PRACTICE AND PROCEDURE - objection to summons - where summons issued to third party - where summons issued to obtain evidence going to credit of expert witnesses - where submitted that materials sought was not for a 'legitimate forensic purpose' - where submitted that the scope of the summons is too broad or oppressive - where applicant undertook to pay reasonable costs arising from summons - where decided summons in relation to certain categories appropriate - and in relation to a category too broad - where decided applicant to provide revised summons to be issued to third party

A New Tax System (Goods and Services Tax) Act 1999 (Cth) - ss 38-385, 40-100, 195-1

Administrative Appeals Tribunal Act 1975 (Cth) - s 40A

Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] FCA 1504; (1997) 37 ATR 432

Fried v National Australia Bank Ltd [2000] FCA 911

Re Radge & Ors and Commissioner of Taxation [2007] AATA 1317

Makita v Sprowles [2001] NSWCA 305

R v Barton [1981] 2 NSWLR 414

Wong v Sklavos [2014] FCAFC 120

Re Universal Press Pty Limited v Provest Limited [1989] FCA 259

AAT Guideline - Persons Giving Expert and Opinion Evidence

1. ACN 154 520 199 Pty Ltd (In Liquidation) (formerly known as EBS & Associates Pty Ltd) (ACN), the applicant in these proceedings, asked the Tribunal to summon the production of documents from two parties. The first summons was issued to the Commissioner of Taxation, the respondent. The second was issued to a third party. Each summons sought documents which the applicant says are required for the purposes of the Tribunal's review of the Commissioner's objection decisions in the imminent substantive hearing of the tax dispute. The Commissioner and the third party asked the Tribunal to set aside both summonses. As it happens, the Commissioner was able to see his way clear to reach a compromise with the applicant in relation to the documents that were sought from him. It is therefore unnecessary for us to deal in detail with that aspect of the dispute. These reasons mainly address the summons for documents from the third party.

1. ACN says it was in the business of refining gold and silver during the period under review. In the course of its business, the refinery produced bullion bars that were sold to dealers. ACN treated those sales as GST-free supplies pursuant to s 38-385 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). ACN explains that the gold and silver used as feedstock in the refining process was acquired in scrap form from various suppliers, including scrap dealers and jewellery related businesses, and was then refined by ACN. ACN also contended that these acquisitions of scrap gold were taxable supplies to ACN and resulted in an entitlement to claim input tax credits, that is, ACN proceeded on the basis it had made creditable acquisitions of scrap gold.
2. The pattern of transactions came to the attention of the Commissioner. Following an audit, the Commissioner issued amended assessments to ACN in respect of the monthly tax periods ending 29 February 2012 to 30 June 2014 which disallowed claims for over $120 million in input tax credits. The Commissioner reached this view because:
   • The so-called 'scrap' gold acquired from the various suppliers was already in a state that meant it did not require further refining. Rather, the gold was melted down and recast. On that basis, the Commissioner argued the applicant could not claim the subsequent supplies to bullion dealers were GST-free under s 38-385 because those supplies were not the first supplies of that precious metal after refining. If the supplies were not GST-free but were instead input taxed under s 40-100 of the GST Act, input tax credits were not available with respect to those transactions.
   • Some of the supplies to ACN of scrap gold did not happen as alleged, or at all, and some of the gold supplied to ACN was not scrap but was, in fact, 'precious metal' as defined in s 195-1 of GST Act that did not require refining. Consequently, these were input taxed supplies that did not give rise to any entitlement to input tax credits.
   • Some input tax credits were alternatively disallowed because they were 'GST benefits' arising out of a scheme covered by the general anti-avoidance provisions of the GST Act.
3. ACN objected to the amended assessments, and it now asks the Tribunal to review the objection decisions (including penalty decisions) that resulted from that process.

