FEDERAL COURT OF AUSTRALIA Mulherin v Commissioner of Taxation [2013] FCAFC 115 Citation: Mulherin v Commissioner of Taxation [2013] FCAFC 115 Appeal from: [2012] AATA 557 Parties: HENRY MULHERIN v COMMISSIONER OF TAXATION File number: NSD 1384 of 2012 Judges: EDMONDS, GRIFFITHS AND PAGONE JJ Date of judgment: 23 October 2013 Catchwords: INCOME TAX – appeal from Administrative Appeals Tribunal – whether applicant was presently entitled to income of a resident trust estate – ground of appeal not competent – onus of proof: whether applicant has to show what his actual taxable income is – necessity to prove actual taxable income when assessment made under s 167 of Income Tax Assessment Act 1936 (Cth) – whether Tribunal erred in refusing applicant leave to give evidence otherwise than in person where applicant's credit in issue – whether such refusal denied applicant procedural fairness – no error in Tribunal's exercise of discretion and no failure to afford the applicant procedural fairness – whether applicant was a non-resident in a relevant year of income – no error of law engaged by amended notice of appeal Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44 Income Tax Assessment Act 1936 (Cth) ss 166, 167 Federal Court Rules 2011 rr 33.12, 33.15 Federal Court Rules 1979 O 53 r 3 Cases cited: Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 cited Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 cited Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) (2009) 181 FCR 152 cited Commissioner of Taxation v Dalco (1990) 168 CLR 614 followed Commissioner of Taxation v Rigoli [2003] FCA 784 cited Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 followed House v The King (1936) 55 CLR 499 cited Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1985–1986) 162 CLR 24 cited Pattenden v Federal Commissioner of Taxation (2008) 175 FCR 1 cited Polanski v Conde Nast Publications Ltd [2005] 1 All ER 945 cited TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 cited Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 Date of hearing: 5 August 2013 Place: Sydney (heard in Brisbane) Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 61 Counsel for the Applicant: Mr F Harrison QC with Mr AW Smith Solicitor for the Applicant: Irish Bentley Lawyers Counsel for the Respondent: Ms KA Mellifont QC with Mr PA Looney QC Solicitor for the Respondent: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1384 of 2012 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: HENRY MULHERIN Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGES: EDMONDS, GRIFFITHS AND PAGONE JJ DATE OF ORDER: 23 OCTOBER 2013 WHERE MADE: SYDNEY (HEARD IN BRISBANE) THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The applicant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1384 of 2012 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: HENRY MULHERIN Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGES: EDMONDS, GRIFFITHS AND PAGONE JJ DATE: 23 OCTOBER 2013 PLACE: SYDNEY (HEARD IN BRISBANE) REASONS FOR JUDGMENT THE COURT: INTRODUCTION 1 This an appeal from a decision of the Administrative Appeals Tribunal ("Tribunal") ([2012] AATA 557) affirming objection decisions of the respondent ("Commissioner") disallowing objections to income tax assessments for the years of income ended 30 June 1999 to 2007 inclusive ("years of income"). The income tax assessments for the years of income increased overall taxable income by nearly $26 million and imposed administrative penalties of nearly $11.3 million. 2 The appeal is brought pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("AAT Act") which provides that "[a] party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding". On 5 December 2012, the Chief Justice exercised his power, pursuant to s 44(3)(b)(ii) of the AAT Act, that it was appropriate for the appeal to be heard and determined by the Court constituted as a Full Court. 3 Rule 33.12 of the Federal Court Rules 2011 ("FCR") regulates the practice and procedure to be followed with respect to appeals from the Tribunal. It relevantly provides: (2) The notice of appeal must state: (a) the part of the decision the applicant appeals from or contends should be varied; and (b) the precise question or questions of law to be raised on the appeal; and (c) any findings of fact that the Court is asked to make; and (d) the relief sought instead of the decision appealed from, or the variation of the decision that is sought; and (e) briefly but specifically, the grounds relied on in support of the relief or variation sought. Note: The Court can only make findings of fact in limited circumstances—see section 44(7) of the AAT Act. 4 Rule 33.15 of the FCR provides: The applicant may apply to the Court for leave to raise, on the hearing of the appeal, a question of law that was not stated in the notice of appeal. Rule 33.15 relates only to raising a new question of law. It makes no mention (as does the heading to it) of relying on other grounds. 