinity of $3 million a year, which would relate to a tax liability of about $1 million a year".
At that point in time, Ms Phillips did not know precisely what offences the AFP had been investigating under the warrants and she had not seen the warrants. The meeting was held as a consequence of the information that she and John Ryan had received because they wanted to determine whether or not it was appropriate for the ATO to continue with the investigation.
Ms Phillips was asked whether she was told by Mr Kay or Mr Salter that it was Mr Salter's opinion in May 1999 that it was unlikely that sufficient evidence would be obtained to proceed with prosecution action. She could not recall and said that if Mr Salter had mentioned that to her it would not have been relevant because she did not consider him skilled in that area.
Ms Phillips was also asked whether she was aware of Mr Salter's view in May 1999 that prosecution would only be possible because of what might be declared in the 1997/98 returns and information from intended interviews of David Bui and Rebecca Tang. Ms Phillips said she could not recall Mr Salter saying that to her, but if he had it would have been something which she would have accepted on face value, because he was an auditor not an investigator. Perhaps there was an error in transcription because taken as a whole her evidence was that she would not have accepted the opinion of Mr Kay at face value.
Ms Phillips also said that when she learnt that the AFP had determined that they would not prosecute that was something that she did not accept on face value either.
At that time Ms Phillips had not considered the seized documents herself. The fact that Ms Phillips was prepared to disregard the opinions of the AFP and Mr Salter, who had both carried out extensive investigations, is significant. At that time she had not seen the warrants, had not seen the seized documents and had carried out no significant investigation of her own. Whether she had some justifiable basis for disregarding the opinions of Mr Salter and the AFP was not made clear in her evidence. It is difficult to understand why she should have disregarded the opinions of Mr Salter and the AFP in such a peremptory way.
Ms Phillips was asked whether she understood from her discussions with Mr Kay that the lodgement of the tax returns was required to see if the sales figures which would be declared reflected the figures that were found on the higher set of records that had been seized under the warrants. Ms Phillips answer was "I don't know what records you are referring to there I'm afraid". I find that evidence difficult to accept. I have referred to contemporaneous records which show that the ATO was waiting for the returns to be lodged before the officers could determine how to proceed. If Ms Phillips did not know what the intentions of Mr Kay and Mr Salter were there was a serious lack of communication within the ATO.
What is significant for present purposes is that Ms Phillips had not perused the documents herself and the evidence reveals no basis for her not accepting the advice which she had received from officers of the ATO and the AFP. Ms Phillips referred to a document prepared by Mr Roger Price dated 25 May 1998 that listed persons of interest, but that was before the documents had been seized and the inquiries had been made by Mr Salter, Mr Kay and the AFP. If Ms Phillips had wanted to inspect the documents herself, neither Mr Kay, Mr Salter nor the AFP had given her any advice which would have supported an investigation by her in accordance with the search warrants. I do not regard her evidence to the effect that she had successfully resurrected other prosecutions which had been abandoned by the AFP in the past to be sufficient to justify the retention of the seized documents. If Ms Phillips had some other genuine reason for wanting to carry out an investigation that reason was not made clear by her evidence.
On the same day Ms Phillips met with Ms Bolton and Ms Propsting of the DPP to discuss the case. She noted a decision that she would see if there was enough evidence. She noted "They see case as worthwhile". In her evidence, Ms Phillips said that in a meeting with Mr Ryan she decided there should be a meeting with the DPP. She said that at the time she considered that offences had been committed. She said she needed to investigate what evidence they had and "whether or not we had enough evidence to proceed". At the time she had not seen any of the material seized pursuant to the warrants. She said that after the meeting with the DPP it was her job to analyse all of the material and determine whether in fact offences had been committed or not. If Ms Phillips had some proper basis for her opinion that offences had been committed that basis was not revealed by the evidence.
Ms Phillips gave evidence that there were a number of people whom she wished to investigate because they were the persons who had been identified as being involved in the management or bookkeeping at restaurants where she believed the ATO had evidence that offences had been committed. She was asked what offences that she had in mind were and said that they were defrauding the Commonwealth in paying cash wages without deducting tax instalment from the cash wages, and preparing false records. She said there was a scheme to defraud the Commonwealth.
Ms Phillips said it was her intention to investigate, that from the information she had she believed offences had been committed and it was her intention to review the information or the evidence collected and determine whether or not the ATO should proceed with the investigation. She believed those offences had been committed prior to the execution of the search warrants. She had in mind section 29D of the Crimes Act 1914. Ms Phillips said:
I guess to sum up again, the activities which I was looking at investigating were the receiving of cash income which wasn't being recorded in the records and the using of that cash income to either pay employees under the counter without tax being deducted or for drawings for private purposes, and that it was a scheme which was conducted across all of the restaurants in a similar manner to defraud the Commonwealth of revenue that they would otherwise receive from the tax instalments and then later on down the track lodging tax returns.
Ms Phillips denied that it was any part of her intention to wait for tax returns to be lodged to see if offences in relation to under-declaration or failure to disclose income would be committed when those tax returns were lodged. She believed that when the tax returns were lodged the correct information would have been provided because the taxpayers had been put on notice that the ATO was investigating the matter and they would lodge correct returns. She said "so it wasn't my intention at that time to investigate some future possible offences because I didn't expect that they were going to be committed, if that's what had happened".
