SRSH and Commissioner of Taxation (Taxation)
[2020] AATA 3807
•9 April 2020
SRSH and Commissioner of Taxation (Taxation) [2020] AATA 3807 (9 April 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2019/1608-1619
Re:SRSH
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:9 April 2020
Place:Sydney
The application for a stay of these proceedings is refused.
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Deputy President Bernard J McCabe
CATCHWORDS
PRACTICE AND PROCEDURE – application for the proceedings to be stayed pending the completion of criminal proceedings – whether the interests of justice require these proceedings to be stayed – consideration of whether requiring progression of these proceedings would adversely affect the applicant’s right to silence in criminal proceedings – application refused
LEGISLATION
Competition and Consumer Act 2010
Taxation Administration Act 1953 sections 14ZZB(b), 14ZZE, 14ZZJ
CASES
Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd [2019] FCA 964
Baker Re: Flatwash Pty Ltd v Commissioner of Taxation (1987) 19 ATR 11
Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153
Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46
In the matter of Plutus Payroll Australia Pty Limited [2017] NSWSC 1854
JWTT and Commissioner of Taxation [2017] AATA 1612
Lee v The Queen (2014) 253 CLR 455
McMahon v Gould (1982) 7 ACLR 202
Ransley v Commissioner of Taxation [2016] FCA 778
Reid v Howard (1995) 184 CLR 1
Smith v Kelsey [2020] QCA 55X7 v Australian Crime Commission (2013) 248 CLR 92
REASONS FOR DECISION
Deputy President Bernard J McCabe
9 April 2020
The applicant has asked the Tribunal to stay these proceedings because she expects she will be arrested on criminal charges that may overlap with the subject matter of the Tribunal review. She says she should not be required to advance her case in the Tribunal because that might compromise her defence of the criminal charges. She argues the Tribunal proceedings should remain on hold until the outcome of the criminal proceedings. That could take years. The Commissioner of Taxation wants to press on with the Tribunal’s review, at least in the short term.
I have already dealt with one request for an adjournment in this matter on essentially the same grounds. At a directions hearing on 22 October 2019 I was told the applicant expected to be arrested and formally charged but was currently residing in Canada. The plan was for the applicant to return to Australia by Christmas 2019 and surrender to the authorities. I did not accede to the request for an adjournment at the earlier directions hearing because it seemed premature given the information before me at the time. I made directions requiring the applicant to file her Statement of Facts, Issues and Contentions and the material she proposed relying on at the final hearing by 14 February 2020 (ie after the applicant was scheduled to return to this country). The applicant was free to make a further request for an adjournment in the new year as events unfolded.
The applicant did not return from Canada at Christmas as anticipated. The reason for that delay was not clearly explained but I understand the applicant is the subject of proceedings in Canada. I am told she is now scheduled to return to Australia in April, and that she plans to surrender to authorities and be formally charged at that point. If all that occurs, the applicant’s lawyer suggests the applicant would face committal proceedings in November 2020. But her travel plans in April are likely to be impacted by the COVID-19 pandemic. It is therefore unclear when she will return – assuming, of course, she genuinely plans to do so. In that sense, we are no further advanced than we were at the time of the last directions hearing in October 2019. The Commissioner argues there is no reason to revisit my earlier ruling in those circumstances. He says the applicant should comply with the timetable in the directions and file her material.
While there have been no new developments, the applicant says we now know more about the criminal charges and this justifies taking a different view on the adjournment application. I have been provided with the warrants for apprehension that outline the criminal complaints. The warrants were provided to the applicant’s solicitors by the Commonwealth Director of Public Prosecutions (the CDPP). The material is exhibited in an affidavit of the applicant’s solicitor dated 19 March 2020. I was also provided with an affidavit dated 20 March 2020 sworn by the solicitor engaged in anticipation of the criminal proceedings. The affidavit provides an explanation of the charges referred to in the complaints. I will have more to say about those matters below.
I had the benefit of extensive oral submissions from counsel at the interlocutory telephone hearing on 24 March 2020. Mr Rares, who appeared for the Commissioner, also provided brief written submissions following the hearing. To do justice to those submissions, and given the importance of the question, I decided to provide written reasons for my decision requiring the applicant to proceed.
Identifying the extent of the likely overlap between the Tribunal’s review and the criminal proceedings
While the Tribunal conducts a de novo review with reference to the material before it at the time of the hearing, it is appropriate for me to have regard to the reasons for decision accompanying the objection decision. In the absence of a Statement of Facts, Issues and Contentions, those reasons are the best guide to the evidence which may be required if the applicant is to meet the evidentiary burden that she bears by reason of s 14ZZB(b) of the Taxation Administration Act 1953 (the TAA). The objection decision is dated 14 January 2019.