ACN wants to summon two parties to produce documents in advance of the hearing

1. ACN says it needs documents in the Commissioner's possession which relate to the tax affairs of a number of companies and an individual who were suppliers of scrap gold and silver to ACN. ACN argues those documents, being the Reasons for Decisions relating to assessments issued by the Commissioner to those respective suppliers, will support its explanation of the transactions. The applicant had identified the specific documents it was after from the contents of the affidavit of Mr Aris Zafiriou, a senior public servant working in the Significant Debt Management team of the Australian Taxation Office, filed in these proceedings. The Commissioner initially resisted the applicant's summons, but has agreed to produce the documents with appropriate redactions to safeguard certain privacy concerns. It remains to be seen whether any of those documents will be tendered in evidence at the final hearing and whether the Commissioner will argue about their relevance to the applicant's tax dispute.
2. A live question remains in relation to the summons that was directed to Gold Corporation, the third party. Gold Corporation is a government-owned enterprise established under the Gold Corporation Act 1987 (WA). Gold Corporation operates the Perth Mint. It is a refiner of precious metals that acquires scrap gold and sells bullion in competition with ACN.
3. There is no suggestion Gold Corporation was a party to any of the transactions which attracted the attention of the Commissioner in these proceedings. Gold Corporation's taxation affairs are not in question. However, there is a connection, albeit an indirect one, between Gold Corporation and these proceedings. The Commissioner has commissioned Mr Richard Hayes, the Chief Executive Officer of Gold Corporation and Mr Nathan Edwards, the Operations Manager of Gold Corporation's Refining Division, to provide expert reports, and they may yet be called to give evidence in the Commissioner's case. Another former executive of Gold Corporation has provided an expert report to ACN. Mr David Woodford, who was previously the Chief Operating Officer at Gold Corporation, was initially engaged by the Commissioner but subsequently took up with ACN.
4. Gold Corporation says that connection is a red herring. In his affidavit, Mr Tom French, a legal practitioner with the firm Minter Ellison, the solicitors for Gold Corporation, insists the two executives of Gold Corporation, Messrs Hayes and Edwards, will not provide evidence in their capacity as officers of Gold Corporation. We were told Messrs Hayes and Edwards were acting on their own behalf. We were also told the evidence of Mr Woodford, the former executive, was no concern of Gold Corporation, although the applicant's counsel pointed out from the bar table that Mr Woodford was prevented from giving all the useful evidence he might otherwise give because of ongoing confidentiality obligations that appear in his contract of employment. Those obligations have not been waived by Gold Corporation. Counsel for the applicant said Mr Woodford would be effectively freed from the restrictions in his contract at the hearing after being issued with a summons, but - inconveniently - he was not free to speak until that point.
5. In any event, Gold Corporation says ACN should not be asking Gold Corporation for documents. Gold Corporation submitted that any request for documents that would substantiate (or not) the evidence of the two expert witnesses who happen to be employed by Gold Corporation should have been addressed to each of those individuals in their personal capacity. Gold Corporation does not have a dog in this fight, we were told. It says it should be excused from the burden of complying with the summons.
6. With respect to that burden, Gold Corporation stated it had already incurred significant costs in considering the scope of the summons and obtaining legal advice in relation to it. It estimated it would be required to expend approximately another 155 hours of time and $60,000 (accounting for both its employees as well as external advisors) in complying with the summons. These estimates, with respect to categories one, five, six and seven of the summons as discussed further below, were canvassed in the affidavit of Mr French. Gold Corporation further says the confidentiality of its data and processes, including commercially sensitive information about its pricing models, services and customers, should also be preserved.
7. ACN says Gold Corporation is not a wholly uninterested bystander in these proceedings. ACN and Gold Corporation are rivals, and ACN's problems with the Commissioner might impact on its presence in the marketplace as well as its efficacy as a competitor to Gold Corporation. ACN fears the evidence given by senior officers of Gold Corporation, albeit as experts, may be infected by bias. ACN wants to use the summons to obtain evidence going to the credit of these witnesses.

1. As noted above, the Commissioner has engaged Mr Edwards and Mr Hayes. Mr Edwards has prepared an expert report on refining practice and processes while Mr Hayes has prepared a report on the relevant market and practices within the Australian precious metals industry. Both reports appear to bear directly on the questions that will ultimately be determined by the Tribunal. Copies of the reports have already been filed and exchanged. Mr Woodford, engaged by ACN, has also prepared a report which responds to matters raised in the reports of Mr Hayes and Mr Edwards.
2. We do not need to comment on the adequacy of those reports for present purposes. Some general remarks are enough. It is well established that an expert's report must do more than state a bare conclusion. Assertions of opinion count for little in Tribunal proceedings unless they are accompanied by an intelligible explanation of how that opinion was reached. The Tribunal needs to understand and evaluate that reasoning so it can assign weight to the conclusion. Where the opinion is formed on the basis of evidence, or is informed by assumptions, the report should identify the evidence or assumptions in sufficient detail. That much is clear from the Tribunal's Guideline titled Persons giving expert and opinion evidence at [4]: see, also, for example Makita v Sprowles [2001] NSWCA 305 per Heydon JA.
3. It follows that one response to ACN's concern about bias will be found in the quality of the reports in each case. The experts engaged by the Commissioner will need to provide supporting material that permits ACN and the Tribunal to explore the veracity and integrity of each expert's reasoning. ACN will be free to criticise the reports tendered against it if there are gaps on the face of those reports. The Tribunal can also take account of the fact that Gold Corporation and ACN are commercial rivals.
4. ACN says it should be entitled to dig more deeply into the experts' backgrounds to explore what are essentially issues of credit. It says the relationship between the experts and Gold Corporation makes it necessary and convenient to summons Gold Corporation. We need to examine both of those propositions in considering the scope of the summons power.

