Deputy Commissioner of Taxation v Bayeh, in the matter of Bayeh

BEAUMONT J. 1 Before the Court is a petition for a sequestration order against the judgment debtor. The petition is based upon an act of bankruptcy, arising from failure to comply with the provisions of a bankruptcy notice, itself based upon a default judgment obtained by the petitioning creditor in the Supreme Court in the sum of $868,753.87, together with interest. Some of the background of the matter appears in my reasons for judgment dated 4 June 1998, dealing with a challenge to the validity of the bankruptcy notice. 2 On behalf of the judgment debtor, reliance is placed upon the provisions of s 52(2)(b) of the Bankruptcy Act 1966. Section 52(2)(b) provides: "(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not be made; it may dismiss the petition." 3 In support of that invocation of the undoubted judicial discretion vested in the Court to dismiss a sequestration order for "other sufficient cause", counsel for the judgment debtor tendered an audited report of the Australian Taxation Office dated 19 April 1996. It is common ground that this report, which is lengthy, contains information obtained from the New South Wales Police Royal Commission and was provided to the Deputy Commissioner of Taxation. 4 It is evident from that report that the information thus obtained from the Royal Commission was used by officers of the Deputy Commissioner of Taxation to make assets betterment assessments, which in turn, were relied upon by the Deputy Commissioner of Taxation in claiming judgment against the judgment debtor in the Supreme Court in the sum previously mentioned. As has been said, that judgment was obtained by default. 5 A number of arguments were advanced on behalf of the judgment debtor in support of his submission that the discretion under s 52(2)(b) should be exercised in his favour. They are mainly contained in the debtor's written outline of submissions dated 9 June 1999. Before going to those, I should mention another argument advanced orally today. 6 It was submitted on behalf of the judgment debtor that although, as has now been held, the judgment debtor is out of time to appeal to this Court against the amended assessments, it is, nonetheless, open to the judgment debtor to apply to the Administrative Appeals Tribunal for an extension of time in which to appeal against those assessments, or more precisely, to appeal against the disallowance of his objections to those assessments; and that, if the Administrative Appeals Tribunal were to grant that extension of time, it would then be open to the judgment debtor to pursue appeals to that Tribunal accordingly. But I indicated in the course of argument, in the absence of any such application to the Tribunal, that question is hypothetical for present purposes. It does not constitute "sufficient cause" in my view, for present purposes. 7 It is then submitted for the debtor that the Court should, in the present circumstances, invoke its power to look behind a default judgment where appropriate, and having done so, to note that the material obtained from the Police Royal Commission was, as has been said, relied upon by the Deputy Commissioner of Taxation in the process of making his amended assessments on an assets betterment basis. In this connection, it is said that the reliance by the Deputy Commissioner of Taxation was in breach of the provisions of the Royal Commissions Act 1923 (NSW) and of the Royal Commission (Police Service) Act 1994 (NSW) in the manner which I will indicate shortly. 8 I should say at the outset that, even if I were to assume that the effect of the two New South Wales statutes which I have mentioned was that material obtained from the Police Royal Commission was not admissible in evidence, it would not, I think, assist the judgment debtor in the present context. I accept, of course, the unquestionable power of the Court to go behind a default judgment, but as the authorities make plain, that inquiry is carried out for the purpose of ascertaining whether the debt merged in the judgment was, in truth, a real debt and not illusory. But no attempt has been made in the present proceedings to challenge the reality of the judgment debt in that sense. Rather, the challenge that has been made, is in truth, a collateral challenge in the sense that it seeks to attack the method and the circumstances in which the process of gathering information for the purpose of making the assets betterment assessments was carried out. 9 I should mention at this point that it is not suggested that there was any irregularity in the obtaining of the default judgment; that is to say, it is not suggested that any of the procedures used by the Deputy Commissioner in the course of the Supreme Court proceedings were themselves irregular, or in any sense illegal. 