The reasons for the objection decision record the Commissioner’s view that the applicant controlled several entities and that she received benefits or payments from those entities over the years of income that should have been reported in her returns. Some of the payments were described as ‘directors fees’ or ‘gross payments’. The Commissioner found she also used a credit card paid for by the entities to charge personal expenses. I note some of the matters referred to in the objection decision do not obviously involve the other entities. For example: the applicant sought deductions for rental losses that were disallowed in a number of years, and the Commissioner says she failed to report interest income.
In order to make out her case in the Tribunal, the applicant will need to adduce evidence which adequately explains the character of the payments she received. That almost certainly includes evidence going to the source and the circumstances of the payments by the other entities. If she fails to establish the assessments were excessive and the correct (or more nearly correct) amount she should be assessed as being liable to pay, she will be unsuccessful in these proceedings.
I have perused the material provided by the CDPP and reviewed the affidavit provided by Mr Juweinat, the lawyer engaged by the applicant for the criminal proceedings. Mr Juweinat points out the first warrant for apprehension dated 20 October 2017 outlines eleven offences arising out of allegations that the applicant in her capacity as a trustee of a trust dishonestly obtained a GST refund in several periods and used false documents to that end. The second warrant said the applicant was to be charged with:
·five counts alleging the applicant was concerned with an entity entering into an arrangement that would result in that company or entity being unable to pay their superannuation guarantee charge obligations in the future;
·two counts alleging the applicant knowingly used a false document to obtain a financial gain; and
·fifteen counts of dishonestly obtaining a financial advantage by deception – specifically, she is alleged to have lodged false business activity statements on behalf various entities.
In summary, it appears the applicant’s conduct in her capacity as a director or trustee is the focus of the charges. Ms Waterhouse, the applicant’s solicitor in the Tribunal proceedings, said in her 19 March 2020 affidavit the central question in these proceedings is likely to be whether the payments from a trust were properly characterised as loan repayments or distributions that were properly characterised as income. She said that would necessitate the applicant adducing evidence about corporate and trust structures, inter-entity loans and the methodology used for recording expenses and repayments. That evidence might go to her conduct in her capacity as director or trustee, which could be relevant to the criminal proceedings. The applicant may also need to address in the Tribunal whether she was in truth the controlling mind and will of the entities in question. That is also potentially an issue in the criminal proceedings.
It follows there may be an overlap – even a significant overlap – between the subject matter of the criminal proceedings and the matters that will be raised in the Tribunal. Yet it is difficult to be sure given the paucity of material before me.
Ms Waterhouse adds that I may be required to assess the veracity and reliability of various books, documents and witnesses that might be the subject of consideration in the criminal proceedings. While that might be so, it is unclear why that would prevent the applicant providing material ahead of a hearing.
THE USUAL CRITERIA TO BE CONSIDERED IN ADJOURNMENT APPLICATIONS IN THESE CIRCUMSTANCES
Mr McGovern SC, appearing for the applicant at the interlocutory hearing, argued the interests of justice required that I adjourn the Tribunal proceedings until after the criminal proceedings had run their course. He said that requiring the applicant to progress the Tribunal’s review would put her in a position where she had to choose between (a) making a positive case in the Tribunal which might generate material that could compromise her in the criminal proceedings, or (b) protecting her position in the criminal proceedings by effectively giving up the opportunity to make out her case in front of the Tribunal. Mr McGovern pointed out the High Court had emphasised it was important not to compromise an individual’s right to participate in a “wholly accusatorial process” in the criminal trial where he or she was free not to give any evidence at all: see, for example, X7 v Australian Crime Commission (2013) 248 CLR 92 at [71] per Hayne and Bell JJ.
A number of the cases that Mr McGovern discussed – including X7 – arose in circumstances where accused persons (or persons who were likely to be formally accused) were being compelled under statute or court order to give evidence in other proceedings.[1] The applicant’s position in this case is different in at least one respect: while she has been directed to file material and lodge a Statement of Facts, Issues and Contentions, she is not compelled to produce any particular item of evidence. She remains free to invoke the privilege. Mr McGovern argues that difference is irrelevant. He points out the applicant has the burden of proof in these proceedings. If she does not produce evidence as part of a positive case, she will likely lose. Mr McGovern says that places the applicant in an invidious position where she is practically compelled to disclose certain matters in the course of these proceedings or risk losing. A loss will be very costly indeed.
[1] See, for example, Reid v Howard (1995) 184 CLR 1; Lee v The Queen (2014) 253 CLR 455 and Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46.
