Robinswood Pty Ltd & Ors v Deputy Commissioner of Taxation

[2004] HCATrans 419

[2004] HCATrans 419

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P2 of 2004

B e t w e e n -

ROBINSWOOD PTY LTD

First Applicant

MADDELIENE CARATTI

Second Applicant

VENETIAN NOMINEES PTY LTD

Third Applicant

GRANGEFIELD NOMINEES PTY LTD

Fourth Applicant

EXCELCO MINING PTY LTD

Fifth Applicant

MINE EXC PTY LTD

Sixth Applicant

and

DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

Respondent

Application for special leave to appeal

McHUGH J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 27 OCTOBER 2004, AT 2.00 PM

Copyright in the High Court of Australia

__________________

MR J.A. DAVIES:   Your Honour, I appear for the applicant.  (instructed by Dawson Davies & Co)

MR S. OWEN‑CONWAY, QC:   May it please your Honours, with MR R.E. LINDSAY, I appear on behalf of the Deputy Commissioner of Taxation.  (instructed by Australian Government Solicitor) 

McHUGH J:   Yes, Mr Davies.

MR DAVIES:   The issue at the heart of this application perhaps may be concisely put this way.  Civil penalties have been imposed on the applicants as punishment for breaches of the group tax provisions of the Income Tax Assessment Act.  The applicant, Maddeliene Caratti, and her sons we say are alter egos of the company applicants and they have been tried for a conspiracy and in the case of one of them imprisoned for that conspiracy.  In that conspiracy, the overt acts alleged against the conspirators are substantially the same breaches which are the subject of present civil proceedings against Maddeliene Caratti and the alter ego companies for the recovery of civil penalties.  The conspiracy case at trial was presented in such a manner ‑ ‑ ‑

HAYNE J:   What does the civil penalty provision actually say?

MR DAVIES:   The civil penalty provision, if you can bear with me, your Honour ‑ ‑ ‑

HAYNE J:   If it is not to hand, come back to it, but I suspect that it may be necessary to begin with the text of the civil penalty provision, as you describe it.

MR DAVIES:   Yes.  The point of it is, does the civil penalty provision impose a punishment, and if it does impose a punishment, is it the kind of punishment which could attract the interest of the rule of law or practice against “double punishment” such as it is known in the law at this time?  Or, rather, does the separate identity of the companies and differing bases of liability between the natural person and the companies preclude the consideration of double jeopardy, even though in substance the effect of imposition of the civil penalties, by virtue of the mechanism of the statute, is substantially overlapping conduct for the purposes of the application of the rule?

We would suggest that the new principle under consideration is this.  Where the principal persons are tried for a conspiracy in circumstances such as the state is seen to rely, as they did, we say, very heavily in this case, on the alter ego relationship to establish the overt acts of the conspiracy, then as a rule of law or practice, when we look at the substance, should the state then not be prevented from separately pursuing what is, in effect, a second line of punishment against the company, where that punishment would, in effect, be to punish the same people concerned by the diminution of their property? 

Now, in this State, the Full Court held Hamilton v Whitehead to be authority for the rule that there can be no identity in point of personal liability between the company, on the one hand, or any of its directors, officers or members, on the other.  They held this case to be determinative of the point against the Carattis.  The question is, were they correct?

In R v Hoar, the High Court has said where a court imposing a penalty for a conspiracy takes into account the overt acts of the conspiracy, it would be wrong to impose a further penalty with respect to those acts.  So the question is whether the distinction between the individual and the alter ego company, highlighted in Hamilton, applies when there is, we say, an effective duplication of penalty. 

Before we come to that stage, we have the issue of whether the civil penalties imposed under the Income Tax Assessment Act are in fact punishment at all, for the purposes of double jeopardy.  It appears that in Australia there is no decided authority on this point, although there is some argument and some discussion in American authorities, particularly the case of LaFranca, in which we suggest the approach the American court has taken is to analyse whether or not the statute goes beyond being merely compensatory. 

HAYNE J:   Why do we begin with these common law considerations?  Why do we not begin with 221NB and work from there?

MR DAVIES:   Having taken a long cold look at 221NB, it strikes me that 221NB cannot be interpreted now to cover the facts of this case.

HAYNE J:   It does not help you?

MR DAVIES:   It does not help us.

HAYNE J:   No, but the fact that it does not help you is itself significant, is not it?  Does not the fact that the legislature in 221NB tells us when penalties are to be alternative to prosecution for certain offences leave at least a question about what common law doctrine is left to do or say? 

MR DAVIES:   Your Honour, that is the very point that is at the heart of this application.  Is there ‑ ‑ ‑

HAYNE J:   Why should it be arguable that there is any room for a common law doctrine to operate when 221NB deals with it?

MR DAVIES:   Because the common law remains, underpinning an essential rule that has been recognised since antiquity, and that is whatever the effect of the statute, unless the legislature specifically empowers the imposition of double penalties, unless the legislation can specifically be read as covering the field, then we would submit there must still be reference to the underlying common law protection.  That is the very point that we seek to ventilate, should we be given leave to appeal in these proceedings.

HAYNE J:   Then how does that intersect with what statutory provision?  You say that double jeopardy is somehow engaged.  Is it engaged at the level of qualifying statutory provisions?  How does it operate?

MR DAVIES:   One says this, statutory provisions cover only the precise circumstances of their text.  There are, for instance, under the particular statutory provision 221NB, the conspiracy element is looked at and contemplated, and double jeopardy protection applies where there is a conspiracy to breach those provisions of the Act.  But here we have an additional element of fraud, in that the conspiracy charge was under section 86A of the Crimes Act as it then was and was a conspiracy to defraud the Commonwealth.

HAYNE J:   And is not a prosecution instituted against a person for an offence against this Division of the Assessment Act? 

