Grounds 1 and 2
19 Shortly after the jury had retired to consider its verdicts, the jury sent to the presiding Judge these two questions:
"Your Honour, (1) Can a Tax Agent legally submit a tax return for a de-registered company for a period prior to its de-registration? (2) Can a Tax Agent legally submit a tax return for a company subsequent to it being liquidated for a period prior to its liquidation?"
20 Ground 1 challenges the directions given in response to Question (1). Ground 2 challenges the directions given in respect to Question (2).
21 Immediately following the receipt of these questions the presiding Judge heard lengthy submissions from the Crown Prosecutor and from Senior Counsel then appearing for the present appellant. At the conclusion of those submissions, and before answering the questions, his Honour, with the agreement of counsel, clarified with the jury that the words "being liquidated" which formed part of question (2) would be taken "…… to in effect mean the appointment of a liquidator".
22 Before turning in a particular way to the manner in which the learned trial Judge dealt with the questions from the jury, it is useful to consider the structure of the competing submissions that were put to his Honour in connection with the answering of the questions.
23 For the appellant it was submitted that both questions should be answered, simply: yes. Counsel submitted that section 252 of the Income Tax Assessment Act provided for the representation of a company by a public officer who was appointed either by the company itself or by an authorised agent of the company. It was submitted that the only evidence in the trial concerning the appointment of a public officer of the relevant companies was evidence that Mr. Paragalli's signature as public officer appeared on the relevant tax returns and that the obligation to lodge tax returns after either liquidation or deregistration was a continuing obligation with which the relevant public officer was fixed. It followed, so the submissions proceeded, that the public officer could engage a tax agent such as the appellant to lodge the relevant taxation returns.
24 One observation that can be made at once about those submissions is that they appear to overlook the fact that two of the returns, namely those with which counts 6 and 11 were concerned, were not in fact signed by Mr. Paragalli. The count 6 return was signed by a Mr. Willox who held no position with the relevant company, although he was one of the appellant's clients. The return with which count 11 was concerned was signed, not by Mr. Paragalli, but by the appellant.
25 The Crown Prosecutor submitted that there was no evidence of any appointment of a public officer by those responsible for the relevant company's affairs after either liquidation or deregistration. It was submitted that the companies were, after liquidation or deregistration, in the hands either of the liquidator or of ASIC. It was submitted that section 252 of the Income Tax Assessment Act applied to companies carrying on business in Australia, and that deregistered companies were outside the ambit of the provision in that by definition they were not carrying on business in Australia. It was submitted that in any event the deregistration of a company brought to an end any antecedent authority of any agent to act on the company's behalf. It was submitted that so far as concerned a liquidator, the Income Tax Assessment Act required that the liquidator immediately notify the relevant taxation authority of the liquidator's appointment; and that thereafter the statute required the Commissioner to notify the liquidator of the company's taxation liability. The Crown submitted that whether a particular case was one of the appointment of a liquidator or one involving company deregistration, the appellant could not have been appointed as the relevant company's tax agent.
26 The Crown's submissions pointed up what was said by the Crown to be a more fundamental flaw in the defence submissions. The flaw, put simply, was that the defence submissions confused powers with liabilities. Powers, the Crown submitted, were terminated in the event of either deregistration or liquidation; whereas liabilities continued to exist after either of those two occurrences. It was submitted that the Income Tax Assessment Act did not confer powers or authorities on company officers. The Act, it was submitted, dealt with, and only with, the very different topics of the creation and the regulation of taxation liabilities.
27 The learned trial Judge, having heard the submissions which had been previously summarised, said that his Honour had: "…….. a feeling in a sense that what the jury has to decide in this matter, in any event, doesn't turn upon the legal issues". The Crown responded that "….. ultimately, the question of fraud is a different question from the question of authority to put in tax returns. ……….. If it be a fact that Mr. Cassaniti was not authorised to - or did not have the legal authority to put in tax returns, does not necessarily answer the question whether he acted fraudulently". It was submitted, further, that if the appellant had been authorised to submit tax returns, that fact of itself could say nothing about whether or not he had exercised that authority dishonestly and therefore fraudulently. The conclusion to which the competing submissions drew the learned trial Judge was expressed by his Honour thus: "I'm inclined to try and not answer these questions with a yes and no answer ….. but to go back to tors (sic) …….".