1. The Tribunal's power to summon a person to give evidence or produce documents is found in s 40A(1) of the Administrative Appeals Tribunal Act 1975 (the AAT Act). There is no doubt that a summons may be issued to a person who is not a party to the proceedings, although a summons should not be directed to a decision-maker in circumstances where the powers under s 37 are more apposite: see Re Radge & Ors and Commissioner of Taxation [2007] AATA 1317 at [78]. Section 40A(2) says the Tribunal may refuse a request for a summons. The courts have a similar power: see, generally Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] FCA 1504; (1997) 37 ATR 432 at 439 per Spender J. The Tribunal would typically refuse to issue a summons where:
   • the scope of the summons is too broad or it is oppressive;
   • it is an abuse of process, or futile, or it is sought for an impermissible purpose - for example, to conduct a fishing expedition; or
   • it is not directed to a "legitimate forensic purpose in relation to the issues in the proceedings": Wong v Sklavos [2014] FCAFC 120 at [12] per Jacobson, White and Gleeson JJ.
2. The forensic purpose of a summons has been analysed in cases like Wong v Sklavos. In that case, Jacobson, White and Gleeson JJ explained (at [12]) the real question was whether:

...viewed realistically, the documents sought have a bearing on an issue which is not unreal, fanciful or speculative (R v Barton (1981) 2 NSWLR 414 at 420), or that the material sought is reasonably likely to add in some way to the relevant evidence in the case (Spencer Motors Pty Ltd v LNC Industries Ltd (1982) 2 NSWLR 921 at 927), or that it be "on the cards" that the documents sought will materially assist the party at whose request the subpoena has been issued: Allister v The Queen [1984] HCA 85; (1984) 154 CLR 404 at 414; Tamawood Ltd v Habitare Developments Pty Ltd [2009] FCA 364 at [13], [35]-[38].

1. The question of what amounts to a legitimate forensic purpose of a summons was also discussed by Weinberg J in Fried v National Australia Bank Ltd [2000] FCA 911. In that case, a party had issued a subpoena to uncover evidence that would only be used to impugn the credit of a witness. His Honour pointed out that s 102 of the Evidence Act 1995 prevented the admission of evidence directed solely to credit except in limited circumstances; that rather suggested there were doubts over the extent to which a subpoena could be used with that end in mind. The Tribunal is not bound by the rules of evidence, but there is still force in his Honour's observation (at [28]):

It is not appropriate, in my view, for a Court to permit a subpoena to stand which does little more than trawl for documents which may be used to impugn the credit of a particular witness. This is particularly so when the documents sought have nothing to do with any of the issues in dispute in the proceeding. The Court must be alert to ensure that any subpoena which is issued has a legitimate forensic purpose. That purpose must be identifiable, and likely to facilitate the conduct of the proceeding, not merely to oppress a party or witness.

1. We will return to this issue below. Before we turn to the detail of the summons request, we should refer to one other consideration cited by Gold Corporation. Gold Corporation submitted the oppressiveness of complying with the summons, as broadly drafted by the applicant, should be given considerable weight.
2. The Tribunal may be inclined to take a closer look at a request to summon a third party. As Cantor J explained in R v Barton [1981] 2 NSWLR 414 (at 419), a decision-maker should be conscious of the extent of the imposition on someone who is a stranger to the litigation. The summons power is coercive, after all, and a third party like Gold Corporation should not lightly be dragged into somebody else's dispute with all the cost and inconvenience that might ensue. But the test of relevance is ultimately the same regardless of the status of the intended recipient of the summons. If the documents in the third party's possession are relevant and likely to be important to the case presented by the party requesting the summons, the third party's interest in minding its own business might have to give way. A balancing exercise is required.

