R v Gould

Basis of Objection

1. It was submitted on behalf of the Accused that the Disputed Documents were obtained improperly or in consequence of an impropriety within the meaning of s138(1)(a) and/or (1)(b) of the Evidence Act ("EA").
2. The Accused bears the onus of establishing that threshold matter.
3. The onus then shifts to the Crown to establish that on balance, notwithstanding any impropriety, the documents ought to be admitted as the desirability of admitting the evidence outweighs the undesirability of admitting the evidence, having regard to the circumstances, including the factors and matters set out in s138(3).
4. Section 138 EA relevantly provides as follows: 138 EXCLUSION OF IMPROPERLY OR ILLEGALLY OBTAINED EVIDENCE (1) Evidence that was obtained: (a) improperly or in contravention of an Australian law, or (b) in consequence of an impropriety or of a contravention of an Australian law, is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained. … (3) Without limiting the matters that the court may take into account under subsection (1), it is to take into account: (a) the probative value of the evidence, and (b) the importance of the evidence in the proceeding, and (c) the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding, and (d) the gravity of the impropriety or contravention, and (e) whether the impropriety or contravention was deliberate or reckless, and (f) whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights , and (g) whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention, and (h) the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law. (Emphasis by italics added.)
5. The Accused did not submit that the Disputed Documents were illegally obtained.

