Summons v Commissioner of Taxation

[2013] AATA 193

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(Decision by: Deputy President S E Frost)

Summons
v Commissioner of Taxation

Tribunal:

Member:
Deputy President S E Frost

Subject References:
summons
summons to give evidence
allegation by applicant that it is a victim of third party fraud
witness has previously told the respondent that paperwork has been fabricated in circumstances relevant to these proceedings
witness now unwilling to give evidence
timing of the request for summons
whether appropriate to issue summons before filing of statements of facts and contentions
issue of summons authorised

Legislative References:
Administrative Appeals Tribunal Act 1975 - s 2A; s 40
Taxation Administration Act 1953 - s 14ZZK

Case References:
Gauci v Federal Commissioner of Taxation - (1975) 135 CLR 81

Hearing date: 14 March 2013
Decision date: 3 April 2013

Sydney

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Decision by:
Deputy President S E Frost

1. The immediate question before me in the context of this dispute is whether, as requested by the applicant, the Tribunal should issue a summons to a named person ("Mr X") to appear before the Tribunal to give evidence. I have decided that the summons should be issued. My reasons for that decision follow.

THE RELEVANT LEGISLATION

2. The Tribunal's summons power is set out in s 40 of the Administrative Appeals Tribunal Act 1975 (AAT Act), relevantly as follows:

40 Powers of Tribunal etc.

...

Summons

(1A)

Subject to subsection (1B), for the purposes of the hearing of a proceeding before the Tribunal, the member presiding at the hearing, the Registrar, a District Registrar or a Deputy Registrar may summon a person to appear before the Tribunal at that hearing:

(a)

to give evidence; or

(b)

to give evidence and produce any books, documents or things in the possession, custody or control of the person or persons named in the summons that are mentioned in the summons; or

(c)

to produce any books, documents or things in the possession, custody or control of the person or persons named in the summons that are mentioned in the summons.

(1B)

A summons under subsection (1A) may require a person to appear at a directions hearing to produce books, documents or things instead of at the hearing before the Tribunal.

(1C)

A person (other than a presidential member, a senior member or an authorised member) who, under subsection (1A), may summon a person to appear before the Tribunal must not refuse a request to do so unless the refusal is authorised by a presidential member, a senior member or an authorised member.

...

3. There are a number of points worthy of note. The first is that there are three types of summons that the Tribunal can issue - a summons to give evidence, a summons to produce, and a summons to give evidence and produce. The second is that the Tribunal may issue a summons "for the purposes of the hearing of a proceeding before the Tribunal". The third is that a person may be summoned "to appear before the Tribunal at that hearing" (emphasis added). The fourth is that, while subsection (1B) explicitly authorises the issue of a summons to produce requiring a person to appear at a directions hearing instead of "at the hearing before the Tribunal", there is no similar explicit authorisation in relation to a summons to give evidence. The fifth is that only "a presidential member, a senior member or an authorised member" may refuse, or authorise the refusal of, a request for the issue of a summons.

THE UNUSUAL NATURE OF THE REQUEST AND THE REASONS FOR IT

4. What is unusual about the applicant's request for the issue of a summons is not so much its substance as its timing. It is somewhat unorthodox to be asking the Tribunal to require a person to attend and give evidence at this relatively early stage of the proceedings, at a time when the parties have not filed statements of facts and contentions, hearing dates have not been set, and the President (or his delegate) has not yet decided how the Tribunal should be constituted for the proceeding.

5. The applicant's solicitor explained in his covering letter dated 21 February 2013:

...

Ordinarily, a summons to give evidence would be issued for a person to appear before the Tribunal at the substantive hearing of the matter.

However, due to the special circumstances of this case, the Applicant is requesting the Tribunal to summons [Mr X] to give evidence at a preliminary and confidential hearing of the Tribunal ...

6. The claimed special circumstances of the matter include the following:

•

The applicant claims to have been the victim of third party fraud;

•

It suspects that Mr X knows the identity of the perpetrator or perpetrators of the fraud;

•

Mr X participated in an interview with the Commissioner's officers in which he indicated that paperwork had been "fabricated" ^[1] ;

•

Mr X was apparently willing to talk to the applicant about his "involvement/knowledge of the case in hand" but retreated from that position when he felt "threatened" upon being told by an unidentified person that it would be "detrimental" to him if he did so. ^[2]

7. The applicant claims that it "requires [Mr X's] evidence in preparing its case". ^[3] It should be noted that, since the substantive application before the Tribunal is made under Part IVC of the Taxation Administration Act 1953 (TAA), the applicant bears the burden of proving that the assessments made by the Commissioner are excessive: s 14ZZK of the TAA. It should also be noted that, in relation to an earlier but for practical purposes identical legislative provision (s 190(b) of the Income Tax Assessment Act 1936), Mason J said in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89:

The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence.

THE COMPETING SUBMISSIONS

8. The Commissioner opposes the issue of a summons at this stage of the proceeding.

9. The thrust of the oral submissions made by his counsel was that the applicant "wants to use the compulsive powers of the tribunal in advance of the hearing". ^[4] Counsel noted ^[5] :

... the power of the tribunal to compel someone to give evidence is limited to the power to compel someone at the hearing of the application, and that is at the hearing of the application for review of the decision. So unless the tribunal were to take the view that it will commence to hear on a final basis its review of this decision at the time that is suggested in the summons, then it's a course that's just not open to the tribunal on the basis of section 40.

