The Overseas Applicants and Commissioner of Taxation
[2014] AATA 788
•27 October 2014
[2014] AATA 788
Division TAXATION APPEALS DIVISION File Numbers
2013/0287-0296; 4168-4177; 2014/1853-1859
Re
The Overseas Applicants
APPLICANTS
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Ms G Lazanas, Senior Member
Date 27 October 2014 Place Sydney Leave to give oral evidence by video link at the hearing of these proceedings is granted to the Applicants.
.....................[SGD]...................................................
Ms G Lazanas, Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – Interlocutory Application – receipt of evidence – application for oral evidence to be given by video link or to be taken by commission – applicants concerned about the respondent issuing a departure prohibition order if they attend to give evidence in person – application for oral evidence to be given by video link granted
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) ss 33(1)(c), 35A(1), 39(1), 40(1), 40(5)
Taxation Administration Act 1953 (Cth) ss 14S, 14ZZK
CASES
Australian Competition and Consumer Commission v Pirovic Enterprises Pty Limited [2014] FCA 544
Commissioner of Taxation v Arnold [2014] FCA 959
Pattenden v Commissioner of Taxation [2008] FCA 1590Re Dunn and Commissioner of Taxation [2012] AATA 486
Re Murray and Commissioner of Taxation [2011] AATA 837
REASONS FOR DECISION
Ms G Lazanas, Senior Member
27 October 2014
This decision concerns an interlocutory application filed by the applicants on 7 February 2014 seeking an order that they be allowed to give their oral evidence by video link or telephone or, alternatively, for their evidence to be taken overseas. I heard the application on 24 September 2014 as it was premature to hear the application before all of the written evidence had been filed.
The applicants are a married couple who live in Mauritius. They are referred to throughout this decision as the ‘Overseas Applicants’ or by the pseudonyms, ‘Mr and Mrs Jones’. The Commissioner has opposed their application to give evidence by video link. He has also opposed their alternative application for their evidence to be taken overseas by the Tribunal. The Commissioner has no objection, however, to a number of other witnesses who live overseas giving their oral evidence in these proceedings by video link.
The Overseas Applicants do not wish to come to Australia to give oral evidence because, amongst other concerns, they fear that if they do so they may then be prohibited from leaving Australia if the Commissioner decides to issue departure prohibition orders (DPOs) pursuant to s 14S of the Taxation Administration Act 1953 (TAA). The Commissioner declined to give any undertakings to them that he would not issue DPOs.
For the reasons set out below, I have decided to allow Mr and Mrs Jones to give their oral evidence by video link pursuant to s 35A of the Administrative Appeals Tribunal Act 1975 (AAT Act).
BACKGROUND AND PROCEDURAL HISTORY
In the substantive proceeding, the Overseas Applicants are seeking review of the Commissioner’s objection decisions relating to objections to a number of disputed assessments, as follows:
(a)Amended assessments in respect of each of Mr and Mrs Jones for the 2001-2009 years of income and an original assessment for the 2010 year of income in respect of Mr Jones (the first set of assessments);
(b)Amended assessment in respect of Mr Jones for the 2002-2008 years of income issued pursuant to s 167 of the Income Tax Assessment Act 1936 (ITAA 1936) (the second set of assessments):
Broadly, the first set of assessments raise a number of issues including whether the Overseas Applicants had an interest in a fund (the Fund) within the meaning of s 483(2) of the ITAA 1936; whether the Fund was a superannuation fund within the meaning of
s 519 of the ITAA 1936; whether the Fund was a superannuation fund maintained for the benefit of an employee or employees of a company (the Company); and whether the Overseas Applicants were employees and had an interest in the Fund because they were employees of the Company. Furthermore, there are issues with respect to whether the Commissioner could issue the amended assessments at any time to the Overseas Applicants pursuant to s 170(1) Item 5 of the ITAA 1936 on the basis that he formed an opinion that there had been fraud or evasion.
The second set of assessments raise the question of whether amounts held in certain bank accounts constituted income of Mr Jones and whether the Commissioner could issue the amended assessments at any time to Mr Jones on the basis that he formed an opinion that there had been fraud or evasion.
