Deputy Commissioner of Taxation v Shi

Federal Court of Australia|2019-06-21|Before: Steward J

Counsel for the Applicant: Mr S White SC with Ms T Epstein

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondents: Mr T Game SC with Mr R Johnson

BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant

JUDGE: STEWARD J DATE OF ORDER: 21 JUNE 2019

Within 14 days after the date of these reasons being published the parties are to file the orders for final relief by agreement, or if there be no agreement, written submissions about the form of final relief limited to three pages in length. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

STEWARD J: 1 The applicant (the "Commissioner") commenced proceedings in 2018 seeking judgment debts against the respondents for outstanding income tax liabilities, interest and penalties arising under the Income Tax Assessment Act 1936 (Cth) (the "1936 Act"), the Income Tax Assessment Act 1997 (Cth) (the "1997 Act") and the Taxation Administration Act 1953 (Cth) (the "TAA"). "Freezing orders", as they are now called, were granted by this Court on 27 November 2018. Orders were also made requiring each respondent to file and serve an affidavit disclosing each respondent's worldwide assets. In response, the first respondent, Mr Shi, filed two affidavits. The first, affirmed on 13 December 2018, was served on the Commissioner. The second, affirmed on 16 March 2019, was not served but a photocopy of it was delivered to the Court in a sealed envelope under a claim that its contents should not be disclosed by reason of the privilege against self-incrimination. Mr Shi invoked, for that purpose, the procedure permitted by s 128A of the Evidence Act 1995 (Cth) (the "Evidence Act"). On 24 April 2019, consent orders granting the Commissioner judgment against each respondent with costs were made by this Court. This only left for determination the claim for privilege over the second affidavit and the potential application of s 128A of the Evidence Act to it. For the reasons which follow, I find that the contents of the second affidavit should not be disclosed to the Commissioner pursuant to s 128A. The Commissioner otherwise has the power pursuant to s 353-10 of Sch 1 to the TAA to obtain the information it contains.

Background 2 The day after this Court made ex parte "freezing orders" the Australian Federal Police executed search warrants at a property associated with the respondents. The warrant recorded the issuing officer's satisfaction that there were reasonable grounds for suspecting that there existed evidence as to the commission by the respondents of the following indictable offences (amongst others): (a) conspiracy to dishonestly cause a loss to the Commonwealth contrary to s 135.4(3) of the Criminal Code (Cth) (the "Code"); (b) dishonestly obtaining a financial advantage by deception from the Commonwealth through evasion of income tax contrary to s 134.2 of the Code; (c) conspiracy to receive, conceal and dispose of the proceeds of crime contrary to ss 11.5(1) and 400.3(1) of the Code; and (d) certain other offences under the Code and the Migration Act 1958 (Cth). 3 Yates J made the "freezing orders" because there was a risk that assets might be removed from Australia to the detriment of the Commonwealth. In Deputy Commissioner of Taxation v Shi [2018] FCA 1915, his Honour said at [20]: On the evidence presented, I was satisfied that the Commissioner had established against each respondent a strong prima facie case of at least prospective indebtedness for a very large sum in respect of his or her tax liabilities. I was also satisfied that the facts and circumstances surrounding each respondent's taxation affairs (including, on the Commissioner's case, an apparently deliberate failure to disclose taxable income), and each respondent's ability to access and transfer offshore large sums to other entities which he or she controls or with which he or she has an association, established that there is a real (as opposed to a supposed) danger that a judgment or prospective judgment obtained against him or her might be wholly or partly unsatisfied because assets (in particular, liquid assets) might be removed from Australia or otherwise disposed of or dealt to the disadvantage or detriment of the Commonwealth. I was satisfied that the balance of convenience favoured the grant of the relief sought and that it should be granted on an ex parte basis. 4 As at the date of the hearing before me the respondents remain under investigation, but have not been charged with any offence. Judgment has also now been entered against each respondent. It is therefore unnecessary for me to make any findings concerning the issue and service of the various assessments relating to the respondents. It is also unnecessary for me to make any findings of the taxable facts that may support each assessment. All of the necessary orders for the final disposition of this proceeding have been agreed, including orders for costs, save for the one issue: access to the sealed affidavit. 5 By an interlocutory application dated 17 April 2019, Mr Shi sought, amongst other orders, the following relief: 1. The affidavit of the First Respondent (Mr Shi) dated 16 March 2019 (Privileged Affidavit) be returned to Mr Shi or his legal representatives under s.128A(5) of the Evidence Act 1995 (Cth) ("the Act"). 2. In the alternative to order 1, in the event that the Court makes an order under s128A(6) of the Act, that Mr Shi file and serve the whole or part of the Privileged Affidavit upon the parties; Mr Shi be given a certificate of the kind described in s.128A(7)-(8), in respect of the information referred to in s.128A(6)(a).

