Tuesday, December 1, 1998

ROGERSON v FC of T


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Tamberlin J: This is an appeal from a decision of the Taxation Appeal Division of the Administrative Appeals Tribunal (``the AAT'') made on 26 April 1998 which, in turn, affirmed a decision by the respondent (``the Commissioner'') rejecting an objection to a taxation assessment in respect of the tax year ended 30 June 1985. The appeal is brought pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (``the AAT Act'') and restricted to questions of law. Under s 14ZZK of the Taxation Administration Act 1953 (Cth), the appellant has the burden of proving that the taxation assessment is excessive. The issue raised on this appeal concerns an amount of $110,000 deposited into two bank accounts opened in fictitious names with the National Australia Bank in Sydney.

The applicant, together with Morris Nowytarger and Nicholas Paltos, was convicted before the District Court of New South Wales of conspiring to pervert the course of justice between 1 May 1985 and 31 July 1986. The charge arose out of an alleged agreement to fabricate evidence, which had as its object the frustration or diversion of a police investigation into the possible commission of a crime. The three convictions were set aside by the Court of Criminal Appeal. The Crown applied to the High Court for special leave to appeal. Special leave to appeal was granted. The appeal was allowed in relation to the applicant and Paltos. The order of the Court of Criminal Appeal in New South Wales was set aside. In the case of Nowytarger, the application for special leave to appeal was granted but the appeal was dismissed.

The relevant background circumstances are set out in the judgment of McHugh J in the High Court in R v Rogerson (1992) 174 CLR 268 at 296 in these terms:

``At all material times, the first respondent, Roger Caleb Rogerson, was a serving member of the New South Wales Police Force. In May 1985, the second respondent, Morris Enrico Nowytarger, arranged with Rogerson for the latter to deposit sums of money totalling $100,000 in false names in two bank accounts with the National Australia Bank. On 1 July 1985, while Rogerson and Nowytarger were closing the accounts, they were photographed by the Bank's security cameras. On 11 or 12 July 1985, a police officer told Rogerson that he had been photographed `with a criminal'. Subsequent to that conversation but before 19 July 1985, Rogerson and the third respondent, Dr Nicholas John Paltos, met a solicitor, Ross Karp, in a restaurant. According to Karp, Paltos said that Rogerson had a problem and that he thought that Karp and Paltos could
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fix it. Rogerson then told Karp that he had money in `a bank account or bank accounts' in false names with a friend. Rogerson said that he needed `to explain how the moneys arrived in the account'. Later the three men were joined by Nowytarger. Thereafter, the respondents and Karp agreed that Karp would prepare a sale agreement which would falsely show that Karp had paid $60,000 to Rogerson and Nowytarger for the sale of a Bentley car. The sale agreement was backdated to December 1983.

On 16 July 1985, a detective inspector, having been informed of the circumstances in which Rogerson and Nowytarger had been photographed at the Bank, commenced an investigation for the purpose of determining whether Rogerson had breached any departmental regulations or had committed any criminal offence in relation to the possession of the $110,000. On 4 October 1985, the inspector interviewed Rogerson who claimed that about $16,000 of the moneys deposited in the account belonged to him and `came about as a result of weeks and weeks of work spent in repairing a motor vehicle in my own time which was owned by Mr Nowytager'. Rogerson asserted the genuiness of the 1983 sale agreement and said that the moneys came from the sale of the vehicle to Karp. On 10 December 1985, Nowytager visited Karp who was then in prison and asked him if he was going to `stick to the story as agreed'. In March 1986 Nowytager, when interviewed by police officers, maintained the genuiness of the sale agreement. When Paltos was interviewed by police, he declined to answer questions in respect of the matter.

A woman who gave evidence under the pseudonym `Miss Jones' also alleged that on about 14 May 1985 she gave Rogerson a large sum of money in exchange for a bag containing white powder in plastic bags. The trial judge told the jury:

`The Crown relies on the evidence of Miss Jones as pointing to the likely source of at least some of the money that went into those accounts.'

Rogerson denied that he had ever met the woman. His Honour also pointed out to the jury that there was no evidence that Nowytarger or Paltos had any knowledge of this alleged transaction.