The Evidence

1. Any comments made on the evidence as it is referred to forms part of the reasons for the ruling.

Oral Evidence

1. In providing these reasons I am assisted by MFI 11, a document prepared on behalf of the Accused which identifies the specific portions of the oral evidence relied upon in support of the objection.
2. The following is a replication of MFI 11, with emphasis by underlining added: (a) Evidence of Matthew Robert Evans T45.35 - Evans initial evidence Q. What did you discuss? A. I discussed the need - that we needed to obtain some information from the Cayman Islands around the ownership of JA and MH for tax periods commencing after 1 July 2010 in relation to the ongoing audits of Mr Gould, his associated entities. Q. Did she give you any advice in respect of that request? A. I believe that she said that it was lawful to do so. Q. You've touched on this briefly but what information were you seeking in your request? A. To understand the ownership of JA Investments and MH Investments, so any - potentially non-entity deeds, who the directors were, who the shareholders were, ultimate beneficial owner, those sorts of details. T46.10 Q. The request was formulated in February 2011, why was it done before the end of the 2011 financial year if it was to be used in respect of documents from that year onwards? A. Because we had already identified transactions that occurred after 1 July 2010 and had already started making inquiries in relation to some of - at least some of those transactions and potentially, potentially we could have raised assessments to those entities under section 16A of the Income Tax Assessment Act 1936 for a part - for a part year assessment. T46.34 A. Yeah. So my, my understanding was that documents could only be obtained for periods after 1 July 2010 and my, my solid and strong belief was that they could only ever be used for periods after 1 July 2010. They could not be used in relation to raising assessments or defending assessments for periods prior to 1 July 2010. T49.47 - Regarding request to CITIA 13 Feb 2012 A. So this was a request to seek the Cayman Islands permission to disclose and use the documents obtained under the, the tax information exchange agreement for periods prior to 1 July 2010, specifically in relation to the..(not transcribable)..proceedings of the - the five taxpayers. So this request - so what follows are discussion - workshop in Brisbane that occurred around early February 2012 with the, with the litigation team. And although, although we - the belief was that the documents couldn't have been used for a period prior to 1 July 2010, we sought the Cayman Islands permission to still - to use those documents. Q. Prior to that meeting that you've just discussed, had you considered using the documents in the Federal Court proceedings? A. No. Absolutely not. Because my belief was that it couldn't have been used for periods prior to 1 July 2010. T71.5-12 (As to February 2011 request) Q. You understand that I'm asking you the question about saying to the addressee in this document about the investigation of the income tax returns concerning Mr Gould before 1 July 2010, you understand that, don't you? A. Correct, so. Q. The only reference to that investigation is you would say in that paragraph commencing the active investigation on page 6, is that correct? A. Correct. T73.10 - role in earlier tax assessments Q. Yes. Were you involved in the process, in any way, of issuing the notices of assessment to the taxpayers for the years of income from 30 June 2000 to 30 June 2007? A. Yes, I was. Q. What was that role? A. I was one of the auditors involved in raising assessment, doing calculations and preparing position papers for at least some of those taxpayers. T78.23 - role change February 2011 A. In 2010 I was one of the auditors working on the five taxpayer matter and then in 2011 my role slightly changed to be more of a project leader for Operation Rubix in around February of 2011. T81.23 - interaction with debt team Q. From your experience of the practice, would the debt team make inquiries from time to time with other sections of the ATO about proceedings on foot? A. They may ask for documents, request documents, and they may also ask us to check documents to make sure they're factually correct. Q. It kind of makes sense, doesn't it, that different parts of the ATO would communicate with each other to make sure that globally things are correct, yes? A. Correct. Correct, yes. T82.42 - 83.8 - Role August to Dec 2010 Q. Now just again concentrating on the period August 2010 to about February 2011, yes? So this set of questions is just about that, Mr Evans. Do you understand? A. Yes. Yes. Q. During that time you were intimately involved in the preparation and issuing of notices of assessment to the taxpayers? Correct? A. Correct. Q. And during that time you were intimately involved in the recovery proceedings against the taxpayers? Correct? A. I was, had some involvement in that, yes. Q. When you say you had some involvement, people from that team, that is the recovery proceedings team, were coming and asking you questions, as you understood it, relevant to those very proceedings. Correct? A. Correct. T84.24 - 84.50- Evans slight Role change Feb 2011 Q. Could I then just ask you, from about February 2011, your role changed? Is that correct? A. Correct. Q. And were you the primary auditor within the SNC line? A. I was more - as I said previously, I was more of a project manager role, overseeing Operation Rubix. Q. So you just describe it for us. So when you went into the new role in February 2011, what was the new role? A. So it was, it was overseeing reviews that were happening and some audits in relation to Operation Rubix matters, and coordinating that that those were at work. …. Q. So just in simple terms, if you can, just tell us what was your main job from February 2011? What were you actually doing? A. So reviewing casework, reviewing cases, casework, helping with preparing correspondence et cetera to taxpayers, assisting with gathering, gathering information for the audits and reviews. T84-85 - Evans providing information to other sections of ATO from February 2011 onwards Q. In February 2011, so from onwards from February 2011, did you still have a role in relation to the taxpayer case? A. In relation to if someone asks, if someone requested documents for that case within the ATO, yes, but wasn't directly involved. I don't believe I was directly involved in those cases and more, more in provision of information if required to the relevant areas in the ATO. Q. And that was occurring from early February 2011? Correct? A. Correct. Q. So in at least early February 2011 there continued to be, in essence, a flow of information between your section and the section tasked with the taxpayers' case. Correct? A. By that stage there would have been objections on foot, so if the objections team had asked for information that information would have been provided to them. I, I can't recall whether any specific information was provided to the recovery team at that point in time. T86.1 - information exchange within ATO Q. Is it fair to say that what you were saying was if someone outside the SNC business line that you were working in asked questions, then part of your role was to assist in answering those questions? Correct? A. Correct. Q. That would include the provision of documents, correct? A. Correct. Q. That, if I can call it intergroup passing of information, was something that was occurring continuously in 2010 and 2011, correct? A. Correct. Q. If you had a document but didn't intend to use it, it wouldn't prevent you giving that document to some other section in the ATO for them to look at it, correct? A. Correct. T89.20 - 89.30 - more regarding Evans role change Feb 2011 Q. Just physically speaking, from August 2010 to February 2011 - excuse me for putting it this way, but you're still sitting in the same chair? A. Same desk, yes. Q. Still during that period, August 2010 to February 2011, still speaking with all of the same people within the ATO, correct? A. Correct. Q. Still exchanging information during that period with all of the same people, correct? A. Correct. T90.21 - majority of work from Feb 2011 still regarding pre July 2010 Q. Is it wrong to describe it in this way, that the overwhelming majority of your work from early February 2011 related to investigations of tax periods before 30 June 2010? A. The - I guess the majority of years involved were prior to that 1 July 2010, yes. Q. So the overwhelming majority of your work was concerned with investigating the tax periods before 30 June 2010, correct? A. Correct. T90.45 - Evans had not previously been involved in real time review of tax Q. From February 2007 until December 2010 had you ever involved yourself in an individual real time assessment of tax? A. Not from memory. T94.49 - Knowledge at time of first conversation with Ms Richards about making request Q. But you also knew that if any documents were obtained they could be used for a purpose other than for proceedings. Correct? A. Correct. Q. You also knew at the time of this first conversation with Ms Richards that if any documents were obtained, they could be accessed by any of the business