Legislative Provision 6 Section 128A of the Evidence Act provides: Privilege in respect of self-incrimination - exception for certain orders etc (1) In this section: disclosure order means an order made by a federal court in a civil proceeding requiring a person to disclose information, as part of, or in connection with a freezing or search order, but does not include an order made by a court under the Proceeds of Crime Act 2002. relevant person means a person to whom a disclosure order is directed. (2) If a relevant person objects to complying with a disclosure order on the grounds that some or all of the information required to be disclosed may tend to prove that the person: (a) has committed an offence against or arising under an Australian law or a law of a foreign country; or (b) is liable to a civil penalty; the person must: (c) disclose so much of the information required to be disclosed to which no objection is taken; and (d) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken (the privilege affidavit) and deliver it to the court in a sealed envelope; and (e) file and serve on each other party a separate affidavit setting out the basis of the objection. (3) The sealed envelope containing the privilege affidavit must not be opened except as directed by the court. (4) The court must determine whether or not there are reasonable grounds for the objection. (5) Subject to subsection (6), if the court finds that there are reasonable grounds for the objection, the court must not require the information contained in the privilege affidavit to be disclosed and must return it to the relevant person. (6) If the court is satisfied that: (a) any information disclosed in the privilege affidavit may tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law; and (b) the information does not tend to prove that the relevant person has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and (c) the interests of justice require the information to be disclosed; the court may make an order requiring the whole or any part of the privilege affidavit containing information of the kind referred to in paragraph (a) to be filed and served on the parties. (7) If the whole or any part of the privilege affidavit is disclosed (including by order under subsection (6)), the court must cause the relevant person to be given a certificate in respect of the information as referred to in paragraph (6)(a). (8) In any proceeding in an Australian court: (a) evidence of information disclosed by a relevant person in respect of which a certificate has been given under this section; and (b) evidence of any information, document or thing obtained as a direct result or indirect consequence of the relevant person having disclosed that information; cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence concerned. (9) Subsection (8) does not prevent the use against the relevant person of any information disclosed by a document: (a) that is an annexure or exhibit to a privilege affidavit prepared by the person in response to a disclosure order; and (b) that was in existence before the order was made. (10) Subsection (8) has effect despite any challenge, review, quashing or calling into question on any ground of the decision to give, or the validity of, the certificate concerned. (11) If a person has been given a certificate under a prescribed State or Territory provision in respect of information of a kind referred to in paragraph (6)(a), the certificate has the same effect, in a proceeding to which this subsection applies, as if it had been given under this section. (12) For the purposes of subsection (11), a prescribed State or Territory provision is a provision of a law of a State or Territory declared by the regulations to be a prescribed State or Territory provision for the purposes of that subsection. (13) Subsection (11) applies to: (a) a proceeding in relation to which this Act applies because of section 4; and (b) a proceeding for an offence against a law of the Commonwealth or for the recovery of a civil penalty under a law of the Commonwealth, other than a proceeding referred to in paragraph (a) of this subsection.

