FEDERAL COURT OF AUSTRALIA Obeid v Commissioner of Taxation [2017] FCA 1135 File numbers: NSD 535 of 2014, NSD 536 of 2014, NSD 537 of 2014, NSD 538 of 2014, NSD 539 of 2014, NSD 540 of 2014, NSD 541 of 2014, NSD 542 of 2014, NSD 543 of 2014, NSD 544 of 2014, NSD 545 of 2014, NSD 546 of 2014 Judge: PAGONE J Date of judgment: 22 September 2017 Catchwords: TAXATION – application for stay of proceedings – substantial overlap with criminal proceedings – real prejudice to applicant in taxation proceeding Legislation: Federal Court of Australia Act 1976 (Cth) Evidence Act 1995 (Cth) Taxation Administration Act 1953 (Cth) Cases cited: Australian Securities and Investment Commission v Active Super Pty Ltd (No 5) [2013] FCA 369 Australian Securities and Investment Commission, in the matter of North West Resources Ltd v Craigside Co Ltd BVI Co No 74124 named in the schedule (2013) 93 ACSR 176 Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 Ransley v Commissioner of Taxation [2016] FCA 778 Seller v Commissioner of Taxation [2013] FCA 1373 Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562 X7 v Australian Crime Commission (2013) 248 CLR 92 Date of hearing: 4 September 2017 Registry: New South Wales Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 8 Counsel for the Applicants: Mr D McGovern SC with Mr D Barlin Solicitor for the Applicants: Deutsch Partners Counsel for the Respondent: Mr T Thawley SC with Ms M Hirschhorn Solicitor for the Respondent: Minter Ellison ORDERS NSD 535 of 2014 BETWEEN: CAROL OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 536 of 2014 BETWEEN: EDWARD OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 537 of 2014 BETWEEN: DAMIAN OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 538 of 2014 BETWEEN: GEMMA VRANA Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 539 of 2014 BETWEEN: GERARD OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 540 of 2014 BETWEEN: GWENDA OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 541 of 2014 BETWEEN: JUDITH OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 542 of 2014 BETWEEN: LUCIA OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 543 of 2014 BETWEEN: MAREE OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 544 of 2014 BETWEEN: PAUL OBEID Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 545 of 2014 BETWEEN: REBECCA JOUMMAS Applicant AND: COMMISSIONER OF TAXATION Respondent NSD 546 of 2014 BETWEEN: CALVIN HOLDINGS PTY LTD IN HIS CAPACITY AS TRUSTEE FOR THE OBEID FAMILY TRUST NO 2 Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PAGONE J DATE OF ORDER: 22 SEPTEMBER 2017 THE COURT ORDERS THAT: 1. The proceedings be stayed until the determination of the criminal proceedings against Mr Edward Obeid Senior and Mr Moses Obeid in respect of the charges of conspiring to commit misconduct in public office against them under the common law or further order. 2. The parties list the proceeding for a further case management hearing within 14 days of the determination of the criminal proceedings. 3. The proceedings will otherwise be listed for a case management hearing on 2 July 2018 on the basis that the date may be vacated if the criminal proceedings have not been determined by that date. 4. The parties each pay their own costs of this application. 5. There be liberty to apply on 3 days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT PAGONE J: 1 The applicants in Part IVC proceedings under the Taxation Administration Act 1953 (Cth) ("the tax proceedings") seek a stay of their tax proceedings pending the completion of a hearing before a jury of criminal charges against Mr Moses Obeid and Mr Edward Obeid Senior ("Messrs Obeid") in relation to conspiracy to commit misconduct in public office ("the criminal trial"). There is substantial overlap between the issues in the tax proceedings and those in the criminal trial arising from the purchase and sale of property by the trustee of the Obeid Family Trust No 2, but Messrs Obeid are not formally applicants in the tax proceedings. The Commissioner of Taxation consents to the stay of the tax proceedings but the Court needs to be satisfied that the proceedings should be stayed. 2 The court has a wide discretion to stay proceedings in the interests of justice: Australian Securities and Investment Commission, in the matter of North West Resources Ltd v Craigside Co Ltd BVI Co No 74124 named in the schedule (2013) 93 ACSR 176 at [16]; Websyte Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562 at [53]; Australian Securities and Investment Commission v Active Super Pty Ltd (No 5) [2013] FCA 369 at [15]-[16]; Seller v Commissioner of Taxation [2013] FCA 1373 at [16]. The fact that there may be criminal proceedings involving the same or related subject matter as civil proceedings does not give rise to an automatic entitlement to a stay: see Seller at [16] and Ransley v Commissioner of Taxation [2016] FCA 778 at [22]. The discretion to grant a stay may be exercised, however, where the applicant for a stay is able to show real prejudice to exist in the proceedings in which the stay is sought: Ransley at [22]. The considerations to take into account in deciding whether to exercise the discretion to grant a stay will vary with the circumstances and the prejudice which may occur if a stay is not granted. Who may be prejudiced and in which proceeding there may be prejudice, as well as how, the extent, and when the prejudice may arise, will need to be considered. 3 In the present case the applicants submit, and the Commissioner agrees, that there may be prejudice in connection with the right to silence which Messrs Obeid have in relation to the criminal trial. The applicants in Seller and Ransley successfully sought stays of their tax proceedings in circumstances in which they sought to preserve their right to silence in connection with criminal proceedings which had issues overlapping those in their tax proceedings, and in which they were the accused. The applicants in the present appeals, however, are not themselves subject to criminal charges and Messrs Obeid are not formally applicants in the tax proceeding. 