lines broadly interested in the affairs of Mr Gould. Correct? A. Correct. October 2011 request re provision of info to UK T170.25- 170.28 Q. As at the date of this letter, that is 19 October 2011, a purpose of it was to investigate tax periods in relation to individuals or companies for tax periods before 30 June 2010, correct? A. It included that, yes. T179.1 - T179.24 Q. Well Mr Evans isn't it as clear as day that when you're asking the UK for documents you'll want them for assessments for tax for financial years both before 30 June 2010 and after, correct? A. Correct. Q. And that was in your head? That's what you wanted before you sent off or had a part in the letter dated 19 October 2011, correct? A. Correct. Q. When you wanted documents from the UK and directing your mind specifically to the period before 30 June 2010 you were interested in a number of financial years before that period, correct? A. Correct. Q. As to whether these documents from the UK could assist the ATO in assessment or other proceedings relating to financial years before 30 June 2010? A. Correct. Q. In the letter of 19 October 2011 anywhere in that document do you tell the addressee that you want to use the Caymans material to obtain documents from the UK in the way I've just discussed with you concerning tax periods before 30 June 2010? A. No. T180.40 Evans belief that info couldn't be used for past 1 July 2010 Q. Yes, you're quite right. So as at the date of 27 May 2011 the second request, you held the belief that you couldn't use any documents for periods before 30 June 2010, correct? A. Correct. Q. After 27 May 2011 did you change that view? A. I still believe they could only be used to obtain information, to be used for matters after 1 July 2010. Q. Was that still your view as at 19 October 2011? A. Yes. T184.41 Evans as to whether real time review was occurring at time of first request Q. This idea that and I'm directing you specifically to that paragraph, this idea of the real time review was what was occurring you say involving you and your team, correct? A. Correct. Q. It wasn't just a possible thing that might happen. It was actually occurring correct? A. Real time review? Q. Yes? A. Review. Yes, yes, correct. Q. It was something that you were individually actively contemplating, correct? A. I don't quite understand that question. The review was happening at that point in time. At the - at the day the drafting was - at the date of this letter is 23 February 2011, the real time review was occurring. Q. As a matter of fact, was occurring, correct? A. Correct. Q. Clearly, it wasn't in your mind a possibility, correct? A. Correct. Correct. Q. Clearly in your mind it's something more than just contemplating doing it, correct? A. Correct. Active inquiries were being made. Q. And because this was actually occurring, at the time of this letter, it's something that you would have specifically discussed with Ms Richards, correct? A. I believe so, yes. It's been - it's been a long time ago but I believe I would have discussed it with her. December 2010 and January 2011 letters to Gould entities T197.18: (as to the 10 "category 2" letters) Q. And so the only purpose of this category of letters could be to indicate that we're reviewing your income tax affairs for the purpose of potential assessments during taxation periods before 30 June 2010, correct? A. For these specific tax payers, yes. T198.15-19 - Mr Evans accepts he would have seen the category 2 letters at the time. Q. I'll just finish it, sorry. Just let me finish it. You can accept it or reject it. At least insofar as the category 2 letters, so the ones relating to the periods before 30 June 2010 you either drafted them, saw them or were aware generally of their contents, correct? A. Yeah correct, I would have seen them, yep. Evans in contrast to Richards evidence in Federal Court T201.14- T201.39 Q. She was the one that said to you what the date was when it came into force, correct? A. No I believe that when I went and spoke to her the date that it came in - sorry, can you clarify the date it came into force, what you mean by that? Q. She said to you that the agreement doesn't come into force until 14 February 2011, correct? A. I believe that it was, it actually came into effect on 14 February 2011. I don't, that's when it actually did come into force. That's, after that's when I had a conversation with her. Q. So on your evidence, on the assumption that 14 February 2011 is the date that the agreement entered into force the first conversation that you had with Ms Richards was after that date, correct? A. Correct. Q. Could you just be completely mistaken about that? A. No I don't believe so. 'Cause I wouldn't have, wouldn't have taken action until that came into effect. Q. Well that's your evidence isn't it? You wouldn't have taken action? A. Yes. Yes. (b) Evidence of Lenore Richards T244.44- 245.16 - Evans first approached Richards before Christmas 2010 Q. The first time that you spoke to Mr Evans about when it had, that is the TIEA had entered into force, was after 14 February 2011, correct? A. That's incorrect. As I said to you earlier, it was earlier than that. I spoke to Mr Dolby(?) earlier than that. The assumption that the TIEA came into effect in February is an assumption that we're working on for your line of questioning. But notwithstanding that, if Mr Dolby says yes, it's come into effect and he's working on in time, and I relay that to Mr Evans, then that is possible that it occurred prior to February 2011. As I said, my recollection is I spoke to Mr Evans prior to that in December 2010 or thereabouts. In fact, just before the Christmas shutdown. Q. Just before the Christmas shutdown when you had a conversation with Mr Evans, you were the tax technical specialist, correct? A. Correct. Q. Was it you who raised with Mr Evans the existence of the TIEA? A. It was not. Q. Did Mr Evans raise that with you? A. I believe Mr Evans did, yes. Q. Did you tell him, do you say that before Christmas 2010 that you told him, "I'll have to check to see whether it's in force"? A. That is my evidence, yes. Richards as to her initial understanding at time of first request T230.26-32 Q. Why did you have that understanding? A. Well, to my mind I think Mr Evans was working on those financial years and since assessments for the previous years had already been raised, he had nothing to do with them anymore. He had moved forward into the financial year in which he was currently looking. He considered the others concluded and otherwise being examined in objections. He had nothing to do with the earlier years. He was working his current year. T247.15-47 Q. The affairs currently under examination as told to you by Mr Evans, were those only for periods after 1 July 2010? A. That was my understanding. Q. You had that understanding because that's what Mr Evans had told you, correct? A. Incorrect. Q. How did you have the - just pause for a moment - how did you have the understanding outside of any conversation you had with Mr Evans? A. Well, I had the understanding because I knew that matters prior to 30 June 2011, assessments had been raised and therefore were in my mind, concluded. Q. I just want to ask you - I'm going to come back to the UK documents. I just want to clarify something. When you say that something like affairs - did you say something like affairs before the end of the period 30 June 2011 were concluded? A. Well, to my mind what Mr - Q. I'm just asking is that what you said? Just remind me what you are saying. A. What I'm saying is that the entities, the five entities that have been previously defined on that when we were making enquiries around those entities, there was no need to make enquiries around those entities for periods prior to 30 June 2010 because they'd already been concluded. So, assessments had been raised and as we both are well aware, I knew that objections were on foot. So, to my mind the, the requests were in matters you know relating to affairs that became effective 1 July 2010. That's what he's asking for. Q. Do you mean by that, relevant to any assessments that might be raised only for taxation periods from 1 July 2010 forward? A. That, that was my understanding. He was gathering-- T248.46 - 249.17 Richards when further pressed as to her understanding of outstanding assessments Q. Were you aware of reviews specifically related to financial years concluding before 1 July 2010? A. Yes I was. Q. How many such reviews were you aware of before 1 July 2010, just forgetting for the moment the taxpayer's case 2001 to 2007. A. I can't quantify that. I don't recall the exact number. Q. Are we talking one or two or ten or 20? A. There was quite possibly up to 40, bearing in mind that Operation Rubix revolved around not just Mr Leaver and Mr Gould and certain numbers of other entities, the clients thereof Ms Gould. So there were several and I was aware of those in some small way. Q. When you were aware of those in some small way, how were you aware of it? A. Well, as I've said already, I was the tax technical specialist and I worked with auditors, not just Mr Evans, in respect of their audits that were ongoing. Q. So does that mean you were aware of it either through Mr Evans or other auditors? A. Quite correct.