Onus 7 The parties disputed who bore the onus of proof in relation to s 128A. In general terms, like s 128 of the Evidence Act, that provision creates a mechanism whereby relevant evidence which is subject to a valid claim for the privilege against self-incrimination may be disclosed where the "interests of justice" require this to occur. It contains a number of integers. The relevant integers in this proceeding are: (1) whether reasonable grounds existed for the objection made by Mr Shi against disclosure on the grounds of the privilege against self-incrimination (s 128A(4)). Mr Shi accepted that he bore the onus of demonstrating this integer; and (2) whether the Court should be satisfied that: (a) any information disclosed in the affidavit may tend to prove that Mr Shi has committed an offence against or arising under an Australian law (s 128A(6)(a)); and (b) if so, whether that information does not tend to prove that Mr Shi committed an offence against or arising under a law of a foreign country (s 128A(6)(b)); and (c) the interests of justice require the information to be disclosed (s 128A(6)(c)). Mr Shi submitted that the Commissioner bore the onus of demonstrating these three matters under s 128A(6). The Commissioner disagreed. 8 In my view, asking who bears the onus of proof in this matter may not greatly assist the task which the Court faces. It is the Court which must be "satisfied" about the matters upon which s 128A(6) turns. At least with respect to paras (a) and (b), satisfaction will or will not arise from an examination of the privileged affidavit by the Court. Here, the Commissioner did not have access to that affidavit and could not meaningfully make any submission about it. 9 Mr Shi nonetheless contended that the onus must be on the Commissioner for he was the party seeking access. As the moving party, ordinarily the onus should be on him to make good his application. That submission overlooked the fact that it was Mr Shi who made the interlocutory application described above. 10 The Commissioner submitted that because it was clear that the onus was on Mr Shi in relation to s 128A(4), it should follow as a matter of statutory construction that the same onus applied throughout the provision. 11 In the circumstances here, with great respect, I reject both submissions. Section 128A creates a specific regime for the facilitation of "freezing or search orders". It enables information about the assets of a person to be disclosed notwithstanding the valid making of a claim for the privilege against self-incrimination in relation to that information. Inferentially, the party that obtains the freezing order will usually know little, or at least incomplete, information about the assets frozen. That is why the Court usually orders the filing and service of an affidavit deposing to the worldwide assets of a respondent to a freezing order application. The function of that affidavit is to facilitate the enforcement of the freezing order. It enables a successful applicant to know, with precision, the reach of the order obtained. Where necessary, it may lead to that applicant obtaining further relief, whether against a respondent or against third parties. 12 Section 128A then contemplates that a valid claim for the privilege against self-incrimination may apply to inhibit disclosure. It does two things: (i) it confirms the availability of that ground of objection; and (ii) it facilitates the making of such claims by permitting a claimant to file an affidavit disclosing "so much of the information required to be disclosed to which no objection is taken" (s 128A(2)(c)) and then to file an affidavit "containing so much of the information required to be disclosed to which objection is taken" in a sealed envelope (s 128A(2)(d)). 13 In my view, it is unrealistic to expect an applicant for a freezing order, such as the Commissioner here, to bear the onus of proof in relation to the contents of the privileged affidavit. Unless the Court were to order limited disclosure of its contents to the lawyers for such an applicant (not sought in this proceeding), that applicant is in no position to meaningfully assist the Court as to whether the information tends to prove that a person has committed an offence under an Australian law or whether it does not tend to prove that a person has committed an offence under a law of a foreign country. In my view, it is most unlikely that Parliament intended an applicant to bear the onus of proof about matters it could not possibly prove, without first knowing the contents of the affidavit. As such, the better view is that Parliament did not intend to impose that onus on an applicant for a freezing order. Rather, in my opinion, Parliament intended that the onus under s 128A(6)(a) and (b) be on the party contending that the conditions for disclosure are not met. In other words, it will be for the party claiming the privilege to show that the affidavit contains information that satisfies s 128A(6)(a) and contains information that does not satisfy s 128A(6)(b). Because that party will know what is contained in the privileged affidavit, it will be best placed to discharge that onus. In the usual case, that onus would be discharged, at least in large part, by having the Court read the privileged affidavit. This is what occurred in this proceeding. 14 In relation to the "interests of justice" requirement, I take a different view. I accept that the "moving party" that seeks access has the technical burden of demonstrating why those interests mandate disclosure. Here, that is the Commissioner. This conclusion is consistent with that reached by Bathurst CJ (with whom Beazley P, Hoeben CJ at CL, Blanch and Price JJ agreed) in Gedeon v The Queen [2013] NSWCCA 257; (2013) 280 FLR 275. That case, amongst other things, concerned s 128 of the Evidence Act 1995 (NSW) as it stood at the time which provided as follows: 128 Privilege in respect of self-incrimination in other proceedings (1) This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness: (a) has committed an offence against or arising under an Australian law or a law of a foreign country, or (b) is liable to a civil penalty. (2) The court must determine whether or not there are reasonable grounds for the objection. (3) If the court determines that there are reasonable grounds for the objection, the court is to inform the witness: (a) that the witness need not give the evidence unless required by the court to do so under subsection (4), and (b) that the court will give a certificate under this section if: (i) the witness willingly gives the evidence without being required to do so under subsection (4), or (ii) the witness gives the evidence after being required to do so under subsection (4), and (c) of the effect of such a certificate. (4) The court may require the witness to give the evidence if the court is satisfied that: (a) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and (b) the interests of justice require that the witness give the evidence. (5) If the witness either willingly gives the evidence without being required to do so under subsection (4), or gives it after being required to do so under that subsection, the court must cause the witness to be given a certificate under this section in respect of the evidence. (6) The court is also to cause a witness to be given a certificate under this section if: (a) the objection has been overruled, and (b) after the evidence has been given, the court finds that there were reasonable grounds for the objection. (7) In any proceeding in a NSW court or before any person or body authorised by a law of this State, or by consent of parties, to hear, receive and examine evidence: (a) evidence given by a person in respect of which a certificate under this section has been given, and (b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence, cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence. (8) Subsection (7) has effect despite any challenge, review, quashing or calling into question on any ground of the decision to give, or the validity of, the certificate concerned. (9) If a defendant in a criminal proceeding for an offence is given a certificate under this section, subsection (7) does not apply in a proceeding that is a retrial of the defendant for the same offence or a trial of the defendant for an offence arising out of the same facts that gave rise to that offence. (10) In a criminal proceeding, this section does not apply in relation to the giving of evidence by a defendant, being evidence that the defendant: (a) did an act the doing of which is a fact in issue, or (b) had a state of mind the existence of which is a fact in issue. (11) A reference in this section to doing an act includes a reference to failing to act. 15 There are clear analogies with this provision (and its Commonwealth equivalent in s 128 of the Evidence Act) and s 128A. Both provide a mechanism for the disclosure of evidence that is subject to a valid claim for the privilege against self-incrimination where it is in the "interests of justice" to do so. In that respect, Bathurst CJ said that the onus was on the party seeking the evidence to show disclosure was in the interests of justice. The Chief Justice said at [285]: A number of matters should be noted at the outset. First, the onus was on the appellant to establish that the interests of justice required the evidence to be given. That, in my opinion, is the effect of s 142 of the Evidence Act: see S Odgers, Uniform Evidence Law, 10th ed (2012) at [1.3.13060]. In Odgers, Uniform Evidence Law, 13th ed (2018), a similar conclusion is made in respect of s 128A(6). At [EA.128A.270], the learned author states: Under s 128A(6) the "burden of proof" is on the party or person arguing that "the interests of justice" require the information to be disclosed. 16 To the extent that this is an observation about s 128A(6)(c), I respectfully agree with it. To the extent that it is also an observation about s 128A(6)(a) and (b), I respectfully do not. Those paragraphs concern requirements that are not found in s 128. For the reasons I have given, statutory context supports the conclusion that for the purposes of s 128A(6)(a) and (b), the onus is on the person asserting the privilege against self-incrimination. 17 In any event, as I have already mentioned, the question of who bears the onus of proof may not practically matter very much, at least in relation to an application of s 128A(6)(c). What is in the "interests of justice" is more likely to be a matter for argument. The Court will decide that issue having regard to the submissions received from each party. No doubt an applicant to a freezing order application will contend that justice requires disclosure; the respondent to that application will no doubt contend otherwise. So assisted it will then be a matter for the Court to determine if it is satisfied that disclosure should be made.