5 Rule 33.12(2) of the FCR is the successor to O 53 r 3(2) of the Federal Court Rules 1979 ("old rules"). In reference to the requirements imposed by O 53 r 3(2) of the old rules, Branson and Stone JJ in Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321, said (at [17] – [18]): [17] … Those requirements include that the questions of law raised by the appeal are to be stated separately from the grounds relied upon in support of the order sought on the appeal. [18] In our view, O 53 r 3(2) discloses an intention that a question of law to be raised on the appeal from the tribunal should be stated with precision as a pure question of law. In other words, a question of mixed fact and law will not suffice to ground jurisdiction, nor will a question of fact. 6 In Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 at 527, Ryan J indicated his view, undoubtedly correct, that merely to assert that the Tribunal had erred in law in making a particular finding was not to state a question of law. A little later his Honour said (at 527): [I]t simply begs the question of law to commence it with the words "whether the Tribunal erred in law." If the question, properly analysed, is not a question of law no amount of formulary like "erred in law" or "was open as a matter of law" can make it into a question of law. 7 Moreover, the question or questions of law must be engaged by the Tribunal in its reasons and decision such as to ground error, or not be so engaged by the Tribunal in error, to be "the subject matter of the appeal itself" in the sense referred to by Gummow J in TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178. 8 On 28 November 2012, the applicant was granted leave to amend his notice of appeal over the opposition of the Commissioner ([2012] FCA 1488). In doing so, the Court observed at [4]: The proposed amended notice of appeal does not strike me as so obviously deficient in statements of questions of law that a grant of leave should be refused. It is conceded on behalf of the Commissioner that there are at least some questions of law in the proposed amended notice of appeal. That being so, and subject, of course, to the grant of leave, the appeal would be competent. It would just be that some alleged questions of law may, on closer analysis, prove not to be so. In our respectful view, the Commissioner's concession and the Court's response was overly generous to the applicant. It is conceivable that a question of law was capable of being extracted from the material, but it was not stated with the clarity and definition necessary to engage the jurisdiction of the Court. 9 During the course of the hearing of the appeal on Monday, 5 August 2013, the Court raised with the applicant's senior counsel the issue of the competency of the appeal because of its concern as to whether the questions raised in the amended notice of appeal were pure questions of law and extended an invitation to him to reformulate the questions of law over the luncheon adjournment. This was attempted but the result fell short of the Court's expectations and the Court therefore extended the time within which a draft further amended notice of appeal was to be furnished to the Court, by way of application for leave to amend, until 5:00 pm on Wednesday, 7 August 2013. It gave the Commissioner two days in which to make submissions if he opposed the grant of leave. In the event, the draft further amended notice of appeal was not furnished to the Court until 8 August 2013. By letter dated 9 August 2013, the Commissioner indicated his opposition to leave being granted and the grounds upon which he did so. This elicited a response from the applicant's lawyers in the form of a letter dated 12 August 2013. 10 On 14 August 2013, the Court refused the applicant's application for leave to file and rely on a further amended notice of appeal in the form of the draft furnished and indicated that it would give its reasons for doing so at the time of giving judgment. 11 The Court refused the applicant's application for leave to file and rely on a further amended notice of appeal in the form of the draft furnished that is, incorporating new questions of law, because each new question was afflicted with one or more of the difficulties outlined below, rendering reliance on the further amended notice of appeal futile: (1) The question was not a pure question of law; (2) the facts on which the question was predicated did not accord with the findings of the Tribunal; (3) the answer to the question accorded with the Tribunal's conclusion and was not attended with any error, whether of law or otherwise; (4) the answer to the question did not accord with the Tribunal's conclusion, but there was no error of law; and (5) a misconception that a failure to take into account a relevant consideration involves an error of law even where the decision-maker was not bound to take the consideration into account: cf., Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1985–1986) 162 CLR 24 at 39–40 per Mason J. BACKGROUND 12 The factual background is largely uncontroversial and no ground of appeal was raised that there was no evidence to support the Tribunal's findings in respect of that background. They are set out at [1] – [12] of the Tribunal's Reasons ("R") and are reproduced, with adaptations, below. 13 In November 2002, an employee of LGT Bank in Liechtenstein AG ("LGT Bank"), a financial institution in Liechtenstein, unlawfully took an electronic copy of a great number of records of a subsidiary of that bank, LGT Treuhand AG ("LGT Treuhand"). In October 2006, that employee ("witness A") provided to the Commissioner three compact discs that contained information about LGT Treuhand's procedures and financial and other information that related to Australian residents. 14 One of those residents was the applicant. 15 In June 2008, using the data obtained about the applicant's affairs from witness A and having made various assumptions in using that data, the Commissioner made assessments and amended assessments of the applicant's taxable income for each of the years of income. 