10 The main argument advanced on behalf of the judgment debtor seeks to rely upon the provisions of s 17(2) of the Royal Commissions Act 1923 (NSW). Sections 17(1), (2) and (3), provide as follows: "17. (1) A witness summoned to attend or appearing before the commission shall not be excused from answering any question or producing any document or other thing on the ground that the answer or production may criminate or tend to criminate the witness, or on the ground of privilege or on any other ground. (2) An answer made, or document or other thing produced by a witness to or before the commission shall not, except as otherwise provided in this section, be admissible in evidence against that person in any civil or criminal proceedings. [Emphasis added] (3) Nothing in this section shall be deemed to render inadmissible: (a) any answer, document or other thing in proceedings for an offence against this Act; (b) any answer, document or other thing in any civil or criminal proceedings if the witness was willing to give the answer or produce the document or other thing irrespective of the provisions of subsection (1); (c) any book, document or writing in civil proceedings for or in respect of any right or liability conferred or imposed by the document or other thing." 11 (A preliminary question arises on this branch of the judgment debtor's argument whether, in any event, the production of the document, being the Taxation Office Audit Report (now Exhibit 1), was produced willingly by or on behalf of the judgment debtor within the meaning of s 17(3)(b), but I pass over this.) 12 It is plain that the judgment debtor bears the onus of indicating the existence of "another sufficient cause". It is equally plain that there was no onus, or need, so far as the Deputy Commissioner was concerned in the present proceedings, to tender, or seek to adduce in evidence, any part of that audit report. As has been said, the onus to establish "other sufficient cause" rests as a matter of form and substance upon the debtor. The Deputy Commissioner has obtained a judgment. It is not said that it was irregularly obtained, and although it was a default judgment, until it is set aside, it is conclusive evidence of the debt merged in that judgment. 13 On behalf of the judgment debtor, reliance is placed in this connection upon the decision of the Court of Appeal of New South Wales in Hartmann v Commissioner of Police (1997) 91 A Crim 141. In that case, s 17(2) of the Royal Commissions Act 1923 (NSW) was given a liberal interpretation (with which I would respectfully agree) so as to pick up subsequent disciplinary proceedings in which the Tribunal entertaining those proceedings admitted into evidence, evidence given by the appellant at the Royal Commission. It was held that the words "in any civil or criminal proceedings" in s 17(2) were not to be narrowly construed, but were wide enough to encompass the full category of possible future proceedings, including a disciplinary proceeding. Whilst I respectfully concur with this construction and with that outcome, I cannot see, even if so construed, how s 17(2) can assist the judgment debtor here. It was the judgment debtor's own act that was involved in the attempt to render the contents of the audit report admissible in evidence in the present proceedings. The Deputy Commissioner did not attempt to do so. 14 As a separate, but related, argument, it is said on behalf of the judgment debtor that this Court, as a court of bankruptcy and thus, of status, should not, in the exercise of its discretion, be seen to encourage the deliberate participation in unlawful conduct on the part of a government authority, such as the Deputy Commissioner of Taxation; and that where, for instance, the Deputy Commissioner of Taxation illegally obtains information, he should not be permitted by this Court to take advantage of it in any forensic proceeding and in particular, not in a proceeding in which status is concerned. 15 Reliance is placed, in this connection, upon some observations of Mansfield J in Woodroffe v The National Crime Authority [1999] ATC 4569 at 4573. In my opinion, the observations of his Honour which were clearly obiter, but with which I would respectfully concur, do not assist the judgment debtor here. I note in this connection that Mansfield J went on to refuse an interlocutory injunction in that matter. 