Reasonable Grounds for the Objection - s 128A(4) 18 I have read Mr Shi's privileged affidavit. The Commissioner did not object to me doing so. In my view, having regard to the offences alleged in the search warrant, there were reasonable grounds for the making of the claims for the privilege against self-incrimination in relation to its contents. 19 In that respect, I have had regard to the "Confidential Annotation to Privileged Affidavit of [Zu] Neng Shi Affirmed 16 March 2019" and to the other submissions filed by Mr Shi. The Commissioner again did not object to me reading the confidential submission to which he was not given access. 20 I should also note that some sentences in the affidavit would not, if considered on a stand-alone basis, merit a claim for the privilege against self-incrimination. These were mainly introductory or contextual statements of no real probative value. In my view, redacting the affidavit and disclosing to the Commissioner so much of the privileged affidavit that does not tend to incriminate Mr Shi would be pointless. 21 The parties were agreed that, in the event of my satisfaction that there are reasonable grounds for Mr Shi's objection, I should not disclose my reasons in redacted form: cf the leading decision of O'Callaghan J in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285. Rather, the parties agreed that I should just express my conclusion about this matter.

Tendency to Prove an Offence - s 128A(6)(a) 22 I am also satisfied that the information disclosed in the privileged affidavit may tend to prove that Mr Shi committed an offence against or arising under an Australian law. Again, I do not express my reasons for that conclusion.

Information Does Not Tend to Prove Commission of a Foreign Offence - s 128A(6)(b) 23 Mr Shi submitted that the Commissioner had not discharged his onus of proving that s 128A(6)(b) was satisfied. But on the view I have taken of the law, he was under no such obligation. It was for Mr Shi to demonstrate that there was information which tended to prove that he had committed an offence under foreign law. Other than noting that the respondents are Chinese nationals with "strong ties to China" who had bank accounts in China, no material was specifically identified as tending to show the commission of a Chinese criminal offence. No Chinese criminal offences were ever identified. It was not contended that there were current criminal investigations in China. Mr Shi was not under arrest or facing criminal proceedings in China. A person "associated with Mr Shi" has been charged and incarcerated in China. But he is not a "relevant person" for the purposes of s 128A; that "person" is the individual required to make disclosure, which is Mr Shi. 24 It was also submitted that in assessing para (b) I should, absent evidence to the contrary, assume that China has enacted into law the same crimes referred to in the search warrant. Foreign law is presumed, it was said, to be same as the law in this country. Mr Shi relied upon Gedeon at [303] per Bathurst CJ and Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331 at [125] per Gummow and Hayne JJ, [249] per Callinan J and [267] per Heydon J. I do not think that this presumption assists Mr Shi. The information in the privileged affidavit concerned matters which had taken place in Australia which tended to incriminate Mr Shi. There was nothing to indicate that those Australian matters could give rise to any offence in China. It may also, and in any event, be inappropriate to make the usual presumption about the content of foreign law in the statutory context of s 128A. The enquiry mandated by s 128A(6)(b) is whether there is information which tends to prove the commission of a foreign offence. It would be unsatisfactory to test that proposition by making a mere assumption about the content of foreign law which may in fact be entirely wrong, especially where, as here, the issues are complex and there is no evidence before me as to the content of Chinese law: cf Damberg v Damberg (2001) 52 NSWLR 492; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; PCH Offshore Pty Ltd v Dunn (No 2) [2010] FCA 897; (2010) 273 ALR 167. 25 For these reasons, I am satisfied that the information in the privileged affidavit does not tend to prove that Mr Shi has committed an offence in China.