The Disputed Documents (Exhibit A)

1. It is not necessary, for the purposes of these reasons, to set out in detail the information contained in the Disputed Documents. It is sufficient to observe that there is no dispute by the Accused that the documents are relevant, in that it is evidence, which if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the trial. That is, amongst other issues, the identity of the beneficial owner of a number of companies and whether the Accused encouraged a witness, Mr Borgas, to give false evidence in the FCP.
2. The documents relate specifically to JA Investments Ltd ("JAI") and MH Investments Ltd ("MHI"), being two companies incorporated in the Cayman Islands, through which the taxpayer companies Chemical Trustee Limited, Derrin Brothers Properties Limited and Bywater Investments ("the TPC") were owned and controlled. Pursuant to Nominee Agreements attaching to both companies, the Accused was the Appointor, which gave him the power to appoint any members or directors of the TPC. This establishes the Accused's control of those entities and any other entities held by them.
3. The documents will be relied upon by the Crown to establish that, contrary to the evidence given by Mr Borgas in the FCP, the Accused was the ultimate beneficial owner of those two companies. The result would be that the management and control of the TPC was in Australia and tax would, therefore, be payable in this country.

Statement of Celestine Wang dated 8 September 2015 (Exhibit B)

1. Ms Wang is a lawyer employed by the Australian Government Solicitor ("AGS"). In her statement of 8 September 2015, she referred to the FCP and attached to her statement sixteen folders containing copies of documents which were admitted as part of the evidence for the Respondent in the FCP, the ATO. Ms Wang also attached to her statement the folders containing the Appeal Books in respect of the appeal to the Full Federal Court.
2. The statement attaching the documents was provided to the AFP, presumably in order to investigate the matter currently before the Court.
3. Ms Wang's statement did not shed any light upon the Disputed Documents were obtained by the AGS, AFP or CDPP.

Agreement between Australia and Cayman Islands on the Exchange of Information with respect to Taxes ("the TIEA") (Exhibit C)

1. This is the agreement between Australia and the Cayman Islands by which the ATO obtained the Disputed Documents in question. The TIEA was dated 30 March 2010 and came into effect on 9 February 2011.
2. Article 1 of the TIEA sets its object and scope in very broad terms, as follows: The competent authorities of the Contracting Parties shall provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of those Parties concerning taxes covered by this Agreement. Such information shall include information that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters. Information shall be provided in accordance with the provisions of this Agreement and shall be treated as confidential in the manner provided in Article 8. The rights and safeguards secured to persons by the laws or administrative practice of the Requested Party remain applicable. The Requested Party shall use its best endeavours to ensure that any such rights and safeguards are not applied in a manner that unduly prevents or delays effective exchange of information. (emphasis by underlining added).
3. By operation of Article 3, the Agreement applied to taxes "of every kind".
4. Article 5 provided the mechanism by which information may be exchanged between the countries. Clause 5 of Article 5 sets out the information to be provided by the applicant party (the ATO) to the requested party (the Cayman Islands) when making a request for information under the Agreement. I note that one of the factors to be identified by the ATO is "the tax purpose for which the information is sought" (Article 5.5(c)).
5. Article 8 related to confidentiality and provides as follows: Any information received by a Contracting Party under this Agreement and [sic] shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use such information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The information may not be disclosed to any other person or entity or authority or any other jurisdiction without the express written consent of the competent authority of the Requested Party. (emphasis by underlining added).
6. Article 8 permitted the disclosure of information to authorities (including Courts and administrative bodies) for the purpose stated. It also permitted the disclosure of information to any other person or entity or authority or any other jurisdiction, but only with the consent of the Cayman Islands.
7. The words "taxes covered by this Agreement" are given temporal relevance by Article 12, which provided as follows: The Contracting Parties shall notify each other in writing through the appropriate channel of the completion of their constitutional and legal procedures for the entry into force of this Agreement. This Agreement shall enter into force on the date of the last notification, and shall thereupon have effect: (a) for criminal tax matters from 1 July 2010; and (b) for all other matters covered in Article 1 from 1 July 2010, but only in respect of taxable periods beginning on or after that date or, where there is no taxable period, all charges to tax arising on or after that date. (emphasis by underlining added).
8. The Accused relied upon the TIEA in support of his submission that the documents were improperly obtained. Specifically, it was submitted on behalf of the Accused that the documents were obtained for the purpose of using the documents in respect of the FCP relating to tax periods 2001 through 2007. That is, for tax periods prior to 1 July 2010.