16 I should, for completeness, however, refer to the provisions of the Royal Commission (Police Service) Act 1994 (NSW) to which I was taken by counsel for the judgment debtor. By ss 6 and 7 of that Act the Commissioner is given statutory power to obtain information and documents. By s 8 privilege is conferred in certain circumstances, and by s 9 the privilege against self-incrimination is preserved conditionally. More pertinently for our purposes, by s 30 a secrecy provision is imposed upon the Commissioner and the Commissioner's officers. Subsection (2) provides: "(2) A person to whom the section applies must not, directly or indirectly, except for the purposes of this Act or the 1923 Act or the person's Royal Commission functions or otherwise in connection with the exercise of the person's Royal Commission functions: (a) make a record of any information; or (b) divulge or otherwise communicate to any person any information, being information acquired by the person by reason of, or in the course of, the exercise of the person's Royal Commission functions." 17 However, by s 30(4)(c) it is provided that, despite s 30, a person to whom the section applies may divulge any such information, inter alia: "... in accordance with a direction of the Commissioner, if the Commissioner certifies that it is necessary to do so in the public interest ..." [Emphasis added] 18 On behalf of the Deputy Commissioner in this proceeding there was tendered a letter signed by Senior Counsel assisting the Royal Commission dated 13 November 1995 in the following terms: "Re: Louis Bayeh The abovenamed has been the subject of investigations by this Commission. Financial investigations reveal an enormous disparity between his declared incomes and his known outgoings. The attached report summarises the results of the Royal Commission's financial investigations into Mr Bayeh. This report, together with the contents of this letter, are disseminated to you in the public interest, pursuant to Section 30(4)(c) of the Royal Commission (Police Service) Act 1994 (NSW). [Emphasis added] The Commission is in possession of a significant volume of holdings relating to this financial investigation, and is prepared to make copies of these holdings available for inspection and copying, should the need arise." 19 It is said on behalf of the judgment debtor that there is no evidence that the Commissioner has certified the matters specified in s 30(4). In my opinion, s 30(4)(c) does not in its terms require the production of a certificate, but it does require that there be material from which at least an inference can be drawn that the Commissioner has certified as there provided. The only evidence before me on this question is the letter dated 13 November 1995 (which is now Exhibit A) which I have set out above. The letter is written on the letterhead of the Royal Commission, it is signed by Senior Counsel assisting the Commission. As has been seen, the letter states that the report together with the contents of the letter were : "... disseminated to you in the public interest pursuant to section 30(4)(c) of the Royal Commission (Police Service) Act 1994 (NSW)." 20 In the absence of any evidence to the contrary, I am prepared to infer from this letter that the Commissioner has certified as to the matter specified in s 30(4)(c). It follows, in my view, that no contravention of the provisions of s 30 has been established. I would add, for completeness, that for the reasons previously given, it would not follow from the absence of any such certificate that a case for the exercise of my discretion under s 52(2)(b) of the Bankruptcy Act 1966 had been made out. 21 In Woodroffe, above, Mansfield J, at the passage I have mentioned, contemplates the possibility of unlawful activity being initiated by the Deputy Commissioner or other public authority. Even if it were to be shown that the Royal Commissioner had not given the appropriate certificate under s 30(4)(c), it would not follow that the Deputy Commissioner of Taxation should be seen as initiating any unlawful conduct. It is clear from the terms of the letter from Senior Counsel assisting dated 13 November 1995, that the initiator of the process which led to the undertaking of the Deputy Commissioner's inquiries was the Royal Commission itself. 22 I would only add that, if it be appropriate to regard the present case as one analogous for a claim that there had been a breach of confidence, with the consequence that documents or information had been improperly obtained by the Deputy Commissioner, the appropriate remedy may have been to seek an injunction to restrain reliance upon the breach of confidence alleged (cf. Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed. at 887). In this case, there is no evidence in any event to establish any such breach in the circumstances in which Exhibit A was written to the Deputy Commissioner. 23 In the result, there is nothing in the material before me which would justify the exercise of my judicial discretion under s 52(2)(b) of the Bankruptcy Act 1966. I propose to make a sequestration order. 24 I make a sequestration order against the estate of the judgment debtor. I order that the applicant creditor's costs, including reserved costs, if any, be taxed and paid from the estate in accordance with the Act. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont.