SMILES v FC of T & ORS

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 13 May 1992

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Davies J

The applicant, Phillip Murray Smiles, a member of the New South Wales Parliament, conducts a consultancy practice. During 1991, the Australian Taxation Office investigated Mr

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Smiles' taxation affairs. In about October 1991, amended assessments were issued disallowing certain claimed deductions for the four years ended 30 June 1987 to 1990 inclusive. The amended assessments imposed additional tax under s. 223 of the Income Tax Assessment Act 1936 (Cth), which provides for penalties for statements which are false or misleading in a material particular.

Subsequently, on 29 January 1992, the second respondent, Mr Ian Howard Tripet, an officer of the Australian Taxation Office, laid three informations under the Justices Act 1902 (NSW) against Mr Smiles. The informations concerned matters which had been the subject of the amended assessments and penalties. One of the informations alleged a breach of s. 7A of the Crimes Act 1914 (Cth) which makes it an offence to incite, urge, aid or encourage the commission of an offence against a law of the Commonwealth. The information alleged that Mr Smiles encouraged a person to knowingly make a statement to a taxation officer that was false in a material particular. The second information alleged breaches of s. 8P of the Taxation Administration Act 1953 (Cth) which makes it an offence to knowingly make a statement to a taxation officer that is false or misleading in a material particular. The third information alleged breaches of s. 8T of the Taxation Administration Act. That section makes it an offence to keep accounting records that do not correctly record or explain the matters to which they relate and to do so with the intention, inter alia, of hindering, obstructing or defeating the administration, execution or enforcement of a taxation law.

Mr Tripet was an officer in the Chatswood office of the Australian Taxation Office who had the task of laying such informations. His duty was to lay informations as and when instructed to do so and he was entitled ``The Informing Officer''. However, the prosecutions were in fact initiated by Mr Peter Smith of the Audit Prosecution Unit in the Chatswood office of the Australian Taxation Office. That section was headed by Mr Bob Fitton and had three other members, including Mr Smith and Mr Tom Mitchell. Pursuant to arrangements which were in place between the Commonwealth Director of Public Prosecutions and the Australian Taxation Office, a potential prosecution is referred by the Australian Taxation Office to the Office of the Director of Public Prosecutions for its decision inter alia when a serious crime, such as an offence against the Crimes Act, is involved or when the prospective defendant is a high profile person. Mr Smiles was such a person. Accordingly, a submission on the matter was sent by Mr Smith with the approval of Mr Fitton to the Director of Public Prosecutions. The Office of the Director of Public Prosecutions decided that the informations I have mentioned should be laid and instructed the Audit Prosecution Unit accordingly. The informations came into the hands of the Audit Prosecution Unit during January 1992 and they were laid by Mr Tripet on 29 January 1992. They and the summonses were served on Mr Smiles later that day.

The present application was lodged with the Court on 6 March 1992. At the hearing of this application, Mr D.H. Bloom QC, with him Mr B.J. Sullivan and Mr R. Gordon of counsel appeared for Mr Smiles. Mr B. Walker of counsel appeared for the Commissioner of Taxation and Mr I.H. Tripet. The Director of Public Prosecutions, Mr M. Rozenes QC, appeared with Mr T. Buddin of counsel. The amended application seeks orders under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") and under s. 39B of the Judiciary Act 1903 (Cth). The intent of the application is to seek orders by way of judicial review bringing the prosecutions to an end.

It was held in
Newby v. Moodie & Anor 88 ATC 4881; (1988) 83 ALR 523 that a decision taken by the Director of Public Prosecutions to prosecute was a decision to which the ADJR Act applied, being a decision of an administrative character taken under the Director of Public Prosecutions Act 1983 (Cth). However, since the exposition of the term ``decision'' as defined in s. 3 of the ADJR Act given by Mason C.J. in
Australian Broadcasting Tribunal v. Bond & Ors (1990) 170 CLR 321 at 335-339, it must be doubted that any such action taken by the Director of Public Prosecutions would be a decision to which s. 5 of the ADJR Act would apply or conduct leading to the making of a decision to which s. 6 of the ADJR Act would apply.

However that may be, the application is within s. 39B(1) of the Judiciary Act which confers jurisdiction upon the Federal Court with respect to any matter in which an injunction is sought against an officer or officers of the

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ATC 4206

Commonwealth. The three respondents are officers of the Commonwealth and an injunction is sought to prevent the continuance of the prosecutions. That jurisdiction would comprehend the giving of any appropriate declaration. See Leonard Hastings Ainsworth and Anor v. Criminal Justice Commission (High Court of Australia, Mason C.J., Brennan, Dawson, Toohey and Gaudron JJ., 9 April 1992).