There were also notices of assessment of administrative penalty based on intentional disregard of the taxation laws issued to each of Mr and Mrs Jones.
Mr Hyde Page, counsel for the Applicants, stated that the amounts of the assessments of tax and penalties total between approximately $10 million and $11 million.
As noted above, all of the evidence of the Overseas Applicants for the substantive proceedings has been filed and that includes statements and affidavits by each of Mr and Mrs Jones. They have respectively deposed to the factual circumstances of the establishment of the Fund, their relationship with the Company and the advice they received over the relevant period about certain transactions, including from their former accountant, Vanda Gould, who apparently played a significant role.
In support of the interlocutory application, Mr and Mrs Jones filed affidavits sworn on 7 February 2014. Relevantly, they also filed as supporting information the Local Court results for criminal proceedings brought against Vanda Gould and two of his colleagues, Peter Borgas and John Leaver. The results show that the various charges were withdrawn.
Mr Jones is 72 years old and lives with his wife, Mrs Jones, in Mauritius. They have no children and no continuing ties to Australia. In the eighties and nineties, they had their own business in Australia with a factory where they manufactured certain products. Mr Vanda Gould was their accountant during the relevant time and advised them on certain transactions. Mr and Mrs Jones became aware that the Commissioner was investigating their tax affairs in or about 2009. They had been living outside Australia for about two years when the Commissioner issued the first set of assessments. They have lived in Mauritius since January 2013.
Mr Jones deposed that based on his “difficulties with the ATO”, he was concerned that he will either be “arrested or prevented from leaving [Australia], possibly for many years”, if he were to come here to give evidence at the hearing and he does not want to risk this, particularly at this stage of his life. Mr Jones did not provide oral evidence for the interlocutory application so I was unable to ascertain precisely what he meant by his “difficulties with the ATO”, although he also deposed that the Commissioner had garnisheed the funds of his Australian superannuation fund.
Mr Jones based his belief that the Commissioner would prohibit him from leaving Australia with a DPO on a number of factors, including the following, which I have extracted from his affidavit:
(a)the Commissioner stated in the audit papers that he “engaged in ‘fraud or evasion’ throughout the period 2000-2010, and that is what gave rise to the asserted tax liabilities”;
(b)the Commissioner stated that he “had undisclosed personal income of approximately $7 million, on which [he] did not pay tax” – which Mr Jones considered to be “very alarming” and “plainly a serious allegation of a criminal nature”;
(c)“[t]he accountant, Vanda Gould, was closely involved in the management of [his] tax affairs in the period 2000-2010” and he had heard that “Mr Gould had been arrested and charged with defrauding the Commonwealth”. He explained his views of Vanda Gould and then said he did not know all the things that might be alleged against him as a person for whom Vanda Gould had acted in the past;
(d)he saw in the media that Paul Hogan had been prevented from leaving Australia because of a civil tax dispute and that he was later found to have no tax liability. His perception was that Paul Hogan was only permitted to leave because he took his case to the media; and
(e)he had been told that “Peter Borgas, who had a connection to Vanda Gould, visited Australia for the purpose of giving evidence in a tax appeal. Mr Borgas was arrested at the airport on criminal charges connected to the very matters that were at issue in the tax appeal...” He stated that he was concerned that a similar thing could happen to him.
Mr Jones deposed that he was, therefore, not prepared to come to Australia for any reason, unless at least one of several different conditions was satisfied. It suffices to note that Mr Jones listed a number of conditions in his affidavit, however, the most relevant of these was, as follows:
“I would come to Australia if I was given a written assurance or agreement that I will not be prevented from leaving Australia by the government, or arrested for alleged tax crimes while in Australia. I would also need to receive independent legal advice that any such assurance or agreement is legally binding on all relevant government agencies and bodies”.