Interests of Justice - s 128A(6)(c) 26 It would appear to be accepted in the context of s 128 that the phrase "interests of justice" should be construed "broadly": Cureton v Blackshaw Services Pty Ltd [2002] NSWCA 187 at [37] per Sheller JA. It would also appear to be accepted that it is not enough that the evidence in question be relevant - a "relatively high standard of satisfaction" is required given that the legislation to a significant extent abrogates a basic common law right: Gedeon at [286]. In my view, these observations apply equally to s 128A(6)(c). 27 In general terms, the Commissioner submitted that it was in the interests of justice that there be disclosure of the privileged affidavit having regard to the findings made by Yates J about the risk of dissipation of assets, the allegations concerning significant historical transfers of funds to China, and the negligible value of the assets disclosed in Mr Shi's non-privileged affidavit. The Commissioner suspects there are more assets over which Mr Shi has effective control. He wants to know about these. As things stand, the assets so far disclosed fall far short of the $42,297,437.65 that Mr Shi owes the Commissioner. The Commissioner, it was said, may wish to issue writs of execution of property, charging orders, a court ordered garnishee and may wish to perform court examinations. These remedies will be facilitated by full disclosure. In that respect, in my view, there is a clear public interest in having Mr Shi's debt to the Commonwealth discharged as fulsomely as is possible. 28 Mr Shi submits that the interests of justice require me to consider the totality of the facts and circumstances, the potential impact on future proceedings and the stage reached in the current proceedings. He points out that s 128A(8) would not prevent the Commissioner from giving the material to prosecutors and that this might lead to a miscarriage of justice. If that were to take place there was also a risk that prosecutors might use the evidence to find or encounter "derivative information" despite the protection afforded by s 128A(8). Whilst Mr Shi has yet to be charged, he notes that the accusatorial process of criminal justice can commence pre-charge: X7 v Australian Crime Commission (2013) 248 CLR 92; Strickland (a pseudonym) v Commonwealth Director of Public Prosecutions [2018] HCA 53; (2018) 93 ALR 1. Mr Shi also points to the fact that disclosure is not needed for the Commissioner to obtain the only remedy he sought in his original applications, namely, judgment debts against each respondent. He now has that. Mr Shi also observes that the issue of any certificate pursuant to s 128A(7) would have no effect in a Chinese court where Mr Shi might face charges. 29 I should point out that the Commissioner submits that he would not be permitted to give the privileged affidavit to the police or other prosecutorial authorities because such disclosure would be in breach of the "Harman" undertaking: Harman v Secretary of State for Home Department [1983] 1 AC 280. I agree with that submission. Unless given leave, the Commissioner would not be at liberty to disclose the privileged affidavit to a third party. No such leave has been sought. Moreover, even if the prosecutorial authorities were to obtain the privileged affidavit, any certificate issued pursuant to s 128A(7) would prevent it being used against Mr Shi in any subsequent criminal proceedings. 30 But for one consideration, I would have been of the clear view that the interests of justice favoured disclosure. The public interest in recovery of the outstanding tax is a compelling consideration. However, in my view, I am also entitled to consider the consequences of the issue of a certificate by the Court pursuant to s 128A(7). In general terms, the consequence of disclosure with the issue of a certificate would be that much of the information contained in the privileged affidavit would not be able to be used against Mr Shi in any Australian Court (s 128A(8)). That would also include evidence of any information, document or thing obtained as a "direct result or indirect consequence" of the disclosure. In my view, that might have consequences in any future criminal proceeding as well as any future tax appeal pursued by Mr Shi pursuant to Part IVC of the TAA. In that respect, there is also a clear public interest that taxpayers pay the correct amount of tax based upon all of the relevant facts. The privileged affidavit contains information that may bear upon that issue. 31 At the hearing I raised with the parties the possible use by the Commissioner of his power to compulsorily obtain information, including the information in the privileged affidavit, pursuant to s 353-10 of Sch 1 of the TAA. That provision is in these terms: 353-10 Commissioner's power (1) The Commissioner may by notice in writing require you to do all or any of the following: (a) to give the Commissioner any information that the Commissioner requires for the purpose of the administration or operation of a *taxation law; (b) to attend and give evidence before the Commissioner, or an individual authorised by the Commissioner, for the purpose of the administration or operation of a taxation law; (c) to produce to the Commissioner any documents in your custody or under your control for the purpose of the administration or operation of a taxation law. Note: Failing to comply with a requirement can be an offence under section 8C or 8D. (2) The Commissioner may require the information or evidence: (a) to be given on oath or affirmation; and (b) to be given orally or in writing. For that purpose, the Commissioner or the officer may administer an oath or affirmation. (3) The regulations may prescribe scales of expenses to be allowed to entities required to attend before the Commissioner or the officer. 