Caratti & Ors v Commissioner of Taxation of the Commonwealth of Australia & Anor P17/2000 [2000] HCATrans 638 (27 October 2000)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P17 of 2000

B e t w e e n -

JOHN MICHAEL CARATTI, VENETIAN NOMINEES PTY LTD, ZEL NOMINEES PTY LTD, DELBAR INVESTMENTS PTY LTD, GRANGEFIELD HOLDINGS PTY LTD, EXCELCO MINING PTY LTD, MINE EXC PTY LTD, ROBINSWOOD PTY LTD, LARKSLOCK PTY LTD, UNICORN VALLEY PTY LTD, TERCON HOLDINGS PTY LTD, JUNANA PTY LTD, OPALSWAN PTY LTD, GIBATE PTY LTD, TOSMAN PTY LTD, CARATTI HOLDING CO PTY LTD, GALVESTON PTY LTD, HARVARD NOMINEES PTY LTD, MAMMOTH INVESTMENTS PTY LTD, NAVARAC PTY LTD, KELENA NOMINEES PTY LTD, BELLA GUARDA FARM PTY LTD and JAMESWAY NOMINEES PTY LTD

Applicants

and

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

First Respondent

THE DIRECTOR OF PUBLIC PROSECUTIONS OF THE COMMONWEALTH OF AUSTRALIA

Second Respondent

Application for special leave to appeal

GUMMOW J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON FRIDAY, 27 OCTOBER 2000, AT 2.51 PM

Copyright in the High Court of Australia

_____________

MR P.W. NICHOLS: May it please your Honours, with MR J.A. DAVIES, I appear for the applicant. (instructed by Davies & Co)

MS L.B. PRICE: If it please your Honours, I appear for the first respondent. (instructed by Australian Government Solicitor)

MR E.M. HEENAN, QC: May it please your Honours, with my learned friend, MS L.F. WARD, I appear for the second respondent. (instructed by the Commonwealth Director of Public Prosecutions)

GUMMOW J: Yes.

MR HEENAN: Your Honour, I am not sure whether this is an appropriate time, but we would be asking to have two affidavits read that have only just been filed.

GUMMOW J: What are they about?

MR NICHOLS: I think that I can overcome that problem for my learned friend because I intend to make certain concessions.

GUMMOW J: Let us see how we go, Mr Nichols.

MR NICHOLS: Yes. Your Honours, the special leave point here is a short narrow compass and it can be summed up in relatively few words. The applicants who have engaged in much litigation against the respondents in the past and have many issues yet to be concluded between them caught out the Commissioner leaking evidence from the audit branch to the investigation branch and, in particular, to that branch of his officers that prepared a prosecution.

GUMMOW J: That is not quite right, is it? What was the nature of the proceeding before Mr Justice French?

MR NICHOLS: Well, it is all summed up in the short particulars and I will quote a short passage.

GUMMOW J: Just tell me the nature of the proceeding.

MR NICHOLS: The misuse by the Commissioner - - -

GUMMOW J: No, no, what relief did you want and what was the cause of action?

MR NICHOLS: For an injunction and various declaratory relief.

GUMMOW J: Yes.

MR NICHOLS: Thank you.

GUMMOW J: That was the proceeding and then there was a motion, was there?

MR NICHOLS: Yes, there was a motion.

GUMMOW J: That was a strike-out motion, was it?

MR NICHOLS: Yes.

GUMMOW J: That succeeded?

MR NICHOLS: Yes, it did, but - - -

GUMMOW J: An appeal against that strike-out motion failed?

MR NICHOLS: Yes, that failed but it was on somewhat different grounds.

GUMMOW J: Maybe, but it failed.

MR NICHOLS: Yes, sir, but it failed on different grounds.

GUMMOW J: I know that, but it is against that decision of the Full Court on this strike-out litigation that the application is brought here. So there is no findings of fact at all?

MR NICHOLS: No, sir. But, however, there is a fact and it has been verified in affidavit that certain undertakings were made in between the proceedings which ended the immediate problem. The question upon which special leave is to be granted - - -

GUMMOW J: When you say "ended the immediate problem", what does that mean?

MR NICHOLS: Well, sir, they undertook to abandon the audit proceedings until after the conclusion of the criminal proceedings.

GUMMOW J: I see. Why should we grant special leave until the criminal proceedings are sorted out?