On appeal the Court of Criminal Appeal of New South Wales unanimously held that the foregoing evidence failed to disclose the offence of conspiracy to pervert the course of justice....''

(Emphasis added)

Before the District Court, the applicant gave evidence that of the sum of $110,000 in question, an amount of $52,723 was given to the applicant by Nowytarger with instructions for him to hold it on account of Nowytarger. It was alleged that Nowytarger had won this money by gambling on various occasions. This claim was repeated in the applicant's Notice of Objection to the Taxation Assessment. He claimed in that document that the total sum received from Nowytarger, for him to hold on Nowytarger's behalf, was $52,723.

At the trial, Mr Karp, who had previously pleaded guilty to the indictment and had been sentenced, gave evidence for the Crown. In the AAT proceedings the applicant gave sworn evidence that the moneys deposited in the two accounts by him came from the sale of a motor vehicle to Karp and from Nowytarger's gambling. That is to say that the applicant adhered to the evidence which he had given in the District Court on his trial.

The Crown's case at the trial, as described in the summing up of the trial judge, was that the conspiracy to disguise the source of the moneys deposited in the National Australia Bank occurred at a time when police investigations were inevitable and at a time when was it likely that such investigations could lead to criminal proceedings against Rogerson and Nowytarger. To establish its case, his Honour directed the jury that the Crown must show that this was done pursuant to a conspiratorial agreement, which would tend to pervert the administration of justice and that the agreement was intended to achieve this result. The Crown's case was that the acts of Rogerson, Nowytarger and Karp, in pursuance of the agreement, were intended to foil the police and had that effect by fabricating a false agreement and giving to the police a false account of their transactions. His Honour further directed that the jury would have to be satisfied beyond reasonable doubt that the accused believed that a police inquiry would take place.
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AAT reasons
The gravamen of the AAT reasons for decision, which are under challenge, is succinctly set out in paragraphs 15 through 19 which read:

``14. Both the Applicant and the Respondent tendered in these proceedings transcript from the trial of the Applicant and there was also tendered transcript from other proceedings concerning the person Karp who gave evidence against the Applicant upon his trial.

15. Of that material I will only say that I regard the transcript of the evidence in chief and cross-examination of the Applicant at his trial as both admissible and highly relevant in these proceedings. As to admissibility I refer to the reasons of Brennan J (as he then was) in Re Pochi and Minister for Immigration and Ethnic Affairs 2 ALD 33 at pp 41, 42. As for the witness Karp, whereas he is a witness of little credit, giving due weight to the fact that Karp was extensively cross-examined in the criminal proceeding but that the jury brought in a verdict of guilty against the accused together with my own reading of the transcript and other material tendered, I am not prepared to disregard the evidence of Karp that the purported agreement between himself on the one part and Nowytarger and the Applicant on the other part was a sham.

16. Notwithstanding the Applicant's sworn evidence in the proceedings that there was an agreement with Karp and himself and Nowytager and a holding of monies for Nowytarger, there was no attempt to call Nowytarger. It was conceded by the Applicant's solicitor during submissions that Nowytager was available to be called and, as the onus of proving the assessment to be wrong is upon the Applicant, I can only conclude that nothing Nowytarger would have said would have advanced the Applicant's case.

17. Mr Bellamy, for the Applicant, drew my attention to the recitation of Nowytarger's dock statement which appears in the transcript of Shillington DCJ's summing up (Exhibit R5). That statement is of course unsworn and not subject to cross- examination and I do not regard it in any way as corroborating the evidence of the Applicant in these proceedings.

18. Above all else, however, I must have regard to the fact of conviction. In convicting the Applicant the jury must of necessity have rejected beyond reasonable doubt his evidence as to the source of the monies. Although the Applicant may in these proceedings attack the facts lying behind the conviction, I consider the issues before the District Court and this Tribunal were, if not identical, so closely related that I would be flying in the face of that conviction to say that I accepted the Applicant's case.

