Donoghue v Commissioner of Taxation [2015] FCA 301 | Case summary

REASONS FOR JUDGMENT (REVISED FROM TRANSCRIPT) 1 Reasons for judgment in respect of the judicial review proceedings (QUD 353 of 2012 and QUD 360 of 2013) were published on 17 March 2015: see Donoghue v Commissioner of Taxation [2015] FCA 291 (principal judgment). At that time I reserved for further consideration the making of consequential orders, consequential in the sense that they were orders which flowed from the quashing of the purported assessments and also of the departure prohibition order. These reasons for judgment must be read in conjunction with the principal judgment delivered on 17 March 2015. 2 First, a slip in respect of the pronouncement of orders on 17 March 2015 should be corrected. I have had the benefit in the course of submissions this afternoon of having my attention drawn to a mismatch which has inadvertently occurred in the orders made in proceedings QUD 353 of 2012 and 360 of 2013. The declaratory orders and also the quashing orders, which are presently to be found in the orders made in QUD 353 of 2012, should more properly have been made in QUD 360 of 2013. By the same token, the injunction found in QUD 360 of 2013, paragraph 1, should instead be an order made in QUD 353 of 2012. The orders concerned have not yet been entered. I shall, therefore, cause those orders to be revised and corrected accordingly. 3 Now, to consequential issues. It is accepted by the Commissioner of Taxation (Commissioner) that a necessary corollary of the principal judgment, which also reflects the kind of order which was sought in QUD 353 of 2012, is that there ought to be what one might compendiously term a delivery up or destruction of materials or documents which record or evidence consideration of materials which came to the Commissioner from Mr Simeon Moore. 4 The Commissioner has sought that the delivery up or destruction not be required to occur until 4.00 pm on 7 April 2015. There are practical reasons for this associated with the identification of material covered by the orders which dictate that, if those orders are to operate reasonably, the Commissioner does need some time, albeit a limited time, to identify and then deliver up or, as the case may be, destroy materials covered by those orders. 5 It may well be, also, that in allowing, as I do, until 4.00 pm on 7 April 2015, there is an element in the allowance of that length of time of, at least in practice, providing the Commissioner with some limited opportunity within which to approach the Court to seek a stay of those particular orders pending the hearing and determination of an appeal. I was informed this afternoon that the Commissioner is disposed to institute appeal proceedings. That, of course, is his perfect entitlement and a necessary check on arbitrary power it is. Had I been approached for a short-term stay, I would have been disposed to allow a short term stay so as to permit the seeking before another judicial officer of a longer term stay after an appeal had been filed. Mr Peden, for Mr Donoghue quite fairly acknowledged that there was a reason which might motivate the Court to grant just that sort of short-term stay. 6 The Commissioner has also sought further time in which to file an affidavit verifying the handing over or, as the case may be, destruction. Until 14 April 2015 is sought. That seems to me to be a reasonable time to allow the Commissioner himself or a delegate (in other words, a senior officer within the Australian Taxation Office), to satisfy him or herself that there has been faithful compliance with the terms of the court order. In QUD 353 of 2012, nothing more then needs to be said in relation to consequential orders, save in respect of costs. 7 As to QUD 360 of 2013, and aside from the correction of the irregularity that I have mentioned, it is conceded on the part of the Commissioner that consequential administrative action, taken on the strength of the deportation order, namely the obtaining of security from, it seems, Mrs Donoghue in support of departure authorisation, and also consequential administrative action taken on the strength of the assessment now quashed, namely the issuing of statutory garnishee notices, should be rectified by orders which would require the delivery up of an executed form for the removal of the caveat, and also the withdrawal of the garnishee notices. 8 Once again, 7 April 2015 is a date which is promoted by the Commissioner for this, and for reasons to which I have already adverted, it seems to me reasonable to allow that particular time. 9 That then leaves a question as to costs in respect of each of QUD 353 of 2012 and QUD 360 of 2013, and proceedings originally instituted in the Supreme Court of Queensland by the Deputy Commissioner of Taxation (Deputy Commissioner) and cross-vested to this Court which have become QUD 727 of 2013. 10 As to the cross-vested proceedings, an order for indemnity costs was sought, at least in respect of costs of and incidental to an application for summary judgment which the Deputy Commissioner caused to be filed in the Queensland Supreme Court on 26 April 2013. 