MR NICHOLS: Well, the criminal proceedings have, to some extent, been sorted out, but that brings me to the first point raised by my learned friend. My learned friend wants to produce the record of the conviction of one of the appellants, Mr Caratti, before the Supreme Court of Western Australia, and then he wants to produce a copy of his notice of appeal to this Court. To the extent that both those documents are relevant, they are conceded. There is no question that those documents are relevant, indeed, from our point of view. But the point is the reasons - - -

GUMMOW J: The question arises, will any of these issues possibly arise in any application arising out of the criminal proceedings?

MR NICHOLS: Yes. Indeed, the whole conduct of the criminal proceedings is the subject of some matters. But, nonetheless, these particular matters will not be raised because they are the subject of undertakings.

GUMMOW J: Undertakings as to what?

MR NICHOLS: Well, sir, in the second paragraph of the summary of the case, on 5 November 1998, undertakings were made. Undertakings were made that the audit would not be continued until the criminal proceedings were terminated one way or the other, and those undertakings were accepted. But still, the original proceedings had not been disposed of. The Federal Court determined in paragraph 12 of its judgment that the question was of two principles affecting the judicial discretion. The principle which they upheld was that a proper - - -

GUMMOW J: Presumably there were objections to tender of evidence at some stage of the trial?

MR NICHOLS: There were many issues at the trial and much evidence was objected to at the trial, but it cannot be said that anything directly turning on this particular issue was tendered.

GUMMOW J: What is the particular issue of principle?

MR NICHOLS: The particular issue of principle is whether the substantive issues between the parties should have been disposed of or whether - - -

GUMMOW J: That is not an issue of general importance.

MR NICHOLS: Well, perhaps I could finish my submission, sir, and you can then see whether the alternative view is perhaps the one that should govern your disposal of this application.

The alternative view was that a parsimony in not granting relief where relief was not necessary, and paragraph 12 of the Federal Court decision turned on that point. The judge there said that it was a matter of particular use but - - -

GUMMOW J: I still do not understand. What is the general point of public importance of the administration of the law that is involved, apart from particular procedural complexities - - -

MR NICHOLS: It is not about procedural complexities, sir. The general principle is that one should be allowed to conclude the issues between the parties. Now, in this case, the real issue between the parties was substantially whether they should carry on the audit while criminal proceedings were operating, and that was never actually determined. An undertaking does not determine whether the plaintiffs were entitled to maintain those issues. All that we know was the whole of those issues are now still open and will have to be raised again, undoubtedly, at some future occasion.

As against this, there is the question as to whether that relief was necessary. Our contention is the relief was necessary. It was necessary between the parties to dispose of the substantial present and future issue between them and it could conveniently have been decided.

Alternatively, the view is that it was not necessary. That is the entire scope of the issue.

GUMMOW J: Yes.

MR NICHOLS: Now, I have set out at some length elsewhere and I do not intend to trouble your Honours with this, but I have never had any difficulty persuading the court whenever it is necessary that there is a substantial principle at stake here. But the only question that has to be asked is, is it necessary, and on each occasion, the courts below have determined that it was not. That is the only issue before you.

GUMMOW J: Yes. Yes, what does the first respondent have to say?

MS PRICE: Your Honour we put our opposition to it quite simply in that there was no error or no sufficient doubt in the decision of the court below. Essentially, their Honours below were dealing with a question of interpreting section 16 of the Income Tax Assessment Act and determining whether any conduct of the Commissioner of Taxation was in the nature of conduct outside the proper purposes of the Act or was conduct that might amount to an interference in the administration of justice. Their Honours followed the established principles as have been arrived at in this Court, and also had been applied in the Full Federal Court in the De Vonk Case.

Their Honours also made it very clear that what they were dealing with was a question that was speculative, that, in fact, the criminal proceedings had finished and that the issues here were really looking towards what might eventuate in the future and that in those circumstances there really was nothing upon which to make a decision at this time. Particularly in the Full Federal Court their Honours noted that did not mean that in the future this matter could not arise between the parties once it was known whether there was to be a retrial and as to what documents may necessarily be disclosed between the first respondent and the second respondent.

Apart from that, your Honours, I think the most important point here that in no way is this case, in its present form, suitable for any determination of the special leave point. The facts, as your Honours noted earlier, have never been determined, they are contested, and this was a strike-out application, and for the purposes of determining the strike-out application, the first respondent made the point that there was no tenable cause of action, even if one could prove all the allegations that had been made by the applicants in their affidavits.