Affidavit of Lenore Patricia Richards sworn 17 September 2015 (Exhibit D)

1. Ms Richards held the position of Senior Tax Technical Specialist within the Serious Non Compliance ("SNC") business line at the ATO at the time of swearing her affidavit. She stated that the ATO had conducted and was continuing to conduct audits and reviews in relation to the Accused. As part of her role, she provided support to compliance staff and auditors. She was also an Information Gathering Adviser ("IGA") and would assist in formulating requests for information. She confirmed that, in February 2011, Matthew Evans was the primary auditor within the SNC line tasked with the ongoing operation audit in relation to the Accused.
2. In the course of investigations by Mr Evans, he informed Ms Richards that he wished to obtain documents from the CITIA in relation to JAI and MHI. Ms Richards ascertained that the TIEA had come into force and could be utilised with respect to obtaining of documents for the year ending 30 June 2011. She assisted Mr Evans in formulating the request to the CITIA, the letter dated 23 February 2011.
3. In paragraph 11 of her affidavit, she stated: "At time of this request, Matthew Evans and other ATO staff were actively investigating the Australian tax affairs of [the Accused] in relation to the then current financial year ending 30 June 2011."
4. Further, she stated: "Although the request was being made part-way through the 2011 financial year, ATO auditors had already identified a number of offshore funds movements which had occurred since 1 July 2010 and which concerned corporations of which JA Investments Ltd and MH Investments Ltd were shareholders and in which they appeared to have controlling interests."
5. On the topic of the complaint now made by the Accused about the manner in which the documents were obtained, Ms Richards stated: "The request for information to CITIA was not issued for the purpose of any information provided being used in connection with the enforcement proceedings, the freezing proceedings, the determination of the objections or any Part IVC appeals which might follow if the objections were disallowed. It was my understanding that the request for information could not be issued for any such purpose because such use would relate to proceedings and objections concerning financial years prior to the commencement of the Tax Information Agreement with the Cayman Islands on 1 July 2010."
6. The remainder of her affidavit sets out the sequence by which and dates upon which the information was requested by the ATO and provided by the CITIA.
7. The letters between the ATO and the CITIA are attached to the affidavit of Ms Richards (Exhibit D) and later extracted into a separate folder (MFI 8).
8. The following observations can be made about the letter of request dated 23 February 2011, being the first request in time: 1. in the preamble to the request, the author of the letter identified all companies and persons who may be affected by the request, including the Accused, Mr Borgas, JAI, MHI and Offshore Nominees Ltd; 2. in the first substantive paragraph of the letter, the relevance of the request was refined to being information in connection with an active investigation into the Australian taxation affairs of Mr Vanda Russell Gould (the Accused) and another who were located in Australia; 3. the remainder of pages 2, 3 and 4 of the request provides background information as to a number of transactions involving the TPC dating back to 27 July 2006. Specifically, it identified the following transactions: 1. a loan of $30,000,000 from Derrin Brothers to CVC Fund Managers Pty Ltd on 27 July 2006; 2. interest payments of $9,000,000 made by CVC Fund Managers Pty Ltd between 2007 and 2010; 3. Australian income tax deductions of $9,800,000 for interest and withholding tax payable in relation to a Derrin Brothers loan that had been claimed by CVC Fund Managers Pty Ltd between 2007 and 2009; 4. the remittance by CVC Fund Managers Pty Ltd of a further interest payment of $1,900,000, by CVC to Derrin Brothers on 5 August 2010; 5. a profit sharing arrangement between Derrin Brothers and Leaver Holdings Pty Ltd, resulting in the payment by Derrin Brothers of $6,500,000 to Leaver Holdings in the period 2008-2010; 6. a transaction on 21 July 2010 whereby Russell Associates remitted $3,000,000 to Derrin Brothers, who subsequently remitted the funds to Leaver Holdings as a profit share payment; 7. a payment by Russell Associates to Derrin Brothers on or about 22 October 2010 of $3,250,000, such funds later remitted by Derrin Brothers to Balzac; 8. the payment of $227,575 by the Education Corporation of Australia Pty Ltd to Chemical Trustee Ltd on 29 July 2010; 9. the payment by Malackey Holdings Pty Ltd to Chemical Trustee on 8 November 2010 in the sum of $250,000; 10. the payment of funds by JAI to charities in 2007; 11. the donation of funds by JAI to the Phillips River Christian Charitable Trust from January 2007; 12. the remittance of the sum of $300,000 from JAI to Phillips River Pty Ltd since 1 July 2010; 13. the payment by Chemical Trustee of $1,000,000 to JAI on 28 July 2010, who subsequently remitted the funds to Melbourne Insurance Company Pty Ltd; 14. the transaction on 24 December 2010, whereby JAI remitted a further $1,500,000 to Melbourne Insurance Company; 1. the ATO's interests were laid bare in the penultimate paragraph on page 4 of the letter: "The ATO has concerns that these transactions represent attempts by the Australian residents to evade tax properly payable in Australia, by establishing offshore arrangements. The ATO believes that Mr Gould and/or Mr Leaver are the ultimate beneficial owners and controllers of the Cayman Island entities J.A. Investments Ltd and M.H. Investments Ltd and have omitted income and/or overclaimed deductions in their Australian income tax returns." 1. in Section (b) of the letter, the information sought is identified as being information for the period commencing 1 July 2010, in accordance with the terms of the agreement; 2. in compliance with the TIEA's requirement that the "tax purpose" be identified, the following statement appeared in Section (c) at page 6 of the letter: "The active investigation of Mr Gould and Mr Leaver is over a number of years to the present, including a real time review of the current financial year ending 30 June 2011 for both taxpayers." 1. at the top of page 7 of the letter, it is again made clear that the information requested is for taxable periods commencing 1 July 2010.
9. By a letter sent by the CITIA to the ATO dated 5 May 2011, the request was complied with by the provision of information, namely signed affidavits of Raymond Whittaker of 4 May 2011 "together with the relevant documents".
10. Both the request (23 February 2011) and the reply (5 May 2011) complied with the requirements for same under the TIEA and were lawful.
11. By letter from the ATO to the CITIA dated 27 May 2011, further assistance was sought by way of clarification of the information and documents provided in answer to the ATO's first request and "to provide some additional information". The tax purpose for which the information was sought was identified in the same or similar terms as the first letter. That is, relating to the active investigation of the Accused over a number of years to the present, including a real time review for the financial year ending 30 June 2011.
12. In its reply dated 20 September 2011, the CITIA provided the ATO with a further affidavit of Mr Whitaker dated 15 September 2011 with "the relevant documents".
13. Again, both the request (27 May 2011) and reply (20 September 2011) complied with the requirements for same under the TIEA and were lawful.
14. What followed then was a request by the ATO by letter dated 19 October 2011 to use the documents obtained from the CITIA to obtain information from the United Kingdom as to Chemical Trustee Ltd and Derrin Brothers Properties Ltd. By letter dated 21 November 2011, the CITIA provided its consent to the documents being provided to the United Kingdom.
15. There was some contention concerning this request as it was the intention of the ATO to facilitate the use of the documents for tax periods prior to 1 July 2010 and this was not spelled out. Whilst it was conceded by the Crown that this particular request may have lacked candour, I do not consider it relevant as to the circumstances in which the Disputed Documents were first obtained by the ATO. Specifically, I do not accept the submission for the Accused that the lack of candour in the letter of request dated 19 October 2011 "must flow back" to the first request in February 2011.
16. Finally, by letter dated 13 February 2012, the ATO wrote again to the CITIA and, inter alia, stated: "This letter is to advise of developments in our investigation, and to request your permission to use documents you provided to us in current Court proceedings concerning the recovery and enforcement of tax claims in respect of taxable periods prior to entry into force of the Tax Information Exchange Agreement between our two governments, notwithstanding the terms of the agreement."
17. On page four of that letter, the ATO sought permission to use the nominee agreements for periods prior to 1 July 2010 and to disclose such documents to Australian courts "for the purpose of defending the assessments raised in respect of tax periods prior to 1 July 2010". The terms of the request and the intended use of the information could not have been clearer.
18. By letter dated 17 February 2012, the CITIA provided such consent, indicating that it had no objection to the disclosure of the information to the Australian courts for the purpose stated.

