Case U115

Members:
Davies J

Tribunal:
Administrative Appeals Tribunal

Decision date: 26 May 1987.

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Davies J. (President)

The issue considered in this interlocutory application is whether or not the application for review of the applicant, E Pty. Limited, should be given a hearing date.

The fixing of a date for hearing is sought by the Commissioner of Taxation who alleges that the sum of $1,974,596.82 is outstanding from the applicant and other companies in a like position and that until finalisation of the application for review is obtained, proceedings against other persons under the Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) ("the TUCT Act") will not be possible. See sec. 5(1)(f) and 7(1)(e) of that Act. The fixing of a date for hearing has been opposed by the applicant on the ground that its two principal witnesses, Messrs B. Saunders and G.F. Sheehan, are the subject of committal proceedings in relation to the affairs of the applicant and of forty-four other companies in a like position and that they would decline to give evidence until the criminal proceedings against them were completed.

An affidavit by Mr G.W. Long, liquidator of the applicant, states, inter alia:

"12. THAT I believe that for [E] Pty. Ltd. to discharge the burden of proof in connection with the Appeals against the disallowance of the Objections against the 1979 Ordinary Company Tax Assessment, the Amended 1979 Ordinary Company Tax Assessment and the 1979 Undistributed Profits Tax Assessment it will need to call as witnesses on its behalf the officers or

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persons who were in control of the company at the time the interest and dividend were paid to [S] Pty. Ltd. These persons include Mr G.F. Sheehan and Mr B. Saunders.

13. THAT I have been advised by Galbally & Rolfe, Solicitors, that until such time as criminal charges against Mr G.F. Sheehan and Mr B. Saunders are finalised that those two persons would decline to give evidence in support of the Company's Appeal."

Mr Saunders and Mr Sheehan are both charged with conspiracy to defraud the Commonwealth and conspiracy to prevent or defeat the execution or enforcement of a law of the Commonwealth, namely, the Income Tax Assessment Act 1936 (Cth) ("the Assessment Act") One of the informations reads that:

"Barry SAUNDERS did between the 30th day of June, 1977 and the 31st day of December 1983, at Melbourne, in the State of Victoria and at other places within and outside the State of Victoria conspire with Gerard Francis SHEEHAN and divers other persons to prevent or defeat the execution or enforcement of a Law of the Commonwealth namely the Income Tax Assessment Act 1936 contrary to Section 86(1)(b) of the Crimes Act 1914."

When this matter came on for the directions hearing before the Tribunal on 13 February 1987, Mr R. Downing, who appeared for the applicant, informed me that conspiracy proceedings had been taken in relation to forty-five companies, twenty-three of which, including the applicant, had been involved in an arrangement or arrangements involving the pre-payment of interest. He informed me that the Commissioner of Taxation had issued assessments on the footing that the paid interest was not a business expense deductible pursuant to sec. 51(1) of the Assessment Act. Mr Downing submitted that the evidence of Messrs Saunders and Sheehan was essential to the applicant's case and that they would decline to give evidence while criminal proceedings were being taken against them.

Dr C. Jessup, counsel for the Commissioner, submitted that Messrs Saunders and Sheehan had no right generally to decline to give evidence though they may decline to give answers to questions if the answers may tend to incriminate them. He submitted that, because of the right to decline to answer, there was no fear of incrimination. He submitted that the company could prove its case in other ways, though these other ways were not clearly identified. He referred to cases such as
Cameron's Unit Services Pty. Ltd. v. Whelpton & Associates Pty. Ltd. (1984) 59 A.L.R. 754 at p. 761,
McMahon v. Gould (1982) 1 ACLC 98; 7 A.C.L.R. 202 and
F.C. of T. v. Ahern 17 A.T.R. 535 which show that a court will not automatically refrain from exercising its jurisdiction in one area because a proceeding in another jurisdiction is also on foot. As Megan L.J. said in
Jefferson Ltd. v. Bhetcha (1979) 1 W.L.R. 898 at pp. 904-905:

"I should be prepared to accept that the court which is competent to control the proceedings in the civil action, whether it be a master, a judge, or this court, would have a discretion, under section 41 of the Supreme Court of Judicature (Consolidation) Act 1925, to stay the proceedings, if it appeared to the court that justice - the balancing of justice between the parties - so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceeding itself, of what is sometimes referred to as the `right of silence' and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings. But in the civil court it would be a matter of discretion, and not of right. There is, I say again, in my judgment, no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant, if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings. The protection which is at present given to one facing a criminal charge - the so-called `right of silence' - does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings."