However, the Court will not interfere by way of judicial review in the ordinary processes of a prosecution. See
Sankey v. Whitlam & Ors (1978) 142 CLR 1, at 25-6;
O'Donovan v. Vereker (1988) 6 Legal Rep. SL 3;
Lamb v. Moss & Anor (1983) 49 ALR 533,
Seymour v. Attorney-General (Cth) (1984) 4 FCR 498,
Souter v. Webb and Ward (1984) 54 ALR 683,
Wong v. Evans & Ors (1985) 6 FCR 95,
Foord v. Whiddett & Anor (1985) 6 FCR 475,
Murphy v. Director of Public Prosecutions & Anor (1985) 60 ALR 299, Forsyth v. Rodda & Anor (Wilcox J., 2 December 1988, unreported) and
Newby v. Moodie & Anor 88 ATC 4072; (1987) 78 ALR 603.

It may be appropriate for the Court to make an order of review affecting a prosecution where, for example, the decision or conduct sought to be reviewed was beyond jurisdiction or an abuse of process (
Bacon v. Rose & Anor [1972] 2 N.S.W.L.R. 793), or the conduct sought to be reviewed was contrary to that provided by statute (
Willesee v. Willesee & Anor [1974] 2 N.S.W.L.R. 275), or there is a discrete point of law the early determination of which may conclude or assist the resolution of the prosecution proceedings (see
IXL Timbers Pty Ltd & Anor v. Attorney-General for Tasmania (1961-1963) 109 CLR 574, Sankey v. Whitlam (supra),
Wiest v. Director of Public Prosecutions & Anor (1988) 23 FCR 472;
Shepherd v. Griffiths and Jones (1985) 8 FCR 464). However, the Court will not interfere with the ordinary conduct of criminal proceedings unless exceptional cause for doing so be shown.

There are particular issues regarding the review of a decision to prosecute.

In
R v. Commissioner of Police of the Metropolis; ex parte Blackburn [1968] 2 QB 118 and in
R v. Police Commissioner; ex parte Blackburn [1973] QB 241, it was accepted that in a special case, as where the decision was founded on an improper policy, it may be proper for a court to overturn a decision not to prosecute.

But a decision to prosecute stands in a different light. Lord Morris said in
Connelly v. Director of Public Prosecutions [1964] AC 1254 at 1300:-

``I consider that if a charge is preferred which is contained in a perfectly valid indictment which is drawn so as to accord with what the court has stated to be correct practice and which is presented to a court clothed with jurisdiction to deal with it and if there is no plea in bar which can be upheld the court cannot direct that prosecution must not proceed.''

That is the general rule, although in
Director of Public Prosecutions v. Humphrys [1977] AC 1, Lord Salmon at 45-6 and Lord Edmund-Davies at 53-5 approved an exception which had been propounded by Lord Reid in Connelly's case. His Lordship had said at 1296:-

``... I think there must always be a residual discretion to prevent anything which savours of abuse of process.''

Viscount Dilhorne, however, said at 26:-

``A judge must keep out of the arena. He should not have or appear to have any responsibility for the institution of a prosecution. The functions of prosecutors and of judges must not be blurred. If a judge has power to decline to hear a case because he does not think it should be brought, then it soon may be thought that the cases he allows to proceed are cases brought with his consent or approval.

If there is the power which my noble and learned friends think there is to stop a prosecution on indictment in limine, it is in my view a power that should only be exercised in the most exceptional circumstances.''

There have been like judgments in this country. Thus, in
Barton & Anor v. The Queen & Anor (1980) 147 CLR 75, Gibbs A.C.J. and Mason J. said at 96:-

``The courts exercise no control over the Attorney-General's decision to commence criminal proceedings, but once he does so, the courts will control those proceedings so as to ensure that the accused receives a fair trial.

...

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There is ample authority for the proposition that the courts possess all the necessary powers to prevent an abuse of process and to ensure a fair trial. The exercise of this power extends in an appropriate case to the grant of a stay of proceedings so as to permit a preliminary examination to take place. As a result of the speeches in
Connelly v. Director of Public Prosecutions [1964] A.C. 1254 and
Director of Public Prosecutions v. Humphrys [1977] A.C. 1, it is now established in the United Kingdom that although a judge has no power to refuse to allow a prosecution to proceed merely because he considers that, as a matter of policy, it ought not to have been brought, the courts have a general power to prevent unfairness to the accused, even to the extent of preventing an abuse of process resulting from the prosecution of proceedings brought without reasonable grounds.''

In
Jago v. The District Court of New South Wales & Ors (1989) 168 CLR 23, Mason C.J. said at 30-31:-

``For the reasons given, I agree with the approach of Richardson J. [in Moevao v. Department of Labour] as I have explained it. Bearing in mind his Honour's relatively broad view of what may amount to an `abuse of process', I agree also with his explanation of the rationale for the exercise of the power to stay a prosecution. His Honour stated [1980] 1 N.Z.L.R., at p. 482:

`The justification for staying a prosecution is that the Court is obliged to take that extreme step in order to protect its own processes from abuse. It does so in order to prevent the criminal processes from being used for purposes alien to the administration of criminal justice under law. It may intervene in this way if it concludes from the conduct of the prosecutor... that the Court processes are being employed for ulterior purposes or in such a way... as to cause improper vexation and oppression. The yardstick is not simply fairness to the particular accused. It is not whether the initiation and continuation of the particular process seems in the circumstances to be unfair to him. That may be an important consideration. But the focus is on the misuse of the Court process by those responsible for law enforcement. It is whether the continuation of the prosecution is inconsistent with the recognized purposes of the administration of criminal justice and so constitutes an abuse of the process of the Court.'