Transcript of Evidence of Ms Richards in the FCP on 17 September 2013 (Exhibit E)

1. Ms Richards was called on behalf of the ATO to give evidence in the FCP on 17 September 2013.
2. The only substantive issue that arose in this trial in relation to that evidence concerned her knowledge as to the date upon which the TIEA came into effect and when her first conversation with Mr Evans about it took place.
3. At T120.40 she told the Federal Court that she went to a person named Harvey Dalby and asked him if the TIEA had been entered into, to which he answered yes. The question was when did this take place and when was it that Mr Evans first approached Ms Richards to discuss obtaining the information from the Cayman Islands. Mr Evans said that it was in February 2011. Ms Richards was quite clear that in her recollection that it was in late 2010. The significance, as it relates to the questions of propriety of obtaining documents, is that the Accused submitted that the discussion as to obtaining the documents occurred at a time prior to the TIEA coming into effect and at a time when Mr Evans was still working on the audit for the dispute the subject of the FCP.
4. This submission is at odds with the evidence of Mr Evans that he would not and did not take any action to obtain the documents until after the TIEA came into force. This evidence is consistent with the evidence of Ms Richards that when she raised the TIEA with Mr Dalby he told her that the agreement had come into effect.
5. As to the conflict in evidence between Mr Evans and Ms Richards as to when the conversation took place, I prefer the evidence of Mr Evans. One would expect him to have a clearer recollection as to when the conversation took place as it was as a result of his change in position that he was seeking to obtain the information.
6. Further, the evidence of Mr Evans that the conversation took place in February 2011 is consistent with that part of the evidence of Ms Richards that, when she made the inquiry of Mr Dalby, she was told that the TIEA had already come into effect. It would appear that Ms Richards was mistaken as to one aspect of her evidence.
7. As the evidence of Mr Evans and Ms Richards is otherwise consistent, I do not consider that this explicable discrepancy gives rise to any concerns about the reliability of Ms Richards' evidence otherwise.

The Cayman Islands Decision (Exhibit F)

1. The companies in respect of which information was sought (JAI and MHI) made an application in the Cayman Islands for judicial review concerning the decision of the CITIA to grant consent to the ATO to use the Disputed Documents in the FCP. More particularly, the consent that was forthcoming was the disclosure of the information to the Australian courts in respect of recovery proceedings and for assessments relating to tax periods prior to 1 July 2010 (letter from ATO dated 13 February 2012 requesting consent).
2. The argument for JAI and MHI was that the CITIA failed to comply with the consultation provision existing under Cayman Islands law. No such requirement exists in Australia.
3. The judgment purported to revoke the consent that had previously been given and sought an undertaking from the ATO that the information would not be so divulged. It also sought the immediate return and/or destruction of all of the applicants' documents.
4. That judgment was handed down just prior to the tender of the Disputed Documents in the FCP and was considered by Perram J in deciding that the Disputed Documents were admissible in those proceedings.
5. One of the bases for objection was the same that is raised here, namely, that the Disputed Documents were obtained by way of an impropriety and for that reason were not admissible pursuant to s138 EA.
6. In the present trial, not much emphasis was placed upon the Cayman Islands Decision. There was no suggestion that it had any extra-territorial application so that it would in any way affect the question of admissibility in this trial. In my view, the judgment did not have such wide-ranging application and its decision was not binding on the ATO.
7. In any event, the judgment was concerned with the CITIA granting consent to the ATO without properly consulting with JHI and MHI. This occurred months after the documents were obtained by the ATO and could not be said to have any bearing upon whether the documents were improperly obtained at that earlier time.

