Donoghue v Commissioner of Taxation

REASONS FOR JUDGMENT 1 The applicant, Sandra Lynne Donoghue, is the applicant in a tax appeal, listed for hearing on 20 April 2015. By interlocutory application, the applicant seeks adjournment of the trial. In support of her application, the applicant refers to the fact that for some time she has been in ill-health, without legal representation and without the necessary funds. The trial dates were fixed in July last year. 2 The applicant submits that she will, in the future, be in a position to source funds in order to conduct the litigation. However her proposals in this regard are not promising. The matter having been set down for so long, and there being no real justification for an adjournment, it is difficult to see how the discretion could properly be exercised in favour of granting it. 3 The applicant and her husband are estranged, and have been for many years. They have not divorced. Mr Donoghue has been in other relationships and has at least one child as a result of one such relationship. Mr Donoghue came to the attention of the Commissioner of Taxation at some time prior to November 2011. He was subjected to audit, although he was probably not aware of that fact at the time. He had been involved in litigation in the Supreme Court of New South Wales. A judgment was delivered by that Court on 9 May 2012, the matter having been heard between 15 February 2010 and 11 May 2011. In the course of that trial, certain information concerning Mr Donoghue's personal and financial affairs was disclosed. 4 On 1 and 2 November 2011, one Simeon Moore, provided to the Tax Office various documents concerning aspects of Mr Donoghue's financial affairs. The documents were of considerable interest to the Commissioner. As the result of the receipt of such information or of other inquiries, or perhaps both, amended assessments were issued. Mr Moore obtained the relevant documents at a time at which he was arguably performing the duties of a solicitor, pursuant to a retainer which Mr Donoghue had given to Mr Moore's father's firm, Mr Moore senior being a solicitor. I have given only a brief outline of the facts, in view of the nature of the present application. In any event Mr Donoghue commenced proceedings in this Court pursuant to s 39B of the Judiciary Act 1903 (Cth), seeking to quash the amended assessments, relying upon the decision of the High Court in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146. That decision raised the possibility that an assessment might be quashed upon the basis of conscious maladministration, by the Commissioner or his staff, of relevant legislation. 5 Mr Donoghue was successful in those proceedings. Logan J made orders requiring destruction of the material provided by Mr Moore to the Commissioner, and restraining the Commissioner from making any future use of, or taking any future action on the basis of any documents, including copies and electronic versions thereof, relating to Mr Donoghue or any entity in relation to which he is a related entity within the meaning of s 9 of the Corporations Act 2001 (Cth), for the purpose of making, amending, or enforcing the assessment of the taxable income of any taxpayer, or in the exercise of any power under ss 263 or 264 of the Income Tax Assessment Act 1936 (Cth), or s 353-10 of Sch 1 to the Taxation Administration Act 1953 (Cth). See Donoghue v Commissioner of Taxation [2015] FCA 235. That decision is subject to appeal. I understand that the appeal will probably be heard in the August sittings. 6 It seems to be common ground that some of the information relevant to the amended assessments related to the existence in Australia and in New Zealand of two trusts, one being effectively described as the Australian Donoghue Family Trust, and the other as the New Zealand Donoghue Family Trust. It was Mr Donoghue's assertion, and that of the present applicant, that the existence of the Donoghue New Zealand Family Trust came to the Commissioner's knowledge only as a result of the disclosures made to him by Mr Simeon Moore. The applicant says, in her affidavit filed on 8 April 2015, that the Commissioner has used his knowledge of, and access to the New Zealand trust deed to amend her income tax assessment for the 2008 income tax year. 7 At para 38 of that affidavit the applicant says: I have now provided instructions to my new solicitors to immediately bring a 39B application in my own name alleging conscious maladministration in the making of the Amended Assessment. I infer that any such application will assert that the Commissioner has used his knowledge of the trust and his access to the trust deed in order to issue the amended assessment made on 30 October 2012. 8 A draft application is attached to the applicant's affidavit. It indicates that she proposes to seek a declaration that the amended 2008 assessment is invalid, an order quashing it and an order that the Commissioner be restrained from taking any action for the purpose of recovering any debt said to be owing on the basis of the assessment. These proposed proceedings appear to be broadly of the same nature as those which were considered by Logan J. In those proceedings, his Honour had access to a draft document concerning the audit of Mr Donoghue's affairs, performed before the Commissioner derived the information from Mr Moore. His Honour compared that document with subsequent documents generated after the acquisition of such information. He noted various items of information which were included in the latter but not in the former. Arguably, that was a basis for inferring that the Commissioner or his staff had acted on such information. 9 As I understand it, Mr Moore's disclosure was made on 1 and 2 November 2011. Thereafter, on 30 August 2012, an application was made to Reeves J for injunctive relief, restraining the Commissioner from referring to the relevant information, on the basis that it was the subject of legal professional privilege. A restraining order was made. The applicant's amended assessment was made on 30 October 2012, well after that order. 