Secondly, it generally turns upon a point of statutory construction, that is, the construction of section 16 of the Income Tax Assessment Act and your Honours may be aware from the papers that hat has been looked at by the High Court in the Canadian Pacific Tobacco Case and that that case has been followed consistently since the time it was determined by Chief Justice Dixon and the Full Court. In our submission, there is nothing at all arising in the present case which would warrant this Court going back and revisiting Canadian Pacific Tobacco.

Finally, your Honours, as a result of the way the judge at first instance and the Full Court of the Federal Court dealt with this matter, this Court would not have the benefit of any intermediate appellate court's consideration of the matter.

GUMMOW J: Now, what did the Full Court do, it refused leave, did it?

MS PRICE: Yes, I think Justice Wilcox summed it up - - -

GUMMOW J: It refused leave to appeal, did it not?

MS PRICE: Yes, it refused leave to appeal and summed up quite succinctly on page 25 of the application book that:

it is sufficient to say I am of the opinion that the reasons of French J are persuasive and I am not of the opinion there is sufficient doubt to warrant reconsideration -

and then over on page 26, his Honour says:

The general principles applicable to a case such as this have been canvassed in recent decisions.....There is really no need for a Full Court again to consider matters of general principle; the principles have been spelt out. The critical matter in any particular case will be the application of the general principles to the facts of that case. This can only be done with specific information as to the documents or other information which is said to be threatened to be used in an improper way.

It seems to me impossible satisfactorily to deal with the issues that the applicants wish to raise until it is known, first, whether there will be a retrial, second, if so, whether there will be any limitation of its ambit and, third, what material is proposed to be tendered -

and in our submission, your Honours, you are in exactly the same position. The matter is purely speculative.

GUMMOW J: Yes, yes, thank you.

MS PRICE: Thank you.

GUMMOW J: Yes, Mr Heenan?

MR HEENAN: Your Honours, we adopt the submissions of the first respondent.

Can I ask for leave to have these two affidavits taken as read. The first deposes to the fact that on 28 September this year, well after the commencement of the special leave application, the applicants' appeal to the Court of Criminal Appeal of Western Australia was dismissed as the appeal from conviction, so the conviction stands and there has been no order for retrial. The second affidavit of 26 October, only yesterday, deposes to the fact that since the order of the Court of Criminal Appeal, the applicant in the criminal proceedings has filed an application for special leave to appeal to this Court from the dismissal of his appeal against conviction, seeking orders that the conviction be quashed. The grounds, which are annexed to that affidavit, do not include a ground for an order for retrial, yet that remains, theoretically, a potentiality.

GUMMOW J: Thank you.

MR HEENAN: Your Honours, the only other submissions we make in addition to those made by the first respondent are that there was a finding at first instance and on appeal that there was power for the Commissioner of Taxation to supply information to the Director of Public Prosecutions so long as the officers were acting within the course of their duties and it was observed, both at first instance and on appeal, that there was no allegation that they were acting outside the scope of their duties.

CALLINAN J: Mr Heenan, do the grounds in the application or the grounds in the draft notice of appeal encompass the same points as are sought to be raised here, and that is that the evidence should not have been admitted because it was illegally obtained? That is the substance of the matter, is it not?

MR HEENAN: Your Honour, I am not closely familiar with the details of the conduct of the appeal in the Court of Criminal Appeal, but I am instructed that there was no objection to the reception of evidence in the criminal proceedings on any grounds which pertain to the subject matter of the Federal Court litigation. There was objection to other evidence on a whole variety of grounds and the proposed notice of appeal and the special leave application renews issues concerning the admissibility of certain evidence.

CALLINAN J: That is another question. Whether they took the point at the trial or in the Court of Criminal Appeal, they are seeking to take the point in the High Court, is that right, in the criminal proceedings?

MR HEENAN: I am sorry, I do understand - - -

CALLINAN J: I am looking at paragraph 9 on page 60 of the application book. At that stage apparently there was a prospect of a retrial, is that so? The matter was pending in the Court of Criminal Appeal, is that right?

MR HEENAN: Yes, well - yes, your Honour, the position - - -

CALLINAN J: That has been determined now.