16 The applicant is an Australian citizen. He was born in Australia and is now aged 70 years. He undertook his professional medical training in Australia and postgraduate study in the United Kingdom. He practised his profession in Hong Kong for many years until the early 1990s when he sold his medical practice and retired from his profession. He then returned to Australia to enable his children to complete their education in this country. 17 The applicant has established a complex net of trusts and companies, some incorporated overseas, through which his financial affairs have been managed. The dealings with LGT Treuhand come within that category. In September 1995 LGT Treuhand was known as BIL Treuhand AG. In June 2009 it changed its name to Fiduco Treuhand AG. 18 In September 1995, the applicant instructed BIL Treuhand AG to set up the San Simeon Foundation ("the Foundation"). It was set up in Liechtenstein on 5 October 1995 with an initial endowment capital of CHF 30,000. It opened an account with the LGT Bank. It is common ground that central management and control of the Foundation was in Australia during each of the years of income in these proceedings. On the applicant's own case, all or most decisions with respect to the investments of the Foundation's funds were made by him. 19 The applicant lodged income tax returns disclosing modest amounts of taxable income in each of the years between 1999 and 2003. He did not lodge returns in the 2004, 2005, 2006 and 2007 years of income. The returns as lodged did not disclose any income attributable to the investments with the LGT Bank or income arising from the Foundation. 20 Witness A provided the LGT documents (as they have been described in the material) to the Commissioner in October 2006. The Commissioner commenced an audit of the applicant's activities in July 2007. The applicant was in Australia from 17 July 2007, however, he departed Australia on 14 August 2007 and has not since returned. He says that he is now, and has been from the 2007 year of income, a resident of Singapore. 21 Included with the LGT documents were statements of the assets of the Foundation as at 31 December 1999 and as at 31 December 2001. The balance of account 0110396 shown in the former was US $3,792,277.23; and in the latter it was US $5,974,321.51. The Commissioner calculated (correctly) that the balance had increased by a little over 51% in that period of two years. He then treated that annual increase, an amount of just in excess of 25%, as the rate of return on the account of the Foundation for each of the years of income and made assessments, or amended assessments, of taxable income for each of the years of income from 1999 to 2007 on the basis that in each of those years there was undisclosed income of the applicant in an amount calculated by reference to that assumed rate of return. Those assessments or amended assessments were evidenced by notices dated 30 June 2008. On 31 July 2008, the Commissioner made assessments of administrative penalty at a rate in excess of 90%. The "intentional disregard" rate of 75% was imposed and then increased by 25% by reason of aggravating factors. 22 On 29 August 2008 the applicant objected to the assessments and amended assessments for the 1999 to 2006 years of income and to the assessments of administrative penalty. By and large his objections were disallowed by letter dated 4 August 2009, however, certain arithmetic errors were detected and corrected by notices of amended assessment all dated 16 September 2009. The applicant objected to the 2007 assessment by notice dated 7 December 2009. That objection was disallowed on 29 June 2011. It is the Commissioner's objection decisions of 4 August 2009 and 29 June 2011 that were the subject matter of the proceedings before the Tribunal. IN THE TRIBUNAL The applicant's evidence 23 The applicant did not give evidence. Prior to the substantive hearing, the applicant had made three applications to give evidence other than in person. His first application to give evidence by video conference was refused for the reasons given in [2011] AATA 837. His second application to have his evidence taken on commission in Singapore, was also refused for the reasons given on 18 May 2012 (unpublished). His third application to give evidence by video link or be taken on commission in Singapore was refused for the reasons given in [2012] AATA 450. The applicant's amended notice of appeal filed with the leave of the Court on 5 December 2012 raises questions as to whether the Tribunal's refusals were "good in law"; whether the Tribunal failed to give the applicant a "reasonable opportunity" to present his case, as required by s 39(1) of the AAT Act, and whether he was, in the circumstances, denied procedural fairness. Reliance is placed on corresponding grounds that the Tribunal erred in refusing the applicant's applications. The applicant's appeal on these questions and grounds are addressed at [47] – [55] below. Contentions 24 At R [31], the Tribunal observed that in his final submissions, the applicant confined his case to three contentions. This was not disputed on appeal. The contentions were: (1) The applicant was not presently entitled to any of the income of the Foundation during any of the years of income; (2) the assessments for each of the years of income are demonstrated to be excessive, (i) generally, by reference to the evidence of Mr Steven Ponsonby; (ii) in particular, by reference to what is said to be the balance of the Foundation's account as at 22 July 2002; and (3) the applicant was not a resident of Australia, and thus not liable to pay income tax on foreign source income, in the 2007 year of income. The Tribunal observed that the applicant did not challenge the correctness of the penalties imposed nor put in issue the Commissioner's entitlement to make amendments to his earlier assessments in the 1999–2003 years of income. Reasoning Present entitlement 25 As to the issue of present entitlement, the Tribunal noted that (at R [32]): The applicant accepts that the Foundation is a resident trust estate for the purposes of s 95(2) of the Income Tax Assessment Act 1936 (Cth) (the ITA Act 1936). That is the premise of the assessments. And it is common ground that the applicant was liable to pay tax on the income of the Foundation (subject to the residence argument in the 2007 income year) if he had been then "presently entitled" to the income of the Foundation. 