The continuation of processes which will culminate in an unfair trial can be seen as `misuse of the Court process' which will constitute an abuse of process because the public interest in holding a trial does not warrant the holding of an unfair trial.

Ultimately, it does not matter whether the problem is resolved in this way, by invoking a wide interpretation of the concept of abuse of process, or by saying that courts possess an inherent power to prevent their processes being used in a manner which gives rise to injustice. In either event the power is discretionary, to be exercised in a principled way, and the same considerations will govern its exercise. And in each case the power will be used only in most exceptional circumstances to order that a criminal prosecution be stayed. I have already noted that a similar result was reached by taking a broad view of the concept of abuse of process in
Reg. v. Derby Crown Court; Ex parte Brooks (1984) 80 Cr. App. R. 164. If the distinction matters, I would prefer to regard the power as an incident of the general power of a court of justice to ensure fairness.''

Brennan J. at 46-47 put the matter thus:-

``The power which was acknowledged to exist in Barton is a power which has a dual purpose: `to prevent an abuse of process or the prosecution of a criminal proceeding in a manner which will result in a trial which is unfair when judged by reference to accepted standards of justice' (1980) 147 C.L.R., at pp. 95-96. One purpose of the power is to ensure a fair trial, the other to prevent an abuse of process. A power to ensure a fair trial is not a power to stop a trial before it starts. It is a power to mould the procedures of the trial to avoid or minimize prejudice to either party.''

The remarks of Deane, Toohey and Gaudron JJ. were to like effect.

Mr Bloom put his case on two bases which, in the end, seemed to coalesce into one. Mr Bloom submitted that the prosecutions had been brought not for their own sake but to achieve an

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improper purpose or collateral advantage, that of obtaining the publicity which would flow from the prosecution of Mr Smiles. Mr Bloom said that it was an abuse of power to prosecute Mr Smiles, a high profile person, the prosecution of whom would result in publicity, when the circumstances were such that, had Mr Smiles been just an ordinary taxpayer and not a member of the New South Wales Parliament, he would not have been prosecuted.

The approach taken in the cases I have mentioned is that a decision to prosecute taken by or on behalf of the Director of Public Prosecutions is unexaminable, but this does not prevent a court, certainly a higher court, from controlling legal proceedings so as to prevent abuse of process. Section 5 of the ADJR Act and s. 39B of the Judiciary Act are not, however, appropriate vehicles for the general control of abuse of process in the court of a State. This is a matter for the courts of the State. As neither provision would avail the applicant, the application must fail.

However, it is nevertheless appropriate that I should deal with the substance of the case as it was presented.

Mr Bloom referred to cases such as
Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses Ltd [1982] A.C. 617, in which the House of Lords considered a case by way of judicial review in which it was alleged that the Inland Revenue Commissioners had treated certain taxpayers favourably in relation to the general body of taxpayers. At 632, Lord Wilberforce said:-

``From this summary analysis it is clear that the Inland Revenue Commissioners are not immune from the process of judicial review. They are an administrative body with statutory duties, which the courts, in principle, can supervise. They have indeed done so - see
Reg. v. Income Tax Special Commissioners (1881) 21 Q.B.D. 313 (mandamus) and
Income Tax Special Commissioners v. Linsleys (Established 1894) Ltd. [1958] A.C. 569, where it was not doubted that a mandamus could be issued if the facts had been right. It must follow from these cases and from principle that a taxpayer would not be excluded from seeking judicial review if he could show that the revenue had either failed in its statutory duty toward him or had been guilty of some action which was an abuse of their powers or outside their powers altogether. Such a collateral attack - as contrasted with a direct appeal on law to the courts - would no doubt be rare, but the possibility certainly exists.''

It is not in doubt that officers of the Australian Taxation Office take into account in deciding whether or not to institute a prosecution and have regard to the fact that a successful prosecution which attracts publicity is likely to have a greater deterrent effect on taxpayers generally than a prosecution which does not attract publicity. The Australian Taxation Office published on 6 February 1986 Income Tax Ruling IT 2246 which sets out its prosecution policy. IT 2246 discusses the imposition of additional tax and the prosecution of a taxpayer as alternative courses of action. IT 2246 provides inter alia:-

``1.4 A prosecution policy, to be effective, must further the statutory objectives of the A.T.O. Those objectives include the timely and efficient collection of revenue by firm but fair administration of the revenue laws through the promotion of voluntary compliance with those laws by the general body of taxpayers. As previously stated in many situations breaches of the revenue law expose the offender to either an administrative penalty or prosecution action and where this option is available the A.T.O. has to consider which of the two techniques should be used. The purpose of enacting provisions which make possible the application of administrative penalties, in respect of contraventions of the law is to reduce the administrative workload on the A.T.O. and to relieve what might otherwise be an impossible burden on the court system. Prosecution action remains an important instrument for achievement of A.T.O. objectives, particularly as a successful prosecution carries effects wider than those in the particular case.''