32 It is now well-established that the privilege against self-incrimination cannot be invoked as a reason for not complying with a notice issued by the Commissioner pursuant to this provision. In Deputy Commissioner of Taxation v De Vonk (1995) 61 FCR 564, Hill and Lindgren JJ said that the insertion of ss 8C and 8D into the TAA lead to the conclusion that the privilege against self-incrimination had been abrogated in relation to notices issued pursuant to former s 264 of the 1936 Act. Those provisions are in the following terms: 8C Failure to comply with requirements under taxation law (1) A person who refuses or fails, when and as required under or pursuant to a taxation law to do so: (a) to give any information or document to the Commissioner or another person; or (aa) to give information to the Commissioner in the manner in which it is required under a taxation law to be given; or (b) to lodge an instrument with the Commissioner or another person for assessment; or (d) to notify the Commissioner or another person of a matter or thing; or (e) to produce a book, paper, record or other document to the Commissioner or another person; or (f) to attend before the Commissioner or another person; or (fa) to comply with an education direction in accordance with subsection 384-15(3) in Schedule 1; or (g) to apply for registration or cancellation of registration under the A New Tax System (Goods and Services Tax) Act 1999; or (h) to comply with a requirement under subsection 45A(2) of the Product Grants and Benefits Administration Act 2000; or (i) to comply with subsection 82-10F(4) of the Income Tax (Transitional Provisions) Act 1997; commits an offence. (1A) An offence under subsection (1) is an offence of absolute liability. Note: For absolute liability, see section 6.2 of the Criminal Code. (1B) Subsection (1) does not apply to the extent that the person is not capable of complying with the relevant paragraph. Note: A defendant bears an evidential burden in relation to the matters in subsection (1B), see subsection 13.3(3) of the Criminal Code. (2) For the purposes of paragraphs (1)(a) and (d), a person shall not be taken to have refused or failed to furnish information to the Commissioner or another person, or to notify the Commissioner or another person of a matter or thing, merely because the person has refused or failed to quote the person's tax file number to the Commissioner or other person. 8D Failure to answer questions when attending before the Commissioner etc. (1) A person who, when attending before the Commissioner or another person pursuant to a taxation law, refuses or fails, when and as required pursuant to a taxation law to do so: (a) to answer a question asked of the person; or (b) to produce a book, paper, record or other document; commits an offence. (1A) An offence under subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. (1B) Subsection (1) does not apply to the extent that the person is not capable of complying with the relevant paragraph. Note: A defendant bears an evidential burden in relation to the matters in subsection (1B), see subsection 13.3(3) of the Criminal Code. (2) A person who, when attending before the Commissioner or another person pursuant to a taxation law, refuses or fails, when and as required pursuant to a taxation law to do so, either to take an oath or make an affirmation commits an offence. 33 At 583 [31]-[32] in De Vonk, Hill and Lindgren JJ said: As Wilcox J points out in Donovan, ss 8C and 8D were inserted shortly after the judgment of the High Court in Pyneboard. As his Honour suggests, it is quite likely that the drafter of the amendment regarded Pyneboard as authority for the proposition that the words "to the extent that the person is capable of complying with it" evidenced the intention to exclude the privilege against self-incrimination. Certainly the change of formulation from "just cause and excuse" to "capable" would seem to have been deliberate and to reveal an intention on the part of Parliament to exclude as a defence, inter alia, the privilege against self-incrimination In these circumstances we are of the view expressed in Stergis that the context of the legislation combined with the terms of ss 8C and 8D lead to the conclusion that the privilege has been abrogated. Clearly it is of the utmost importance that a taxpayer disclose to the Commissioner all sources of income. Failure so to do would constitute an offence. If the argument were to prevail that the privilege against self-incrimination was intended to be retained in tax matters, it would be impossible for the Commissioner to interrogate a taxpayer about sources of income since any question put on that subject might tend to incriminate the taxpayer by showing that the taxpayer had not complied with the initial obligation to return all sources of income. Such an argument would totally stultify the collection of income tax. 34 In my view the foregoing conclusion reached in relation to former s 264 applies equally to its successor, namely s 353-10, given the similar language in, and purpose of, the two provisions and the fact that ss 8C and 8D remain in the TAA: Federal Commissioner of Taxation v Warner (2015) 244 FCR 479 at [27] per Perry J. 35 It follows that it would, generally speaking, be open for the Commissioner to exercise his powers to obtain the same information disclosed in the affidavit following the finalisation of this proceeding. The Harman undertaking, even if relevant, would be no answer to any such request: Deputy Commissioner of Taxation v Rennie Produce (Aust) Pty Ltd (in liq) (2018) 260 FCR 272. Moreover, the information could be obtained and then, if necessary, "used against" Mr Shi in any future tax appeal. That might assist in ensuring that the correct tax liability of Mr Shi is determined. That outcome is in the public interest. 