4 The right to silence is an important principle in the administration of justice. In X7 v Australian Crime Commission (2013) 248 CLR 92 Hayne and Bell JJ (with whom Kiefel J agreed) said at 127, [71]: Requiring the accused to answer questions about the subject matter of a pending charge prejudices the accused in his or her defence of the pending charge (whatever answer is given). Even if the answer cannot be used in any way at the trial, any admission made in the examination will hinder, even prevent, the accused from challenging at trial that aspect of the prosecution case. And what would otherwise be a wholly accusatorial process, in which the accused may choose to offer no account of events, but simply test the sufficiency of the prosecution evidence, is radically altered. An alteration of that kind is not made by a statute cast in general terms. If an alteration of that kind is to be made, it must be made by express words or necessary intendment. Their Honours went on to say at 136-7, [102]-[105]: 102 These features of the accusatorial system of criminal justice can be described as an accused having a "right to silence". And discussion of the "right to silence" must often proceed in conjunction with a discussion of the privilege against self-incrimination. But, as this Court's decision in Environment Protection Authority v Caltex Refining Co Pty Ltd shows, the privilege against self-incrimination is distinct from what was there described as "[t]he fundamental principle that the onus of proof beyond reasonable doubt rests on the Crown" and its "companion rule that an accused person cannot be required to testify to the commission of the offence charged". 103 In this case, it is necessary to unpack the content of both the privilege against self-incrimination and the so-called "right to silence" to identify whether compulsory examination of a person charged with an offence about the subject matter of the offence charged would be an impermissible interference with the due administration of criminal justice. 104 As four members of this Court said in Reid v Howard, "[t]he privilege [against self-incrimination], which has been described as a 'fundamental ... bulwark of liberty', is not simply a rule of evidence, but a basic and substantive common law right". The evolution of and rationale for the privilege against self-incrimination have been described in various ways164. No single explanation has achieved universal acceptance, whether in judicial decisions or academic writings. But neither the existence nor the content of those controversies can be understood as denying that the privilege is now regarded as being "a basic and substantive common law right", and not just a rule of evidence. That is, it is not a privilege which is concerned only with the use to which answers given may be put at, or in connection with, a trial. It is a privilege which permits the refusal to make an answer regardless of whether the answer is admissible as testimonial evidence. The accusatorial process of criminal justice and the privilege against self-incrimination both reflect and assume the proposition that an accused person need never make any answer to any allegation of wrong-doing. 105 The notion of an accused person's "right to silence" encompasses more than the rights that the accused has at trial. It includes the rights (more accurately described as privileges) of a person suspected of, but not charged with, an offence, and the rights and privileges which that person has between the laying of charges and the commencement of the trial. (Footnotes omitted). The prejudice relied upon by the applicants in their written submissions in the tax proceedings in the present application was not expressed to be that to the applicants in the tax proceedings, but to Messrs Obeid because they could "be compelled to disclose matters in the Federal Court Proceedings in a way that fundamentally" altered the accusatorial judicial process in the criminal trial. The prejudice relied upon was described in their written submissions to be that to Messrs Obeid "in the conduct of their respective defences in the criminal proceedings by being forced to effectively waive their right to silence, and their privilege against self-incrimination", but senior counsel for the present applicants embraced, at the hearing of the application for the stay, the submission that the applicants may be prejudiced in the tax proceedings if the applicants were required to go to trial of the tax proceedings without the evidence of Messrs Obeid. The difference is not without importance because the way in which the prejudice was described in the applicants' written submissions looked to the prejudice to persons who are not formally parties in the proceedings to be stayed, and looked to the prejudice to those persons in their criminal trial if compelled to give evidence in the tax proceedings. The adoption of the submission in argument that the prejudice was to the applicants in the tax proceedings, in contrast, focused upon persons who were not themselves accused in a criminal trial and did not themselves need to preserve a right to silence. In Ransley prejudice was found to the applicant in Part IVC proceedings where the applicant could not discharge the onus of proof in those proceedings without losing the right to silence in a parallel criminal prosecution: see also Seller. 