In the following paragraph, 1.5, IT 2246 provides that, in determining whether an administrative penalty would be more appropriate than prosecution, regard should be had inter alia to ``any publicity which the case may attract''. Paragraph 6.1 of IT 2246 specifies criteria relevant to the choice between prosecution and statutory penalties for false and misleading statements. Criteria (f) reads as follows:-

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``f. The prevalence of the particular offence and the extent to which the publicity of a prosecution would help to promote a greater level of compliance. This factor should never be the sole reason for prosecution. Care must be taken to ensure that the charge is not being brought simply to make an example of the defendant or simply to treat the defendant as a sacrificial victim.''

Paragraphs 6.21 and 6.22 provide inter alia:-

``In the Compliance Branch, the majority of audit or special examination cases would not be suitable for prosecution under sec. 8K, 8N and 8P.

...

6.22 However, there would appear to be a minority of cases in which prosecution action would be justified and cost effective having regard to the value of the deterrent effect that the resulting publicity would have.''

Likewise an information booklet prepared by the Audit Prosecution Unit for its staff, entitled ``Audit Prosecution Case Selection Guidelines and Procedures'' commences:-

``The document `Future Directions for ATO' states it is the ATO's aim to have `a maximum deterrent prosecution strategy based on compliance measurement research...'

CASE SELECTION STRATEGY

This means that in selecting taxpayers for prosecution from the range of audit cases whence possible offences have been revealed, APU staff must look for cases with the greatest deterrent impact on the taxpayer community generally or some significant sector within it.

Accordingly, the ATO's prosecution case selection strategy is to undertake a program concentrating on offences in the following categories:

• (1) those that are particularly serious, blatant or involve persistent offenders;
• (2) those which are representative of significant/prevalent non-compliance practices; and
• (3) those for which there are no other effective means of ensuring compliance or no other sanction,

and which, if prosecuted on a timely basis, may carry effects wider than those of the particular case. Prosecution is a drawn out and relatively expensive process. Given the fact the ATO has a range of other deterrent mechanisms, notably administrative penalties, it should not be used in an audit context as a routine action.''

An office minute from the Prosecution Business Management Committee of the Australian Taxation Office to Audit Chiefs and Audit Prosecution Managers, dated 5 July 1991, reads, inter alia:-

``The Prosecution Business Management Committee (BMC) recently considered the strategic areas to be addressed by Audit Prosecutions. In so doing, it fully endorses the recommendations from the Audit Chiefs Conference of 29-30 April, viz:

• • the need to take action to increase publicity of prosecutions;
• • the need to use results of prosecutions [lb]sic] cases to raise our profile and to impact on voluntary compliance levels;
• • that there are basically three categories of cases (i.e., high profile, blatant and representative); and
• • publicity of representative cases could be expected to have the broadest compliance effect.''

There is also a document entitled ``Audit Prosecution Publicity Guidelines'' which includes information such as:-

``When Should There Be Publicity

• ...
• (ii) where the audience is investors, salary and wage earners, etc.
  • - just prior to end of financial year
  • - around return preparation time
  • - following court action
    • • if possible, activities should be planned so that cases are in court around return preparation time
    • • use pre-court publicity just prior to end of financial year to remind taxpayers of obligations and advise of up and coming cases
    • • follow up pre-court publicity with post-court publicity, preferably around return preparation time, to show `we

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      mean business' and thus reinforce messages.''

These Guidelines include information as to what should be publicised including:-

``- actual cases

• • offences involved
• • results/penalties
• • circumstances peculiar to case
• • relate message to others.''

A document setting out ``Future Directions for the Taxation Office'', states that ``Vision for 1992'' including:-

``A `maximum deterrent' prosecution strategy based on compliance measurement research will be in use.''

For convenience, I shall refer to IT 2246 and to the above documents as ``the Guidelines''.

Mr Rozenes suggested that the above policy of the Australian Taxation Office was irrelevant as the decision to prosecute had been taken in the Office of the Director of Public Prosecutions. Mr Rozenes tendered a document entitled ``Prosecution Policy of the Commonwealth'' which sets out the principles which the Director of Public Prosecutions applies. There is nothing in that policy which refers to the question of publicity. The policy accepts in paragraph 2.8 that ``It is not the rule that all offences brought to the attention of the authorities must be prosecuted''. The deciding factor is that stated in paragraph 2.1 and paragraph 2.9, namely ``whether the public interest requires a prosecution''. The policy recognises in paragraphs 2.11(j) and 2.12 that the alternative penalties that can be levied under various Taxation Acts should be taken into account as possible alternatives to prosecution.

However, the fact that the prosecution policy of the Commonwealth does not refer to the question of publicity would not make the contents of the Guidelines irrelevant. These prosecutions arose out of an investigation by the Australian Taxation Office of Mr Smiles' taxation affairs. The prosecutions were initiated by the Australian Taxation Office and the informant is an officer of the Australian Taxation Office. In this circumstance, it seems to me that the policy as enunciated in the Guidelines would have played a part in the course taken by Mr Smith to recommend to the Director of Public Prosecutions that Mr Smiles be prosecuted. The element of publicity, one of the criteria specified by the Guidelines, was satisfied in Mr Smiles' case, as extracts from newspapers tendered in evidence show. Mr Smiles' tax affairs are newsworthy.