MR DAVIES:   That is right, and so simply we have a situation where the conspiracy charge, adding the additional element of defrauding the Commonwealth, puts the matter quite outside section 221NB.  We say if it falls outside the circumstances of that statute, that does not mean that the common law ought be disregarded entirely, because, whether it is a rule of law or a rule of practice, it is aimed at preventing multiple prosecution and trial, particularly in the case of this nature.

McHUGH J:   Your real problem is that none of these companies were ever in jeopardy.  They were not convicted or acquitted and they just have not been previously punished in respect of the offence.  Now, you want them to get the benefit of a double jeopardy rule because of what happened to the directors.

MR DAVIES:   The double jeopardy rule, if we look at it as one of substance, and we look at the way the conspiracy case was presented, where the jury was effectively invited to disregard any distinction – indeed, the evidence in the criminal trial has been substantially led in the civil proceedings.  In fact, if I can take your Honour to a couple of interesting points in the papers.  At page 204 of the applicant’s booklet of cases, in the interlocutory decision dealing with evidence in this case, at about page 204D, you will see how her Honour has regarded the parties, the companies and the natural persons, for the purposes of admission of the criminal evidence in the civil proceedings as being “virtually and substantially the same” or, she says, at least not strangers. 

So what you have effectively in the civil proceedings is a re‑litigation of much of the substance that we heard about in the criminal trial.  Is this not what double jeopardy is about?  In substance, the same acts or the same impugned conduct, same or substantially the same conduct, is being re‑litigated for the effective purpose of imposing civil penalties upon the same people.  An account for group tax is an entirely separately civil debt and we cannot argue with that, but what we say is, when we are dealing with civil penalties, we are dealing with an additional punishment.

Now, this question has not been looked at in terms of punishment, as far as I can see, by the superior courts.  We have references to some of what the judges have said in the Federal Courts dealing with the APRA cases.  I am thinking particularly of Holloway, Dimmeys Stores, where those courts are taking into account the fact that there is a separate civil penalty against an alter ego company in determination of what the final penalty should be.

We would have thought that the alternative that was open to the state in the prosecution of the Caratti family would have been this, that at the end of the criminal trial – where the jury was not asked for any determination of the final amount owing – a reparation order could have been sought, but that reparation order would not have taken into account penalties.  It would have been, I suppose, the primary group tax which was alleged to have been defrauded.  But by taking the course of action the state has chosen to taken, it is in substance putting the same people in jeopardy again, by virtue of the diminution of their property.  We say that double jeopardy could be further defined and refined as an operating concept by this Court in the consideration of this appeal.

The authorities to which I should like to take you start with the question of Hoar that I have mentioned, particularly where it cites Verrier at page 9D of the applicant’s booklet.  That deals with the question of the imposition of a penalty for a conspiracy, taking into account the overt acts.

The definition of “double jeopardy”, of course, has been dealt with in Pearce v The Queen and I would refer particularly, your Honours, to the paragraph at page 129C of the applicant’s booklet, when the very loose definition of double jeopardy is discussed by the Court.  It is that very loose definition that we would seek to redefine or we would seek to re‑establish as a rule of practice when it comes to relationships, not only between this respondent and the people in the community with which it deals, but also the other statutory authorities who have the fiat of or they have the power to impose parallel civil penalties and criminal prosecution.

As for a helpful definition, this Court has recognised the dicta of Justice Black in Green v United States and I would refer you to page 176C of the applicant’s booklet in that regard.  Also very helpful in Pearce in this Court is the passage at page 145E, where this Court has said:

the expression of a principle confined to the prevention of double punishment for the same crime would be too narrow – 

and goes on to state in a broad fashion the concepts that lie at the heart of what we understand double jeopardy to be:  puniri, vexari and the freedom from repeated or multiple prosecution and trial.

The fact that double jeopardy provisions can apply to civil proceedings we say is indicated in Gray in this Court, particularly the passage at page 21B of the applicant’s booklet.  In that case, of course, the Court was considering the effect and the impact of exemplary damages and whether or not it constituted a second punishment for the purposes of double jeopardy, and, of course, it did.  The other authorities that we have referred to in our list essentially deal with the fact that the elements and

ingredients of the conduct overlap, and it is those to which the Court or the system should look in determining whether or not protection could apply.

There has, as far as I am aware, been no instance that we are able to find where a case of this nature has arisen in the past, where there has been a parallel prosecution for a conspiracy to defraud and then subsequent proceedings of a civil nature to recover penalties.

So the essence of the application is that there is scope to redefine and revisit what we mean by “double jeopardy”.  These matters are very important for the purposes of the general consideration of the development of the law, particularly as in regard to statutory authorities.  In this particular case, as I have referred you to at page 204D and E in the applicant’s booklet, the distinction for the purposes of evidence in the civil trial has been practically abolished.  You will see also in the decision of the Honourable Justice Wheeler at page 27E of the application booklet, notwithstanding that finding in the evidentiary and interlocutory steps, her Honour goes on to say: 

the present defendants have never been prosecuted or penalised –

and she relies on that distinction.  We say that distinction ought be looked at very clearly and plainly, because even though Hamilton v Whitehead recognised the different bases of liability, nonetheless it did not say anything about what you do as far as weighing the correct approach to the imposition of penalties. 

That, in outline, your Honours, is where I wish to take you with respect to these matters.  I would urge you to consider this is an opportunity for the Court to consider development of the common law in this area.  Unless there is anything further? 

McHUGH J:   Thank you, Mr Davies.  We need not hear you, Mr Owen‑Conway.

The Court is of the view that the decision of the Full Court is not attended with sufficient doubt to justify the grant of special leave.  The application is dismissed with costs.

AT 2.17 PM THE MATTER WAS CONCLUDED