Ms Phillips said that her delay in attending to investigate the matter was not because she was waiting for tax returns but was because they had a very small unit and had a lot of work, she was bogged under with other cases which needed to be finished and in December 1999 she was seconded to work on a project so that she only worked on prosecutions for one day a week. She said:
So, unfortunately due to other reasons, I didn't find the time to devote to the case, which I would have liked to have done but I wasn't waiting on tax returns to be lodged. I was aware that Bill Kay and Jamie Salter were doing work and analysing information and I knew that that would be very useful in relation to an investigation and we were at least achieving something in relation to the investigation of the matter and the work that they were doing.
I did not find the evidence of Ms Phillips convincing.
The accused disputes that evidence. It is contradicted by contemporaneous file notes of ATO officers and the fact is Ms Phillips never commenced an investigation during the time that she was the sole custodian of the documents. Perhaps the most telling fact is that the prosecution unit of the ATO never recommended that proceedings should be commenced with respect to the period prior to the execution of the warrants. The undisputed fact is that on 23 December 1998, the AFP had decided that there was insufficient evidence to prosecute. I do not accept the evidence of Ms Phillips that she wanted to investigate the matter because in other cases where the AFP had not proceeded she had been successful in referring the case to the DPP and having matters charged successfully. However, even if that evidence of Ms Phillips is correct, the retention of the documents for a period of about 12 months without using them was unjustified.
On 3 August 1999 Ms Phillips formed the intention, with the authority of her manager Mr Ryan, that they should request that the search warrant material be transferred to the ATO to look into whether or not offences had been committed. She could not recall what was said at the meeting about what offences may have been committed. Ms Phillips said the purposes she had in mind were investigating whether or not there had been a fraud against the Commonwealth contrary to section 29D, paying cash wages under the counter without deducting tax and doing that by hiding cash sales to fund the payment of wages. She said it was no part of her function to investigate offences that might have occurred as a consequence of the future lodgement of tax returns. She expected that the tax return would have been correct, because the defendants were fully aware of the investigation. Ms Phillips said that for the purpose of the transfer and analysis of material the offences being investigated were offences which predated the execution of the warrants. She said she was aware that Mr Kay and Mr Salter were analysing the records and gathering information. After she obtained the material from the AFP she placed it in a secure position in a storage area and Mr Kay and Mr Salter never had access to that material. They had copies of the documents and did not need to see the originals. During the period from August 1999 until June 2000 the documents remained in storage and nobody had access to them other than Ms Phillips. She never looked at them herself. Later she transferred the documents to Mr Body. Ms Phillips said she intended to analyse the information being gathered by Mr Kay and Mr Salter.
A Case Note entry made on 5 August 1999 records that Mr Boonstoppel had met with Ms Phillips of the ATO on 3 August 1999, and that Ms Phillips requested all seized documents to be transferred to the ATO. The entry records that the auditors, through T-accounts, believed they had uncovered about $150,000 in undeclared income over a four-year period and that they required more documents to try to establish offences and that they wanted to recheck the seized records. The note records that the seized documents would be transferred to the ATO on 6 August 1999. That is what happened. Ms Phillips took control of the documents and secured them in a compactus to which she held the only key. The documents remained in the compactus from 6 August 1999 until June 2000.
It cannot be correct that the ATO required the originals to "recheck" the documents. The ATO already had copies of those documents which they required. The reason to secure the original seized documents must have been to make sure that the originals could be used as evidence in a prosecution should that become necessary.
On 18 August 1999 Heng Leow, the restaurant's accountant, contacted Mr Kay and advised that she was having difficulty collating information that Mr Kay had requested. In that conversation Mr Kay did not advise Ms Leow that he was auditing the returns to determine whether there had been an under-declaration of income.
On 4 November 1999 Mr Kay had a discussion with Ms Phillips who advised that she still thought there was scope for prosecution. Apart from that, Mr Kay could not remember much more of the conversation. He was unable to say why there was still scope for prosecution.
Between July and November 1999 Mr Kay did not know what Ms Phillips was doing to progress her examination of the evidence to see if prosecution was likely. Mr Kay was aware that documents were to be transferred to the ATO but did not know how and why that happened, although he was prepared to accept that it was something that he had suggested because he was the go-between between the prosecution unit and the AFP.
In July 2000 Mr Body took over the investigation from Ms Phillips. On 23 October 2000 authority was given to audit the Red Rock Noodle Bar and Restaurant. On 14 November 2000 Mr Kay wrote to the trustee of the Bui and Tang Family Trust advising of the audit.
On 31 August 2 001 Mr Boonstoppel noted in the AFP records advice from the ATO that they were in the process of preparing a brief of evidence for submission to the Commonwealth DPP as a result of the audit of the principals involved in the investigation, that no further action was required by the AFP until property was returned by the ATO and the case status was changed to "awaiting finalisation".
In October 2001 Mr Body prepared a brief of evidence for the Commonwealth Director of Public Prosecutions in relation to the Red Rock Noodle Bar and Restaurant.
On 21 November 2001 Mr Kay approved an Audit Case Plan for the Red Rock Noodle Bar and Restaurant. The purpose of the audit case plan was to set out what the intention was with the audit, what areas were going to be looked at, how long it was going to take, what the officers thought they needed to do and how they were going to get the information. The periods under review were the years ended 30 June 1997 to 30 June 2000 inclusive.