Mr McGovern relied on Ransley v Commissioner of Taxation [2016] FCA 778 to argue I should not follow older authorities (like Baker Re: Flatwash Pty Ltd v Commissioner of Taxation (1987) 19 ATR 11 at 14 per Sheppard J) which suggested the courts were less sympathetic to an applicant facing a conflict of interest of this kind. In Ransley, Jagot J reviewed the more recent authorities and explained (at [30]):
While unnecessary delay should be avoided, the value of timeliness in the hearing and disposal of matters in court, in the present case, is not equivalent to the weight required to be given to the value of protecting [the accused’s] right to silence in the pending criminal case and of ensuring open justice.
Mr McGovern argued Ransley suggests the courts (and by implication, the Tribunal) have demonstrated what Brereton J referred to In the matter of Plutus Payroll Australia Pty Limited [2017] NSWSC 1854 at [35] as a “greater tenderness” towards the rights of the accused facing criminal proceedings that should lead to a more generous approach in stay applications.
Days after the decision in Ransley, the Full Federal Court handed down its decision in Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153. In the CFMEU case, the Full Court considered whether the trial judge had erred when he refused to adjourn civil proceedings even though witnesses would be faced with an “invidious choice” whether to give evidence in those proceedings or give priority to the criminal proceedings they might face. The civil proceedings in question involved alleged contraventions of s 45D[2] of the Competition and Consumer Act 2010 where the witnesses – who were union officials – were charged with blackmail.
[2] The Australian Competition and Consumer Commission also made allegations under s 45E of the Act and s 50 of the Australian Consumer Law but the Commission agreed not to pursue those matters.
The Full Court reviewed the High Court’s reasoning in Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 and some of the other authorities discussed in Ransley. After discussing the background to the Zhao case in particular, the Full Court extracted a number of principles which it said were relevant to the question at hand. Dowsett, Tracey and Bromberg JJ explained (at [22]):
(i) where both civil and criminal proceedings are pending, a stay of the civil proceeding will be ordered where “the interests of justice require such an order”: Zhao (HC) at [36];
(ii) a court will not grant a stay of a civil proceeding merely because related charges have been brought against an accused and criminal proceedings are pending: Zhao (HC) at [35];
(iii) to warrant a stay of the civil proceeding, “it must be apparent” that the accused “is at risk of prejudice in the conduct of his or her defence in the criminal trial”: Zhao (HC) at [35];
(iv) the risk of prejudice must be real and, in considering what the interests of justice require, that risk is to be weighed against the prejudice that a stay of the civil proceeding would occasion: Zhao (HC) at [47] and [50].
After setting out these principles, the Court also referred to the oft-cited remarks of Wootten J in McMahon v Gould (1982) 7 ACLR 202. While acknowledging those remarks had been criticised in some of the authorities, the Court refused to disown them. The Court said they were merely guidelines and could be applied flexibly.[3] I note Moshinsky J offered a similar qualified endorsement of the guidelines in Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd [2019] FCA 964 at [51].
[3] The Queensland Court of Appeal cited the guidelines in McMahon v Gould in a recent case, Smith v Kelsey [2020] QCA 55, which suggests they retain value: at [84]-[86] per Morrisson JA.
It is worth reproducing the substance of the guidelines in McMahon v Gould. Wootten J explained (at 206-207, citations omitted):
(a)Prima facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court;
(b)It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds;
(c)The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with;
(d)Neither an accused nor the Crown are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e)The court’s task is one of “the balancing of justice between the parties”, taking account of all relevant factors;
(f)Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors;
(g)One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s “right of silence”, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding. I return to this subject below;
(h)However, the so-called “right of silence” does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursuing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding;
(i)The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings;
(j)In this regard factors which might be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil proceedings;
(ii) the proximity of the criminal hearing;
(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses;
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently;
(v) whether the defendant has already disclosed his defence to the allegations;
(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him;
(k)The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;
(l)In an appropriate case the proceedings may then be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed.
Mr McGovern suggested the principles in the CFMEU decision (and, I infer from his submissions, the guidelines suggested in McMahon v Gould) were not binding on me because I am dealing with tax proceedings and different considerations might apply.
There are certainly some features of tax proceedings in the Tribunal that must be considered. I will refer to those features below. For now, I am satisfied the differences in revenue cases can be adequately accommodated within the principles identified in the CFMEU case. The central question remains: do the interests of justice require a stay? My answer to that question requires an assessment of the potential risk of prejudice to the applicant in the criminal proceedings and a balancing exercise in which that risk is weighed against other factors militating against a stay, including the risk of prejudice to the Commissioner and the public interest in timely and efficient administrative decision-making. In conducting that balancing exercise, I must be especially conscious of the value attached to the right to a fair trial in criminal proceedings.
SHOULD THE TRIBUNAL PROCEEDINGS BE STAYED AT THIS STAGE?