Documents produced by the ATO (Exhibit G)

1. In the course of giving evidence, Mr Evans was unshaken in his testimony that the purpose for the request of documents from the Cayman Islands was "the active investigation of Mr Gould over a number of years to the present, including a real time review of the current Australian financial year ending 30 June 2011". In support of that evidence, he said that letters had been sent out by the ATO to the TPC indicating that the ATO was conducting a review of the income tax affairs for the company, in respect of at least one international monetary transaction involving either the sending or receiving of funds to or from an offshore jurisdiction, during financial year after 1 July 2010.
2. As a result, 20 letters were produced and tendered demonstrating that between December 2010 and January 2011, information was sought from the TPC. In the submissions for the Accused (MFI 12), there is helpfully set out in paragraph 6 a table which identified by reference to the letters the transactions under review and the period to which they related. Ten of the twenty-one letters included references to transactions after 1 July 2010. All of the letters included references to transactions prior to 1 July 2010. The letters were redacted as to which of the TPC each letter related. Nevertheless, the argument proceeded on the basis that the letters related to those companies and perhaps other related entities.
3. The relevance of this evidence was to demonstrate the investigations which were on foot at the time of the ATO's first request of the CITIA on 23 February 2011, relating to entities associated with the Accused. In particular, the extent to which the investigations concerned transactions occurring prior to 1 July 2010 and those which occurred after that date.
4. The Accused sought to challenge the evidence of Mr Evans that there were in fact real time reviews ongoing at the time the requests for information were made of the CITIA. Alternatively, that the requests of the CITIA said to have been covered by the agreement but which related to information concerning tax matters prior to 1 July 2010.
5. It is apparent from Exhibit G that, prior to the requests being made of the CITIA, the ATO had informed a number of entities associated with the Accused of investigations in relation to transactions which were current, that is occurring after 1 July 2010. This evidence corroborates the evidence of Mr Evans and Ms Richards on this point. The fact that the letters also referred to tax periods prior to 1 July 2010, does not derogate from the evidence of Mr Evans. In fact, that is consistent with the purpose expressed for requesting the information by the ATO in its first letter to the CITIA.

Statement of Facts by AFP Officer Alistair Wills-Johnson dated 15 October 2013 (Exhibit 1)

1. This document was tendered on behalf of the Accused on the Voir Dire. The document bears the date which coincides with the date of the arrest of the Accused and others by the Australian Federal Police ("AFP"). The only matter referred to by Senior Counsel for the Accused relating to that statement was a footnote at page 18, where the following appears as footnote 28: ATO dissemination. Note, Cayman Island Court has demanded the ATO destroy their copies. We probably can't use these in the criminal brief.
2. I understood the reference to that footnote was to bolster the submission that the AFP were aware that the documents were improperly obtained by the ATO and were sought to be used by the AFP "in consequence of an impropriety" by the ATO.
3. In my view, the footnote is no more than an agent raising for consideration whether or not the documents could be used by the AFP as a result of the Cayman Islands Decision. The state of mind of Agent Wills-Johnson does not, in my view, bear upon the question of impropriety as to how the documents were obtained by the ATO, AFP and the CDPP.
4. That evidence was of marginal relevance and is of no assistance in the determination of the issue in the Voir Dire.

