FEDERAL COURT OF AUSTRALIA Brown v Commissioner of Taxation [2001] FCA 276 EVIDENCE – where Taxpayer failed to declare home unit as part of his income – where Taxpayer claimed he believed home unit was a gift– where Taxpayer brought proceeding in the Administrative Appeals Tribunal – where proceeding heard in private pursuant to s 14ZZE Taxation Administration Act 1953 (Cth) – where an appeal lodged to the Federal Court – whether questions relating to Administrative Appeals Tribunal proceeding admissible in current proceeding Taxation Administration Act 1953 (Cth) ss 8XB, 14ZZE Administrative Appeals Act 1975 (Cth) s35 Evidence Act ss 102, 103, 135 Federal Court of Australia Act 1976 (Cth) s 50 Income Tax Assessment Act 1997 (Cth) s 2 JOHN JOSEPH BROWN v COMMISSIONER OF TAXATION N 1480 OF 1999 EMMETT J 14 MARCH 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1480 OF 1999 BETWEEN: JOHN JOSEPH BROWN APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: EMMETT J DATE: 14 MARCH 2001 PLACE: SYDNEY RULINGS ON EVIDENCE ruling A 1 Counsel for the Commissioner seeks to put a series of questions to the Taxpayer designed to demonstrate that the Taxpayer failed to include certain income in his return for the year ended 30 June 1991. This income is derived from consulting services referred to in a letter of 8 August 1991. The income is also referred to in other documents originating from the Tourism Task Force Limited, a lobby group which retained the Taxpayer as a consultant, and of which he was Chairman. 2 It is conceded that such matters are not relevant to any fact in issue in the proceeding, and that such evidence would be relevant only to the Taxpayer's credibility. Accordingly, under s 102 of the Evidence Act 1995 (Cth) ("the Act"), which corresponds to the common law credibility rule, the evidence is not admissible. However, s 103(1) provides that the credibility rule does not apply to evidence adduced in cross-examination of a witness if the evidence has substantial probative value. 3 Under the Dictionary, which forms part of the Act, "probative value" of evidence means "the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue". The Taxpayer has given evidence by way of affidavit and orally as to circumstances that led up to the transfer of the Unit, (as defined in my earlier ruling on evidence: Brown v Commissioner of Taxation [2001] FCA 240). 4 The Taxpayer's evidence in relation to those matters is challenged by the Commissioner. It is said that if the Taxpayer were to concede that there were a conscious omission of assessable income from his income tax return, that would have a bearing on the Taxpayer's credibility in relation to the matters about which he has given evidence. At present, I have no knowledge of what the answers would be to the proposed questions. I have been informed that there are concurrent proceedings in the Administrative Appeals Tribunal involving an appeal from an objection decision in relation to a further amended assessment issued by the Commissioner to the Taxpayer in relation to the consulting fees in question. 5 I have been informed that that appeal is being prosecuted but have no further information concerning the issues that will arise in that proceeding. In any event, while of course I must take a very dim view of the deliberate omission of income from a tax return, I am not persuaded that, even if that were accepted by the witness, that would have substantial probative value within the meaning of s 103(1) in relation to any fact in issue. Accordingly, I propose to reject the evidence at this stage. ruling B 6 Counsel for the Commissioner seeks to put questions to the Taxpayer concerning evidence that he gave in a proceeding before the Administrative Appeals Tribunal in relation to an application for an extension of time within which to file an objection to the amended assessment in issue in this proceeding. 7 Counsel for the Commissioner indicates that the questions are designed to indicate that the Taxpayer on that earlier occasion gave answers under oath to questions which are inconsistent with the evidence that he has given in this proceeding. Objection was taken by counsel for the Taxpayer to the questions on several bases, namely: · s 14ZZE of the Taxation Administration Act 1953 (Cth), · s 8XB of the Taxation Administration Act, · s 102 of the Evidence Act 1995 (Cth), and · s 135(a) of the Evidence Act. 8 I shall deal with each separately. Section 14ZZE of the Taxation Administration Act relevantly provides as follows: "Despite section 35 of the AAT Act, the hearing of a proceeding before the Tribunal, other than the Small Taxation Claims Tribunal, for: (a) a review of a reviewable objection decision; or (b) a review of an extension of time refusal decision; or (c) an AAT extension application; is to be in private if the party who made the application requests that it be in private." Section 35 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") relevantly provides as follows: "…(1) Subject to this section, the hearing of a proceeding before the Tribunal shall be in public. … (2) Where the Tribunal is satisfied that it is desirable to do so by reason of the confidential nature of any evidence or matter or for any other reason, the Tribunal may, by order: (a) direct that a hearing or part of a hearing shall take place in private and give directions as to the persons who may be present; and (aa) give directions prohibiting or restricting the publication of the names and addresses of witnesses appearing before the Tribunal; and (b) give directions prohibiting or restricting the publication of evidence given before the Tribunal, whether in public or in private, or of matters contained in documents lodged with the Tribunal or received in evidence by the Tribunal; and (c) give directions prohibiting or restricting the disclosure to some or all of the parties to a proceeding of evidence given before the Tribunal or of the contents of a documents lodged with the Tribunal or received in evidence by the Tribunal in relation to the proceeding. (3) In considering: (a) whether the hearing of a proceeding should be held in private; or (b) whether publication, or disclosure to some or all of the parties, of evidence given before the Tribunal or of a matter contained in a document lodged with the Tribunal received in evidence by the Tribunal, should be prohibited or restricted, the Tribunal shall take as the basis of its consideration, the principle that it is desirable that hearings of proceedings before the Tribunal should be held in public and that evidence given before the Tribunal and the contents of documents lodged with the Tribunal or received in evidence by the Tribunal should be made available to the public and to all the parties but shall pay due regard to any reasons given to the Tribunal why the hearing should be held in private or why publication or disclosure of the evidence or the matter contained in the document should be prohibited or restricted." Counsel for the Taxpayer contends that the expression, "the hearing of a proceeding before the Tribunal is to be in private", in s 14ZZE, should be given a wide interpretation that would include a prohibition on the publication of evidence given before the Tribunal in a proceeding to which s 14ZZE applies. I consider that s 14ZZE must be construed in the light of s 35 of the AAT Act to which express reference is made in s 14ZZE. Section 35(2) draws a clear distinction between a hearing taking place in private, on the one hand, and the prohibition or restriction of the publication of evidence given before the Tribunal on the other. I do not see any reason for reading the expression in s 14ZZE as meaning anything more than the similar words contained in s 35(2)(a). 9 Thus s 35(2)(a) constitutes an exception to s 35(1) which requires, prima facie, that the hearing of a proceeding before the Tribunal be in public. Section 14ZZE also provides an exception to s 35(1) where a party who makes an application to the Tribunal requests that a hearing be in private. The matters that are dealt with in paragraphs 35(2)(aa), (b) and (c) are distinct and separate matters from the matter of the privacy of the hearing. 10 Parliament has conferred an express right on parties to certain taxation matters before the Tribunal to have the hearing in private. It does not confer any express right for a party to have the publication of evidence before the Tribunal prohibited or restricted. On the other hand, having regard to the terms of s 14ZZE, it would be a most unusual case where the Tribunal, if asked, did not give the directions that are contemplated by s 35(2) in a proceeding to which s 14ZZE applies. The Tribunal is empowered to give such directions for any reason, where it is satisfied that it is desirable to do so. Where a party exercised the right, under s 14ZZE, to have a hearing in private, that would be a very cogent reason for the Tribunal to make an order under s 35(2)(b). 11 I do not have before me direct evidence of the proceeding before the Tribunal. However I understand from statements from the bar table that a request was made, as is contemplated by s 14ZZE. I also understand that the hearing before the Tribunal was in private. However, counsel has not suggested to me that the Tribunal was requested to make any order under s 35(2)(b) or that it made any such order. 