Mr Bloom sought to establish that the prosecution of Mr Smiles was undertaken solely or primarily for the publicity which would be attracted. Mr Bloom relied in this respect upon an affidavit by Mr Graeme L. Herring, a chartered accountant who has had long experience in the taxation field. However, notwithstanding my respect for Mr Herring, I have not found his affidavit helpful in this present case. Mr Herring did not have before him when he prepared his evidence and was not made aware of the nature of the evidence and allegations which the Director of Public Prosecutions intends to bring forward in the prosecutions.

Mr Bloom submitted that the sums involved in Mr Smiles' case were less than the sums set out in ``Prosecution Case Referral Guidelines'' of the Australian Taxation Office which establish a level of omitted income or overclaimed deductions which, if exceeded, should result in the matter being referred to the Audit Prosecution Unit. However, Mr Bloom was not aware of the figures set out in the Prosecution Case Referral Guidelines which, though tendered in evidence, were confidential to the Australian Taxation Office. The figures in the Prosecution Case Referral Guidelines are before me. It seems to me that the prosecution of Mr Smiles is consistent with those Guidelines.

Mr Bloom also relied upon the evidence of Mr T.W. Moon, the Tax Agent for Mr Smiles. Mr Moon gave this evidence in his affidavit, inter alia:-

``15. I then had the following conversation with Mr Mitchell [a member of the Audit Prosecution Unit]:

`Why are you prosecuting Phil?'

He then replied:-

`Because of who he is.'

I said:

`You mean you're prosecuting him because he is a member of Parliament.'

He said:

`Yes.'

I said:

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`You mean that if I was involved in a similar tax matter you would not prosecute me.'

and I then said:-

`No I am a bad example because I am a Tax Agent and you probably would prosecute me.

If Fred Bloggs off the street was involved in a tax matter like this you would not prosecute him?'

He said:-

`That's right.'''

I rejected a submission that Mr Mitchell's statements to Mr Moon could not be taken as an admission against the Commissioner of Taxation or Mr Tripet. Mr Mitchell had not, in fact, been the officer who had made the decision to refer Mr Smiles' case to the Director of Public Prosecutions. However, in January 1992, because Mr Fitton, the head of the Audit Prosecution Unit, and other members of the Unit were on leave, Mr Mitchell was in charge of the prosecution of Mr Smiles. It was Mr Mitchell who sought to obtain a statement from Mr Moon, who received the informations, who arranged for the informations to be laid by Mr Tripet and who then served the informations and summonses upon Mr Smiles. Mr Walker described Mr Mitchell as a mere messenger boy. However, Mr Mitchell was at the time the person in the Australian Taxation Office who was in charge of the prosecution of Mr Smiles. Therefore, what he had to say to Mr Moon shortly before the documents were served on Mr Smiles was admissible in evidence on this issue of abuse of power.

Mr Rozenes did not call evidence from the officer who made the decision in the Office of the Director of Public Prosecutions to prosecute Mr Smiles nor did he put in evidence any documents setting out the reasons for that officer's decision. Nor did Mr Walker adduce evidence from Mr Fitton, the head of the Audit Prosecution Unit or from Mr Smith, the member of the Unit who had initiated the prosecution.

However, Mr Walker adduced evidence from Mr Mitchell who denied inter alia that he had spoken to Mr Moon in the terms deposed to by Mr Moon. Mr Mitchell deposed in his affidavit to the following conversation:-

``He [Mr Moon] said-

`Why are you prosecuting Phil?'

I said-

`You would know from your involvement with the audit and the DPP that there is a question of false and misleading statements.'

He said-

`Is it because he is a politician?'

I said-

`No, not at all.'

He said-

`But the amounts involved are small, you wouldn't prosecute Joe Bloggs for such an amount. If I did it you wouldn't prosecute me, or maybe you would because I'm a Tax Agent.'

I said-

`The decision to prosecute or not rests with the DPP and whatever decisions they make will be in the light of the guidelines set out in the Prosecution Policy of the Commonwealth.'

He said-

`It seems like discrimination to me. I've been involved in audits where the amounts involved have been more than this and there has not been a prosecution.'

I said-

`It may appear that way but that is always a complaint that is thrown up when a decision is made to prosecute. It's a bit like driving over the bridge. Probably the average speed of the traffic is over the legal limit but the cops don't pull everyone over for speeding. When the decision to prosecute is made a whole range of factors is taken into account including such things as the person's background. Obviously we would take a rather serious view of the bank manager who deliberately failed to declare interest income as opposed to some old age pensioner who forgot to declare a few dollars.'''