36 The Commissioner, perhaps understandably, is concerned that he will lose his opportunity to obtain the information in the privileged affidavit if I do not now make orders for its disclosure pursuant to s 128A(6). As he puts it, an exercise of his powers pursuant to s 353-10 of Sch 1 to the TAA might, to use his language, "embroil the Commissioner in an argument about contempt of court" because of the possibility of future criminal proceedings. He cited, for that purpose, the decisions of De Vonk and of Heerey J in Watson v Commissioner of Taxation (1999) 96 FCR 48. 37 In De Vonk, the taxpayer had been issued with a notice pursuant to former s 264 of the 1936 Act to attend and give evidence. The notice had been issued three days after the taxpayer had been indicted with conspiracy to defraud the Commonwealth and two other charges. Criminal proceedings in the District Court of Western Australia were pending. Hill and Lindgren JJ said at 588-589 [58]: … On the whole we think that the legislature should not be taken in s 264 of the Act and ss 8C and 8D of the Taxation Administration Act to have authorised the compulsory interrogation of persons in circumstances where so to do might constitute an interference with the administration of justice, civil or criminal. The decision to refuse to answer a question on the grounds of self-incrimination is a matter for the person to whom the question is put. It remains within the capability of that person to answer. Contempt of court is not a matter for the parties to litigation, or for that matter any person not a party; it is a matter under the sole control of the court itself. If it is a contempt of court to require a person under compulsion to answer a question that person could not excuse the contempt. If Parliament intends to interfere with the administration of justice it should express that intention clearly or unambiguously. 38 On the facts before the Court, Hill and Lindgren JJ were of the view that questions asked pursuant to the s 264 notice concerning the same "factual circumstances as those covered by the criminal charges could constitute a contempt of the court" (at 589). However, much would depend on the nature of the question. The relief granted, amongst other things, was limited to the following order: Liberty to apply on 48 hours' notice to a judge of the Court should interrogation pursuant to the notice dated 1 November 1994 referred to in the first Order and declaration of Carr J be commenced and objection taken to specific questions. 39 In Watson, the Commissioner issued a s 264 notice following the commencement of review proceedings in the Administrative Appeals Tribunal pursuant to s 14ZZ of the TAA. The taxpayer had by then been charged with conspiracy to defraud the Commonwealth. A committal hearing had commenced and had then been adjourned part heard following the issue of the notice. The committal hearing was "non-contested": that is, it was not being held to determine whether the taxpayer had a case to answer but rather to allow the taxpayer to test the evidence. That evidence included a witness statement given by the taxpayer's "co-licensee" (a Mrs Mackey) of a child care centre operated by a company owned by the applicant and her husband. The s 264 notice had been issued to Mrs Mackey. 40 Heerey J ordered an injunction restraining the Commissioner from acting on the s 264 notice until the hearing and determination of the criminal proceeding. His Honour said: 52 An important function of the law of contempt is to ensure that: "... once the dispute has been submitted to a court of law (citizens) should be able to rely upon there being no usurpation by any other person of the function of that court to decide it according to law." 53 This passage from the speech of Lord Diplock in Times Newspaper was cited by Franki J in Brambles at 194; 340 and by Hill and Lindgren JJ in De Vonk at 586. 54 The concept of usurpation is applicable when, as in the present case, there is a parallel inquisitorial inquiry into matters of central importance in the criminal proceeding. In such circumstances, the applicant does not have to go any further in order to satisfy the test of a real risk of interference with the administration of justice in pending proceedings. There is no evidence before me as to what Mrs Mackey said in her statement or at the committal proceedings. I do not need to, and should not, speculate as to what she might be asked at a s 264 examination and whether that might be contradictory or additional to her earlier evidence and what effect her answers might have on the evidence she would give at the trial and whether that effect would help or harm the applicant's case. However, the observation can be made that should the s 264 examination of Mrs Mackey proceed the applicant would be in a worse position than Mr De Vonk. If the examination proceeded (although, as mentioned above, it seems that was not going to happen anyway) at least he could object to particular questions and apply to the Court under the liberty reserved. By contrast, the applicant would not be present at any s 264 examination of Mrs Mackey and would not know what she was being asked. The suggestion, advanced in written submissions on behalf of the Commissioner, that the applicant would be provided with a transcript of Mrs Mackey's examination, is hardly an adequate solution. 