On 21 December 2001 a Compliance Report covering the financial years 1997 and 1998 for Red Rock Noodle Bar and Restaurant was approved by Mr Kay.
On about 16 December 2002 an Information was laid charging a person with the offence of defrauding the Commonwealth contrary to section 29D. of the Crimes Act 1914. On 23 July 2003 Alice Tang was summoned to appear in the Adelaide Magistrates Court and on 31 May 2004 an Information was laid in the Adelaide Magistrates Court charging the accused.
The documents which were seized on the execution of the search warrants were in the custody of the Australian Federal Police from 29 June 1998 until 6 August 1999 when they were transferred to the ATO. The only key to the compactus where documents were stored was held by Ms Phillips. Ms Phillips did not have the opportunity by the ATO to advance the investigation until Mr Body took over the case from her in July 2000.
The original documents were in the possession of the ATO for almost twelve months from 6 August 1999 until July 2000 without any use being made of them. However, auditors in the ATO did have copies which they used for the purpose of carrying out their audit. Mr Body said that the documents may also have been used to establish untaxed cash payments.
If the ATO were not holding the documents pending lodgement of the tax returns, what were they doing? Ms Phillips did nothing. What were the auditors auditing? What was the outcome of their audit? There was no report or recommendation arising out of any audit. Officers of the ATO had copies of the documents since about October 1998. If they were unable to identify offences in the ten months from October 1998 until 6 August 1999, what were they doing? No offence disclosed by the seized material had been identified in July 2000 when Mr Body took over the investigation. It was not until 16 December 2002 that the first Information was laid. The Information against the accused was not laid until 31 May 2004. The Information did not relate to offences which predated the warrants but related to offences committed when the taxation returns were lodged after the execution of the warrants. The contemporaneous documents record, and I find, that the ATO was waiting to see whether the taxation returns would disclose offences when they were lodged.
In my opinion the documents should have been returned either when the AFP decided they were not going to prosecute or shortly after Mr Salter made his report on 25 February 1999.
I do not accept the submission of the prosecution that the photocopies of the documents were in a different position from the original documents which had been seized. The DPP submitted that the AFP could seize the original documents, make copies, return the originals as required by the Act and retain the copies to be used in an unrestricted way.
Mr Boonstoppel said that when the warrants were executed in 1998 he had no knowledge that tax returns would be lodged twelve months later. There is no reason to doubt his evidence. The "impropriety" which is the subject of this application is really the retention of the documents and the decision by the ATO to return the documents pending lodgement of the returns.
Search warrants
A search warrant authorises what would otherwise amount to a trespass and the unlawful detention of the property of another person. The characteristics of a warrant were described in Baker v Campbell[1] in particular per Mason J at 82 and in George v. Rockett[2] and are well understood.
[1] (1983) 153 CLR 52
[2] (1990) 170 CLR 104
The requirement that a person executing a search warrant should adhere strictly to the terms of the warrant is beyond dispute. Crowley v. Murphy[3]. Carter, The Law Relating to Search Warrants, which was published in 1939, at 69 states the fundamental proposition that:
The officer executing the Search Warrant must strictly follow the directions contained therein, and must be careful not to exceed the limits of his authority, or he will not be justified in his acts.
[3] (1981) 52 FLR 123 at 152 and 155
In Ghani v Jones[4] Denning MR discussed five principles which he said govern the conduct of officers acting without a warrant. In Bartlett v Weir and Others[5] Beazley J at page 520 said that three of those principles also applied when the law enforcement agency was acting pursuant to a warrant. Two of the three principles are relevant to the present case. One principle that is relevant for present purposes is that the police must not keep the article for any longer than is reasonably necessary to complete their investigations or preserve it for evidence. That is entrenched in section 3ZP of the Crimes Act 1914. If a copy will suffice, it should be made and the original returned and as soon as the case is over, or it is decided not to go on with it, the article should be returned.
[4] (1970) 1 QB 693
[5] (1994) 70 A Crim R 511
Another principle which is relevant to the present case is that the lawfulness of the conduct of the police must be judged at the time, and not by what happens afterwards.
In Bartlett, Beazley J discussed the retention of seized goods at page 523 saying:
The goods were seized on 19 March 1992 and were not returned until after the court order their return on 15 May 1992. It appears that part of the reason, if not the reason, for this delay was the second respondents were using the services of an officer of the Tax Office who was only working on a part-time basis. I do not consider that this excuses the retention for in excess of two months. It must be remembered that the seizure of goods constitutes an interference with an individual’s proprietary and possessory rights. If the seizure is pursuant to a validly issued and executed warrant it is a lawful interference with those rights, but nonetheless an interference. If it is not intended that the seized goods be retained for evidence, they should be returned as soon as is reasonably practicable to the person who has been deprived of their possession. It is no answer to say that the goods had not been examined or a decision not made as to whether they should be retained because of a lack of resources, because of the employment conditions of the person undertaking the examination or because the seizing officers have given priority to other matters.
In Malone v Commissioner of Police of the Metropolis[6] Roskill LJ said with respect to the retention of seized goods:
It seems to me that the line of authorities to which counsel for the plaintiff referred, and to which I do not find it necessary to refer in detail, show that there is no general power in the police, when they have lawfully seized property which is thereafter not the subject of any charge and is clearly shown not to have been stolen, to retain that property as against the person entitled to possession of it against some uncertain future contingency. The police must be able to justify the retention of such property in such circumstances on some clearly ascertainable ground.