28 When his Honour actually addressed with the jury the substance of the two questions, he began by reminding the jury, correctly, that the first question was relevant only to the counts numbered 3, 6, 7, 10 and 11. His Honour then gave to the jury these directions:
"When a company is de-registered it ceases to exist as a legal entity, it is dissolved. Dissolution of a company means that the authority of any agent to act on its behalf is forthwith terminated. Anything that is required to be done in relation to the affairs of a de-registered company, can only be done by the Australian Securities and Investments Commission, that is ASIC, or its predecessor, the Australian Securities Commission. The Crown case against the accused and what the Crown seeks to prove, however, is a different issue than the accused's legal authority to lodge income tax returns for a relevant corporation for a relevant year. Here, a factual issue, or factual issues, you will need to consider in relation to what the Crown has to prove is whether the accused knew that the relevant corporation was de-registered at the relevant time that the income tax returns were lodged and whether the accused knew that the relevant public officer signing the income tax return had authority to sign that particular income tax return at that time, either by reason of the de-registration of the corporation and in the relevant case, by reason of Mr. Joseph Paragalli's bankruptcy. Mr. Joseph Paragalli being bankrupt, he had no legal capacity to conduct his affairs whilst bankrupt, other than through his Trustee in Bankruptcy. These matters are not decisive of course, they are some of the matters that the Crown asks you to take into account.
The Crown case is that in combination with other matters arising from the evidence, the only reasonable inference to be drawn, which is what the Crown must establish, that this was the only reasonable inference that can be drawn, is that the accused knew that the relevant claims, in respect of the respective counts, were false and that the accused intended and in fact did defraud the Commonwealth, as I have explained in my other directions, by lodging the relevant tax return that relates to each count and by receiving and depositing the refunds that were issued by the Australian Taxation Office."
29 His Honour then progressed to the second question. He reminded the jury, correctly, that this question was relevant only to the count numbered 4. His Honour then gave to the jury these directions:
"In relation to the second question it reads, "Can a tax agent legally submit a tax return for a company, subsequent to the appointment of a liquidator for a period prior to the appointment of that liquidator?". In relation to this matter; firstly, when a liquidator is appointed the powers of the directors vest in the liquidator. Directors of a corporation have no power to lodge tax returns after the appointment of a liquidator. At the time of the appointment of a liquidator the directors of the company cease to have powers to control the company. Only the liquidator has power to appoint an agent to act on behalf of the corporation.
Again, the Crown's case is not dependent upon proving that the accused had no legal authority to lodge the tax returns, that is a different matter and a different issue from what you have to consider in determining whether the Crown has proved that the accused is guilty. Here the Crown seeks to prove, on the part of the accused, knowledge of the appointment of the liquidator and knowledge of Mr. Paragalli's bankruptcy as matters relevant to, in conjunction with other matters, establishing that the accused relevantly defrauded the Commonwealth in the way in which it has explained, as it relates to this matter."
30 As to the deregistration question, the appellant submits that the jury question should have been answered simply: yes. The structure of the supporting argument depends, essentially, upon the drawing of what are put as being substantive legal distinctions between, on the one hand, the standing of a director or other agent of a company after the company has been deregistered; and, on the other hand, the standing after deregistration of a person who was, as at the date of deregistration, the "public officer" of the company for the purpose of compliance with the company's taxation obligations. The suggested distinctions, putting them into a different form, depend upon contrasting provisions of, on the one hand, the Corporations Law as set out in the Corporations Act 1989 (C'th); and, on the other hand, the Income Tax Assessment Act 1997 (C'th).