10. He also noted that the Tribunal only has power to issue summons "for the purposes of the hearing" (s 40(1A) of the AAT Act) and submitted that this summons is sought not for that purpose but for the purpose of "work[ing] out what [Mr X] would say at the hearing if he was summonsed". ^[6] In addition, counsel was concerned about the "distinct disadvantage" ^[7] to the Commissioner if Mr X were to be "interrogated in advance of the proceedings", ^[8] since the Commissioner would then be in no position to cross-examine Mr X, long before the Tribunal (or the Commissioner, for that matter) knew what the real issues in dispute between the parties were.

11. In reply, counsel for the applicant emphasised that the purpose of summoning Mr X is ^[9] :

... to get [his] evidence before the tribunal. It's not to interrogate [him] and then see what he would say.

...

... the purpose to summons [Mr X] to give evidence, say in the next couple of weeks, obviously before the parties have put evidence on or statements of facts, issues and contentions, his evidence will be what it is and it will be before the tribunal. It's not to interrogate him and see what he would say. His evidence will be what he says and the parties will be stuck with what he says. But the thing about it is - the fraud aspect of this case is quite vital to the applicant's case, and I will give you an example. In this situation, the applicant has been assessed outside the four year period on the basis of fraud and evasion by them ...

Now, if it was the case that [Mr X's] evidence was that there was another party that perpetrated that fraud on the applicant, it may be that that's something that the parties could then talk about in terms of a possible settlement of the matter without having to go to all the time and expense of actually proceeding to a hearing. I mean, at the end of the day what we want to do is try and resolve this dispute between the parties, and the tribunal offers that vehicle. But by the same token, if evidence emerges at any time with the parties preparing their cases that could facilitate a settlement without tying up the tribunal's time and resources, then I think that's something that's desirable.

12. Counsel for the Commissioner submitted, correctly in my view, that it would be "quite improper" for the Tribunal to issue the summons "simply because one party says it will facilitate an early settlement of the matter". ^[10] However, that is not the basis on which it was put by the applicant. Rather, in my view, the applicant was merely raising settlement of the dispute as a possible outcome, mindful of a desire to proceed as efficiently as possible, and in a way that is consistent with the Tribunal's statutory mandate to provide a mechanism of review that is fair, just, economical, informal and quick: s 2A of the AAT Act.

ANALYSIS

13. While there remains some ambiguity around the applicant's initial request for Mr X to be summoned to a "preliminary" hearing, the parties appear to agree that what the applicant wants, as the applicant's counsel eventually described it, is "effectively a split hearing" ^[11] : that is, a splitting of the substantive hearing. The first day of the "split hearing" would be the day on which Mr X gives evidence; the proceeding would then be adjourned to allow the parties to prepare for the remainder of the hearing, taking into account the evidence that Mr X will have given.

14. Counsel for the Commissioner accepted that it would be possible to proceed in that way - provided "the tribunal were to take the view that it will commence to hear on a final basis its review of this decision at the time that is suggested in the summons" ^[12] - but submitted that, as a matter of discretion, I should refuse the request to issue the summons.

15. The circumstances here are unusual. An applicant claims to be a victim of third party fraud. That applicant bears the burden of proving the Commissioner's assessments excessive. A person, Mr X, has told the Commissioner on oath that evidence has been "fabricated". The applicant thinks, perhaps not unreasonably, that Mr X knows more than he has said. There is a good deal of force in the suggestion that Mr X's evidence will help the Tribunal to decide what is the "correct or preferable decision" on review of the Commissioner's objection decisions.

16. To have Mr X attend and give evidence sooner, rather than later, may create problems for the Commissioner in that he may not know how best to cross-examine him. That circumstance may require a heightened degree of flexibility and indulgence to be extended to the Commissioner, in the interests of justice. There will be some disruption, with a gap (and perhaps a long gap) between the receipt of Mr X's evidence and the receipt of the other evidence in the proceeding. On the other hand, that type of approach may help the applicant to narrow its own lines of enquiry and save it considerable time and expense in establishing its case. It may (but will not necessarily) lead to the Tribunal having to allocate less time to the hearing of the dispute.

17. To have Mr X attend and give evidence later, rather than sooner (that is, after the filing and service of statements of facts and contentions, and witness statements from the other witnesses), is the more orthodox approach. Assuming that Mr X did not wish to provide his evidence in affidavit form or by way of a witness statement, he would give oral evidence on one of the (probably consecutive) days set down for the substantive hearing. If his evidence disclosed information otherwise unknown or unavailable to the parties, it might have the effect of rendering some of the applicant's previously obtained evidence redundant (and the gathering of it a waste of money). It might also trigger an adjournment application by either party to enable further enquiries to be undertaken. If an adjournment were granted, there would be some disruption to the hearing schedule. Additional costs would likely be incurred.

18. Neither approach is ideal.

CONCLUSION

19. I have weighed up the competing arguments by reference to those elements of s 2A of the AAT Act that I consider most relevant in this case. The approach that I favour is one that provides, in my view, fairness and justice to both parties, and which remains as economical as possible in the circumstances.

20. I authorise the issue of the summons, on the following basis:

(a)

Mr X will be required to appear before the Tribunal to give evidence on a day that is convenient to the parties and the Tribunal;

(b)

That day will be the first day of the substantive hearing in these proceedings;

(c)

After Mr X has given evidence, and on that same day or as soon after that day as possible, the Tribunal will make directions for the future conduct of the proceedings.

21. I direct the parties to provide to the Tribunal, by the end of the second business day after publication of these reasons to the parties, a range of dates during the ensuing four weeks, when they will be available for the first day of the substantive hearing in these proceedings.

22. I will ensure that this decision is brought to the attention of the District Registrar without delay, so that the President (or his delegate) can decide on the constitution of the Tribunal. The Tribunal as constituted will, I am sure, take into account the comments I have made, particularly those in paragraph 16 of these reasons relating to the potential prejudice to the Commissioner arising from this decision.