19. Given the fact of the conviction and the failure to call Nowytarger in support of his case, I find that the Applicant has not satisfied me that the assessment by the Commissioner is excessive. Consequently the decision under review is affirmed.''
Present appeal
The Notice of Appeal in this matter purports to raise seventeen questions of law and to set out twenty-two grounds of appeal. On the hearing of the appeal most of these questions and grounds were not pressed. A number were consolidated. In view of this, it is appropriate to point out that it is clearly wasteful in the extreme to raise matters which are not to be pressed on the hearing because it leads to unnecessary preparation and to the reproduction of irrelevant material. It is, therefore, essential in order to efficiently conduct proceedings and to avoid wasting time and the incurring of unnecessary expense, both for the Court and the parties, that the grounds of appeal should be carefully examined and reduced to essentials at an early stage.

As pressed at the hearing of the Appeal, the matters submitted on behalf of the applicant fall under the following headings:
  1. Misdirection as to the effect of the verdict and conviction.
  2. Similarity of issues before the AAT and the District Court.
  3. Failure to give reasons — s 43(2B) of the Administrative Appeals Tribunal Act 1975 (``AAT Act'').
  4. Absence of evidence for findings and inferences.
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  5. Failure to require production of information and documents.
  6. Misdirection as to effect of failure to call.
  7. Error of law as to onus of proof.

Briefly expressed, the question raised in this matter is: When and to what extent can a criminal conviction provide evidence of facts in issue in a civil trial? Generally speaking, if the issues in the criminal trial and the civil proceedings are closely related, the authorities indicate that weight can be given to the conviction but that it is open to re-examine the factual issues which underlie and were necessary to the criminal conviction, provided that the fact of conviction is not a condition precedent to the exercise of a power in question. In other words there is no estoppel in such cases. Nor is there any presumption that the evidence provided by the conviction is such that it cannot be rebutted. In cases where a power, duty, right or privilege is founded on the fact of a conviction, the courts have generally not allowed evidence to be introduced to contradict the essential facts underlying the conviction.

1. Misdirection as to the effect of the verdict and conviction.

The applicant submits that the AAT misdirected itself in respect of the use it made of the jury verdict and the way in which it dealt with the fact that the applicant had been convicted. On this aspect particular reference is made to pars 18 and 19 of the AAT reasons, which are set out above.

In support of the submission as to the misdirection, the applicant referred to the Full Federal Court decision in Saffron v FC of T 91 ATC 4646; (1991) 30 FCR 578. In that case, the applicant was convicted on a charge of conspiracy to defraud the Commonwealth. This charge was based on an allegation that the applicant agreed with another person that not all cash received from certain business interests would be declared for income tax purposes by the entity conducting the business. Prior to indictment on the charge forming the foundation of the conviction, the applicant lodged an objection to the assessment made by the Commissioner of Taxation based on the conduct of the business. The objection was disallowed and the applicant subsequently requested that the objection be referred to the Supreme Court of New South Wales. In turn, the tax proceeding was transferred to a single judge of the Federal Court.

Prior to hearing, the applicant's criminal charge was heard and the applicant entered a plea of not guilty. No sworn evidence was given but he made an unsworn statement from the dock. The jury returned a verdict of guilty and the applicant was sentenced to three years imprisonment. At the subsequent hearing of the taxation appeal, the applicant was asked by Counsel in examination in chief whether he denied that he and another person agreed not to declare all of the cash received by the entity conducting the business. The applicant answered in the affirmative and this answer was objected to by the Commissioner.

A special case was stated to the Full Federal Court seeking a decision as to whether the answer contradicted one of the matters of fact on which the criminal conviction was based or which was critical to that conviction and, for that reason, was inadmissible. Counsel submitted that the conviction in the criminal case was conclusive proof of the facts on which the conviction was based. The matter before the Court in that case did not involve an appeal from a decision of the AAT which, of course, is not bound by the rules of evidence.