[6] (1979) 1 All ER 256
In Esso Australia Ltd v Curran[7] Hill J held that while each of the warrants in question were at the time of their issue valid on their face there could not, at the time of the trial exist in the mind of the persons executing the warrants, be a reasonable belief that the things seized could provide evidence of the offences which formed the basis for the issue of the warrants. At 169 Hill J said that the continued detention of the things seized by the respondent pursuant to the warrants would be unlawful and the court should order the return of the things seized.
[7] (1989) 39 A Crim R 157
I emphasis that Hill J thought that the relevant criterion was the belief of the person executing a warrant.
In the present case, if the executing officers, that is the constables named in the warrant by the magistrate as being responsible for executing the warrant, could no longer have believed on reasonable grounds that the things seized could have provided evidence of the offences described in the third condition in the warrants, then the continued detention of the things seized would have been unlawful.
In the present case, the executing officers never applied their minds to the question and had no relevant belief at all.
It is difficult to see how documents relating to the day-to-day trading of the businesses in 1998 could have ever provided evidence of a failure to declare income for earlier years. Even if the warrants had been valid, there was no enquiry by the executing officers or the constables assisting them as to whether the documents satisfied the three conditions stated in the warrant.
For the requirements of the Crimes Act 1914 and the search warrants to be satisfied separate decisions should have been made with respect to each of the categories of documents seized. There appears to have been an assumption by the executing officers that any trading record of the restaurant satisfied each of the three conditions.
The executing officers simply handed over the seized documents to Mr Boonstoppel as officer in charge of the AFP investigation. Thereafter the executing officers played no further part in the investigation and gave no further thought to the seized documents. Without descending to detail, it is clear that the AFP generally and the executing officers in particular never applied their minds to the necessity to comply with the strict requirements of the Crimes Act1914. There was never any acknowledgement by the AFP, or the ATO, of the strict obligations attendant upon the execution of a warrant.
In my opinion, if the documents were to be retained, it was necessary that each of the executing officers (not Mr Boonstoppel or some other officer of the AFP or an officer of the ATO) was required to hold a belief as to the satisfaction of the three conditions with respect to the documents seized by him at all material times. In Trimboli v Onley (No. 3)[8] Holland J said at 335:
Next comes an important question in the present case. At what time must the belief be held for a seizure and subsequent detention to be lawful? In my opinion, the only possible answer is that the belief must exist at every point at which lawfulness is claimed under the warrant for taking and keeping another's property. It must exist contemporaneously with the act of seizure. Thereafter it must exist at least whenever it is sought to justify retention of the property under the warrant.
[8] (1981) 56 FLR 321
In Williams v Keelty[9], Hely J said at 224, paragraph 233:
If entry is gained to premises by means of the compelling nature of a search warrant, and documents are seized, in my view it would be consistent with general principle to hold that it would be improper for documents seized pursuant to the warrant to be used for any purposes outside those comprehended by the warrant. That view is consistent with the terms of Pt 1AA of the Crimes Act. Section 3F(5) is a limited legislative permission to make the things seized available to officers of other agencies and s 3ZV(1) obliges the return of things seized, subject to a contrary order of a Court, if the reason for the seizure no longer exists, or if it is decided that the things seized are not to be used in evidence.
[9] (2000) 111 FCR 175
As I have mentioned, the AFP allowed officers of the ATO to make copies of the seized documents. The decision or decisions to allow copies to be made were not made by the executing officers but were made by either Mr Boonstoppel or other AFP officers working under his direction. In my opinion the way in which copies were permitted to be taken was a further example of the lax attitude that was taken towards compliance with requirements of the warrants and the Crimes Act 1914. The prosecution asserts that the making of copies was permitted by section 3F(5) of the Crimes Act 1914.
In Williams v. Keelty, Hely J, at page 234, inferred that it was considered to be necessary for the AFP to make documents seized pursuant to the warrants available to ASIC for the purpose of investigating or prosecuting the offences to which the documents seized related. His Honour considered the expression "make the things available" in section 3F(5) of the Crimes Act 1914. The applicants in that case had submitted that the expression "make the things available" only permitted the AFP to do that and did not authorise relinquishing custody of those things, nor surrendering care, custody and control of them. Hely J said that it would not be open to the AFP to deal with the documents seized in such a way as would make it impossible for the section 3ZV obligation to be performed. His Honour said at 235:
"Make available" is a non-technical expression which would give a range of choices to the person empowered to make a thing available to officers of other agencies. For example, allowing inspection of a document by an officer of another agency might constitute making that document "available" to the officer of that agency, but there is no reason for restricting the expression to that illustration, when clearly, it is capable of a wider signification. As a matter of ordinary English a document might be made available to a person by putting the document into the possession of that person. The applicants submit that a power to make something "available" does not authorise its surrender. If all that is meant by this submission is that AFP cannot disable itself and its officers from their ability to discharge the s 3ZV obligation, then the submission is unexceptionable, but, as I have said, there is no evidence that AFP has so acted as to make the s 3ZV obligation incapable of performance. But if the submission is meant to convey that giving possession or custody of a document to a person is sufficient of itself to establish that something beyond making the document available to that person has occurred, then I do not agree.