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At the hearing of this interlocutory application on 13 February 1987, it was a principal submission of Dr Jessup that the effectiveness of the steps which were taken by the applicant company in the arrangement in which it was involved was not an issue, or at least an important issue, in the consideration of the charge against Messrs Saunders and Sheehan. At that time, a decision of the Magistrate hearing the committal proceedings, Mrs S.E. Brown, that there was a prima facie case against Messrs Saunders and Sheehan, was the subject of an application to the Federal Court of Australia under the Administrative Decisions (Judicial Review) Act 1977 (Cth). I informed council that I would not proceed further in relation to this matter until the judgment on that application was given. Subsequently, on 1 April 1987, a Judge of the Federal Court of Australia, Jackson J., handed down a judgment in which he set aside the decision of the magistrate for reasons which included the reason that the learned magistrate had not turned her mind to the effectiveness of the steps that were taken to avoid liability for income tax. His Honour held that, in the charge of conspiracy to defraud, it was necessary to consider whether or not the steps taken were in fact effective to avoid taxation liability. His Honour's judgment is now the subject of an appeal to a Full Court of the Federal Court of Australia which has been listed for hearing on 22 June 1987.

After the handing down of Jackson J.'s judgment, a further hearing of this interlocutory application was held on 28 April 1987. On that day, Dr Jessup accepted that, under the judgment of Jackson J., the view that he (Dr Jessup) had taken as to the nature of the matters to be heard in the criminal proceedings was incorrect. He submitted, however, that the Tribunal would be able to hear and dispose of the application for review prior to the handing down of the judgment of the Federal Court of Australia in the appeal against Jackson J.'s judgment, that is to say, at a time when the committal proceedings were not currently in progress. Not only would it be undesirable to do this, however, but as the appeal is listed for hearing on 22 June 1987, it would not be possible for the Tribunal to complete its review during the currency of the appeal.

In a matter such as this, a major point to be taken into account is the privilege against self-incrimination. This was described by Gibbs C.J. in
Sorby v. Commonwealth of Australia (1983) 46 A.L.R. 237 at p. 241:

"... It has been a firmly established rule of the common law, since the seventeenth century, that no person can be compelled to incriminate himself. A person may refuse to answer any question, or to produce any document or thing, if to do so `may tend to bring him into the peril and possibility of being convicted as a criminal':
Lamb v. Munster (1882) 10 QBD 110 at 111. The mere fact that the witness swears that he believes that the answer will incriminate him is not sufficient; `to entitle a party called as a witness to the privilege of silence, the court must see, from the circumstances of the case and the nature of the evidence which the witness is called to give, that there is reasonable ground to apprehend danger to the witness from his being compelled to answer':
R v. Boyes (1861) 1 B & S 311 at 329-30; 121 ER 730 at 738. That statement of the law has frequently been approved; see
Ex parte Reynolds; Re Reynolds (1882) 20 Ch D 294;
Triplex Safety Glass Co v. Lancegaye Safety Glass (1934) Ltd [1939] 2 K.B. 395 at 403-4;
Rio Tinto Zinc Corp v. Westinghouse Electric Corp [on appeal from Re Westinghouse Electric Corp Uranium Contract Litigation] [1978] A.C. 547 at 612, 627, 647...."

