CATCHWORDS Taxation - unpaid company tax - promoters tax - appeals against assessments of promoters tax pending in Court's list - appellants threatened with possibility of criminal proceedings involving similar questions to those which would arise in the appeals - applications for adjournment of appeals pending outcome of criminal proceedings - relevant principles - matters taken into account in exercise of discretion. Taxation (Unpaid Company Tax - Promoters) Act 1982 Taxation (Unpaid Company Tax) Assessment Act 1982. s. 4 Income Tax Assessment Act 1936, ss. 177. 190, 201. RICHARD EDWARD BAKER: RE FLATWASH PTY LIMITED v. THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA No. G447 of 1986 PETER ANTHONY HUGHES: RE J.F. POWELL INVESTMENTS PTY LIMITED v. No. G458 of 1986 Coram: Sheppard J. Date : 13 May 1987 Place: Svdney eye wee FY ses eter et eer ey , ' ote "4, ayes BIR a : — my "y . Bere re Te Te te er 3 ' : > IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) } ) GENERAL DIVISION SHEPPARD J. SYDNEY : 13 MAY 1987 No. G447 of 1986 BETWEEN : RICHARD ENWARD. BAKER: RE FLATWASH PTY LIMITED Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent No. G458 of 1986 BETWEEN : PETER AN'THONY HUGHES: RE J.F. POWELL INVESTMENTS PTY LIMITED Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Responden MINUTES OF ORDER IN EACH CASE THE COURT ORDERS THAT: - lL. The Notice of Motion of 24 Februarv 1987 be dismissed. wee von pe ' * eo a wae aed 2. The applicant Notice of Motion. NOTE: Settlement and 2. entry of orders is dealt of the Federal Court Rules. (appellant) pay the respondent's costs of the with in Order 36 proceso wee crew wasrtre ccm mpg > IN THE FEDERAL COURT OF AMSTRALTA ) NEW SOUTH WALES DISTRICT REGISTRY ) ) } GENERAL DIVISTON CORAM: SHEPPARD J. DATE : 13 MAY 1987 No. G447 of 1986 BETWEEN : RICHARD EDWARD RARER: RE FLATWASH PIY LIMITED Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALTA Respondent No. G458 of 1986 BETWEEN : PETER ANTHONY HUGHES: RE d.F. POWELL INVESTMENTS PTY LIMITED Appellant AND: THE COMMISSIONER OF TAXATION OF _THE COMMONWEALTH OF AUSTRALTA Resvondenk we REASONS FOR JUDGMENT HIS HONOUR: There are pending in the list a number of appeals rs foe Or rror Pod 2. brought by Mr. Richard Baker and Mr. Peter Hughes. The appeals are against assessments made by the Commissioner of Taxation of tax said to be pavable pursuant to the Taxation (Unpaid Company Tax - Promoters) Act 1982. Relevant to that legislation are the provisions of other taxing Acts, namely, the Taxation (Unpaid Company Tax - Vendors) Act 1982 and the Taxation (Unpaid Companv Tax) Assessment Act 19982. Ik is for what I may call promoters tax that Messrs. Baker and Hughes have been assessed and it is against those assessments that they have appealed. ct Section 4 of the Taxation (Unpaid Campanv Tax Assessment) act 1D Les] applies the provisions of Parts IV and V of the Inc La) TH ax Assessment Act 1934 to assessments, inter alia. of promoters tax. Those Parts deal respectivelv with returns and assessments and objections and appeals. Section 177. which is in Part IV. provides in effect that the production of a notice of assessment or of a document under the hand of the Commissioner. the Second Commissioner or a Deputy Comminsinner, oucporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and. except in proceedings on appeal against the assessment, that the amount and all the particulars of the assessment are correct. The appeal procedure is provided for in Part V., as I have indicated. Amongst the sections which are contained in that Part 15 s. 190 which in para. (b) provides that upon everv reference or appeal the burden of vroving Enat the assessment is excessive shall Lie upon the taxnaver. Also in Part V is s, 201 which provides that the fact that an arnreal or reference is pending, shall not in the meantime intecfere with or affect the assessment the subiect of Ehe appeal or reference and wm te pce ces om my rye egies ee aN steer nee = ao eon ane hao sere wee ne 3. income tax may be recovered on the assessment as if no appeal or reference was pendina. There have been directions hearings in relation to the various appeals. From time to time it has been mentioned that the Director of Public Prosecutions, through one or other of his officers or members of the Australian Federal Police. has indicated, either to Messrs. Baker and Hughes themselves, or to persons who represent them, that criminal proceedings will or may be instituted against them apparentiv in relation to matters which raise issues similar to those which will arise for determination in the appeals. The solicitors for Messrs. Baker and Hughes have sought the aqreement of the Commissioner of ct wv Taxation to the adjournment of the appeals pending either th ts) gutcome of any criminal proceedings or the