Both Mr Moon and Mr Mitchell were cross- examined on their affidavits. Both seemed to me to give their evidence in a straightforward manner and to express what each recalled of the conversation. I do not think I should accept the evidence of one of them in preference to that of

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the other. It seems to me more likely that the conversation was somewhat between the two versions, that Mr Mitchell did say that the fact that Mr Smiles was a high profile person played a part in the decision to prosecute and that Mr Moon expressed the view that that was unfair and discriminatory. In reaching this view, I have taken into account the fact that Mr Mitchell's evidence also differed in some respects from that of other witnesses.

After the affidavits had been read and the deponents had been cross-examined, Mr Walker then tendered in evidence the brief of evidence which Mr Smith of the Audit Prosecution Unit had sent to the Office of the Director of Public Prosecutions, which included the submission that Mr Smiles be prosecuted. Had this brief been disclosed by being exhibited to an affidavit, it may be that the hearing would have taken an entirely different course. However, the document was not foreshadowed by the affidavit evidence and it was not tendered until after it had been shown to Mr Mitchell during his re-examination and Mr Mitchell had verified it.

It is unnecessary to set out the contents of the brief of evidence. It is sufficient to say that what was alleged against Mr Smiles was the deliberate evasion of tax in circumstances, which if proved, would seem to justify the prosecution of any taxpayer.

Accordingly, Mr Bloom's submission that the advantage of obtaining publicity was the sole or predominant factor influencing the prosecution of Mr Smiles should not be accepted.

But that is not to say that the advantage of publicity played no part in the decision of the officers of the Taxation Office to initiate and to carry through the prosecution. Publicity is one of the factors which the Guidelines specify as criteria to be taken into account in a decision to prosecute. Furthermore, there was the conversation between Mr Mitchell and Mr Moon from which Mr Moon certainly gained the impression that Mr Smiles' position as a Parliamentarian played a part in the decision to prosecute. Then there is the fact that the amended assessments imposed additional tax and it was not until later that a decision was taken to prosecute Mr Smiles. Moreover, no relevant officer who decided that Mr Smiles should be prosecuted, the only person who would know the precise reasons for the prosecutions, was called to deny the allegation.

The brief of evidence referred to above made no mention of the question of publicity or of Mr Smiles' position other than setting out his occupation as ``Politician/Consultant''. However, the Guidelines give emphasis to the publicity which may arise from the prosecution of a high profile person and Liaison Guidelines operating between the Office of the Director of Public Prosecutions and the Australian Taxation Office provide for the referral of matters from the Australian Taxation Office to the Office of the Director of Public Prosecutions both when the prosecution is for an offence against the Crimes Act or the Crimes (Taxation Offences) Act 1980 (Cth) and in cases which involve prominent or high profile figures or which, for any other reason, are likely to attract public attention. It is thus probable that, notwithstanding the lack of any express reference to the matter in the brief of evidence, Mr Smiles' position as a Parliamentarian would have been taken into account, both in the deliberations of the Audit Prosecution Unit and in the deliberations in the Office of the Director of Public Prosecutions.

I note that attached to the brief of evidence there is a note from Mr Fitton, the Manager of the Audit Prosecution Unit. He endorsed the brief with his report and with his view that the seriousness of the offences justified prosecution. However, Mr Fitton was not called to say that Mr Smiles' position played no part in the decision.

I therefore conclude that Mr Smiles' position as a high profile person was a factor which led to the institution of the prosecutions.

Mr Bloom referred to remarks of Lockhart J. in
Citibank Limited v. FC of T & Ors 88 ATC 4714 at 4729; (1988) 83 ALR 144 at 160-1 in which his Honour said:-

``The press release is a curious feature of this case. It was argued that it is inexplicable except on the basis of enforcing the Department's policy of `voluntary compliance', in effect using a prominent bank as an example of what may happen to others, especially banks and other financial institutions, if they do not voluntarily comply with the Australian Taxation Office's perception of the obligations of taxpayers under the Act and other revenue legislation.

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ATC 4213

There is more than one inference that can be drawn from the issue of the press release in all the circumstances; but even with the aid of Jones v Dunkel (supra), it is not permissible to draw from the evidence in this case the inference that it was at the relevant time the policy of the Australian Taxation Office to target or single out appropriate persons or institutions in the community who were perceived as not complying with the Office's perception of their obligations under relevant tax legislation, to take action in some form against them, including the exercise of powers under sec. 263, and to couple that action with publicity so as to have the largest possible impact on persons to ensure `voluntary compliance' by the targets of the action and by others.

If there was a policy of the Australian Taxation Office of ensuring `voluntary compliance' and if regard was had to it by any decision maker and positively relied on by him in reaching any of the impugned decisions, it would have been a wholly impermissible consideration.''

However these observations are not directly on point. His Honour was referring to a situation where the allegation was that taxpayers had been pressured to adopt practices of which the Commissioner approved but which were not required by law. That is not a case such as the present.

Mr Bloom referred to Inland Revenue Commissioners v. National Federation of Self- Employed and Small Businesses Ltd, cited above, in which the issue was discussed whether it was unlawful for the Inland Revenue Commissioners to introduce a special arrangement for some employers and employees who were members of unions but which were not applied to the general body of taxpayers. The case was decided in a formal sense on the basis that the National Federation did not have a sufficient interest to challenge the action taken by the Inland Revenue Commissioners. However, their Lordships made it clear that they did not accept that there had been any improper action taken by the Inland Revenue Commissioners. See Lord Wilberforce at 635. At 637, Lord Diplock said:-

``... no court considering this evidence could avoid reaching the conclusion that the board and its inspector were acting solely for `good management' reasons and in the lawful exercise of the discretion which the statutes confer on them.''