In his judgment, Davies J accepted that in determining the effect of a criminal conviction in a civil proceeding there was a distinction between two types of case. The first is where the conviction is the foundation, condition precedent for the exercise of a power. Where that is the case, then the legal principle is that no challenge can be made to the fact of the conviction or of the essential facts on which it was based. However, where, as in the present case, there is no question of an exercise of power being based on a criminal conviction then, even if the conviction is relevant, a challenge may be made to the essential facts on which it was based. At ATC 4648; FCR 582 of the decision, his Honour went on to say:

``The rationale for the distinction between the two categories is, of course, that in the first of the categories the exercise of the power arises out of, and is founded on, the conviction. The power conferred is not a power to reconsider the matter or the essential facts on which the conviction was based but a power to consider matters of discretion and like consequential matters which flow from the established fact of
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conviction. When the power is not so founded, then all relevant matters, including the facts on which the conviction was based, are open.

In the present taxation appeals, the conviction of the taxpayer is not a matter on which the ascertainment of the taxpayer's taxable income is founded. It is not even a relevant matter unless the conviction is admissible evidence of the essential facts on which it was based.''

(Emphasis added)
Lockhart J expressed a similar view and went on to consider the underlying public policy in adopting such an approach. At ATC 4656; FCR 592 his Honour said:

``What the applicant seeks to do in the tax appeals, as I understand it, is to deny an agreement between himself and Mr Anderson to the effect that not all of the cash received from the conduct of various businesses in which they were involved would be declared for income tax purposes. This is an assertion of fact which is relevant to the tax appeals; and I can see no good reason why he cannot lead evidence to that effect if he wishes. The respondent may lead evidence to the contrary and in the result the primary Judge can determine the facts. But the Court cannot reach or express a view that the applicant was wrongly convicted of the offence of conspiring to defraud the Commonwealth. The processes of and respect for the criminal law would not be undermined by the applicant leading evidence of the kind which he seeks to lead. The position would be different if this evidence was led for the purpose of impugning the applicant's conviction or the fairness of his trial.''

A clear example of a situation where the fact of conviction is the foundation of the power is found in the deportation cases, where the power to deport is based on the existence of a conviction. In such cases the Courts will not permit a collateral attack on the conviction: see Minister for Immigration and Ethnic Affairs v Daniele (1981) 61 FLR 354; Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441 and Pochi v Minister for Immigration and Ethnic Affairs (1979) 36 FLR 482. Of more immediate relevance to the present circumstances is the later decision of the Full Federal Court in Ridley v Secretary, Department of Social Security (1993) 42 FCR 276, where the Court considered the use which could be made by the AAT of a conviction by a Court of Petty Sessions on charges of knowingly claiming an amount which was not payable. The decision is of relevance in the present case because it examined the manner in which the AAT should determine the evidentiary effect to be given to a conviction. At 280-282 of the joint judgment, referring to the judgment of the primary Judge, Hill J, the Court said:

``It was submitted on the hearing of the appeal before his Honour that it was `contrary to public policy' and `an abuse of process' to permit Mrs Ridley to `re-litigate' before the Tribunal, an issue necessarily determined against her by the convictions in that the convictions were conclusive proof of the essential facts on which they were based.
His Honour carefully reviewed the authorities relevant to these submissions and concluded that pursuant to the decision of the Full Court of this Court in Saffron v Commissioner of Taxation (1991) 30 FCR 578 it was not open to the Secretary to submit that Mrs Ridley's convictions were conclusive proof of the essential facts upon which those convictions were based. His Honour also said that his earlier decision in Commissioner of Australian Federal Police v Butler (1989) 91 ALR 293 which had suggested that public policy may prevent a court going behind a conviction, had to be read subject to the reasoning of the Full Court in Saffron (supra). His Honour held that it would not be said that there would be an abuse of process in permitting the Tribunal to go behind Mrs Ridley's convictions.
...
We are satisfied that the reasons of his Honour exhibited no error on respect of either the grounds raised in the notice of contention.''

The above line of authority was recently reviewed by Weinberg J in the immigration context in Minh Dung Luu v Minister for Immigration and Multicultural Affairs (Unreported, 25 August 1998, FCA 1021 of 1998).

Although the Full Court allowed the appeal from the primary judge in Ridley, it affirmed
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the relevant principles of law as applied by his Honour, the primary judge. The decision of Hill J was reversed because the Full Court took a different view to that of the primary judge as to whether the AAT had properly taken the conviction into account.