provision by th Director of Public Prosecutions of a clear statement that no criminal proceedings will be instituted. The Director is apparently wunwillina to provide such a statement and the possibility, perhaps even the probdabilitv, of criminal proceedings remains. It should be said at this point, that although the Director ef Public Prosecutions and the Commissioner of Taxation are both emanations of che Commanwealth, each has his own area of responsibility and the Commissioner of 'Taxation is not &o be identified with the Director of Public Prosecutions. The two offices are separate and distinct and the Commissioner certainly has no control or ability fo influence the Director in decidindg whether or not there should be anv criminal prosecution. wn oee 4, Eventually, the solicitors for Messrs. Baker and Hughes took out motions seeking an adjournment of the appeals in matters number G447 of 1986 and G458 of 1986, the first being an appeal brought by Mr. Baker and the second an appeal brought by Mr. Hughes. It is aqreed that the determination of these motions will determine not only whether the proceedings No. G447 of 1986 and G458 of 1986 should be adiourned, but also whether each of the appeals in the other similar matters will be adjourned. The motions were fixed for hearing for todav. In support of each there has been sworn an affidavit by the solicitor tor Messrs. Baker and Hughes in which he sets out the relevant matters. Wo objection was taken to anv part of the affidavits except in one minor respect to which I need not refer. There has been no cross-examination and the Commissioner has not led anv evidence in opposition to the applications. The basis for the applications for adiournment is that, in accordance with proper principles, the civil proceedings, being the appeals aqainst the assessments of promoters tax, should await the outcome of the criminal proceedings if they wre Lo be inslibubted, of a clear indication from the Direckor of Public Prosecukions cthak there are to be no criminal proceedings. The principles which applv., in what I might call a conventional case. are propounded by Wilcox J. in Cameron's Unit Services Ptv Limited v. Whelpton & Associates Pty Limited (1984) 59 A.L.R. 754. His Honour there made a useful collection of the relevant authorities including Jefferson Limited v. Bhetcha C19793 12 W.L.R. 898, Rochfort v. John Fairfax & Sons Limited (19723 1 N.S.W.L.R. 16. McMahon v. Gould (1982) 1 A.C.L.C.: 7 era teeny ee ee nee rep ree ee 5. A.C.L.R. 202. Re _Salteraate Insurance Co. Limited (1980) 4 A.C.L.R. 732 and Beecee Group Limited v. Rarton (1980) 5 A.C.OU.R. 33. I propose to accept the law as it is stated by Wilcox J. in his judament in the Cameron case and in the cases which he has applied and to which I have referred. It was not suggested bv either counsel that I should do otherwise. The facts in relation to the criminal proceedings are meagre. This is perhaps understandable in the light of the fact that the solicitor for Messrs. Baker and Hughes could not be expected to know the nature. at least in any detail, of what is proposed to be alleged in the proceedings. Furthermore, the Commissioner, although perhaps he mav have some knowledge of what may be proposed because of some Liason between himself and the Director of Public Prosecutions of which there is 15 no evidence. will not be a party to them and 1s not directly concerned or really concerned at all. as I have earlier said, with their prosecution. However, amongst the documents which are annexed to the affidavit in each case is a copy of a search warrant which refers to a number of companies including Halaran Pty Limited and Timentas Pty Limited. The first of these companies is referred to in a letter from the Australian Taxation Office indicating the amount and make-up of the promoters tax to be paid by Mr. Huahes. The second company is referred to ina similar letter written to Mr. Baker. The search warrant aoes on to refer to the basis upon which the search warrant 1s sought bv saving that documents relating to the companies I have mentioned, amongst others, "will afford evidence of the commission of offences by all or some of worse Vw ele BP ee ener ere oe re maar yr. fi 6. the persons against laws of the Commonwealth by entering into agreements to strip profits" from target companies rendering those companies incapable of paying their tax liabilities. namely (1) offences against para. 986(1)(a) of the Crimes Act 1914, that is to say conspiracy to commit an offence against a law of the Commonwealth. to wit s. 231 of the Income Tax Assessment Act 1936: (2) offences against para. 86/(1)(e) of the Crimes Act 1914, that is to sav conspiracy to defraud the Commonwealth: and (3) offences against s. 231 of the Income Tax Assessment Act 1936, to wit, by any wilful