I have already explained there may be overlap between the subject matter of the foreshadowed criminal proceedings and the matters considered in the Tribunal review. But given we are still in the early stages of the Tribunal review, and the criminal proceedings are yet to be formally commenced, the precise extent of the overlap – and any prejudice which might flow - is unclear. The position would probably be clearer if the applicant had filed her Statement of Facts, Issues and Contentions as directed, or if she had returned home in a timely way. To that extent, her conduct has contributed to the uncertainty that confronts me.
Some of that uncertainty is inevitable. While it is incumbent on the applicant to establish a stay is appropriate having regard to the criteria I have identified, she will obviously be reluctant to disclose evidence or make admissions that risk causing the very prejudice she is seeking to avoid. The Tribunal must be conscious of those limitations on the applicant’s ability to articulate her application for the stay.
The applicant’s legal representatives plainly believe there is a problematic overlap between the foreshadowed criminal proceedings and the matter before the Tribunal. They say as much in the material they filed in support of the stay application. The evidence of their opinion counts for something, but they can also be expected to adopt a conservative, risk averse approach which is entirely appropriate in their position.
On balance, I think it is still too early to tell whether there is likely to be a significant overlap between the Tribunal’s review and the criminal proceedings. There is no certainty when the criminal proceedings will begin, and – notwithstanding the information attached to the warrants – it is unclear what charges the applicant will ultimately face. In those circumstances, it is difficult to make a meaningful assessment of the risk of prejudice if the Tribunal review proceeds, at least for now.
There are other factors which are relevant to the assessment I must make. One of them is the relatively low risk of adverse publicity arising out of the Tribunal proceedings that might affect a jury. Unlike proceedings in the Federal Court, s 14ZZE of the Taxation Administration Act 1953 (the TAA) says an applicant may request a private hearing in the Tribunal. Where a private hearing is requested, the hearing is closed and the reasons for decision are anonymised when they are published.[4] A jury is unlikely to be prejudiced by information coming out in a Tribunal hearing. On the other hand, s 128 of the Evidence Act 1995 does not apply in the Tribunal. That section deals with the privilege against self-incrimination in court proceedings. The section permits a court – but not the Tribunal - to provide a certificate to a witness which prevents that witness’s evidence from being used against him or her in subsequent criminal proceedings. While there remains the theoretical possibility of using the powers in s 35 of the AAT Act to fashion a form of ‘use immunity’ to quarantine evidence given in the Tribunal, there are real difficulties with that course in practice: see the discussion in JWTT and Commissioner of Taxation [2017] AATA 1612. There remains a danger that evidence given in the Tribunal might make its way to prosecutors, if not directly to jurors or other witnesses in the criminal trial. That could disturb the balance in the accusatorial process. The risk of that prejudice is obviously greater when witnesses are making statements or giving evidence; there is less risk when the Tribunal review is still at an early stage and witness statements have not been finalised.
[4] Section 14ZZJ of the TAA modifies the obligation to give reasons in s 43 of the AAT Act to introduce s 43(2D).
These considerations do not weigh heavily in favour of a stay at this stage although there is some concern about the production of witness statements.
If the applicant returns to Australia and she faces a committal hearing, it is likely a good deal of her attention and resources will be devoted to that process. Conducting simultaneous proceedings would obviously be a burden, even if she were to dispense with the expense of legal representation in the Tribunal. She is not currently fighting on two fronts because she has not returned to Australia. She could continue her preparation for the Tribunal’s review until the criminal proceedings ramped up. This consideration does not weigh strongly in favour of a stay at this point.
The Commissioner is unlikely to be seriously prejudiced by a stay in the near term in circumstances where the reviewable decision remains in effect and can be implemented. Even so, it is possible the Commissioner may experience some forensic disadvantage in the event of undue delay in these proceedings. Documents can be lost, memories tend to fade and personnel can change. There is also a public interest in finalising administrative processes and providing certainty. These matters weigh against ordering a stay.
After taking all these matters into account, I am satisfied it would be premature to stay the proceedings. I nonetheless propose varying the timetable in the directions. I would allow the applicant some further time to produce a statement of facts, issues and contentions in which she should articulate her case. She should do that by 1 June 2020. I propose that a case management telephone directions hearing be listed to discuss the way forward shortly thereafter. If there are further developments in the meantime that shed more light on the overlap between the Tribunal’s review and the criminal proceedings, she may approach the Tribunal.
CONCLUSION
The application for a stay of the proceedings is refused.
I certify that the preceding 32 (thirty -two) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe
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Associate
Dated: 9 April 2020
Date(s) of hearing: 24 March 2020 Date final submissions received: 27 March 2020 Counsel for the Applicant: Mr D McGovern SC Solicitors for the Applicant: Waterhouse Lawyers Counsel for the Respondent: Mr Q Rares Solicitors for the Respondent: Balazs, Lazanas & Welch LLP
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