In this case there are two matters to consider in the context of what is permitted by the expression "make the things available". First there is the making of the photocopies. Secondly there is the transfer of the original documents to Ms Phillips of the ATO.
In my opinion both of those actions by the AFP had the effect of making it impossible for the executing officers to comply with their section 3ZV obligation. The executing officers ceased to be involved. So far as the making of copies is concerned the executing officers made no record of what copies were made or by who the copies were held and were not a position to ensure that the copies would be returned or destroyed.
I reject the submission of the prosecutor that the copies never had to be returned. The information contained in the documents, or the intellectual property as it was referred to in argument, is just as important as the piece of paper which contains the information. I acknowledge that difficulties may arise if a person with a prodigious memory were to read the documents and retain a memory of the information, but that is not the case here.
In my opinion the making of photocopies went beyond making the things available pursuant to section 3F(5). It amounted to a handing over of the information in the documents by the AFP to the ATO without any restriction on the use or return of the information. In my opinion the AFP had disabled itself and the executing officers from their ability to discharge the section 3ZV obligation in the sense discussed by Hely J.
In addition, after the documents were transferred to Ms Phillips, she was the only person with a key to the compactus. In my opinion the giving exclusive possession of the documents to Ms Phillips amounted to more than just making them available.
Of greater concern is the fact that the executing officers did not retain any ongoing responsibility for the documents which they had seized and never considered their section 3ZV obligation with respect to the original documents. The scheme of the Act is there should be an executing officer who can monitor the entitlement to retain documents seized under a warrant and can be held responsible. The AFP and the ATO paid no regard to section 3ZV or the scheme of the Act in general.
Subsection 3F(5) provides that "the warrant authorises the executing officer to make the things available to officers of other agencies if it is necessary to do so for the purpose of investigating or prosecuting an offence to which the things relate". I do not accept the submission of the accused that the offences to which the thing relates must be the offences nominated in the warrant. The only requirement is that they should be offences to which the thing relates. If the documents had been lawfully retained and disclosed some offence other than an offence nominated in the warrant, there is no reason why the documents should not have been used for the purpose of investigating and prosecuting that other offence. In Applebee[10], Higgins J said at 556:
It is well settled that if, in the course of a lawful search, evidence of another offence is discovered, that evidence may be seized notwithstanding the lack of a warrant to enter and seize the item or items considered to provide such evidence: see Chic Fashions (West Wales) Ltd v Jones [1968] 2 QB 299.
[10] (1995) 79 A Crim R 554
Also in Australian Securities and Investments Commission v Rich and Others[11], Austin J said with respect to Part 1AA that there was an inference that the search warrant power was conferred for the purpose of obtaining evidential material, that is, material relevant to an indictable or summary criminal offence specified in the warrant, or some other indictable offence. To put it another way, "the purpose of search and seizure provisions is to provide for the gathering of information to determine whether offences have been committed and to facilitate proof of them": Hart v Commissioner; Australian Federal Police[12] at (65).
[11] (2005) ACSR 374
[12] (2002) 124 FCR 384; 196 ALR 1
At page 427 Austin J said the statement of principle by Hely J in Williams v Keelty to the effect "that as soon as the investigation extends beyond the purposes comprehended by the warrant (that is, beyond investigation of the particular offences identified in the warrant) the search warrant materials cannot be used, whether the additional matters under investigation are other criminal offences or purely civil contraventions or both" is too broad and not justified. The terms of section 3F(5) do not confine the investigation to the offences named in the warrant, but refer to “an offence to which the things relate”.
Even if the observation of Austin J with respect to the first limb of the statement by Hely J which relates to the use of documents to investigate offences outside the warrant is correct, there is no reason to doubt the second limb of the statement by Hely J which refers to the return of things seized if the reason for seizure no longer exists.
It is necessary that the document should have been lawfully retained. If there was no lawful reason to retain the documents, and the documents had been retained to await lodgement of taxation returns to see whether an offence would be committed, that would in my opinion not be a lawful retention.
In Applebee, Higgins J found at 558 that the warrant had not been promptly executed and was not executed within a reasonable time. He found that once there had been a failure to execute the warrant within a reasonable time it ceased to authorise the entry which in fact was made.
The same principle can be applied to the retention and use of the documents which have been seized in the execution of a warrant. In this case the documents were seized on 29 June 1998. The investigation by the AFP had been completed by 23 December 1999. The documents were transferred to the ATO on 6 August 1999. Nothing was done with the documents until at least July 2000 when Mr Body took over the case. In my opinion the warrant did not authorise the ATO to leave the documents in storage for a period of about twelve months. There was no basis for the retention of the documents by the ATO if they were not being used for a purpose authorised by the warrants.
The Quarterly Case Management Reports and Case Note entries of the AFP provide objective and contemporaneous evidence of the purpose for which the ATO wanted to retain the original documents, that is, to see whether an offence would be disclosed when the returns were lodged. In my opinion that was not a proper purpose.
It is possible that the ATO had another purpose, as well as to retain the documents pending lodgement of the returns, which was proper; but I am not able to accept the evidence of Ms Phillips that she wanted to retain the original documents for the purpose of investigating whether an offence had been committed. The evidence of Ms Phillips was not convincing. The evidence does not establish any legitimate purpose for the retention of the documents by the ATO beyond 6 August 1999.