act, default or neglect or by any fraud, art or contrivance whatever to avoid or attempt to avoid assessment of taxation. No particulars of the matters of fact relied upon in support of such charges are given either in the search warrant or elsewhere, and the precise nature of the offences which are or may be alleged can only be the subject of conjecture. This case is different from the conventional case which usually concerns the courts in this area. such as the Cameron Unit case to which I have referred. It is different because here, at least as a matter of form. the moving varties. Messrs. Baker and Hughes. are the persons who seek the adjournment of the proceedings. In the more usual situation it is a defendant who is proceeded against by a plaintiff who seeks the exercise of the court's discretion to stav or adjourn proceedings. I think, however. that this difference is not a difference of substance or, 1£ it be so, not such a difference of substance as to make the ordinary principles inapplicable. In the end it is a question of considering what should be done in the overall interests of the administration of justice, that is to sav 7. justice to the parties to the litiaation., in these cases either Mr. Baker or Mr. Hughes and the Commissioner of Taxation. in addition to being referred to the decision of Wilcox J. in the Cameron Unit case and the cases there mentioned, I have been referred to the decision of Ryan J. in Ahern v. The Commissioner of Taxation (14 April 1986, unreported). His Honour did not approach the matter any differently from the way it has been approached in more conventional cases. I propose to take the same course. The first matter which counsel for Messrs. Baker and Hughes relied upon was the fact that. pursuant to s. 201 of the Income Tax Assessment Act as applied by the Taxation (Unpaid Companv Tax) Assessment Act, the amounts of the assessments were recoverable and that the notices of assessment were. pursuant to s. 177, conclusive evidence of the amount due and payable thereunder, The only way the conclusive nature of the assessments could be challenged was by an appeal under Part V in which the appellants carried the onus of proof. But the Commissioner could proceed to obtain ludgment for the amount notwithstanding that the appeals were pending. Although he has taken no steps in this reqard, it was said that if he did and recovered judgment. he would not be preiudiced because he would have the amount of the assessments with the conseauence that the appeals could wait until the position in relation to criminal proceedings became clear. I appreciate the force of the matters upon which counsel relies. But the appeals are pending in the Court's list. The Yee eS ee ree - re Bae ie ee roe prenaes ow 8. fact that the Commissioner may, 1n recovery proceedinas, recover the amounts of the assessments relying for evidentiary purposes on s. 177, does not seem to me to provide a reason why these applications for adiournment should be aranted. Counsel then turned his attention to what is known as the right of silence of an accused person. He pointed to the difficulty which confronts a person bound to make a positive case but who is facing criminal proceedinas. If he qoes into evidence, the evidence he gives may be used in the criminal proceedings. This was a matter discussed at some lenath by Wilcox J. in the Cameron case. It has also been the subject of discussion in a number of cases to which he referred. Eventually his Honour said (p. 760):- "The 'right of silence' is a right which a person has in relation to present or anticipated criminal proceedings. As a matLer of evervday experience, suspects or accused persons waive the right by giving an explanation of their conduct during the course of interrogation by police or other investigating authorities or in evidence at their trial. No doubt the riaht is often waived incautiously or through iaqnorance, but is also deliberatelv waived by informed persons who take the view that waiver will best serve their interests overall. The conflicts of interest which give rise to waiver already exist; the law does not step in to prevent those conflicts or to deny the ability to waive the right. The existence of a civil action which an accused person may wish to defend provides simplv another example of a conflict of interest between maintaining silence and disclosing the substance of the defence in the criminal proceedings". Counsel submitted that che appellants would be prejudiced because. if they were compelled to prosecute their appeals in pee ere wenn ee er eer er 9. advance of the criminal proceedings, they would be forced to give evidence at large. They could be cross-examined on matters germane to the criminal proceedings and their answers might eventually be used by the prosecution in evidence