FEDERAL COURT OF AUSTRALIA Chambers v Commissioner of Taxation [1999] FCA 163 PRACTICE AND PROCEDURE – exercise of discretion to stay proceedings pending possible institution of criminal proceedings involving similar issues – likelihood of prejudice to applicant – relevance of potential availability of certificate under s 128 Evidence Act 1995 (Cth). Federal Court Rules O 52B Director of Public Prosecutions Act 1983 (Cth) Crimes Act 1900 (NSW)s 178BA Taxation Administration Act 1953 (Cth) ss 14ZU and 14ZZO Evidence Act 1995 (Cth) s 128 Federal Commissioner of Taxation v Ahern (1986) 17 ATR 535 applied Deputy Commissioner of Taxation v Alvaro (1990) 21 ATR 726 applied Hurley v Commissioner of Taxation (1992) 37 FCR 11 applied Baker; Re Flatwash Pty Ltd v Federal Commissioner of Taxation (1987) 87 ATC 4626 applied Krakouer v The Queen [1998] HCA 43; 155 ALR 586 considered Cameron's Unit Services Pty Ltd v Kevin R Whelpton Associates (Australia) Pty Ltd (1984) 4 FCR 428 considered Grofam Pty Ltd v Australia & New Zealand Banking Group Ltd (1993) 43 FCR 408 considered McMahon v Gould (1982) 1 ACLC 98 considered ALLEN WILLIAM CHAMBERS v COMMISSIONER OF TAXATION SG 51 and 52 of 1998 MANSFIELD J ADELAIDE 26 FEBRUARY 1999 IN THE FEDERAL COURT OF AUSTRALIA SG 51 OF 1998 SOUTH AUSTRALIA DISTRICT REGISTRY SG 52 OF 1998 BETWEEN: ALLEN WILLIAM CHAMBERS Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: MANSFIELD J DATE OF ORDER: 26 FEBRUARY 1999 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application for a stay of these proceedings is refused. 2. The time for the applicant to file and serve the affidavits upon which he proposes to rely at the hearing is extended to 2 March 1999. 3. The time for the respondent to file and serve the affidavits upon which he proposes to rely at the hearing is extended to 24 March 1999. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SG 51 OF 1998 SOUTH AUSTRALIA DISTRICT REGISTRY SG 52 OF 1998 BETWEEN: ALLEN WILLIAM CHAMBERS Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: MANSFIELD J DATE: 26 FEBRUARY 1999 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is an application by the applicant to stay these proceedings until further order. 2 The applications instituted on 15 April 1998 are by way of appeal against the disallowance by the respondent on 16 and 18 February 1998 of objections to assessments made by the respondent against the applicant on 26 March 1997 and 26 November 1996 respectively. The objections were made on 22 May 1997, and 30 April 1997, respectively. On 19 May 1998, the respondent sought a lengthy adjournment of the hearing to enable him to prepare the matter. It was adjourned by consent for directions to 7 September 1998 and then to 15 October 1998. On 4 September 1998, the respondent filed the documentation required under O 52B of the Federal Court Rules, including statements of facts, issues and contentions. In November 1998, the respondent provided to the applicant a large bundle of statements of witnesses and of documents to disclose the material upon which, largely, the respondent will rely in these proceedings. On 18 December 1998 the Court listed the matters for hearing to commence on 29 March 1999, and gave directions to facilitate the process of the hearing. Those directions included the filing and service of affidavits proposed to be relied upon by the applicant by 15 February 1999. 3 It is common ground that the primary issue in these appeals is whether the applicant used an entity entitled Donatello Pty Ltd ("Donatello") in order to procure goods free of sales tax. That is the allegation of the respondent. It is denied by Mr Chambers. Consequently, as it is put, the issue on the appeals relates to the issue of identity. 4 By notice of motion of 15 February 1999, the applicant sought orders that these appeals be stayed until further order, and to vacate the hearing date. It is sought to defer the hearing indefinitely until the Director of Public Prosecutions ("the DPP") under the Director of Public Prosecutions Act 1983 (Cth) has determined that there will be no criminal charges laid against the applicant in respect of the matters the subject of the appeals, or until any criminal proceedings against him are completed. 5 It is accepted that the Court has a discretion to make those orders: Federal Commissioner of Taxation v Ahern (1986) 17 ATR 535; Deputy Commissioner of Taxation v Alvaro (1990) 21 ATR 726; Hurley v Commissioner of Taxation (1992) 37 FCR 11. 6 In Hurley, Hill J at 13 expressed the proper approach in cases such as the present as follows: "The true position, in my view, is that the court must weigh up against the Commissioner's right to have the taxpayer's application heard and decided, the danger that prejudice or injustice may be caused to the taxpayer in the criminal proceedings. What must be considered is what Sheppard J referred to in Sterling (supra) and in Baker (supra) as the "requirements of justice overall"." His Honour expressed the view, with which I respectfully agree, that those principles should be applied notwithstanding that it is the applicant seeking the stay, because a taxpayer is obliged by the scheme for taxation appeals to institute the proceedings once the objection is disallowed as otherwise the right to appeal is lost. His Honour also noted that the entitlement of the respondent to recover outstanding tax even though on appeal has been instituted against the disallowance of an objection is a relevant factor in the exercise of the discretion by the Court. 