If in August 1999 the ATO believed that a serious offence had been committed those offences should have been investigated forthwith. Pressure of work provides no excuse. I refer to the comments of Beazley J in Bartlett v Were which I have referred to above. Ms Phillips did nothing to investigate the offences and a period of about twelve months elapsed before she handed the documents over to Mr Body. At the time the original documents were transferred to the ATO the auditors had already had access to the originals since October 1998 and they had made copies of letters or documents. Officers of the ATO had already had almost ten months in which to investigate if any offence had been committed.
Neither Ms Phillips nor the auditors ever identified any offence other than those arising out of the lodgement of the returns for the 1998 year. Mr Body, who took over the investigation from Ms Phillips, said that he eventually came to the conclusion that there was insufficient evidence to prosecute for the year ending 30 June 1997 or the earlier years. So far as the financial years ended 1997 and the preceding years were concerned it was Mr Body's view that there was never sufficient evidence to refer a prosecution to the DPP.
One fact which puts the evidence of Ms Phillips into perspective is that the majority of the records which were seized related to a limited period of seven weeks during the 1998 year. It is difficult to see how they could ever have related to the earlier years. As a matter of logic those records could only have been used for the purpose of auditing the return for the 1998 year. While they might theoretically have been used to establish other offences, such as the payment of untaxed cash wages or improper record keeping, the AFP had on 9 December 1998 decided that there was insufficient evidence to pursue group tax fraud.
In his report provided to Mr Kay on 25 February 1999, Mr Salter made preliminary findings that he did not think there was sufficient evidence to prosecute David Bui and Rebecca Tang at that time. The T-accounts covered the period from the 1994/95 tax year through to the 1997/98 tax year. Mr Salter had a meeting with the AFP at which his findings and conclusions were conveyed by him. He said that thereafter his work was basically trying to fill the gaps within his analysis and investigation. He did that by searching for third-party information such as bank accounts and assets. He had spent the majority of his available work time on the task from September 1998 through to February 1999. He said he did not prepare his report until he had completed a thorough preliminary analysis. It included the T-accounts.
If the executing officers, whose beliefs were the relevant beliefs, had considered the matter as at the end of February 1999, they should have concluded on the basis of the AFP decision of 23 December 1998 and Mr Salter’s findings of 25 February 1999 that the warrants did not authorise the continued retention of the seized documents.
Mr Salter said that on 18 March 1999 he spoke to a representative of the parties he was dealing with advising of the intention of the ATO to commence a tax audit. That indicates that at that time the emphasis had changed from investigating whether offences had been committed to carrying out an audit. Of course an investigation into whether offences had been committed could have been carried out concurrently with the audit, but the evidence establishes that no real investigation as to whether offences had been committed was conducted by the ATO from that time.
As I have mentioned, Mr Body gave evidence that he did not think that there was sufficient evidence to refer a prosecution for the 1997 financial year and the preceding years.
Even if Ms Phillips did have the intention to investigate group tax fraud, which is challenged by the accused, the fact that she did nothing about such an investigation for about twelve months by itself makes the continued retention of the documents during that period improper.
So far as compliance with the warrants is concerned it is significant that officers of the AFP had determined that there was insufficient evidence to prosecute group tax fraud. If the AFP had made that determination it was not necessary for the executing officers or the AFP to make the documents available to Ms Phillips for the purpose of investigating group tax fraud and the making available the documents for that purpose was not covered by section 3F(5). Again, it is necessary to mention that the executing officers played no part in the retention or transfer of the documents. For the requirements of section 3F(5) to be satisfied it was necessary for each executing officer to have a belief that the things which they had seized should be made available to the ATO. That never happened. However, even if the belief of Mr Boonstoppel could be substituted for the belief of the executing officers, Mr Boonstoppel was aware of the determination that there was insufficient evidence to prosecute group tax fraud and so he could never have held a relevant belief which would have authorised making the things available to Ms Phillips.
In my opinion the retention of the documents beyond 6 August 1999 was not authorised by the warrants. The documents were provided to the ATO by Mr Boonstoppel, not the executing officers as required by section 3F(5). The executing officers did not give consideration to whether the things should be made available for the purpose of investigating or prosecuting an offence to which the things related.
In my opinion the offence referred to in section 3F(5) must be an existing offence. That is, the provision does not authorise the retention of documents for the purpose of investigating whether an offence might be committed some time in the future.
Additionally, the purpose of "investigating and prosecuting an offence", which is referred to in section 3F(5), is the purpose of the executing officer who makes the seized thing available, rather than the purpose of the officers of the agencies who receive those things. ASIC v Rich at page 426, paragraph 261. In this case, the executing officer never had any purpose in mind. Section 3F(5) only authorised the executing officer to make the things available "if it is necessary to do so for the purpose of investigating or prosecuting an offence… ". There is no evidence that any executing officer had applied his mind to the question of whether there was the required necessity. As I have said the decision to transfer the documents was not made by the executing officers.
The records of the AFP establish that the AFP knew that the ATO was waiting to see whether offences would be committed when the returns were lodged. That purpose was not authorised by the Act or the warrants. It could not have authorised the retention of the documents.