Mrs Jones filed a similar affidavit to that of Mr Jones in support of the interlocutory application and her reasons for seeking to give evidence by video link or outside Australia were relevantly the same as those of Mr Jones. That is to say, she too was concerned about the possibility of the Commissioner preventing her from leaving Australia if she were to attend to give evidence. Like Mr Jones, she also stated that she would not come to Australia except on certain conditions, one of those also being the same as that extracted from Mr Jones’s affidavit set out above at [15].
At a directions hearing on 7 August 2014, I asked counsel for Mr and Mrs Jones (Mr Hyde Page) and junior counsel for the Commissioner (Professor Graycar) whether there had been any communications between the Overseas Applicants and the Commissioner or the respective legal representatives about the Commissioner’s attitude to the possible issue of a DPO and/or the possibility of the Commissioner giving an undertaking that he would not issue a DPO. Counsel informed me that, insofar as they were aware, no such requests had been made nor had the Commissioner expressed any view on the matters.
I then directed the parties to exchange correspondence with a view to ascertaining the Commissioner’s position as to whether he would give an undertaking to Mr and Mrs Jones that he would not issue them with DPOs if they were to come to Australia to give evidence. I suggested this course because, as I said at the directions hearing, I wanted to test the preparedness of the Overseas Applicants to attend and give evidence in person and to also understand whether their fears about being detained had any foundation. In this regard, senior counsel for the Commissioner (Mr McGovern SC) had submitted in earlier written submissions dated 3 June 2014 that “[t]he reasons proffered by the Applicants as to the inability or refusal to come to Australia amount to conjecture or speculation”.
I suggested to Mr Hyde Page that the Overseas Applicants should be realistic about what they could ask the Commissioner to provide, as the Commissioner cannot, for example, provide undertakings with respect to the exercise of powers available to other Commonwealth agencies. Finally, I also directed the parties to file the correspondence with the Tribunal by 17 September 2014, a week before the scheduled interlocutory hearing.
On 12 August 2014, the legal representatives for Mr and Mrs Jones wrote to the Commissioner seeking not only an undertaking in relation to DPOs but also a sweeping range of other conditions with respect to them coming to Australia, a number of which are patently outside of the tax administration powers of the Commissioner. It is unnecessary to repeat the terms of that long wish list. However, relevantly, the legal representatives for the Overseas Applicants asked the Respondent to provide the undertaking to the Tribunal.[1]
[1] Exhibit A1
On 17 September 2014, the Commissioner’s legal representatives (the Australian Government Solicitor (AGS)) responded by letter indicating that the undertakings sought are very broad and go well beyond what would be appropriate for the Commissioner to consider, in particular because the requested undertakings sought to bind other agencies. In relation to the discrete issue of the Commissioner’s attitude towards giving an undertaking not to issue DPOs, the AGS stated as follows:
“7. The Commissioner will not provide an undertaking that a departure prohibition order will not be issued to Mr[Jones] or Mrs [Jones].
8. The purpose of a departure prohibition order is to stop a debtor from departing from Australia until such time as their tax liability is paid in full or suitable arrangements for payment of their tax liability are made.
9. The relevant legislation and ATO policy documents set out in detail when and how a departure prohibition order may be issued by the Commissioner. However neither the legislation nor ATO policy documents deal with the Commissioner’s obligation to provide an undertaking not to issue a departure prohibition order.
10. We are unaware of any proceeding where a Court has directed the Commissioner to provide an undertaking not to make a departure prohibition order.”[2]
[2] Exhibit R1
I considered the AGS’s letter to be unclear on its face because it was not plain whether the Commissioner was only addressing the issue of whether the undertaking would not be given to the Tribunal, which is what the Applicants’ legal representatives solicited. Mr McGovern confirmed at the interlocutory hearing that the Commissioner was also not prepared to give any undertaking about DPOs, to the Applicants.[3]
[3] Transcript p.25
RELEVANT LEGISLATION AND PRINCIPLES
Section 35A(1) of the AAT Act relevantly states that “the Tribunal in the hearing of a proceeding may allow a person to participate by:
(a) telephone; or
(b) closed-circuit television; or
(c) any other means of communication”.