7 In that case, Hill J granted a stay. The order was made on 21 August 1992. The applicants had been committed for trial on a number of counts under s 178BA of the Crimes Act 1900 (NSW) for dishonestly obtaining a financial advantage by deception. It was anticipated that the trial would not take place before early 1993. Hill J formed the view that there would be clear prejudice to the applicants if no stay were granted, as they would either have to give evidence in the taxation cases and thereby admit an important element in the criminal proceedings, or the taxation cases would almost inevitably be lost. The only prejudice to the respondent, who could in any event enforce payment of the tax, was delay. 8 The applicant contends that the purpose, or a purpose, of the respondent in "bringing" the present proceedings, or more accurately in seeking that they be heard, or in disallowing the objections the subject of the appeals in the time frame in which that was done, is such as to constitute an abuse of process by the respondent. It was contended that his purpose was to procure evidence in the course of these proceedings for an extraneous purpose, namely to procure evidence for use in any future criminal proceedings adverse to the applicant. 9 The respondent, at least by November 1998, had prepared and delivered to the DPP a brief concerning the issues the subject of the current proceedings. No charges have yet been laid. It is accepted, as I was assured by counsel for the respondent, that the DPP has not informed the respondent that there is insufficient evidence to lay charges against the applicant, or that in any sense the current appeals should be proceeded with for the purposes of collecting evidence to assist in the proof of any criminal charges. Under the Director of Public Prosecutions Act 1983, the respondent has no control over any decision by the DPP as to whether criminal proceedings should be instituted, or the timing of any such decision: Baker: Re Flatwash Pty Ltd v Federal Commissioner of Taxation (1987) 87 ATC 4626; Alvaro (above, at 732). 10 The scheme of the taxation review and appeal procedures contemplates that the objection to any assessment be made within a specified time, and that the appeal from the disallowance of any objection also be instituted within a specified time. There is nothing to suggest that the respondent, in disallowing the objection when he did, acted for a purpose extraneous to his powers and obligations under the Taxation Administration Act 1953 (Cth). The rulings disallowing the objections were not made in any precipitous time frame. The respondent has, at the Court's invitation, provided to the applicant's solicitors the statements of witnesses and the documents on which he has relied for the purposes of his attitude to the applicant's claim. In the light of that disclosure, the initial reluctance to disclose that material, at least before these proceedings, and the time requested to complete the materials to be filed under O 52B of the Rules, does not in my view enhance the picture the applicant seeks to draw. 11 In my judgment, that attack upon the respondent must fail. I accept that communications between the DPP and the respondent may be privileged, and that as a result a litigant in the position of the applicant has great difficulty in obtaining access to material to fortify or dispel any suspicion of an ulterior purpose for the respondent's attitude to these proceedings: Grofam Pty Ltd v Australia & New Zealand Banking Group Ltd (1993) 43 FCR 408. However, the matters to which I have referred do not in my judgment provide any foundation for concluding that the respondent has the improper motive alleged. 12 It is then contended that, in the particular circumstances, "the requirements of justice overall" should lead to the conclusion that these appeals should be stayed pending determination of whether the applicant is to be charged with any criminal offence and, if so, pending the completion of any criminal trial. It is said that, on the material before the Court, there is a real risk that these appeals will be used unfairly to cause prejudice to the appellant. 13 The applicant stresses, in that regard, that s 14ZZO of the Taxation Administration Act 1953 (Cth) imposes, or may impose, upon him the burden of proving that the disallowance of the objections should not have been made, or should have been made differently. He points out that, because the central issue is whether Donatello or the applicant was properly the subject of the sales tax assessments, he will contend that the onus of proof imposed by s 14ZZO does not apply in respect of the issue of "identity", as distinct from issues about the incidence and extent of sales tax: cp Krakouer v The Queen [1998] HCA 43; 155 ALR 586. It is not necessary in my judgment to determine that point. It is a point which will arise whenever the present proceedings are to be determined. If the onus in respect of the identity issue remains with the applicant, he will have to lead his evidence first. If it does not, the respondent will lead evidence first and the applicant will have to respond. Either way, I accept that the applicant will be obliged for practical reasons to give evidence on the hearing of these appeals. 