31 The following synthesis of paragraphs 36, 37 and 38 of the appellant's written submissions puts the essential reasoning upon which the appellant relies:
"A business run by a deregistered corporation may continue to operate and derive income as if the corporation had not been deregistered. As such the business entity has an obligation to pay income tax and to lodge income tax returns. It would be extraordinary for an entity to escape paying tax because it was a deregistered corporation. ………………………. Deregistration has no effect on the obligation to lodge income tax returns and to pay income tax. By lodging an income tax return in these circumstances, a company and its public officer are fulfilling their legal obligations. It is submitted that his Honour erred by failing to refer to this aspect of the law. Integral to a complete direction was an explanation of the obligations and responsibilities of the public officer of a company. ……………. (references then made to section 252(1) of the Income Tax Assessment Act)………. . Despite the corporation being deregistered, if the business continued to trade and was considered to be a company under the Income Taxation Assessment Act 1936 it was obliged to have a public officer. The jury should have been told that if they found the company had continued to trade after deregistration, it continued to be a tax paying entity and as such, if it derived income, it had to have income tax returns lodged. Whilst ASIC and agents of the corporation were the proper parties to have this done under the Corporation Act, there is an obligation under the Income Taxation Assessment Act 1936 on the part of those actually conducting the business, in particular its public officer, to lodge income tax returns and to pay income tax. In these circumstances, it was legal for the public officer to engage the services of a tax agent to assist in preparing and lodging the tax returns. There was no evidence in the trial to suggest that the public officers of the relevant Paragalli companies were removed following company deregistration."
32 The essential response of the Crown is put succinctly in the following extract from paragraph 47 of the Crown's written submissions:
"……………. Underlying the argument is the false premise that if a person trades or runs a business in the name of a company which is defunct, the defunct company attracts income tax liabilities rather than the person who is running the business. ………………... It would seem to be self evident that if an artificial entity, such a company, no longer legally exists (which is the position on deregistration), it cannot do anything including run a business. This does not have the extraordinary consequence that the Submissions suggest, since any income tax liability reposes in the person running the business whatever name(s) he chooses to call the business(s) which he is operating.……… "
33 In my opinion it cannot be conceptually correct to speak of a deregistered company as having any capacity, however notionally restricted, to carry on business after deregistration has been formally and lawfully effected. The company has thereupon "ceased to exist"; not provisionally or conditionally, but simply and comprehensively.
34 It is, no doubt, entirely possible that the business formerly carried on by a deregistered company will continue to be carried on post-deregistration, and whether by means of another lawfully constituted legal entity or by means of individual activity; but it will not continue to be carried out by the deregistered company.
35 In such a context, I agree with the Crown's submission that the lawful incidence of post-deregistration taxation liabilities and responsibilities will burden whoever or whatever actually takes over any post-deregistration carrying on of any pre-deregistration business activities of the deregistered company.
36 Given the foregoing propositions, the learned trial Judge had open to him two contrasted ways of dealing with the jury's particular deregistration question. One was to engage the question directly. The other was to give effect to his Honour's instinct that it was better not to attempt a simple yes or no answer but to re-focus the deliberations of the jury on the true issue for trial which was whether the appellant had defrauded, as alleged by the Crown, the Commonwealth.
37 His Honour elected to take the latter course. I see no basis upon which this Court would be entitled to say that his Honour was in error in making that choice. In my opinion, and all to the contrary, the way in which his Honour took up the jury question did in fact direct the attention of the jury away from a potentially misconceived and misleading emphasis upon mere matters of corporate governance and the authority of a taxation agent; and directed the attention of the jury, instead, back to the correct focus of the Crown case which was that of an allegation of fraud.
38 I am unpersuaded that his Honour erred in the way in which he dealt with the deregistration question. I should make plain that in so saying I leave aside for the moment what was put to the jury about Mr. Paragalli's bankruptcy. That topic will require later consideration in connection with Ground 3.