26 The Tribunal summarised the respective contentions on "the present entitlement" issue at R [34] as follows: (1) The applicant said that he was not then presently entitled because he was "neither vested in interest or vested in possession relative to the [Foundation's] income". (2) The Commissioner contended either that the evidence demonstrated that the applicant was presently entitled or, in the alternative, the applicant did not discharge the onus of showing that the assessments were excessive by reason that he was not then presently entitled. 27 In concluding at R [47] that the applicant was, at all material times, presently entitled to the income of the Foundation, the Tribunal embarked on a process of reasoning at R [35] – [46], the salient features of which were as follows: (1) The Tribunal noted that the applicant produced no documents that evidenced the nature of the relationship between the applicant and the Foundation; all that existed were the copies of documents produced by witness A. The Tribunal expressed surprise at that absence and also the absence of an explanation for that absence given the applicant's evidence of his involvement with LGT Treuhand and his Statement of Facts, Issues and his Contentions: R [36]. (2) The evidence of the two Liechtenstein lawyers who gave evidence – Mr Florian Zechberger (called by the applicant) and Mr Gerd Jelenik (called by the Commissioner). The Tribunal noted (R [37]) that Mr Zechberger did not disagree with Mr Jelenik's conclusions: (a) that the applicant was the "economic founder" of the Foundation; (b) that the applicant was the sole primary beneficiary of the Foundation for life and thus, during his lifetime, he was "the entitled sole beneficiary to receive any distributions coming from the assets or income of the Foundation"; and (c) that the applicant was a discretionary beneficiary because the Board of the Foundation was entitled to decide "the volume of beneficiary right". (3) It further noted that where there was disagreement was on the question whether the applicant could compel any payment from the Foundation. Mr Jelenik came to the conclusion that the documents allowed for an inference to be drawn that the applicant could direct the Board of the Foundation. Mr Zechberger was of the opinion that the applicant had no right to demand and receive distributions of the Foundation and had no such right at any time from 1 July 1998 to present: R [38]. (4) The Tribunal placed considerable reliance on a document called "Agency Agreement", between the applicant and LGT Treuhand, only one page – number 1 – was in evidence. In doing so, the Tribunal accepted the evidence of Mr Jelenik that it was likely that the additional pages of the document contained provisions along the lines of the pro-forma agency agreement located amongst the electronic copies provided by witness A: R [39]. (5) The Tribunal accepted that while there was no direct evidence that a document in that form was executed, such documents as exist, referable to the Foundation, demonstrated that the execution of a document of that nature was contemplated by the parties at some stage: R [43]. The Tribunal noted (at R [44]) that the pro forma agency agreement contained the following clause: LGT Treuhand as well as the persons appointed by it undertake to act expressly in accordance with the instructions issued by the Principal or by persons authorised to act on behalf of the Principle [sic]. And concluded that if, as is likely, the applicant executed an agency agreement containing such a clause there is no doubt that he was presently entitled. The Tribunal did not understand the applicant to submit to the contrary if that were the conclusion that it reached. 28 Finally, the Tribunal concluded at R [47] that even without reference to Mr Jelenik's opinion, it would not have been satisfied that the applicant was not presently entitled to the income. It said: Given that [the applicant] bears the onus of showing that the assessments are excessive I do not consider him to have discharged that burden when he does not produce the documents that explain the nature of the relationship between him and the Foundation (nor explain that there are none). Were the assessments excessive? 29 In relation to this issue, the Tribunal, at R [48], made the following observations concerning the manner in which the Commissioner went about calculating his taxable income of the years of income: The [Commissioner's] assessments were undertaken on a fairly unsophisticated basis. The increase in the assets of the Foundation between 31 December 1999 and 31 December 2001 was taken to be entirely attributable to income earned by the Foundation. The increase in "income" over that two year period was then applied on a compounding basis across each of the income years from 1998 to 2007. The effect of this, as the applicant's submissions observe, is that the assets of the Foundation were assumed to have increased from US $5.9m in December 2001 to US $20.9m by 30 June 2007, obviously an extraordinary increase. 