The following extract of the decision of Deputy President Hotop in Re Dunn and Commissioner of Taxation [2012] AATA 486 (Re Dunn) at [8]–[9] is directly relevant to the contextual framework and how I have also approached the application of s 35A(1) of the AAT Act in the present case. It is, therefore, apt to set out it out in full:
“8. Section 35A(1) of the AAT Act confers on the Tribunal a broad, in terms unfettered, discretionary power to grant or refuse an application for such leave. However, as the applicant submits, that discretionary power must, if it is to be exercised lawfully, be exercised having regard to the subject matter, scope and purpose of the AAT Act and in accordance with the policy and objectives of that Act. The relevant statutory context, as submitted by the applicant, comprises the following provisions of the AAT Act:
·s 2A – “In carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick”;
·s 33(1)(a) – “the procedure of the Tribunal is ... within the discretion of the Tribunal”;
·s 33(1)(b) – “the proceeding shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and a proper consideration of the matters before the Tribunal permit”;
·s 33(1)(c) – “the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate”;
·s 39(1) – “... the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case ...”.
To that list of provisions should be added:
·s 40 which confers on the Tribunal, inter alia, procedural powers in relation to the giving of evidence at hearings; and, very importantly
·s 43(1) which empowers the Tribunal to perform its ultimate function, namely, to make a substantive decision on the relevant application for review – a decision which the Federal Court of Australia in Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589 (per Bowen CJ and Deane J), and in subsequent cases, has described as the “correct or preferable” decision on the material before the Tribunal.
9. In their submissions the parties cited numerous judicial authorities regarding the exercise by courts in Australia, namely, the Federal Court and certain State Supreme Courts, of corresponding statutory discretionary powers to allow oral evidence to be given at a hearing by video link. Although those authorities are useful to the extent that they refer to, and discuss, various factors which will generally be relevant in the exercise of such discretionary power, they are of limited assistance because the exercise of such discretionary power in a particular case will ultimately depend on the facts and circumstances of that case: see ASIC v Rich [2004] NSWSC 467 at para 16 (per Austin J).”
For the reasons given by Deputy President Hotop in Re Dunn at [9], I also do not propose to traverse all the cases cited by counsel before me because, although they are helpful, the exercise of any discretionary power must, as a matter of fairness, ultimately depend on the factual matrix of each case. This was most recently restated by Flick J in Australian Competition and Consumer Commission v Pirovic Enterprises Pty Limited [2014] FCA 544 at [11]. In Pirovic, Flick J also helpfully distilled a list of considerations relevant to the exercise of the discretion for allowing evidence to be given by video link in the Federal Court, subject to the qualification that it was unwise to attempt to do so (at [11]).
In Pirovic, Flick J further relevantly stated that other considerations in any particular case could also include “factors peculiar to the proposed witness, including ... an inability to freely travel to and depart from Australia” (at [12]). In doing so, his Honour was clearly leaving open the possibility of other considerations. It is against that background that I now turn to a consideration of the factual matrix of Mr and Mrs Jones.
SHOULD THE APPLICANTS BE ALLOWED TO GIVE EVIDENCE BY VIDEO LINK?
In balancing the competing considerations and determining what is fair and just to the parties, I have decided that Mr and Mrs Jones should be given a reasonable opportunity to present their cases and that permitting them to give oral evidence by video link is an appropriate course. In that way, the Commissioner will also be afforded procedural fairness as he will have a reasonable opportunity to test the cogency of their written statements. Section 39 of the AAT Act requires the Tribunal to ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case.