See also Lord Fraser at 645 and Lord Roskill at 663.

Lord Scarman made an observation on which Mr Bloom relied. At 651, his Lordship said:

``Notwithstanding Reg. v Lords Commissioners of the Treasury, I am persuaded that the modern case law recognises a legal duty owed by the revenue to the general body of taxpayers to treat taxpayers fairly; to use their discretionary powers so that, subject to the requirements of good management, discrimination between one group of taxpayers and another does not arise; to ensure that there are no favourites and no sacrificial victims. The duty has to be considered as one of several arising within the complex comprised in the care and management of a tax, every part of which it is their duty, if they can, to collect.''

At 652-3, his Lordship said:-

``I am, therefore, of the opinion that a legal duty of fairness is owed by the revenue to the general body of taxpayers. It is, however, subject to the duty of sound management of the tax which the statute places upon the revenue.''

However, it is plain that Lord Scarman did not regard the ``legal duty of fairness'' as requiring that every taxpayer be treated in the same manner. His Lordship agreed with the other members of the Court in this respect and at 654 said:-

``But by the time the application reached the Divisional Court for a hearing, inter partes, of the preliminary issue, two very full affidavits had been filed by the revenue explaining the `management' reasons for the decision not to seek to collect the unpaid tax from the Fleet Street casuals. At this stage the matters of fact and degree upon which depends the exercise of the discretion whether to allow the application to proceed or not became clear. It was now possible to form a view as to the existence or otherwise of a case meriting examination by the court. And it was abundantly plain upon the evidence that the applicant could show no such case.''

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ATC 4214

Mr Bloom also referred to the remark of Lord Denning M.R. in
Laker Airways Ltd v Department of Trade [1977] Q.B. 643 at 707 where his Lordship said that the Crown misuses its powers ``if it exercises them in circumstances which work injustice or unfairness to the individual without any countervailing benefit for the public'' and to the remarks of Lord Templeman in
In Re Preston [1985] A.C. 835 at 864-5:-

``The court can only intervene by judicial review to direct the commissioners to abstain from performing their statutory duties or from exercising their statutory powers if the court is satisfied that `the unfairness' of which the applicant complains renders the insistence by the commissioners on performing their duties or exercising their powers an abuse of power by the commissioners.

In most cases in which the court has granted judicial review on grounds of `unfairness' amounting to abuse of power there has been some proven element of improper motive. In the leading case of
Padfield v. Minister of Agriculture, Fisheries and Food [1968] A.C. 997 the Minister abstained from exercising his statutory discretion to order an investigation because he feared the consequences of the investigation might be politically embarrassing. In
Congreve v. Home Office [1976] Q.B. 629 the Minister exercised his power to revoke television licences because he disapproved of the conduct of the licence holders, albeit they had acted lawfully. In
Laker Airways Ltd. v. Department of Trade [1977] Q.B. 643 the Minister exercised his statutory discretion to give directions with regard to civil airways with the ulterior motive of making it impossible for one of the airlines to pursue a course of which the Minister disapproved. In these cases judicial review was granted because the Ministers acted `unfairly' when they abused their powers by exercising or declining to exercise those powers in order to achieve objectives which were not the objectives for which the powers had been conferred.''

As can be seen, none of these cases is directly in point or particularly analogous.

One can find in academic writings a demand for a principle such as that ``persons in similar situations should be afforded similar treatment''. See P. Finkle and D. Cameron, ``Equal Protection in Enforcement: Towards More Structured Discretion'' (1989) 12 Dalhousie L.J. 34 at 55. Hart refers to the precept ``Treat like cases alike''. See H.L.A. Hart, The Concept of Law (1961) p. 155. A decision to prosecute is not examinable on any such ground, even in the context of abuse of process. As Brennan J. said in Jago's case at 48:-

``When process is abused, the unfairness against which a litigant is entitled to protection is his subjection to process which is not intended to serve or which is not capable of serving its true purpose.''

Likewise, in the two Ex parte Blackburn cases cited above, which considered decisions not to prosecute, and in Inland Revenue Commissioners v. National Federation of Self- Employed and Small Business Ltd, emphasis was placed on the width of the discretion, upon aspects such as ``sound management''.

The proper exercise of power may necessarily involve some discrimination. Thus, Mason CJ, Brennan, Deane, Dawson, Toohey & McHugh JJ. said in
Industrial Equity Limited & Anor v. DFC of T & Ors 90 ATC 5008 at 5014; (1990) 170 CLR 649 at 660-661:-

``It is entirely consistent with the Act that the Commissioner should, at one time, decide to look more closely into the affairs of particular categories of taxpayers as well as of particular taxpayers, with a view to ascertaining their taxable income, and this whether an assessment or an amended assessment has issued.''