30 The Tribunal then referred to the way in which the applicant sought to discharge the onus to show that the assessments were excessive. At R [49] and [50] the Tribunal observed: [49] The applicant called evidence from Mr Steven Ponsonby, a chartered accountant, to demonstrate that the respondent's calculations could not possibly be correct. Mr Ponsonby concluded that the respondent's methodology was flawed. That was so, he said, (a) because it assumed a consistent annual rate of return in excess of 25% which could only be true in a rising investment market; (b) because it assumed that any future capital contributed was income; (c) because it did not consider capital losses or withdrawals; and (d) because reference to benchmarks demonstrated that the average rate of return over those years was 7.23%. [50] Additionally, the applicant relied on a document produced by witness A which that witness said records that the Foundation had asset values as at 22 July 2002 of CHF 1,910,178 (US $1,324,689). This amount of the "real assets" of the Foundation was contrasted with the [Commissioner's] assumed value on that day of US $6,829,390. 31 The Tribunal then observed at R [51]: All of this may be accepted. It is certain that the [Commissioner's] assessments are not correct. But the cases demonstrate that it is not enough for a taxpayer to show error in the [Commissioner's] assessment; the taxpayer must also show what the actual taxable income was. That was a burden that the applicant here did not discharge. 32 The Tribunal then referred to what was said by Sir John Latham in Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87–88; by Brennan J in Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 619 and 625 and by Toohey J at 631 in the same case, and noted at R [54] that all other members of the Court (Mason CJ, Deane, Dawson, Gaudron and McHugh JJ) agreed with the reasoning of Brennan J and Toohey J. 33 The Tribunal then concluded at R [55]: The same reasoning applies to the present applicant. It is certain that the [Commissioner's] assessments are not correct; but the applicant has not shown what his taxable income actually was. On the view I take of the matter he was presently entitled to the income of the Foundation. He has made no attempt to show what the actual income of the Foundation was during any of the relevant years. This is not a case where all the relevant facts are known and the resolution of the proceedings depended upon the legal analysis of those facts. It is a case where the [Commissioner] has proceeded upon an intelligible basis to make an estimate of taxable income on the material available to him in circumstances where the applicant has chosen not to provide any information about the actual income of the Foundation. It is undoubtedly the case that the [Commissioner's] assessments are not correct but the applicant has not shown the taxable income on which tax ought to have been levied. It follows that he has not shown that the assessments are excessive. Was the applicant a non-resident in the 2007 year of income? 34 The issue here was whether the applicant was a resident of Australia in the 2007 year of income by reason of being "a person … who resides in Australia", as the Commissioner asserted he was, or whether, as the applicant asserted, he was not, having departed Australia with the intention of living in Singapore on 28 June 2006. 35 In both assessing the applicant, and before the Tribunal, the Commissioner relied solely on the premise that the applicant was a resident of Australia in the 2007 year of income by reference to ordinary concepts, and did not rely on any extended definition of the term in s 6(1)(a) of the Income Tax Assessment Act 1936 (Cth) ("ITAA 36"). So confined, the issue was one of fact. The Tribunal canvassed the respective arguments put forward by the applicant and the Commissioner predicated, as they were, on the applicant's biographical, family, economic and other interests and history at R [59] – [67], and then expressed its conclusion at [68] and [69] in the following terms: [68] I am, in the end, not satisfied that the applicant has discharged the burden of showing that he was not a resident of Australia during the 2007 income year. As it seems to me one way of looking at the question is to compare what is known about the position prior to the end of June 2006 and the position that is demonstrated thereafter. The applicant appears to accept that prior to 28 June 2006 he was a resident of Australia, at least that is how he described himself on incoming and outgoing passenger cards prior to that date. All that appears to have changed thereafter are the notations made by the applicant on passenger cards and the fact of the acquisition of a residential property in Singapore. [69] As to the first of those matters I accept, as the [Commissioner] submits, that the applicant's absence from the witness box means that he has not been able to be cross-examined on the motivation behind the change in his description of his residence and all other material that would tend to point to a contrary conclusion. And, as to the second, the fact of acquisition of a residential property in Singapore did not prevent the applicant from occupying a residential property in Australia for a period, in total, in the order of five months of that year in exactly the same way that