14 The unfairness and prejudice asserted is that the applicant, before the anticipated criminal proceedings, will be required to give evidence on these appeals. That evidence will or may be admissible against him in the criminal proceedings. He will have to "show his hand" on the identity issue. The respondent will have the benefit of a "test run" in cross-examination of the applicant and witnesses he presents to give evidence. The disclosure of this evidence may give the respondent an opportunity to explore lines of investigation to respond to that material, and even to establish its inaccuracy in certain respects, whereas that evidentiary material might otherwise emerge for the first time only during any criminal trial, and the DPP and the respondent might then be unable to check it or respond to it as effectively. 15 I accept that, in a general way, those matters are realistic concerns on the part of the applicant. They have been the subject of consideration in other cases. It would be naďve not to anticipate that, in the light of the evidence in the current proceedings, the respondent would not consider delivering a supplementary brief to the DPP if new information emerged. 16 The Cameron's Unit Services Pty Ltd v Kevin R Whelpton Associates (Australia) Pty Ltd (1984) 4 FCR 428, Wilcox J at 434 said: "The "right of silence" is a right which a person has in relation to present or anticipated criminal proceedings. As a matter of everyday 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 right is often waived incautiously or through ignorance, but it is also deliberately 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 simply another example of a conflict of interest between maintaining silence and disclosing the substance of the defence in the criminal proceedings. I see no basis for the view that the court should intervene to relieve against this particular conflict, when it does not relieve against others. The fact that the existence of the civil action may result in a decision by the accused person to waive his right of silence is not, in itself, a sufficient reason to stay that action. The real question must be the likelihood of causing injustice in the criminal proceedings: par (i) above." Sheppard J in Baker (at 4629) referred to that passage with approval, in reaching the view that in the circumstances before the Court, a stay should not be granted, although his Honour gave "substantial weight in the overall consideration of the matter" to the circumstance that the appellants would be obliged to give evidence on the taxation appeals in advance of any criminal proceedings (no charges had by then been laid), and be cross-examined on matters germane to any criminal proceedings so that those answers might be used against them. Similarly, in Ahern (above), Ryan J declined a stay of taxation appeals in similar circumstances because his Honour was not persuaded that the applicant would be exposed to a real danger of injustice in the criminal proceedings, or would be seriously prejudiced in the taxation appeals, if the taxation appeals proceeded to hearing. 17 Wilcox J in Cameron at 432 referred with approval to a lengthy passage in the reasons of Wootten J in McMahon v Gould (1982) 1 ACLC 98 at 102-103 which concluded with the following: "[The Court] should be concerned to avoid the causing of unjust prejudice by the continuance of the civil proceedings, not to preserve the tactical status quo in the criminal proceedings whether it be just or unjust." 18 I have concluded that, in the present circumstances, the concerns of the applicant do not give rise to a real risk of unjust prejudice if the present taxation appeals proceed to hearing. The issue on these appeals is said to be one of identity. Under s 14ZU of the Taxation Administration Act 1953, the applicant, when making the objections, has already been obliged to state "fully and in detail" the grounds of the objections. No doubt, in these appeals, he will reassert those grounds, and perhaps provide additional evidence in support of them. If these proceedings were not on foot, he may not have been obliged to disclose so fully that material until any criminal trial, but he is not being obliged to admit any matters which are against his asserted interest, and in particular he is not being obliged to admit any matters which the DPP might otherwise have difficulty proving in support of any criminal prosecution. He has already disclosed his position in the objections. If the course of the hearing does result in him being concerned about giving some evidence which might tend to incriminate him, the procedures provided for in s 128 of the Evidence Act 1995 (Cth) may be availed of. His concerns do not, in my view, go much if at all beyond wishing to preserve his right to silence. If the applicant's evidence on these appeals is flawed, so that the respondent can at some later stage disprove it, it is hard to see how that produces any unjust prejudice to the applicant. If, on the other hand, it is not flawed, then any investigations carried out by the respondent will confirm it and it may result in issues which might otherwise have been asserted later in any criminal prosecution no longer being asserted. It is also entirely possible that such material may demonstrate to the respondent or to the DPP that the approach of the respondent in disallowing the objections is itself incorrect. No judgment of the Court on these appeals will give rise to any issue estoppel in any criminal proceeding, but if the applicant succeeds overall in these appeals, it is not beyond the realms of possibility that the same material when made available to the DPP would lead to a decision not to institute any criminal proceedings. 