FEDERAL COURT OF AUSTRALIA Howard v Commissioner of Taxation [2011] FCA 137 Citation: Howard v Commissioner of Taxation [2011] FCA 137 Parties: STEPHEN JAMES HOWARD v COMMISSIONER OF TAXATION File numbers: VID 80 of 2010 VID 28 of 2011 Judge: JESSUP J Date of judgment: 23 February 2011 Date of hearing: 21 February 2011 Place: Melbourne Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 8 Counsel for the Applicant: Mr H Carmichael Solicitor for the Applicant: Oakley Thompson & Co Counsel for the Respondent: Mr P Hanks QC with Mr P Sest Solicitor for the Respondent: Maddocks IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 80 of 2010 BETWEEN: STEPHEN JAMES HOWARD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 23 FEBRUARY 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. This proceeding be heard together with proceeding VID 28/2011. 2. By 4:00 pm on 14 February 2011, the respondent file and serve any additional documents pursuant to Order 52B of the Federal Court Rules. 3. By 4:00 pm on 18 February 2011, the applicant file and serve an Amended Appeal Statement. 4. By 4:00 pm on 25 February 2011 the respondent file and serve an Amended Appeal Statement. 5. By 4:00 pm on 28 February 2011, the applicant, in consultation with the respondent, compile and serve an indexed and paginated Court Book, such Court Book to be consolidated with that prepared for proceeding VID 28/2011 and to contain each party's Appeal Statement, the affidavits, including exhibits, on which each party intends to rely at trial, any documents which each party intends to tender, and the documents filed under Order 52B of the Federal Court Rules. 6. By 4:00 pm on 9 March 2011, each party file and serve a list of objections to the evidence of the other party, referring to the relevant page (and, where relevant, paragraph) of the Court Book, together with a short summary stating the grounds of every such objection. 7. By 4:00 pm on 15 March 2011, the parties file and serve any response to any list of objections received, together with a short summary stating the grounds of response. 8. By 4:00 pm on 15 March 2011, the parties file and serve their outlines of submissions. 9. The proceeding be listed for trial at 10:15 am on 24 March 2011. 10. The trial of the proceeding be by affidavit with the right of cross-examination in accordance with the Federal Court Rules. 11. Pursuant to section 7(1)(a) of the Foreign Evidence Act 1994 (Cth), the oral evidence of the following witnesses be taken by way of examination before the trial Judge at a venue approved by the court in London in the United Kingdom, commencing at 10:15 am on 28 March 2011: (a) Kevin Patrick Donovan care of Harbottle & Lewis LLP, solicitors of 14 Hanover Square, London; (b) Christopher Baynes of Greywalls, 52 High Street, Findon Village, West Sussex, United Kingdom; (c) Simon James Hopkins of 44 Clerkenwell Close, London, United Kingdom; (d) John Richard Shenton of Grant Thornton Limited, Kensington Chambers, 46/59 Kensington Place, St Helier, Jersey, Channel Islands; (e) Stuart Hornby of RBC Trustees (CI) Limited, La Mottle Chambers, St Helier, Jersey, Channel Islands; and (f) David Ross Mackie of 69 Grand Rue, Mazenay, St Sernin du Plain, 7150, France. 12. Subject to any direction by the examiner, the examination proceed at the appointed venue from day to day until concluded, but not beyond 4:15 pm on 31 March 2011. 13. The Evidence Act 1995 (Cth) apply to the examination. 14. Pursuant to O 1 r 8 of the Federal Court Rules, for the purposes of the said examination, the requirements of rr 1(2), 3, 4, 6, 7, 8, 9 and 10 of O 24 of those Rules be dispensed with. 15. The applicant make the necessary arrangements, subject to the approval of the court, for: (a) a venue for the examination; (b) the taking of a transcript of the proceedings of the examination. 16. Subject to correction, and to all just exceptions, the transcript of the proceedings of the examination be received into evidence as an exhibit in the proceeding. 17. Subject to any agreement between the parties, the applicant be responsible, in the first instance, for the costs of the venue and the transcript, such costs to the applicant's costs in the cause. 18. Before the commencement of the said examination, the parties pay, in equal shares, the costs expected to be incurred by the court of and incidental to the said examination, such expected costs to be paid to the District Registrar by each party within seven days of receipt of her written estimate of that party's share. 19. After the conclusion of the said examination, the District Registrar account to the parties for the costs actually incurred by the court of and incidental to the said examination, and – (a) if the sums paid pursuant the previous order exceed those costs, the excess be repaid to the parties in their respective shares; (b) if the sums paid pursuant to the previous order fall short of those costs, the parties pay, in their respective shares, the amount of the shortfall to the District Registrar; such repayment, or payment, as the case requires to be made within 28 days after the district Registrar's account.. 20. Subject to any order by the court, the balance paid by each party pursuant to the two preceding orders be that party's costs in the cause. 21. The costs of 4 February 2011 be each party's costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 28 of 2011 BETWEEN: STEPHEN JAMES HOWARD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE OF ORDER: 23 February 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. This proceeding be heard together with proceeding VID 80/2010. 