he had during the period when he accepts that he was a resident of Australia. The fact of the applicant's continuing business activities in Australia, the fact that documents concerning his business affairs continued to be addressed to him at the Australian residence where he had lived for many years and to describe his Australian address as his residence, the fact that so little changed after June 2006, lead me to the conclusion that I am not satisfied that the applicant has discharged his onus. THE AMENDED NOTICE OF APPEAL: GROUNDS AND ALLEGED QUESTIONS OF LAW Present entitlement 36 This ground provided: The Tribunal should have held that the applicant was not presently entitled to any of the income of the Foundation (para 29). The following questions of law were said to be engaged: (1) Did the Tribunal err in law in accepting Dr Jelenik's opinions, rather than itself deciding the question of what were the terms of the Agency Agreement as a matter of inference or from facts found by the Tribunal? (para 5) (2) Did the Tribunal err in law in accepting the speculative contentions as evidence, they being opinions on matters going beyond Dr Jelenik's declared expertise as a person qualified to advise on Liechtenstein law? (para 6) (3) In the absence of a finding that under the terms of the instruments establishing the Foundation ("the Trust Deed") and under Liechtenstein law, the trustee could bind itself as to the future exercise of its discretionary powers, that is to say, could bind itself to act in accordance with instructions issued by the applicant, as provided (as found by the Tribunal) in the Agency Agreement, does the finding that the Agency Agreement would have contained a provision requiring the Trustee to act in accordance with instructions issued by the applicant, and that the Trustee would act in accordance with instructions issued by the applicant, justify the finding (R [44]) that the applicant was presently entitled to the income of the Foundation? (para 7) (4) In the absence of a finding that the applicant had directed the Trustee to pay him that income or to hold it on his behalf, does the finding that the Agency Agreement would have contained a provision requiring the Trustee to act in accordance with the applicant's instructions and thus that the applicant had the capacity to require the trustee to exercise its discretion in his favour, and that the Trustee would act in accordance with such instructions, justify the finding (R [44]) that the applicant was presently entitled to the income of the Foundation? (para 8) 37 All of these questions are concerned with and put in issue the Tribunal's process of reasoning whereby the Tribunal reached the conclusion at R [47] that the applicant was, at all times material, presently entitled to the income of the Foundation. None of them is a question of law in the terms required for a competent appeal, and the first two do not achieve that status by being prefaced: "Did the Tribunal err in law…". 38 While the indicia of what constitutes "present entitlement' for the purposes of Div 6 of Pt III of the ITAA 36 is a question of law, the issue of whether a beneficiary of a trust estate is presently entitled to the whole or part of the net income of that trust estate will always be a question of mixed fact and law. 39 In any event, the Tribunal, even without reference to Mr Jelenik's opinions, was not satisfied that the applicant was not presently entitled to that income because, due to his failure to produce the documents that explained the nature of the relationship between him and the Foundation, it did not consider him to have discharged the burden of showing that the assessments were excessive: R [47]. This lack of satisfaction was not asserted to be infected with error of law and was not raised as a ground of appeal. 40 This ground of appeal is not competent. Onus of proof 41 This ground provided: If the applicant was presently entitled to the income of the Foundation, the Tribunal erred in finding that the applicant had not discharged the onus of proof for want of showing "what his taxable income actually was" (R [55]), instead of finding that on the balance of probabilities the applicant's income was less than that assessed (para 30). It is said to engage the following question of law (para 11): If the applicant was presently entitled to the income of the Foundation, was the Tribunal correct in law, having concluded that there was error in the respondent's assessment [R [51] and R [55]], in holding that the applicant must show what the actual taxable income was [R [51] and R [55]], or should it, instead, have considered the evidence before it that showed, without proving a precise figure for the income of the Foundation, that the amount of income was probably less than the amount assessed? That is to say, did the Tribunal err in law in concluding (at R [51]) that: [T]he cases demonstrate that it is not enough for a taxpayer to show error in the respondent's assessment; the taxpayer must also show what the actual taxable income was. That was a burden that the applicant here did not discharge. 42 The short answer to this question is that the Tribunal did not err in law in stating that it is not enough for a taxpayer to show error in the Commissioner's assessment; the taxpayer must positively prove his or her "actual taxable income" and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623 – 625 per Brennan J; Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 at [63]. Unless he does so, the taxpayer has not discharged the burden of proving the assessment is excessive. 