5 The issues common to the tax proceedings and to the criminal trial arise from the purchase and sale of property by the trustee of the Obeid Family Trust No 2 in the 2011 and 2012 income years. The trust was settled as a discretionary trust by deed on 14 May 2002 and the trustee from 14 May 2002 to 29 April 2011 was Equitax Pty Ltd and from 29 April 2011 was Calvin Holdings Pty Ltd. The Commissioner contends in the tax proceedings that profits from the sale of the property acquired are to be assessed as ordinary income rather than as discounted capital gains. The evidence of Messrs Obeid is centrally relevant to the tax issues in each of the tax proceedings and, importantly, Messrs Obeid are agreed by the parties in the tax proceedings to have been the principal persons involved in relation to the negotiation, acquisition and management of the assets of the trust and were also heavily involved in certain mining dealings concerning its property. 6 The need for the applicants to show real prejudice does not require them to state the specific matters of prejudice because, as was observed in Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 at [43], to require that "would be to make the risk of prejudice a reality by requiring [the accused] to reveal information about [the] defence, the very situation which an order for a stay seeks to avoid". It does require an applicant, however, to show real prejudice to exist and that it is not outweighed by recourse to provisions such as those enabling the Court to make a non-publication or suppression order or orders restricting the use of evidence: see Federal Court of Australia Act 1976 (Cth), Part VAA, Division 2; Evidence Act 1995 (Cth), s 128(5). In this case it is clear that the prejudice is real in that the evidence of Messrs Obeid filed in the tax proceedings relates directly to, and overlaps with the period of, the events in respect of the criminal charges against them. In those circumstances the Commissioner was not responsibly able to give an undertaking not to subject them to cross-examination in the tax proceedings. 7 The overlap between the issues in the taxation proceedings and in the criminal trial can be seen in the present case by comparing the appeal statements filed in the taxation proceedings with the particulars of the prosecution case against Messrs Obeid in the criminal trial. A comparison of those documents reveals a very substantial overlap of issues and evidence, and, in particular, of the importance in the tax proceedings of the evidence of Messrs Obeid in respect of which they have a right to silence in their criminal trial. Messrs Obeid are not parties to the tax proceedings but have both sworn an affidavit in the tax proceedings in support of the applicants. The common issues include their evidence concerning knowledge of, and intentions in relation to, the acquisition of a property known as Cherrydale Park, and knowledge of, and intentions in relation to, exploration and mining licences in connection with that property. Their credit in relation to that evidence in the tax proceedings may also be an issue to be determined in the tax proceedings. Furthermore, Messrs Obeid are not just witnesses for unrelated parties in the tax proceedings but were, or may be found to have been, the controlling or guiding minds of the trustees in respect of which the taxation issues in dispute in the taxation proceedings depend. Their positions in relation to questions of prejudice in relation to the proceedings in which the stay is sought, are, therefore, in substance the same as the applicants in Ransley and Seller. The evidence of Messrs Obeid in the present case is necessary to determine the character of the receipt by the trustee of the trusts at the relevant times. The applicants in the Part IVC proceedings will not be able to discharge their burden of proof without it and, therefore, there will be prejudice to them in their proceeding if they are required to proceed to trial without the evidence of Messrs Obeid. Counsel for the applicants had also submitted, as mentioned above, that relevant prejudice might also be caused to each of Messrs Obeid in their criminal trial if they were compelled to give evidence in the tax proceedings, but in the circumstances it is unnecessary to express a concluded view about whether that is the correct way to identify the relevant prejudice for the purpose of the grant of a stay or whether their prejudice in their criminal trial would be sufficient to grant a stay of the tax proceedings as if they were unrelated parties. For present purposes it is sufficient that the applicants in the proceedings in which the stay is sought can show prejudice to them in their tax proceeding in circumstances in which those seeking to preserve their right to silence are in substance interested and related parties to the outcome of the tax proceedings. 8 It is next relevant to consider the form of order to be made in granting a stay. In Ransley her Honour stayed proceedings pending the determination of committal proceedings but listed the proceedings for directions on a specified date on the basis that the date may be vacated if the committal proceedings were not determined by that date. The parties informed the Court in the present matter that the date of the criminal trial had not yet been fixed but was unlikely to take place in 2017. The parties expected that the criminal trial would be listed at a directions hearing on 6 October 2017 for a trial to be conducted in 2018. In the circumstances there will be a stay of the tax proceedings until charges against each of Messrs Obeid have been tried by the Supreme Court of New South Wales, but the tax proceedings will otherwise be listed for a case management hearing on 2 July 2018 on the basis that the date may be vacated if the criminal trials have not been completed by that date. The parties otherwise agreed to an order that each pay their own costs of this application for a stay. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone. Associate: Dated: 22 September 2017