41 Critically, the usurpation takes place where there is a criminal proceeding and a "parallel inquisitorial inquiry". Here, of course, there is no criminal proceeding. There is only a criminal investigation. It may, or may not, result in charges being laid. 42 In Nelson v Commissioner of Taxation [2017] FCA 819; (2017) 106 ATR 109, the taxpayer sought suspension of the operation of a notice issued pursuant to s 353-10 of Sch 1 to the TAA. This was refused by Gilmour J. No criminal proceeding had been commenced. His Honour said at [42]: The present case is clearly distinguishable from the threat to the administration of justice outlined in FCT v De Vonk (1995) 61 FCR 564; 31 ATR 481; 85 A Crim R 410; 95 ATC 4820; 133 ALR 303 and Watson v FCT (1999) 96 FCR 48; 43 ATR 549; 99 ATC 5313; 169 ALR 213. First, no criminal proceedings have been instituted against any of the Applicants. Indeed, no civil proceedings have been instituted, nor can it be assumed that they will. The Applicants' assumption that the objection decision will be resolved against them and will lead inevitably to appellate proceedings under Part IVC is an assumption that, at this time, is not open. The objection may be resolved in favour of the Trustee. In refusing relief, Gilmour J emphasised the importance of the Commissioner having the fullest information before him. His Honour said at [48]-[49]: The Commissioner is entitled to seek the fullest information he can. Robertson J in Binetter v DCT (No 3) (2012) 89 ATR 296; 2012 ATC 20-331, which involved a challenge to notices under analogous legislative provisions (s 264 of the ITAA), at [108] stated: In my opinion it is clear that the objection decisions had not been made and indeed there is no evidence that they have yet been made. To contend that the decisions could have been made without the material sought or had been held up to obtain that material is to invert the inquiry... These contentions do not recognise that the better the information before the Commissioner at the objection stage the better the decision on the objection. This passage was referred to with approval by the Full Court on appeal: Binetter v DCT (2012) 206 FCR 37; 90 ATR 327; 2012 ATC 20-345 at [37]. 43 In Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412, Keane CJ, Dowsett and Reeves JJ noted that the Commissioner was under a duty to make assessments based upon the information available to him. Their Honours observed that it was in the interests of the Australian community that assessments are made "based on the most accurate information available" (at [82]). These observations also apply to the enforcement of tax debts. The Commissioner needs the "fullest" information, both for the purposes of assessment and for the purposes of recovery of unpaid tax. 44 In my view, it is in the public interest that the Commissioner have access to the most complete information concerning the worldwide assets of Mr Shi. He should have that access, and be able to use any resulting information for the purposes of a recovery. If necessary, he should be free to use that information "against" Mr Shi in any subsequent proceedings relating to recovery or in any future tax appeal instigated by the respondents. That type of use is in the public interest. 45 In my view, the risk that Mr Shi and the other respondents would be able to frustrate or impede the Commissioner in the exercise by him of his powers under s 353-10 on the grounds of contempt of court is remote. As things presently stand there are no "criminal proceedings" of which to be in contempt. Mr Shi and the other respondents have yet to be charged. There was no evidence before me about the likelihood of that occurring. They are under investigation. They may be charged. But there is only that possibility. The possibility may be realistic, but there was no evidence to suggest it was probable. In those circumstances, I cannot see how the Commissioner could be prevented from exercising his powers to obtain the information contained in the privileged affidavit once this proceeding has been finalised. The 1936 and 1997 Acts contemplate that he should have that information. 46 In reaching this conclusion I have taken into consideration the contention of Mr Shi that the "accusatorial process" of the criminal law may have commenced against him. But the commencement of that process with a period of investigation and no more would not justify, in my view, a refusal by Mr Shi to answer a valid request made of him pursuant to s 353-10. The absence of charges is relevantly decisive: cf R v Independent Broad-Based Anti-Corruption Commissioner (2016) 259 CLR 459 at [48]. Until Mr Shi is charged with an offence the Commissioner should be entitled to the information in the privileged affidavit. 47 For these reasons it is not in the interests of justice that I make orders for disclosure pursuant to s 128A(6) with a certificate pursuant to s 128A(7). I will hear the parties on the form of final relief required to bring this proceeding to an end. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.

(the "1936 Act"), the Income Tax Assessment Act 1997(Cth)

Evidence Act 1995(Cth)ss 128, 128A

Taxation Administration Act 1953(Cth)ss 8C, 8D, 14ZZ, 353-10

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Judgment (15 paragraphs)

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Legislation Cited (7)

Cases Cited (22)

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