10 In material read today, Mr Hanson, a barrister employed in the Australian Government Solicitor's Office, swears that he has been informed by Ms Sue McPhee, a senior litigator in the Tax Resolution Practice of the Australian Taxation Office, that no document received from Mr Moore was used in the creation of the amended assessment, and that all documents used in that process had their origins in sources other than Mr Moore. The applicant does not accept that assertion at face value but, as I understand it, she has only suspicions as to its veracity. She submits, however, that she should have the opportunity to investigate further by seeking, pursuant to the Freedom of Information Act 1982 (Cth), access to relevant documents. One of her purposes in seeking an adjournment today is so that such a process may be pursued. In the proceedings before Logan J, there was evidence suggesting some use of the documents in respect of Mr Donoghue's affairs. There is no such evidence to suggest that the documents were used for the purpose of amending the applicant's assessment. It must be kept in mind that Mr Donoghue's affairs were under examination prior to the receipt of information from Mr Moore. 11 On 29 July 2014, in the current proceedings, the applicant's then solicitor indicated to Logan J (who was then managing this case), that the present applicant might commence proceedings pursuant to s 39B. At that time no instructions had been given. It seems distinctly odd that the applicant has not yet commenced such proceedings, assuming that she intends to do so. It is difficult to understand why she should have delayed so long and now indicate such intention. It was suggested in argument, and undoubtedly it is the case, that she has been encouraged by the favourable decision in Mr Donoghue's case. That is no excuse for leaving this case on the list for trial for such a lengthy time. 12 The applicant relies upon her lack of funds sufficient to prosecute the action and, in a general way, her ill health. It seems to me that her conduct, in standing by for such a long time, should be seen as disqualifying conduct, using that term in a loose sense, in connection with the present application for an adjournment. 13 It was suggested in argument on behalf of the applicant that the Commissioner ought not now be able to resist her claims of impecuniosity as a reason for failing to prosecute the appeal. Her only asset, her home, has been subject to a restraining order obtained at the suit of the Commissioner, presumably against the possibility that it will be needed in order to meet her liability under the amended assessment. However, until today, no approach has been made to the Commissioner with a view to securing the release of funds for that purpose. In those circumstances, the Commissioner cannot be held responsible for any failure by the applicant's solicitors to draw her attention to this possibility. 14 I am told that in an affidavit by the applicant filed in these proceedings on 15 September 2014, copies of both the Australian and New Zealand trust deeds were exhibited. The applicant's previous solicitors had ceased to act for her on the preceding day. The affidavit appears to have been professionally prepared, but I draw no inference one way or the other in that regard. Her reason for so disclosing these documents, which are now said to have been subject to legal professional privilege, is difficult to identify. Counsel for the applicant said that it was filed by her personally, and that such filing may have been ill-advised. Nonetheless, it is difficult to see why, if she were, at that time, insisting upon her entitlement to legal professional privilege, she disclosed the document. Counsel points out that Logan J discounted such an argument in the context of the proceedings which were before him. However his Honour's reasons seem to have been based upon the fact that it was necessary for Mr Donoghue to disclose the documents in order to obtain appropriate interlocutory relief. The material does not suggest that reason for the applicant's filing of the affidavit on 15 September 2014. In any event, the fact that the trust deeds were disclosed in that way seriously reduces the applicant's prospects of success in any proceedings pursuant to s 39B. 15 I do not mean to understate the difficulties undoubtedly faced by the applicant in the prosecution of these proceedings. I have no medical evidence concerning her medical condition. I am willing to accept that she may have been having difficulties. However, the extent of it and its effects are unclear. As to impecuniosity, many would-be litigants and litigants find themselves in that position. The Court is, on occasion, able to accommodate them, but that is not the general rule. Once litigation has been commenced, it must be prosecuted to the end. The parties are obliged to do what they can with the resources available to them. 16 I accept that the applicant has sought to make appropriate arrangements, but that effort comes very late. I am not entirely convinced that it is likely to solve her problems in the longer term. In the circumstances, it would not be appropriate to adjourn the trial. I understand the arguments about justice, but the courts are simply unable to dispense what might be called justice in its purest form. We have to take into account the interests of the parties and the expectations of the public that the courts will dispose of their business in an expeditious way. 17 In this case the delay is of a quite serious kind and is, in effect, largely unexplained, other than on the limited grounds to which I have referred - impecuniosity and some degree of ill-health. One might well have expected an application for adjournment at a much earlier stage than this. In those circumstances, I refuse the application. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.