2. By 4:00 pm on 28 February 2011, the applicant, in consultation with the respondent, compile and serve an indexed and paginated Court Book, such Court Book to be consolidated with that prepared for proceeding VID 80/2010 and to contain each party's Appeal Statement, the affidavits, including exhibits, on which each party intends to rely at trial, any documents which each party intends to tender, and the documents filed under Order 52B of the Federal Court Rules. 3. By 4:00 pm on 9 March 2011, each party file and serve a list of objections to the evidence of the other party, referring to the relevant page (and, where relevant, paragraph) of the Court Book, together with a short summary stating the grounds of every such objection. 4. By 4:00 pm on 15 March 2011, the parties file and serve any response to any list of objections received, together with a short summary stating the grounds of response. 5. By 4:00 pm on 15 March 2011, the parties file and serve their outlines of submissions. 6. The proceeding be listed for trial at 10:15 am on 24 March 2011. 7. The trial of the proceeding be by affidavit with the right of cross-examination in accordance with the Federal Court Rules. 8. Pursuant to section 7(1)(a) of the Foreign Evidence Act 1994 (Cth), the oral evidence of the following witnesses be taken by way of examination before the trial Judge in a venue approved by the court at London in the United Kingdom, commencing at 10:15 am on 28 March 2011: (a) Kevin Patrick Donovan care of Harbottle & Lewis LLP, solicitors of 14 Hanover Square, London; (b) Christopher Baynes of Greywalls, 52 High Street, Findon Village, West Sussex, United Kingdom; (c) Simon James Hopkins of 44 Clerkenwell Close, London, United Kingdom; (d) John Richard Shenton of Grant Thornton Limited, Kensington Chambers, 46/59 Kensington Place, St Helier, Jersey, Channel Islands; (e) Stuart Hornby of RBC Trustees (CI) Limited, La Mottle Chambers, St Helier, Jersey, Channel Islands; and (f) David Ross Mackie of 69 Grand Rue, Mazenay, St Sernin du Plain, 7150, France. 9. Subject to any direction by the examiner, the examination proceed at the appointed venue from day to day until concluded, but not beyond 4:15 pm on 31 March 2011. 10. The Evidence Act 1995 (Cth) apply to the examination. 11. Pursuant to O 1 r 8 of the Federal Court Rules, for the purposes of the said examination, the requirements of rr 1(2), 3, 4, 6, 7, 8, 9 and 10 of O 24 of those Rules be dispensed with. 12. The applicant make the necessary arrangements, subject to the approval of the court, for: (a) a venue for the examination; (b) the taking of a transcript of the proceedings of the examination. 13. Subject to correction, and to all just exceptions, the transcript of the proceedings of the examination be received into evidence as an exhibit in the proceeding. 14. Subject to any agreement between the parties, the applicant be responsible, in the first instance, for the costs of the venue and the transcript, such costs to the applicant's costs in the cause. 15. Before the commencement of the said examination, the parties pay, in equal shares, the costs expected to be incurred by the court of and incidental to the said examination, such expected costs to be paid to the District Registrar by each party within seven days of receipt of her written estimate of that party's share. 16. After the conclusion of the said examination, the District Registrar account to the parties for the costs actually incurred by the court of and incidental to the said examination, and – (a) if the sums paid pursuant the previous order exceed those costs, the excess be repaid to the parties in their respective shares; (b) if the sums paid pursuant to the previous order fall short of those costs, the parties pay, in their respective shares, the amount of the shortfall to the District Registrar; such repayment, or payment, as the case requires to be made within 28 days after the district Registrar's account. 17. Subject to any order by the court, the balance paid by each party pursuant to the two preceding orders be that party's costs in the cause. 18. The costs of 4 February 2011 be each party's costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 80 of 2010 BETWEEN: STEPHEN JAMES HOWARD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: JESSUP J DATE: 23 FEBRUARY 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 In these proceedings, it is either common ground, or previously determined by the court, that – (a) Mr Kevin Patrick Donovan is a necessary witness for the applicant, without whose evidence the applicant's case would be significantly compromised; (b) Mr Donovan resides in the United Kingdom and has refused to travel to Melbourne to give evidence on behalf of the applicant; (c) the substance of the evidence proposed to be given by Mr Donovan, and the likely length of his cross-examination, is such that it would be inappropriate to receive his evidence by way of video link; and (d) therefore, Mr Donovan's evidence will be received in London in the week commencing 28 March 2011. 