11 The categories in which indemnity costs may be sought are not closed. The Court has an unfettered discretion in respect of the power to award costs in these proceedings. That power is to be found in s 43 of the Federal Court of Australia Act 1976 (Cth). Even though the discretion is unfettered and the categories not closed, there are certain recognised categories of case in which in the past indemnity costs have been ordered. These, and the rationale for the awarding of indemnity costs, are discussed in the most helpful of ways by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. 12 One of the past categories, (see p 233, item 5) in which indemnity costs have been ordered is where proceedings were commenced or continued in wilful disregard of known facts. A known fact pointed to by Mr Donoghue is the interlocutory order made by Reeves J on 14 February 2013. Accepting, as I do, that it is permissible to read reasons for judgment in conjunction with orders pronounced, particularly so as to resolve any ambiguity, there is a question which emerges as a result of the submissions between the parties as to whether the summary judgment proceeding was commenced or continued contrary to a known fact, namely the terms of the interlocutory injunction, which materially restrained any enforcement. One might have thought that a summary judgment application was a paradigm example of the enforcement of an assessment. 13 Even so, the point was made on behalf of the Deputy Commissioner that, in the course of proceedings before Reeves J and reflected in his Honour's reasons for judgment, was a concession on Mr Donoghue's part such that the restraint, read in light of the reasons for judgment, would only operate in respect of any assessment in the future and thus any enforcement of any future assessment. There is reference in the reasons for judgment to concessions, but as I read those reasons for judgment the concessions go to the use of information for the making of future assessments rather than to a concession that existing assessments ought not to be the subject of interlocutory restraint. That is not, though, the way in which the Deputy Commissioner read the reasons for judgment in conjunction with the interlocutory orders. 14 It became apparent to the Deputy Commissioner, immediately after the filing and service of the summary judgment application, that there was an emphatic difference of view as between him and Mr Donoghue and their respective legal advisers as to the effect of the interlocutory orders. 15 It is a fact to be noted that the Deputy Commissioner chose, for reasons which doubtless seemed good to him at the time, to utilise an in-house solicitor in the conduct initially of the proceedings for recovery in the Supreme Court of Queensland. The Australian Government Solicitor was at that stage acting for the Deputy Commissioner in the judicial proceedings which had by then been instituted in this Court and which had resulted in the interlocutory orders. It may very well be that, had the Deputy Commissioner had the same external legal advisers in respect of both the Federal Court and Supreme Court proceedings, the particular view of how the orders operated would not have been reached in relation to the Supreme Court proceedings. Even so, the Deputy Commissioner acted very promptly indeed after the difference of views was highlighted, not to prosecute further the summary judgment proceeding. I can see, albeit with some difficulty, how another view might be taken of the nature of the concessions, at least as they are recorded in the reasons for judgment. 16 It is also a fact that the Deputy Commissioner co-operated fully with Mr Donoghue in response to an intimation I made at an interlocutory stage that the recovery proceedings were apt for cross-vesting to this Court. 17 When I look at the conduct of the Deputy Commissioner and the explanation proffered without objection this afternoon through the Deputy Commissioner's counsel, I do not regard this as a case where there has been a deliberate disregard of a known fact. I am particularly cautious in reaching any view other than that because this is not a contempt proceeding. Indeed, I was informed that there had been endeavours made to seek from this Court clarification, but that that in the end had not come to anything. Thus, what remains is a recovery proceeding where, as a result of the quashing of assessment, there is no tax to recover. Costs in those proceedings should just follow the event. 18 As to the judicial review proceedings in this court, QUD 353 of 2012 and QUD 360 of 2013, it was not put that indemnity costs should be ordered on the basis of some anterior offer of compromise. Rather, what was put was that there was particular conduct on the part of the Commissioner, which had the effect of the proceedings falling within the class of case where there were allegations which had been made or submissions which had been made which were groundless and that there was in the evidentiary content of the Commissioner's case a feature which warranted an award of indemnity costs. That feature was said to be found in Mr Main's statement that the material provided by Simeon Moore was of "limited use". 