That privilege, which applies both to answers to questions and to the production of documents, is available in proceedings before the Administrative Appeals Tribunal as it is in proceedings before a court. As Mason, Wilson and Dawson JJ. said in Sorby v. Commonwealth of Australia, cited above, at p. 258:

"We reject the submission that the privilege is merely a rule of evidence applicable in judicial proceedings and that it cannot be claimed in an executive inquiry. We adhere to the conclusion we expressed in
Pyneboard [Pyneboard Pty. Ltd. v. Trade Practices Commission (1983) 45 A.L.R. 609] that the privilege against self-incrimination is inherently capable of applying in non-judicial proceedings: see
Kempley ([1944] A.L.R.) esp at 253 (per Starke J.); 254 (per Williams J.);
Ex parte Grinham; Re Sneddon [1961] SR (N.S.W.) 862;

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Commissioners of Customs and Excise v. Harz [1967] 1 A.C. 760 at 816."

See also sec. 60(3) of the Administrative Appeals Tribunal Act 1975 (Cth).

Thus, the application for review ought not to be given a date for hearing at this point of time unless the Tribunal is satisfied that the applicant has no case to put or the applicant would not be unduly prejudiced in the presentation of its case should Messrs Saunders and Sheehan claim the privilege which it is their entitlement to claim or there are other reasons for proceeding which are of such weight that the matter should be brought on for hearing notwithstanding that the applicant's case would be prejudiced thereby. In this respect, the Commissioner's understandable desire to obtain finality in this application for review and, if he is successful therein, to proceed as soon as possible to recover unpaid tax pursuant to the TUCT Act would be relevant.

Another, matter to be considered is whether the conduct by the Tribunal of its review at this time would constitute a contempt of court, having regard to the criminal proceedings which are on foot. As Mason, Wilson and Dawson JJ. said in Sorby v. Commonwealth of Australia, cited above, at p. 256:

"It is of the essence of contempt of court, except contempt scandalizing the court, that it be committed in relation to proceedings. For this purpose `proceedings' includes pending proceedings and the expression must be given a sufficiently broad meaning in criminal cases to cover a person who has been arrested and charged:
James v. Robinson (1963) 109 C.L.R. 593 at 606;
R v. Daily Mirror; Ex parte Smith [1927] 1 K.B. 845 at 851..."

A proceeding by an administrative tribunal may constitute a contempt of court. See
Australian Builders Construction Employees and Builders' Labourers' Federation v. Commonwealth of Australia (1981) 37 A.L.R. 470 and
State of Victoria v. Australian Building Construction Employees' and Builders Labourers' Federation (1982) 41 A.L.R. 71.

On the issue whether the conduct of review by the Administrative Appeals Tribunal would constitute a contempt of court, I express no concluded view. I note, however, that in his reasons for judgment, Jackson J. expressed the view that:

"The first respondent [the Magistrate] did not express a view on the question whether the schemes had been effective to create allowable deductions."

His Honour's conclusion that that issue was one on which a finding ought to be made is one of the matters raised in the appeal against his Honour's judgment. Unless his Honour's view on this point be held to be incorrect, the position will be that it will be part of the function of the learned magistrate to consider whether what was done by and in relation to the applicant company was effective to give rise to an allowable deduction. That is precisely the issue in the review before this Tribunal. It is therefore strongly arguable that the investigation of that issue by this Tribunal, including the examination and cross-examination of witnesses and the production of documents, while the same issue is being considered in the committal proceedings, would be a contempt of court as prejudicing the committal proceedings and the subsequent conduct of the trial.

A further matter to be considered is whether it would be appropriate for the Tribunal, which has a large backlog of taxation cases to deal with, to spend time on this review when, if the prosecution is successful, it may be that the applicant may not wish to proceed with its challenge to the Commissioner's assessments.

These are some of the matters to which attention must be given before a decision is finally made on this interlocutory application. At the present time, however, I am of the opinion that it is inappropriate to fix this matter for hearing, having regard to the early hearing of the appeal against Jackson J.'s judgment. That appeal will settle the nature of the issues which have to be considered in the committal proceedings and in the subsequent trial should Messrs Saunders and Sheehan be committed for trial. After the handing down of the judgment in the appeal, the question may be further considered, if the parties or either of them then so wish.

For these reasons, I shall direct that the application for review be not fixed for hearing prior to the handing down by the Full Federal Court of Australia of its judgment in the matter of Phillip George Curry v. Barry Saunders & Anor. I shall reserve leave to the parties to apply at any time after the handing down of the

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judgment for the fixing of a date for hearing of the review.