In Williams v Keelty, Hely J said at page 224 paragraph 233:
If entry is gained to premises by means of the compelling nature of a search warrant, and documents are seized, in my view it would be consistent with general principle to hold that it would be improper for documents seized pursuant to the warrant to be used for any purposes outside those comprehended by the warrant. That view is consistent with the terms of Pt 1AA of the Crimes Act. Section 3F(5) is a limited legislative permission to make the things seized available to officers of other agencies and s 3ZV(1) obliges the return of things seized, subject to a contrary order of a Court, if the reason for seizure no longer exists, or if it is decided that the things seized are not to be used in evidence.
I find that once the AFP had decided it would not pursue the allegations of group tax fraud, and once Mr Salter had on 25 February 1999 advised of his preliminary findings, the seized documents were no longer being retained for a purpose comprehended by the warrant.
So far as the executing officers and the AFP were concerned their reason for retention of the documents no longer existed in August 1999. What reason did the ATO have for the retention of the documents?
I accept the submission of the accused that the evidence demonstrates that the ATO treated the transfer of the documents to the ATO as an authorisation to deal with the documents in any manner that the officers of the ATO saw fit. To put that another way the officers of the ATO did not acknowledge that there were constraints upon the use of the documents.
The accused contends that the evidence establishes that the seized documents were retained for the purpose of determining whether offences of failing to disclose income were going to be committed. In my opinion that contention is correct. It was not a purpose authorised by the search warrants.
The discretion
Both parties have referred to the considerations described by Stephen and Aickin JJ in Bunning v Cross[13].
[13] (1978) 141 CLR 54 at 78-80
The relevant conduct is that of the executing officers. After seizing the material none of them complied with their obligations such as the section 3ZV obligation.
The conduct of both the AFD and the ATO in retaining the documents was a deliberate act.
Both parties accept that the offence charged is serious.
Both parties accept that the evidence is of probative value and important in the proceedings. However, the material which was seized has a different significance from the evidence under consideration in Bunning v Cross. In that case the evidence in question was breathalyser evidence which by itself was capable of establishing the offence. In the present case the prosecution propose to use the records of the 49 days trading for the purpose of extrapolating the trading of the business over the whole 1998 financial year. There will be contests as to both the provenance of the records themselves and as to the opinions that can be extrapolated. I do not accept the submission of the prosecution that the evidence is cogent. It is obvious that there will be a serious contest as to the conclusions that can be drawn from the evidence. The jury will be required to engage in an analysis of highly contentious evidence.
The fons et origo of the principle underlying the discretion to exclude evidence was stated by the Chief Justice in R v Ireland[14] as follows:
Whenever such unlawfulness or unfairness appears, the judge has a discretion to reject the evidence. He must consider its exercise. In the exercise of it, the competing public requirements must be considered and weighed against each other. On the one hand there is the public need to bring to conviction those who commit criminal offences. On the other hand is the public interest in the protection of the individual from unlawful and unfair treatment. Convictions obtained by the aid of unlawful or unfair acts may be obtained at too high a price. Hence the judicial discretion.
[14] (1970) 126 CLR 321 at 335
In Bunning v Cross, Stephen and Aickin JJ said at 74:
What Ireland involves is no simple question of ensuring fairness to an accused but instead the weighing against each other of two competing requirements of public policy, thereby seeking to resolve the apparent conflict between the desirable goal of bringing to conviction the wrongdoer and the undesirable effect of curial approval, or even encouragement, being given to the unlawful conduct of those whose task it is to enforce the law. This being the aim of the discretionary process called for by Ireland it follows that it by no means takes as its central point the question of unfairness to the accused. It is, on the contrary, concerned with broader questions of high public policy, unfairness to the accused being only one factor which, if present, will play its part in the whole process of consideration.
The matter of concern in the present case is that the AFP and the ATO paid no regard to the safeguards which are attached to the issue of search warrants. In my opinion it was not appropriate to hold the records of a taxpayer in storage for twelve months awaiting the lodgement of taxation returns.
It might be said that the events which occurred involved no unfairness to the accused, because at the time when the relevant returns were lodged she was aware that the ATO was in possession of the seized documents. However, as Stephen and Aickin JJ discussed at pages 76 and 77, unfairness is a minor consideration when deciding to exercise the discretion. The major consideration in this case is the disregard by the executing officers and the AFP generally for the safeguards attached to the use of search warrants. There is also the impropriety of the ATO in holding on to documents after they should have been returned whilst waiting for the returns to be lodged. As Stephen and Aickin JJ said in Bunning v Cross at 78:
In appropriate cases it may be “a less evil that some criminals should escape than that the Government should play an ignoble part” -per Holmes J. in Olmstead v. United States (1927) 277 U.S. 438, at p. 470 [72 Law.Ed. 944 at p. 953]. Moreover the courts should not be seen to be acquiescent in the face of the unlawful conduct of those whose task it is to enforce the law. On the other hand it may be quite inappropriate to treat isolated and merely accidental non-compliance with statutory safeguards as leading to inadmissibility of the relevant evidence when of their very nature they involve no overt defiance of the will of the legislature or calculated disregard of the common law and when the reception of the evidence thus provided does not demean the court as a tribunal whose concern is in upholding the law.
One of the considerations referred to in Bunning vCross is the ease with which the law might have been complied with in procuring the evidence in question. If the ATO only required the information for the purpose of auditing the 1998 return it could have obtained the information using its coercive powers; however if that had happened the information could not have been used for the purpose of a prosecution. Any suggestion that the ATO was using the warrants as an alternative to its coercive powers should not receive the imprimatur of the court.