The scope of the proposed summons addressed to Gold Corporation

1. We now turn to the individual categories of documents that have been described in the amended summons addressed to Gold Corporation. An earlier request has been modified following negotiations between the parties. Categories three and four of that request are no longer pressed, and category seven has been substantially narrowed in its scope. Our discussion is directed to the amended summons that was tendered at the interlocutory hearing. We will consider each category in turn.

(a) Nathan Edwards and Richard Hayes;

(b) Nathan Edwards and any other employee of Gold Corporation; and

(c) Richard Hayes and any other employee of Gold Corporation;

relating to the giving of evidence in this proceeding.

1. Gold Corporation said this summons is inappropriate because all the correspondence in question is presumably held by Messrs Edwards and Hayes. It is therefore convenient and appropriate to obtain it from them before disturbing a third party that is otherwise unconnected to the proceedings. Counsel for Gold Corporation relied on the affidavit of Mr French to argue Gold Corporation would incur considerable expense if it were required to respond to this request in the summons.
2. ACN (belatedly) undertook to pay the reasonable costs of Gold Corporation arising out of the summons. That reduces the extent of the imposition somewhat, but the potential inconvenience remains (assuming the parties do not end up in a dispute over whether expenses are reasonable: cf Re Universal Press Pty Limited v Provest Limited [1989] FCA 259). We are mindful of that imposition, although we note the expert reports were only commissioned in mid-February 2018 and filed in mid-March 2018, that is, comparatively recently. Additionally, the search would presumably be contained within a closed period. That would limit the cost and inconvenience still further. Gold Corporation also accepts many of the relevant documents are within its possession and therefore accessible because it seems likely the expert reports were prepared by the witnesses at work and any correspondence with other employees of Gold Corporation, as per the express terms of paragraphs (b) and (c), and "relating to the giving of evidence" would have taken place with the employees of Gold Corporation at their workplace.
3. The balancing exercise contemplated in Barton requires that we have regard to the potential value of the evidence as well as alternative, less onerous, ways of accessing the evidence from an existing party or witness involved in the proceedings. Gold Corporation says we should look to Messrs Hayes and Edwards and we should not entertain a summons that is directed to identifying evidence that will be useful only to impugn credit.
4. As it happens, we are satisfied Gold Corporation resources are going to be expended one way or another if ACN is required to address the request to Messrs Hayes and Edwards, having regard to their seniority at Gold Corporation, and their potential interactions with other employees. The correspondence is mostly in electronic form and it is likely to be on the servers of Gold Corporation. That material will have to be examined by somebody on the Gold Corporation payroll given Messrs Hayes and Edwards are both employees. We also accept the evidence sought has a legitimate forensic purpose, even though the applicant suspects it will go to the credit of the witnesses. Both of the witnesses have been engaged to comment on the nature of the processes and usage in the industry. We do not think evidence that might reflect on their motivation and that of Gold Corporation in giving evidence can be said to "have nothing to do with any of the issues in dispute in the proceeding": Fried at [29]. The applicant is not seeking evidence of some unrelated misbehaviour on the part of the witnesses that would, if revealed, cast them in a bad light but tell us little else. The evidence it seeks is (at least potentially) relevant to the Tribunal's evaluation of the quality and integrity of their evidence as to industry practices and usage.
5. On balance, we accept ACN should be permitted to issue a summons seeking the documents referred to in category one. Gold Corporation may ask for confidentiality orders to be put in place with respect to those documents, and we accept the Commissioner should have an opportunity to review the documents before they are disclosed to the applicant to give the Commissioner the opportunity to decide whether a claim of legal professional privilege should be made.

1. Category two of the summons issued to Gold Corporation provides as follows:

2. Copies of all documents used by Richard Hayes in his expert report dated 14 March 2018 to calculate that the "Perth Mint refined 1.1 tonnes" of Australian secondary gold in the 2013 calendar year.