12 The matter is complicated further by the fact that there was an appeal to this Court under s 44 of the AAT Act from the orders made by the Tribunal in the proceeding. Again, I have been informed from the bar table that an appeal book was filed in this Court. Further, the appeal was heard by a Full Court of this Court and determined. No order was sought or made under s 50 of the Federal Court of Australia Act 1976 (Cth). If an order had been made under s 35(2)(b) in relation to the evidence before the Tribunal, some question could arise as to the extent to which that would impede the proceedings which were then brought in this Court. The proceedings could well have involved a contravention of an order of the Tribunal. However, since there has been no order, that question does not presently arise. 13 I am not satisfied that s 14ZZE would operate to prevent the Commissioner's counsel from putting questions which have been foreshadowed. 14 Secondly, reliance is placed on s 8XB(1) of the Taxation Administration Act. That section relevantly provides as follows: "Subject to subsection 3, a person shall not, except to the extent required or permitted by a taxation law, or reasonably necessary in order to comply with an obligation imposed by a taxation law, directly or indirectly: (a) make a record of any taxation information relating to another person; or (b) divulge or communicate to another person any taxation information relating to a third person; or (c) otherwise make use of any taxation information relating to another person; being information disclosed to obtained by the person in breach of a provision of a taxation law…" Under s 2 "taxation law" includes the Income Tax Assessment Act 1997 (Cth). Under s 8XB(6), "taxation information" means information with respect to a person's affairs, being information that is, or at any time has been, in the possession of the Commissioner. 15 There has been no material put before me to suggest that the questions put and answers given before the Tribunal constitute information disclosed to or obtained by any person in breach of a provision of a taxation law. There is no doubt that an officer of the Commissioner and counsel retained by the Commissioner would be entitled, for the purposes of the Income Tax Assessment Act and the Taxation Administration Act to conduct an appeal before the Tribunal. 16 Whether or not the questions and answers can be properly characterised as information with respect to the present Taxpayer's affairs that has been in the possession of the Commissioner, I do not consider that any contravention of s 8XB(1) could be demonstrated by asking the proposed questions. 17 Section 102 of the Evidence Act provides that the evidence that is relevant only to a witness's credibility is not admissible. It is accepted by counsel for the Commissioner that the questions proposed are relevant only to the credibility of the Taxpayer, insofar as they are designed to show that, on a previous occasion, he gave evidence under oath inconsistent with answers given in evidence in this proceeding. 18 Section 103(1), however, provides that that rule does not apply to evidence adduced in cross-examination of a witness if the evidence has substantial probative value. Insofar as the questions foreshadowed are concerned with specific matters about which the witness has given evidence, I consider that the evidence does have substantial probative value so as to attract s 103(1). That ruling is, however, a provisional one until such time as the precise questions have been put. I would entertain any further objection if it appears that the questions as put do not satisfy s 103(1). 19 Section 135 provides that the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party. The contention advanced on behalf of the Taxpayer is that it would be unfairly prejudicial to him to have disclosed in a public proceeding evidence given in private. However, as I have said, it was open to the Taxpayer to seek an order from the Tribunal under s 35(2)(b), but no order was sought or made. 20 If it were desired to establish that the evidence given before the Tribunal was of a confidential nature, such that an order under s 50 of the Federal Court Act were warranted, then such an application could be made. At this stage, no such application has been made. Indeed, it is difficult to see why the provisions of s 50 would be attracted in relation to the questions that have been foreshadowed. 21 In the circumstances I have formed the view that the questions are not prohibited by any of the provisions relied on by counsel for the Taxpayer. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 March 2001 Counsel for the Applicant: Mr M Christie with Mr J Scarcella Solicitor for the Applicant: Blake Dawson Waldron Counsel for the Respondent: Mr D McGovern Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 12, 13, 14 March 2001 Date of Judgment: 14 March 2001