In the present case, it is common ground that an applicant in an AAT matter is entitled to lead evidence in contradiction of the facts underlying his conviction and that there is no issue estoppel as a consequence of the conviction. It is a matter for the AAT, of course, as to the evidentiary weight which should be given to the conviction. Essentially, the question to be decided by the AAT is whether the matters in issue in the tax appeal are so closely related to the matters in issue in the criminal proceedings as to be relevant and of significant evidentiary weight in the tax appeal. In this case, as in Ridley, the AAT was well aware that the jury was satisfied, beyond reasonable doubt, that the facts essential to the establishment of guilt were proven and that the applicant was unable to raise a reasonable doubt as to his guilt.

It is apparent from a reading of the relevant parts of the trial transcript in evidence and the summing up of the trial judge in the present case that the source of the amount of $110,000 and the truth of the explanations proffered were of central importance in establishing the conspiracy. It is clear that the story concerning the sale of the Bentley and the back-dated agreement were in evidence before the jury. In his evidence in chief at the trial, the applicant said:
``... He [the taxation officer] then wanted to know where that money [the $110,000] came from and I then explained to him that $60,000 was from the, was from the proceeds of the Bentley and that the other money was from Maurie Nowytarger's winnings from gambling.''
In my view, there was ample material for the AAT to find that there was such a close identity of issues in the trial and in the taxation appeal so as to warrant giving the conviction evidentiary weight sufficient to reject the explanation proffered by the applicant as to the sources of the sum of $110,000.

Unlike the position in which the Court was placed in Ridley (supra), the decision-maker in the present case had before him part of the trial transcript and the whole summing up together with some of the trial exhibits. He recognised that it was open to the applicant to attack the essential facts lying behind the conviction. He found that the fact of conviction of guilt was a matter which should be given great weight. This is evident from his statement beginning ``Above all else...''. It is, of course, correct to observe that in order to convict the applicant the jury must have rejected, beyond reasonable doubt, the applicant's version as to the source of the $110,000. It is also correct to say that the central issues before the District Court and the AAT were sufficiently similar to form the view that the applicant's version would be contrary to the essential facts underlying the conviction. Although the colourful expression ``flying in the face of the conviction'' was used by the decision-maker, in essence, the correct approach was applied. Of course the conviction was not the only important consideration taken into account. In addition, the AAT gave significant weight to the failure of the applicant to call Nowytarger. This is a matter which I will address later in these reasons.

It is true that the evidence before the AAT and the District Court was not identical. The parties were different, the witnesses and exhibits were not the same and there were no specific findings or reasons given by the jury. Nevertheless, it cannot be said that the AAT misunderstood the correct approach to be taken to the conviction. The reasons indicate that it undertook the task of evaluating the evidence placed before it.

It is also evident that the AAT had the advantage of observing the witnesses who were called and forming a view as to the cogency of their evidence. No error of law has been demonstrated as to the way in which the AAT directed itself and I do not accept the argument of the applicant on this submission.

2. Similarity of Issues before AAT and District Court

I am not persuaded that there was any error on the part of the AAT in concluding that the relevant issues before the AAT and the District Court were so closely related as to warrant giving substantial evidentiary effect to the conviction in deciding the questions raised on the tax appeal. The AAT did not treat the conviction in isolation or as determinative of the matter. On a fair reading of the reasons as a whole, it is apparent that the decision-maker took into account a number of other
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considerations. He also had the important advantage of hearing oral evidence from the applicant.

Although it is apparent that great weight was placed on the conviction, I am satisfied that the AAT did not in any way treat the conviction as if it gave rise to an estoppel or a conclusive finding of fact.

It was also submitted that there was no identification of issues in the District Court proceedings and those in the AAT because the amount challenged in the tax appeal was an amount of $110,000 and evidence was only adduced in the criminal proceedings in relation to an amount totalling $57,277. At best, it was suggested, the conviction could only be persuasive in some limited sense. However, there was evidence given by the applicant that the balance of the amount of $110,000 came from Nowytarger, who was not called to give evidence on his behalf. The failure to call Nowytarger was not an irrelevant consideration as has been suggested for the applicant, but was a relevant and important matter to take into account. It was submitted that there was no evidence to support the conclusion that the sum of $110,000 was income, even taking into account the effect of the conviction. This submission is misconceived because under the Act, the onus is on the applicant to establish that the sum of $110,000 was not income. Moreover, there was clearly a close and direct relationship between the evidence as to the source of the sum of $57,277 and the balance. Therefore, it cannot be said that the AAT made its decision without any evidence in this respect.