1. Counsel for Gold Corporation said it made no sense for Gold Corporation to produce documents that Mr Hayes used to make his calculations precisely because Mr Hayes was the one who prepared the report - not Gold Corporation.
2. We should say at once that the information sought is potentially relevant to issues in dispute in these proceedings. It may become necessary for us to make findings of fact about refining practices and the state of the market for 'secondary gold'. We also accept the obvious starting point for the enquiry is with Mr Hayes. It is his report, and he presumably knows what documents he used to the extent they have not been specifically identified in the report. But we also note the documents may be owned or maintained by Gold Corporation, and the expert witness is not necessarily entitled to produce those documents because they contain confidential information about Gold Corporation, although he may have used those documents for preparing his expert report. Gold Corporation is the party that is best able to comply with the summons. Gold Corporation is not going to bear a heavier burden than it would have if Mr Hayes was issued with the summons because, one way or another, it is going to need to identify and review the documents. We are satisfied the summons request seeking documents described in category two is appropriate although, once again, Gold Corporation might seek confidentiality orders defining the scope of access and the Commissioner will be entitled to have first access so he can advise of any claims of privilege.

1. We turn next to the documents in category five of the amended summons (categories three and four having been abandoned). Category five of the amended summons provides as follows:

5. Copies of all memoranda of out-turn and tax invoices regarding the acquisition or receipt by Gold Corporation of gold being of 99.99% or higher fineness in any physical form during:

(a) the 2013 calendar year; and

(b) the 2016 calendar year.

1. The applicant says it needs the memoranda and invoices for the two relevant years to verify claims that Gold Corporation did comparatively little refining of 'secondary gold'. The applicant's interest in these documents was piqued because it had obtained copies of a memorandum of out-turn and a tax invoice from a jeweller which record Gold Corporation charging him a fee for refining services in circumstances which are, on their face, at odds with the evidence, as we understand it, about refining practices. Counsel for Gold Corporation pointed out that all of the Gold Corporation invoices provided to customers who supplied gold with high levels of purity included a standard form of words that mentioned refining services whether those services were provided or not. The applicant was not satisfied and said it was still important to see all of the documents because they included basic data that would enable the applicant to perform accurate calculations of the amount of gold that was acquired and refined by Gold Corporation.
2. We accept the data appearing in the memoranda of out-turns and tax invoices may be relevant to an issue in the proceedings concerning the applicant's position in the market as well as refining activities. We are not persuaded the collation and redaction of the documents would be so burdensome as to outweigh the potential advantage to the applicant's case. After all, documents such as tax invoices are required to be retained as business records for a number of years. The applicant does not need to know the identity of the customers or other details that are unnecessary to the calculations it wishes to make. We are satisfied the documents in category five may be requested although Gold Corporation might seek orders allowing it to redact some of the details, including the information that identifies its customers.

1. Category six of the summons issued to Gold Corporation states:

6. Documents recording assay and refining procedures of Gold Corporation relating to the processing of gold with a metallic purity of 99.99% in the period from 1 February 2012 to 31 December 2016.

1. These documents appear to relate directly to an issue in the proceedings. The Commissioner's experts are talking directly to the refining process; the detail of those procedures is potentially of interest. The provision of the procedures would not be especially burdensome, although we acknowledge the documents may be commercially sensitive. We are satisfied the confidential nature of the documents can be adequately safeguarded through the imposition of confidentiality orders that exclude the applicant from information shared with lawyers and perhaps an expert.

1. Category seven was amended by the applicant so as to read:

7. Board papers and minutes of board meetings of Gold Corporation from 1 January 2013 to date which refer to:

(b) the Applicant (as EBS or ABC Refinery) or ABC Refinery (Australia) Pty Ltd

1. We were told the applicant was looking for evidence of a discussion at board level that might confirm the suspicion that Gold Corporation hoped to exploit opportunities created by the applicant's predicament, or which suggested Gold Corporation's officers were inappropriately enthusiastic in their approach to giving evidence in the Commissioner's case.
2. We do not accept the summons request seeking board papers and minutes of Gold Corporation's board meetings is appropriate. The category of documents is defined too broadly. It is conceivable the board might refer to the applicant precisely because it is a commercial rival. There is nothing surprising in that. While it is possible a more precisely drawn request could be developed, the request in its current form will potentially require the disclosure of a number of highly sensitive documents the relevance of which is unclear.

1. The applicant is to provide a revised summons to be issued by the Tribunal to the proper officer of Gold Corporation which gives effect to these reasons for decision.

I certify that the preceding 39 (thirty-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe and Senior Member G Lazanas

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