2 That being the case, as a matter of convenience, the applicant proposes to call at the same time another witness resident within proximity of London whose evidence also ought not to be taken by video link but who has not refused to travel to Melbourne for the purpose (although he would prefer not to do so), together with the evidence of four other witnesses which, in other circumstances, might well be taken by video link. 3 The question which presently arises is whether the expenses incurred by the court in taking evidence in London should be paid, in the first instance, by the applicant, as the party calling the evidence, or by the parties equally. One aspect of the Commissioner's case that the former course should be adopted relates to Mr Donovan's reasons for refusing to come to Melbourne. Having regard to the circumstances of another of the applicant's overseasbased proposed witnesses, it may be inferred that Mr Donovan fears that, if he comes to Australia, he will be served with an assessment of his own tax, and with a departure prohibition order. It was submitted on behalf of the Commissioner that Mr Donovan was thereby seeking to thwart the administration of the tax laws of Australia, and that the court should do nothing which might be interpreted as providing some comfort for the pursuit of such an endeavour. I do not think that this is a relevant factor to be put on the discretionary scales against the position for which the applicant contends. I am in no position to form a view – particularly in the absence of Mr Donovan – as to whether there is any culpability involved in his refusal to come to Melbourne, but, even if there were, it would be wrong to visit the applicant with the consequences thereof. I am not prepared to hold that the applicant bears any greater, or any less legitimate, responsibility for the need for the court to travel to London than is implicit in the fact that it is to take the evidence of his witness that such a course has been made necessary. 4 That leaves the wholly pragmatic matter of how the court's expenses should be covered in the first instance, remembering always that, to the extent that a party does contribute to those expenses, his contribution will be his costs in the cause to be dealt with at the appropriate time. This is not a case, therefore, in which I now have to decide upon whom the final obligation to meet these expenses should fall. 5 A point made by the Commissioner was that, since the court was travelling to London at the applicant's behest, it is he who should cover the expenses in question. He will have to bring the witnesses to Melbourne, so why should he not cover the cost of the court travelling to London? Although there is certain simple symmetry in this position, it pays insufficient regard to the fact that the court is taking evidence overseas not for the convenience of any party, but because it is apparent – and I believe it to be common ground – that justice cannot be done in the proceedings generally unless this exceptional course is adopted. There must be no suggestion that, merely by paying the court's expenses pro tem, a party is entitled to have the court sit at places beyond the customary seat, as it were, of its jurisdiction. 6 Although this court does not have a practice note on the subject, I have drawn the parties' attention to a practice note issued by the Chief Justice of the New South Wales on 17 August 2005, under which "the costs and expenses of, and incidental to, [an examination of the kind presently proposed] be borne in the first instance equally by the parties". Although adhering to his position as indicated above, the Commissioner raised no objection to my taking the New South Wales practice into account in resolving the present question. 7 In what is otherwise a finely balanced situation, I am disposed to think that there is merit in adopting the New South Wales practice on this occasion. The fact that that practice exists – and I infer has been in place without apparent controversy for some five and a half years – leads me to use it as a precedent for what might be done in the present case. If nothing else, I can see the sense in the establishment of some measure of uniformity as between superior courts on how these kind of exceptional, but intensely pragmatic, issues might be resolved. I propose, therefore, to order that the parties pay, in equal shares, the costs expected to be incurred by the court of and incidental to the examination of these proposed witnesses in the United Kingdom; and otherwise in accordance with directions as to which the parties raised no objection. 8 Another, perhaps less contentious, question which presently arises is, assuming that the applicant will be responsible, in the first instance, for the costs of the venue and for obtaining a transcript of the evidence, those costs should be his costs in the cause. The Commissioner resisted the making of any such order at this stage, upon the basis that, in due course, he would wish to submit that costs of this kind should be the responsibility of the applicant in any event. I do not, however, intend that an order now made in the terms proposed would foreclose the Commissioner from making a submission along those lines. In the normal course, costs of this kind which had to be incurred by a particular party would be that party's costs in the cause and, the proposed order will do no more than give effect to that situation. Should the Commissioner wish to submit, at some future stage, that special circumstances exist which would justify depriving the applicant, if successful in the proceeding, of an order for the payment of these costs, I do not intend that the order which is now proposed should stand in the way of any such submission, or should anticipate the manner of its determination. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 23 February 2011