3. Failure to give reasons
Reliance is placed on s 43(2B) of the AAT Act, which requires the Tribunal to give in writing the reasons for its decision including findings on material questions of fact and reference to the relevant evidence on which those findings were based. In my view, the AAT decision made explicit reasons sufficient to identify any grounds in respect of which an appeal or review procedure might be pursued to challenge the decision. In considering this ground, it is important to appreciate that the question is whether reasons have been furnished and not whether the reasoning process is correct.

4. Absence of evidence.
It is said that the AAT erred in law in making findings and drawing inferences in the absence of evidence and that it misdirected itself because it did not consider the dangers inherent in accomplice evidence when evaluating the evidence of Karp. An attack is levelled against Karp's evidence on the basis that his testimony was totally lacking in credibility. He was not called before the AAT but the transcript of his examination and cross-examination was tendered and it is apparent from the AAT reasons that it was cognisant of the deficiencies and problems with the Karp evidence. However, notwithstanding these problems, the AAT considered that having regard to the whole of the evidence, his evidence was to be preferred to that of the applicant as to the circumstances surrounding the alleged sale of the Bentley. This does not reflect any error in approach.

5. Failure by the Commissioner to produce documents
There is no indication in the submissions as to how information and documents relating to the financial and taxation affairs of Nowytarger would have assisted his case. In my view, it was open to the AAT to form a view that the assertions made in the applicant's statement of facts and contentions as to the role of Nowytarger were unsupported and on their face improbable. There was no obligation on the part of the AAT to require production of such material.

6. Failure to call Mr Nowytarger
On the applicant's version as to the source of the amount of $110,000, the testimony of Nowytarger was of central importance. It was claimed that the moneys deposited in the two fictitious accounts came partly from the sale of the motor vehicle to Karp and partly from Nowytarger's gambling activities. If the applicant's version was accepted, Nowytarger was a witness who might have been expected to be called by him rather than the respondent. It could not reasonably be expected that the respondent would call Nowytarger on the tax appeal. It is evident from the summary of the factual background quoted earlier that Nowytarger was, to say the least, an ``associate'' of Rogerson in relation to the transactions in question. Accordingly, the failure to call Nowytarger could be applied to
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strengthen an available inference; namely, that the explanation proffered by the applicant was false as to the source of the moneys in the fictitious accounts: see Jones v Dunkel (1959) 101 CLR 289 at 304-305, 308, 312 and 320-321. In my view, although cast in strong terms, on a reasonable reading of paragraphs 16 through 19 of the decision, this is the way in which the decision- maker approached the absence from the witness box of Nowytarger. Attention was drawn by Mr Bellamy, who appeared for the applicant before the AAT, to the unsworn dock statement of Nowytarger. However, it was open for the decision-maker to take the view that his statement did not corroborate the evidence of the applicant in the proceedings.

It was further submitted that in attaching importance to the failure to call Nowytarger, the AAT had failed to provide natural justice in not warning the applicant of the importance which it might attach to such a failure. There is no substance in this submission. It is not a requirement of decision making that a decision- maker signal in advance, or later in the course of formulating reasons after the hearing, that an adverse inference might be drawn, in order that the parties might consider whether to supplement their evidence. It will usually be the case that after a hearing, the decision-maker, upon a consideration of the whole of the material, will make findings adverse to one of the parties on the evidence presented at the hearing. In such circumstances it will, generally speaking, be unreasonable to require a decision- maker to recall parties or invite further submissions. There may be special circumstances in which such a course is appropriate. For example, where a critical submission has been overlooked or where it appears that the law has been changed by statutory amendment. However, these are exceptional cases. If it were otherwise, the litigious process would be never-ending.

I reject this submission.
Conclusion
For the above reasons, the appeal in this case should be dismissed with costs.
THE COURT ORDERS THAT:
The appeal be dismissed with costs.