19 It was also contended by the applicant that he may be prejudiced because he may be exposed to the expense of two trials on the same issues, whereas if the criminal matter is heard first, and he is convicted on the basis that he used Donatello as the vehicle for his transactions, the civil proceedings will in practical terms become unnecessary. I do not think that is a significant factor in the present circumstances. The work involved in the preparation of this matter has now substantially advanced in any event. The respondent's primary material was largely made available to the applicant in November 1998. The applicant's affidavit material, including that of two proposed witnesses, has been prepared and is ready to be filed. Thus, the real concern must be the costs involved in two hearings. There is no evidence to suggest that the applicant will be unable to pay for representation at any later criminal proceedings. There is no certainty that, whatever the outcome of these proceedings, there will be a criminal prosecution, and it would be a reasonable consideration to believe that if the applicant succeeds on these taxation appeals the prospects of a criminal prosecution against him in respect of the same transactions would reduce. If he fails in these appeals, there may be repetition of much of the evidence in any later criminal prosecution. I do not think that that consideration is of sufficient weight, either of itself or in conjunction with the other matters to which the applicant refers, to warrant the exercise of the discretion to stay these proceedings now. 20 It is also put that the applicant may be prejudiced if he has to prove a negative, that is that he was not the person who used the sales tax number of Donatello: s 14ZZO of the Taxation Administration Act 1953. I have not determined on this application whether that contention is correct, but I do not consider that it weighs in any real way in favour of granting a stay. The legislative scheme, and its effect, should not itself be a reason why these taxation appeals should defer in sequence of hearing to any criminal proceedings. Much the same difficulty will confront the applicant whenever these proceedings are heard. He has received the benefit of much of the respondent's material, and will receive all the respondent's proposed affidavit evidence before the hearing commences. I accordingly do not consider that that aspect, either alone or in conjunction with all the matters to which my attention has been drawn, should result in the grant of the stay sought. 21 I have reached the conclusion that the application for a stay should be refused. There are two considerations which, if added to the scales, reinforce that conclusion. Whilst it may be accepted that the prejudice to the respondent by any stay will generally only be by reason of delay, particularly as the respondent may enforce the assessments in any event, there is no particular time within which a decision need be made that criminal proceedings be instituted. If they are instituted, there will be a long period of time before they can be heard and determined. That prospect of a very lengthy delay is to be compared to the fact that these appeals are listed for hearing on 29 March 1999 and should be able to be completed shortly thereafter. The second aspect is that, during any period of delay, there is the potential for recollections of witnesses to further fade and the sources of material available in relation to the events in question to diminish, to the prejudice of the respondent. The events in question are now some years old, and there is a risk that further delay may work prejudice to the respondent in those respects. 22 The application for a stay of these proceedings is refused. I extend the time for the applicant to file and serve the affidavits upon which he proposes to rely at the hearing to 2 March 1999, and for the respondent to file and serve the affidavits upon which he proposes to rely by 24 March 1999. In the case of the applicant's affidavits, I indicate that any evidence proposed to be given and which may involve the invocation of s 128 of the Evidence Act 1995 may be omitted from the affidavits and may be adduced orally at the hearing. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 26 February 1999 Counsel for the Applicant: Mr S Tilmouth QC with him Ms A MacDonald Solicitors for the Applicant: Camatta Lempens Pty Ltd Counsel for the Respondent: Mr M Griffin Solicitors for the Respondent: Australian Government Solicitor Dates of Hearing: 22 and 25 February 1999 Date of Judgment: 26 February 1999