43 While the Tribunal's reasons make no reference to the basis upon which the relevant assessments and amended assessments were made, it is clear that they were made under the authority conferred on the Commissioner by s 167 of the ITAA 36. In the case of the 1999 to 2003 years of income, on s 167(b) – if the Commissioner is not satisfied with the return furnished by any person – and in the case of the 2004 to 2007 years of income on s 167(a) – if any person makes default in furnishing a return. 44 Gashi was, of course, based upon the asset betterment basis of calculation, however, as was pointed out recently by Pagone J in Commissioner of Taxation v Rigoli [2013] FCA 784 at [8]: The need … for a taxpayer to prove the "actual taxable income" in order to establish the excessiveness of an assessment made under s 167 was not so much that the assessment in Gashi was based upon the asset betterment basis of calculation as that it was made under s 167 where the "process of calculating taxable income as assessable income minus deductions is not possible (in whole or in part)". The figure arrived at by the Commissioner under s 167 may in any given case be based upon calculations similar to those where the taxpayer has furnished a return under s 166, but an assessment under s 167 is fundamentally different from one under s 166. A taxpayer seeking to establish that an assessment under s 167 is excessive needs to establish not that some element in the assessment is wrong but that "the amount upon which in [the Commissioner's judgment] income tax ought to be levied" was the taxpayer's actual taxable income. The primary obligation of a taxpayer is to furnish a return of income under s 166 and an assessment under s 167 does not provide a means by which taxpayers may be relieved of their obligation to establish their actual taxable income… 45 As was observed by Brennan J in Dalco at 624, the manner in which a taxpayer can discharge the burden of proving that an assessment is excessive is not defined or specified – it varies with the circumstances. In the present case, it may have been possible for the applicant and the Commissioner to agree to confine the issue of the amounts on which the assessments depended to the income of the Foundation in each of the years of income, in which case the applicant may have discharged the onus of proving his assessments were excessive by proving the actual income of the Foundation in each of those years. But obviously, that was not a course which the applicant was prepared to embrace. 46 For these reasons, this ground of appeal must be rejected. AAT Act: Sections 33(1)(b); 33(1)(c) and 39(1) 47 This ground provided: The tribunal erred in refusing to allow the applicant to give evidence by video link or on commission in Singapore: paras 31 – 33. Alternatively, it was alleged that the Tribunal's refusal amounted in the circumstances to a denial of procedural fairness (para 34). 48 The following questions of law were said to be engaged: (1) Was the Tribunal's refusal to allow the applicant to give evidence by way of video link or on commission in Singapore good in law under s 33(1)(a) despite ss 33(1)(b) and 35A? (para 15) (2) Was the Tribunal's refusal to allow the applicant to give evidence by way of video link or on commission in Singapore good in law under s 33(1)(a) despite ss 33(1)(c) and 35A? (para 17) (3) Does s 33(1)(a), in light of ss 35A and 39, allow the Tribunal to exclude evidence (as it did) on the grounds of form rather than that the proffered evidence lacked probative value? (para 19) (4) In particular, did the Tribunal, by requiring that the applicant submit himself to the risk of being prohibited from leaving Australia by a departure prohibition ("DPO") if he attended to give evidence in person, by denying him the means of avoiding such risk, fail to give the applicant the reasonable opportunity required by s 39(1), and in particular, did the Tribunal err in: (a) basing its decision on the Tribunal's view of the risk rather than on the applicant's belief (it not being a fanciful belief) that there was such a risk; (b) failing to treat as relevant the refusal of the Commissioner to undertake not to apply for such an order during the applicant's stay in Australia for the purposes of the proceedings; and (c) failing to have regard to the Commissioner's past conduct in respect of such orders as adverted to before the Tribunal and as otherwise known to informed members of the community (cf., Pattenden v Federal Commissioner of Taxation (2008) 175 FCR 1 and subsequent proceedings); (d) failing to apply the reasoning of the House of Lords in Polanski v Conde Nast Publications Ltd [2005] 1 All ER 945 (para 20). (5) In the alternative, did the Tribunal's refusal to allow the applicant to give evidence by video link or on commission amount in the circumstances to a denial of procedural fairness? (para 21) 49 The AAT Act relevantly provides: 33 Procedure of Tribunal (1) In a proceeding before the Tribunal: (a) the procedure of the Tribunal is, subject to this Act and the regulations and to any other enactment, within the discretion of the Tribunal; (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; and (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. … 35A Participation by telephone etc. (1) A person holding a directions hearing and 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. … 39 Opportunity to make submissions concerning evidence (1) Subject to sections 35, 36 and 36B, the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case … 50 It was not put in issue that the Tribunal had a discretion as to whether or not it allowed the applicant to give evidence by way of video link or on commission in Singapore. 