19 It is to be remembered that the awarding of costs on an indemnity basis has no punitive element to it. If awarded at all, the purpose of the award is wholly compensatory. As to the conduct in the case, it was put that the Commissioner had been reticent in the provision of discovery. That would not, in my view, sound in an award of costs in respect of the whole of the case. So much in the end, I rather thought, was conceded on behalf of Mr Donoghue. It would though, sound in relation to the making of a particular order in respect of the discovery application. 20 Drawing upon my very particular knowledge of this case, as a result of having been the docket judge, it seems to me that what occurred in relation to discovery was initially a disposition on the part of the Commissioner, reflected in the masking-out of materials, to be cautious on public interest immunity grounds in relation to the disclosure of sources. In the end, that view changed, and changed on the basis that it was accepted that the very essence of the proceedings was that the conduct of a particular source, namely Simeon Moore, was at issue. Thereafter, there was no particular difficulty in the provision of unmasked material which was the subject of the legal professional privilege claim. 21 There was some difficulty at an interlocutory stage in relation to electronic versions of the material, but this stemmed not so much from obfuscation of the kind that I described in the principal reasons for judgment, but rather, so I thought, from the very particular difficulties of locating within a large office of the public service all of the materials which would be directly relevant in terms of a discovery order including electronic materials. I do not see in the discovery aspect of the case occasion for the awarding of indemnity costs. Mr Donoghue is, though, entitled to costs in respect of the interlocutory stages of the case. It was not submitted otherwise. 22 A basis for the awarding of indemnity costs with respect to the trial was said to be found in the pressing by the Commissioner of unmeritorious submissions. These were said to lie in a number of ways. 23 First, it was submitted that the Commissioner's submissions with respect to the process of assessment point were unmeritorious. It is to be remembered, though, that, while prior authority gave guidance, there was no particular case directly on point as to whether the very officer who made, as an authorised officer on behalf of the delegate, the assessing decision, was the only person engaged in the process of assessment or whether the process of assessment included, materially, the officer who provided the relevant submission. There were certainly indications in earlier cases that the Commissioner's view was overly narrow. That is a quite different thing from classifying the submission as completely without merit. 24 It was then put that the Commissioner's submissions with respect to waiver were unmeritorious. Whilst they may not, with all due respect, have been worthy submissions for a model litigant, there were some aspects of the exposure of the material which I can see might have inspired thinking that there had been a waiver. Even if I were to regard that particular submission as unmeritorious to the point of being not arguable, that would hardly provide a basis for the awarding of indemnity costs for the whole of the proceeding. That particular point did not, even in submissions, overly prolong the case. 25 There is then a question about whether, in the submissions in relation to s 166 and s 263 of the Income Tax Assessment Act 1936 (Cth), there was to be found an over-prolonging. There are passages in the Full Court's judgment in Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412 which, if read in an uncritical way, might be thought to have grounded adequately a submission in relation to the use of material in this case. The Commissioner's submissions certainly put that forward at one stage. In the end, I was not persuaded that, even if the Commissioner were to be regarded as pressing a submission as to an ability to use the material even if it were privileged, that the submission should be upheld. 26 This is a developing area of the law. It is only after the High Court's judgment in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 that the precise meets and bounds of what constitutes conscious maladministration in the assessing duty consigned to the Commissioner have come to be explored, case by case. I do not see this as a case where the Commissioner was in his conduct or by submissions, acting in a way that promoted points that were completely unarguable. Whether viewing these particular propositions in isolation or, as I consider I should, in conjunction, I do not see these as warranting in any way the awarding of costs other than in the usual way. 27 The orders then as to costs in respect of QUD 353 of 2012 and QUD 360 of 2013 are that the respondent pay the applicant's costs of and incidental to the proceedings, to be taxed if not agreed. For the avoidance of doubt I should record that those costs include the costs of today and reserved costs. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Donoghue v Commissioner of Taxation

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