I have taken into account in reaching my decision that the only basis relied upon by Mr and Mrs Jones for seeking to give their evidence by video link or overseas is because they fear, amongst the possible consequences of them coming to Australia, the Commissioner may issue them with DPOs prohibiting them from leaving Australia. This consideration is similar to that referred to by Flick J at [12] in Pirovic, namely, “an inability to freely travel to and depart from Australia”. It is similar because Mr and Mrs Jones fear that they will be in that situation. But their fears are, in my view, real and rational, for the reasons explained in their affidavits (see [14] and [16] above), as well as because the Commissioner did not proffer any undertaking not to issue DPOs. Their fear of being issued with DPOs is a very significant consideration for the exercise of the discretion because DPOs represent “a serious intrusion on a person’s freedom of movement”: Pattenden v Commissioner of Taxation [2008] FCA 1590, per Logan J. These fears are in my view well founded, unlike in Re Murray and Commissioner of Taxation [2011] AATA 837 where Deputy President Hack was not satisfied of Mr Murray’s beliefs (see [12]–[17]).
Mr McGovern said that there is nothing in the material that is before the Tribunal to indicate that any decision with respect to DPOs has yet been made and, further, that it would be premature for the Commissioner to make any such decision given the particular statutory framework that governs the making of DPOs. Furthermore, he also submitted that it would clearly be an impermissible and irrelevant consideration for the Tribunal to take into account the refusal of the Commissioner to undertake, in effect, to fetter or impose an advanced constraint upon one of his statutory powers.
While it may be accepted, as submitted by Mr McGovern, that the Commissioner has not made any decision as yet as to the issue of any DPOs, the Commissioner’s decision to decline to offer any undertakings with respect to the possible issue of DPOs lends credence to the fears of Mr and Mrs Jones. It also adds to the uncertainty and their vulnerability, especially when it is recalled that the Commissioner does give undertakings that he will not issue DPOs in other cases. The case of Commissioner of Taxation v Arnold [2014] FCA 959, where Edmonds J rejected an application by Mr Arnold to give his evidence by video link, is directly on point. In that case, Edmonds J noted that the factors there pointed “strongly in the direction that Mr Arnold’s application should be refused”. Significantly, however, his Honour commented that the only matter that caused him “some concern” was the possibility that Mr Arnold might be restrained from leaving Australia were he to come here to give evidence, but that concern was alleviated by the Commissioner proffering an undertaking in relation to not issuing a DPO (see [21]). As already noted, no such undertaking was proffered by the Commissioner to Mr and Mrs Jones.
I have also taken into account s 33(1)(c) of the AAT Act, which relevantly provides that the Tribunal “is not bound by the rules of evidence”. In this regard, I note that Mr and Mrs Jones have filed with the Tribunal a number of affidavits and written statements for the hearing. I consider that the taking of their oral evidence, albeit by video link, will be preferable to the pre-prepared written material on its own as there is spontaneity.
Furthermore, it appears that several issues in the proceedings are likely to be about the legal efficacy of the arrangements under the provisions of the taxation laws in part due to the role apparently played by Vanda Gould as the former accountant. It follows that while Mr and Mrs Jones are important and their credit may be put in issue (as is also acknowledged by Mr Hyde Page), it is unlikely that their evidence will necessarily be determinative. Consequently, I also do not consider that cross examination by the Commissioner will be impeded.
Finally, it must also be borne in mind that Mr and Mrs Jones, as the taxpayers, bear the burden of proving that the assessments are excessive: s 14ZZK of the TAA. They should not be deprived of the opportunity to give oral evidence.
CONCLUSION
I will allow Mr and Mrs Jones to give their oral evidence by video link.
It is unnecessary for me to make a decision on the application of Mr and Mrs Jones for their evidence to be taken overseas, given the decision I have reached on their application for their evidence to be given by video link. A proper consideration of the application of ss 40(1) and (5) of the AAT Act which deals with the Tribunal’s power to take evidence on oath or affirmation outside Australia should await a matter where that issue must be determined.
I certify that the preceding 35 (thirty -five) paragraphs are a true copy of the reasons for the decision herein of Ms G Lazanas, Senior Member ......................[SGD]..................................................
Associate
Dated 27 October 2014
Date of hearing 24 September 2014 Date final submissions received 2 October 2014 Counsel for the Applicant Mr J Hyde Page Solicitors for the Applicant Dormer Stanhope Counsel for the Respondent Mr D McGovern SC and Prof R Graycar Solicitors for the Respondent Australian Government Solicitor
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