51 A reading of the reasons of the Tribunal in [2011] AATA 837 makes it clear that the main or fundamental consideration underlying its refusal of the applicant's request to give evidence by video link was the fact that the applicant's credit was "very much in issue" (at [11]). Indeed, if this Court were faced with such a request in similar circumstances, we have no doubt the answer would be the same. So much is exemplified in the Tribunal's reproduction of what Buchanan J said at [77] and [78] of his reasons in Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) (2009) 181 FCR 152. 52 A reading of the reasons of the Tribunal given on 18 May 2012 makes it clear that had the application for the applicant's evidence to be taken on commission in Singapore been made earlier, it "may well have been considered more favourably however it having been made for the first time two weeks prior to the scheduled start of the hearing the undoubted consequence of granting the application would be a further adjournment of these proceedings", which had been on foot for a considerable period of time (at [11]). 53 It was not suggested, at least expressly, that in exercising its discretion to refuse the applicant's request to give evidence otherwise than in person, the Tribunal's discretion miscarried in the sense referred to in House v The King (1936) 55 CLR 499 at 504 – 505: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. That is what must occur before the Tribunal could be said to have erred in law in exercising its discretion in the way it did. 54 Equally, the Tribunal's decisions in this regard do not fail to give the applicant a reasonable opportunity to present his case as required by s 39(1) of the AAT Act any more than they deny the applicant procedural fairness. 55 For these reasons, these grounds must also be rejected. Residence during 2007 year of income 56 This ground provided: The Tribunal erred in failing to find that the applicant was not a resident of Australia, either for the whole, or for part, of the 2007 year of income (para 35). 57 The following question of law was said to be engaged (para 22): Did the Tribunal err at [sic] law in finding (para 68) that the taxpayer was a resident of Australia in the 2007 year of income and, in particular, in: (a) failing [to] give adequate reasons for his conclusions as to residence, in that the Tribunal's reasons do not disclose whether or not the Tribunal applied the correct test in the present case under the definition of "residence" in s 6(1) of the Income Tax Assessment Act 1936, that is to say, whether the applicant was resident in Australia according to ordinary concepts, or was domiciled in Australia without his permanent place of abode being in Singapore; (b) failing to take into account that the applicant acquired a permanent place of abode in Singapore pursuant to an option to purchase entered into on 4 July 2006, exercised 11 August 2006 and settled 31 October 2006; (c) failing to take into account the fact that it had previously found ([2011] AATA 837 [1]) that the applicant was a resident of Singapore, so that the question was not whether the evidence showed that he had become a resident of Singapore but rather, accepting that he had, whether on the evidence before the Tribunal, it was more probable than not that he had became [sic] such a resident before the start of the 2007 financial year, or in the alternative 31 October 2006; (d) failing to give weight (as evidence of the applicant's state of mind) to the applicant's statement in his Immigration Departure Card completed on 28 June 2006 that he was an "Australian resident departing permanently"; (e) wrongly treating as probative (in particular, because the applicant did not have the opportunity to explain them once they became an issue) the facts that: (a) the applicant had not obtained permanent "residency" in Singapore (para 62); (b) lawyers in Singapore had written to him at the Pullenvale property owned by his wife as trustee (para 64); (f) giving weight to the absence of explanation from the applicant as to such matters in the circumstances where the absence of such evidence was explained by the taxpayer's fear of being subject to a DPO and where the Tribunal had refused to allow the taxpayer to give evidence by video link or on commission in Singapore? (para 22) 58 Whether or not the Tribunal made any of the errors it is alleged to have made, any errors so made are not errors of law. The Tribunal certainly did not make a finding as to the applicant's residence in the 2007 year of income at [1] of [2011] AATA 837. The Tribunal was there speaking of the applicant's residence at that time – 2011. 59 The only issue under this head that was before the Tribunal was whether the applicant resided in Australia during the 2007 year of income. The Tribunal concluded that he did for the reasons given at R [59] – [70]. To that end, the Tribunal's reasons were certainly adequate; if it failed to take account of any matters, it was not required by the statute to take those matters into account; or if it failed to give appropriate weight to a matter, or gave inappropriate weight or probative value to a matter, that is not to err in law. 60 For the reasons given earlier, this ground of appeal is incompetent. CONCLUSION 61 The appeal must be dismissed with costs. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Edmonds, Griffiths and Pagone. Associate: Dated: 23 October 2013