The persons in the Audit Prosecution Unit who initiated the prosecution of Mr Smiles and the officer in the Office of the Director of Public Prosecutions who decided that informations should be laid against Mr Smiles were satisfied that there was evidence that Mr Smiles had committed a number of offences and that it was in the public interest that he be prosecuted. Mr Bloom submitted that, in judging what was in the public interest, it was not proper for those persons to discriminate between taxpayers by taking into account, in the context of a prosecution, the point that the publicity arising from the prosecution of a high profile person might deter other taxpayers from committing like offences.

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ATC 4215

Of course, there may in addition be other factors in the public interest to be taken into account when a high profile person is concerned. It may be desirable that a high profile person should be prosecuted if the evidence of an offence is strong just to ensure that confidence is maintained in the courts and in the criminal justice system. Nothing would be more damaging to public confidence in the judicial system than that it should be thought that a person of high profile was not prosecuted simply because of his position in society and his influence. There may, on the other hand, be good reason for not prosecuting a high profile person if the evidence was weak, because the harm done by the prosecution could be immeasurable. No doubt, the Director of Public Prosecutions and his officers have very many difficult decisions to take in these circumstances and no doubt that is the reason why the arrangement is on foot whereby the prosecution of high profile persons is referred to the Director of Public Prosecutions for his decision.

The prosecution of taxpayers for all offences would not be in the public interest. In very many cases, the administrative penalties available by way of additional tax available under the Income Tax Assessment Act provide a suitable penalty as the Income Tax Assessment Act itself contemplates. It is not wrong to take account of the publicity likely to arise from and the deterrent effect of a prosecution when considering whether or not a prosecution for a taxation offence should be instituted. I see no element of abuse of power in that consideration, rather good administration.

Publicity which makes known to the community that an offender has been convicted and a penalty imposed is not in itself in conflict with the criminal justice system. General deterrence is one of the aims of punishment. As was said in Blackstone's Commentaries on the Laws of England (1769) Bk. IV Ch. 1 p. 12:-

``The public gains equal security, whether the offender himself be amended by wholesome correction; or whether he be disabled from doing any farther harm: and if the penalty fails of both these effects, as it may do, still the terror of his example remains as a warning to other citizens.''

See also
The Queen v. Radich [1954] NZLR 86 at 87. Publicity is assumed from the pronouncing of sentence in open court. As King C.J. said in
Yardley v. Betts (1979) 22 SASR 108 at 112:-

``The courts must assume, although evidence is wanting, that the sentences which they impose have the effect of deterring at least some people from committing crime.''

To further this end, s. 14 of the Income Tax Assessment Act provides for the Commissioner to furnish an annual report ``including any breaches or evasions of this Act of which the Commissioner has notice''.

Of course, it would not be appropriate for a prosecution to be instituted merely for the purpose of the publicity which might be gained. Rather the emphasis should be placed on the imposition of administrative penalties on offenders whenever prosecution does not seem to be in the public interest. Prosecution action should be proportionate to the offence. See
Veen v. The Queen [No. 2] (1987-1988) 164 CLR 465. But the quantum of the publicity likely to follow could be a relevant factor in the assessment of the public interest.

I am satisfied that the officers of the Audit Prosecution Unit and the officer of the Office of the Director of Public Prosecutions concerned with this matter had such evidence of significant offences by Mr Smiles that it was, in their view, in the public interest that he be prosecuted. There was no abuse of power. For this reason also, the challenge to the prosecutions must fail.

It was not in the present case submitted that the Australian Taxation Office had actually initiated media publicity in relation to Mr Smiles' prosecution. So that is not an issue. I merely note, therefore, that some of the statements in the ``Audit Prosecution Publicity Guidelines'' to which I have already referred seem to me to go too far and to have the potential, if implemented, to bring about an abuse of process. It should always be kept in mind that the Prosecution Policy of the Commonwealth says nothing about publicity. Publicity if achieved may serve a deterrent effect. But to seek publicity through the management of cases or through media releases or leaks respecting actual prosecutions in hand would have a tendency to interfere with and distort the ordinary processes of the criminal justice system.

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ATC 4216

Mr Bloom also relied upon the point that Mr Smiles had been charged additional tax under s. 223 but that, until the hearing of this matter, he had not been informed that the additional tax would be refunded. IT 2246 proceeds as if there would be a clear decision taken as to whether additional tax should be imposed or whether a taxpayer should be prosecuted. However, such a policy would be difficult to apply. The position is dealt with by s. 8ZE of the Taxation Administration Act which specifically provides for the refund of additional tax if a prosecution is not withdrawn.

For these reasons, the application should be dismissed. In my view, the applicant should pay the respondents' costs of the proceedings. I have considered the fact that the brief of evidence put by the Audit Prosecution Unit to the Office of the Director of Public Prosecutions was not produced until a very late stage in the hearing. It was a very significant piece of evidence and, in view of the pre-trial directions given by a Judge of the Court, ought to have been produced and verified at an early stage. Nevertheless, it does not seem likely that the nature of its contents would have taken the applicant by surprise.