MR HEENAN: Yes, and there has been a rejection of that appeal and now there is a special leave application, but the grounds do not, as far as one can tell, rely on these issues and, according to my instructions, objections to the reception of evidence in the criminal proceedings was not taken on these grounds.

GUMMOW J: That was the time to take it, I suppose.

CALLINAN J: Yes.

MR HEENAN: Yes, and it its pointed out - - -

CALLINAN J: What utility would there be in these proceedings that we are talking about now? There has been a trial. There is not going to be another trial, unless possibly this Court grants special leave and orders a retrial. There are no damages sought in these proceedings.

MR HEENAN: No.

CALLINAN J: Indeed, there probably could not have been, anyway. It was only equitable relief, is that right? An injunction - - -

MR HEENAN: There are no 264 notices pending, according to my instructions.

CALLINAN J: So there would seem to be no utility, in any event, in these proceedings.

MR HEENAN: Precisely, your Honour, and that brings me to the final point that if any of the authorities purported to do anything illegal or prejudicial to the applicant by convening fresh section 264 inquiries or making use of information in a retrial, there would still be an opportunity to bring proceedings in the Federal Court to challenge them or to object to the reception in evidence of the criminal proceedings of any information which might materialise. In both those instances, the judge in the Federal Court and the judge at the trial would have the advantage, a concrete issue on known or ascertainable facts presenting itself, rather than an abstract and speculative issue which the present application we say, with all respect, involves. May it please your Honours.

GUMMOW J: Thank you. Yes.

MR NICHOLS: May it please your Honours, my learned junior, Mr Davies, will address the three points raised in argument.

GUMMOW J: Thank you.

MR DAVIES: Yes, if it please your Honours, the point firstly about the utility of the proceedings must come down to this and it is that if there is to be a retrial of Mr Caratti, which at the moment would depend on, firstly, a successful special leave application before this Court and a successful appeal which orders a retrial, if there is to be a retrial, then with the audit process being presently on foot, there is still a very real danger to ongoing criminal proceedings. So the position we take on the point is that it is not - - -

CALLINAN J: But if there were a retrial and if the objection were available, it could be taken during the retrial.

MR DAVIES: Well, the difficulty is this, sir, as far as taking objection - - -

GUMMOW J: "Utility" is a technical term when one says "no utility"; it is a technical legal term.

MR DAVIES: Yes.

GUMMOW J: It does not mean it would not be of interest.

CALLINAN J: Or perhaps more convenient.

MR DAVIES: The real point of it is this: it is not that evidence went in that should have been objected to, it is that questions were asked in cross-examination of Mr Caratti and in the papers in the court below we pointed out seven instances of what we termed forensic use of information which could have only, in our submission - this is after the trial and after we have seen what been afoot - been sourced within the audit team, and that there should be a "Chinese wall".

Now, the real point that we take issue about in his Honour's judgment at first instance and which we do not believe was properly ventilated or dealt with on the appeal was the question of the consultant, Ms Rajan, who had been a senior level officer with access, wearing a consultant's hat and being determined to be an officer of the Commonwealth and it being determined that whatever she did in disclosure of this information to prosecute, the use in cross-examination was within the scope of her duty. That is the point, that is the real point that is of general importance because if the duties of non-disclosure on an officer as defined in section 16 of the Act are to be read in this way, then really they are a paper tiger and there is no real statutory protection that there is meant to be to balance the community interest of the Commissioner having these very, very strong audit powers. Really, that is the point that we have to impress upon this Court to warrant a grant of special leave, that there really is an overriding public need to look at the interpretation of 16(2), and if you would - - -

GUMMOW J: There is, perhaps, but on an appropriate occasion.

MR DAVIES: We would go on to say that whilst there is a possibility of a retrial and criminal proceedings in one form or another, be they appellate or at first instance are on foot, it should, as a general principle, be the safer course for the Commissioner to down tools. If we cannot have your agreement on that, sir, then our application cannot succeed today.

GUMMOW J: Thank you.

No error of principle has been shown in the reasoning by which Justice French decided that the statement of claim did not disclose a reasonable cause of action and the Full Court refused leave to appeal. Further, in the circumstances, there would now be no utility in the award of the declaratory and injunctive relief sought in this litigation. Accordingly, special leave is refused with costs.

AT 3.15 PM THE MATTER WAS CONCLUDED