against them in the criminal proceedings. This is a matter deserving of substantial weight in the overall consideration of the matter. It is thus something which must be weighed in the balance and I propose to treat it in that way, but in doing so I have taken very much into account what was said bv Wilcox J. in the passage which I have cited from his iudgment in the Cameron case. Counsel for Messrs. Baker and Huches specified a number of other matters which. in his submission, led to the conclusion that to direct these appeals to proceed would be to cause injustice in any criminal preceedings which might be instituted. The particular matters upon which he relied were:- (a) The possible effect of adverse publicity on the minds of potential jurors who read of the evidence given in the taxation appeals. (b) The distinct possibility of there being two cases running simultaneously involving the same documents. (ec) The possibility of a miscarriage of justice which could be caused by disclosure of the defence to the criminal charges and which might thus enable evidence to be fabricated by prosecution witnesses or defence witnesses to be interfered with. a ee 10. The last matter comes from one of the dicta in one of the cases to which T have referred. [I regard the possibility in this case as being remote in the extreme. There is not the slightesr foundation for it. The possibility of running two cases simultaneously may arise. Undoubtedly there will be vast numbers of documents in these cases and there may be a requirement eventually that the same documents be required for the appeals and any criminal proceedings. But that is a matter which can be catered for at amuch later. stage. Now is not the time to attempt to deal with any such problem. It may never arise. If it does, sensible management of both the criminal and civil proceedings will overcome it. In such a case as 15 supposed bv the submission. it would be almost certain that the appeals, if Chey were being heard at the same time or about the same time as the criminal proceedings, would be adiourned until after the criminal proceedings had been disposed of. There remains the question of adverse publicitv on the minds of jurors. This is Always a matter that must be taken into account, and again, it is a matter which T weigh in Lhe balance in determining what T should do. But T do nok think that in this case it should be afforded much weight. Tf cEhere were to be adverse publicity during Lhe hearing of Lhe appeals, or indeed publication of extensive extracts from the evidence. the matter could be raised with the judge hearing the appeals who would have power to cope with the situation as he thought fit, bearing in mind the circumstances which then existed. In the wav that the matters have proceeded so far. 1t seems =| ————. . sre sp ig + seer, oe ll. likely that, if there are to be criminal proceedings, the appeals in these matters will be over and done with longa before the criminal proceedings come on. IT have given the whole matter due consideration. I think it is always unfortunate for persons to have the possibility of criminal proceedings hanging over their heads. That possibilitv in this case has existed since 1984 and there is still no resolution of it. It would be desirable if the position could become certain before lona. There was an indication at one stage that certainty would be reached by the end of last vear, but we are already well on the way to half-way through this year and still there is no certainty. One realizes that there must be all sorts of difficulties faced by prosecuting authorities because of shortages of staff and other limitations on their resources, but I do think there comes a time eventually when, in fa1rness to those who mav be affected adversely by criminal proceedings, the position should be made certain. That however is not a matter which concerns me in these cases. I must deal with them as they are. After due veflection I have decided that in all the circumstances I should refuse the applications for adjournment which have been made and I propose therefore to dismiss each of the motions. In each motion I make the following orders. The motion is dismissed. I order the applicant (appellant) to pay the respondent's costs. Each matter - that 1s to sav each of the appeals ~ is stood over to 21 May next at 9.30a.m. for further directions. | certify thatthis andthe !O preceding en pages are atrue ened or the teasers ior uy we. nS ay juarmert reise The Honcuracie r. " wi ASSOMNa.2 neiea /3 AWeY (987 12. Counsel for the Appellant: Solicitors for the Appellant: Counsel for the Respondent: Solicitors for the Respondent: Date of hearing: Mr. P.E. Esler Messrs. Duffield & Duffield Mr. S.W. Gibb Australian Solicitor 13 May 1987 Government ~~, ae pee tf yr ye eer re ie 2 . wh, ~ : oe