It is significant that the Information in this case alleges an under-declaration in the return that the ATO was waiting for while the seized documents were detained.
The following comments made by Spender J in Pressler and Others v Holzberger and Others[15] are apt:
The evidence in this case clearly excited deep suspicion that there was unlawful conduct in the conduct of the business or businesses of some member of the Pressler family. In my opinion, the purpose in obtaining the search warrants was to make general inquiries to see whether those broad suspicions could be refined. A search warrant is not properly to be used for that purpose. There are powers under the Income Tax Assessment Act 1936 (Cth) available in that investigatory process.
In that case Spender J also said:
To permit police officers and others whose duty is to vindicate the law to be able to retain documents seized in contravention of the law is seriously to undermine the protection which s 10 of the Crimes Act gives. To condone unlawful conduct may subtly, or not so subtly, encourage it. The words of Sir Garfield Barwick in Ireland (1970) 126 CLR 321 at 334-335 have a present and pressing relevance:
"Evidence of relevant facts or things ascertained or procured by means of unlawful or unfair acts is not, for the reason alone, inadmissible. This is so, in my opinion, whether the unlawfulness derives from the common law or from statute. But it may be that acts in breach of a statute would more readily warrant the rejection of the evidence as a matter of discretion: or the statute may on its proper construction itself impliedly forbid the use of facts or things obtained or procured in breach of its terms. On the other hand evidence of facts or things so ascertained or procured is not necessarily to be admitted, ignoring the unlawful or unfair quality of the acts by which the facts sought to be evidenced were ascertained or procured. Whenever such unlawfulness or unfairness appears, the judge has a discretion to reject the evidence. He must consider its exercise. In the exercise of it, the competing public requirements must be considered and weighed against each other. On the one hand there is the public need to bring to conviction those who commit criminal offences. On the other hand there is the public interest in the protection of the individual from unlawful and unfair treatment. Convictions obtained by the aid of unlawful or unfair acts may be obtained at too high a price. Hence the judicial discretion."
The observation that "it may be that acts in breach of the statute would more readily warrant the rejection of the evidence as a matter of discretion…", in my respectful view, goes some part of the way towards establishing a doctrine of due process in Australia. Where the legislature has defined the circumstances in which a person's liberties might be infringed or their rights curtailed, it should not readily be concluded that conduct outside the defined authorisation is to be tolerated or excused. Judges ought not, by a wink or a nod, weaken the protection which the law gives to the rights and liberties of citizens.
[15] (1989) 44 A Crim R 261 at 271
A further consideration in the present case is that the taxpayers were under a legal obligation to lodge returns. As one of the ATO officers said in evidence “they were between a rock and a hard place” and “they would be dammed if they did and dammed if they didn't”. There is an obvious unfairness involved in requiring them to lodge returns in circumstances where the ATO had seized and retained records relating to part of the period covered by the return.
At the end of the day the court is required to engage in a balancing exercise.
I find that by the month of February 1999 the documents obtained by the exercise of the search warrants were no longer being retained for the purpose authorised by the search warrants, but were being held in case they might provide evidence of some offence which might be disclosed after the returns for the 1998 year had been lodged.
The executing officers never considered whether the things seized should have been made available to officers of the ATO as required by section 3F(5). Accordingly, neither the photocopies nor the original documents were ever lawfully in the possession of the Australian Taxation Office. If I am wrong in that finding, so that the photocopies and originals were lawfully in the possession of the ATO, then the obligation on the executing officers to return the documents by reason of section 3ZV continued to apply and the executing officers should have retrieved the originals and the photocopies from the ATO and returned them to the persons from whom they were seized.
If the purpose of the ATO was to audit the 1998 returns when they were lodged, the relevant material could have been obtained by the ATOs use of the coercive powers. The retention of the material seized pursuant to the search warrants was in effect being used as a substitute for the use of the coercive powers. The material should have been returned once the investigation of the offences described in the search warrants had been completed. Search warrants issued pursuant to the Crimes Act 1914 do not permit the retention of the documents for purposes outside of those described in the warrant.
I am guided by the remarks of Spender J in Pressler which are referred to above. To ignore the circumstances in which the photocopies and then the original documents first came to be in the possession of the ATO and then remained in the possession of the ATO after the investigation of the offences described in the search warrants had been completed would be to weaken the protection which the Crimes Act 1914 gives to the rights and liberties of citizens. The intrusion upon the time-honoured principle that "an Englishman's home is his castle", which is created by search warrants, is justified by the requirement that the executing officers must comply with the safeguards in the legislation which gives the executing officers the right to violate the principle.
The offence charged was completed by the lodgement of the returns. At the time the returns were lodged the taxpayers knew that the ATO had possession of the records and if the accused played a part in the lodging of the returns or the making of a declaration as to income she did so with that knowledge. It could be said that in those circumstances the accused was not subject to any unfairness as a result of the possession of the documents by the ATO. However, the taxpayers were under a statutory obligation and pressure from the ATO to lodge returns. Also, the cases indicate, unfairness to the accused is only one of the matters to be taken into account.
For the reasons, which are set out above, I ruled that the evidence obtained by reason of the execution of the six search warrants should be excluded from evidence.
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