Submissions

1. Extensive written and oral submissions were presented for both parties. As they developed the issues became more refined. The original submissions for the Crown (CS1) were prepared after they had been put on notice of the Accused's objection but prior to receiving any submissions for the Accused. The Crown's pre-emptive submissions were, understandably, broadly cast.
2. The first written submissions for the Accused (AS1) were prepared in advance of evidence being called from Mr Evans and Ms Richards. Again, they were broadly cast and later refined by reference to the evidence. The key submissions made at this point for the Accused were: 1. that the likelihood was that the key purpose of the ATO request was to obtain information that would assist the ATO in the pursuit of the TPC for tax periods prior to 1 July 2010; and/or 2. the obtaining by the AFP and the CDPP could only have been for a purpose outside of matters permitted by the TIEA.
3. The submissions were largely focussed on the use of the information rather than how it was obtained, where only the latter is the question under s138. The submission was, however, that the intended use was for purposes outside the TIEA and the obtaining of the documents were for such an impermissible purpose. That is, that the state of mind of the ATO was, at the time the request was made, for use of the documents in the FCP which related to tax periods prior to 1 July 2010. The effect of the submission that this intention was the basis for the request and, thereby, contaminated by impropriety the manner in which the documents were obtained.
4. Ultimately, on the question of the Court's discretion, the Accused submitted that the desirability of admitting the evidence does not outweigh the undesirability of its admission.
5. The Crown responded (CS2), maintaining its original position that: 1. it is not forbidden for the AFP, CDPP and the Court to use the information in the present prosecution; 2. there is no basis to find that the information was obtained by way of an impropriety; 3. no public policy issues arise as to compliance with international treaties; 4. the information was used in the Federal Court; 5. the information was, thereafter, in the public domain and available to be used; 6. the use by the AFP and CDPP was pursuant to a direction made by the Federal Court; and 7. by s166 of the Income Tax Assessment Act (Cth), the ATO had a legal obligation to use the documents to make tax assessments.
6. Understandably, the submissions became more focussed after oral evidence. A fair summary of that evidence is extracted above.
7. In the second submissions for the Accused (AS2) two relevant improprieties were identified: 1. the ATO obtaining the documents from the CITIA for purposes that were impermissible under the Treaty; and 2. the obtaining of the documents by the AFP and CDPP that were impermissible under the Treaty, in that the documents were obtained by the AFP and CDPP as a consequence of impropriety.
8. The written submissions (AS2) were supplemented by oral addresses by Senior Counsel for the Accused. It was submitted that the relevant impropriety was misleading the CITIA "as to how this material could be used" (T301.50).
9. When asked, Senior Counsel for the Accused conceded that the Accused was "a bit light" on the argument that there was any impropriety in the manner in which the documents were obtained by the AFP and the CDPP (T330). In fact, there was no evidence adduced by the Accused as to how the Disputed Documents were obtained by the AFP and the CDPP. In those circumstances, no determination can be made about whether they were obtained improperly or otherwise. In any event, I would not accept the submissions that the AFP or CDPP obtaining the documents from the ATO breached the confidentiality clause in Article 8 of the TIEA.
10. The Accused relied upon the extended operation of s138(1)(b) to exclude documents obtained as a consequence of an impropriety. That is, if the documents were obtained by the ATO improperly, the secondary use of those documents in this trial was affected by the manner in which the documents were first obtained. It would follow that if it was found that the documents were not improperly obtained by the ATO then the second contention falls away.
11. In support of the first submission, it was said that a key purpose of the ATO requests was to gain information regarding the TPC for periods prior to 1 July 2010. It was submitted that this conclusion arose directly and by inference. This submission largely turned on the evidence of Mr Evans and Ms Richards.
12. The Accused urged the Court to find that the purpose of the request by the ATO to the CITIA was to obtain information to assist the ATO in respect of the assessments challenged for the financial years 2001-2007, the subject of the FCP.
13. The Accused submitted that there was a lack of candour by the ATO in its request for information from the CITIA and as to the intended use of that information. As already stated and for reasons which follow, I do not accept that submission.
14. It was submitted that the CITIA may well and probably would have acted in a different way if a true picture had been drawn for them. There was no evidence of this and, indeed, when it was asked if the documents could be used by the ATO for periods before 1 July 2010, consent was forthcoming.
15. It is plain from the correspondence between the ATO and the CITIA which I have recited that the ATO made the following matters clear to the CITIA, as early as the first request: 1. that a number of relevant transactions had occurred involving the TPC prior to 1 July 2010; 2. the particular transactions, the subject of investigation by the ATO, were identified by the letter to the CITIA; 3. that whilst the transactions occurred prior to 1 July 2010, the information sought was for the period commencing 1 July 2010; 4. that the ATO was involved in an active investigation in respect of the Accused; 5. that the investigation was over a number of years to the present; and 6. the investigation included a real time review of the current Australian financial year ending 30 June 2011.
16. It was submitted for the Accused that the request by the ATO of the CITIA was "positively misleading" and deliberately so (T308.17). I do not agree. In my view the letters of request which procured the Disputed Documents were detailed and quite clear as to the intended use of the information.
17. It was further submitted on behalf of the Accused that there was "overwhelming" evidence which contradicted the evidence of Mr Evans and Ms Richards. I do not agree. In my view their evidence was consistent with and corroborated by the documentary evidence, in particular the requests which resulted in the Disputed Documents being obtained. I found both witnesses to be impressive and reliable.
18. Much was made by Senior Counsel for the Accused that the ATO had not produced the documents which were ultimately produced through Mr Evans (Exhibit G). Those were the documents which indicated that in respect of the entities (identities redacted), there had been requests for information made by the ATO in what was the current tax period. It was submitted that it was "incredibly surprising" and "incredibly worrying" (T308.25) that the documents had not been produced earlier. The answer to that is that at no earlier point in time had the Accused sought production of those documents. The Crown confirmed that the documents had never been the subject of a subpoena, despite the longstanding evidence that the ATO had been conducting real time reviews. I reject the submissions that the ATO's failure to produce those documents somehow reflects poorly upon the reliability of the witnesses called.

Determination as to whether the documents were improperly obtained

1. The Accused directed the Court's attention to two decisions which have bearing upon the meaning of improper. First, in Parker v Comptroller-General of Customs (2009) 83 ALJR 494, French CJ noted at [28] that the dictionary definition of improper includes "not in accordance with truth, fact, reason or rule, abnormal, inaccurate, erroneous, wrong". Secondly, in DPP v Carr [2002] NSWSC 194 at [34] per Smart AJ. I accept that "impropriety" should not be narrowly construed.
2. Mindful of those authorities, I have formed the view that the manner in which the Disputed Documents were obtained was not improper. The request made by the ATO of the CITIA was a proper request. Both the request and response were within the terms of the TIEA. Whilst it was said that some of the transactions under investigation related to financial years prior to 1 July 2010, it was equally made plain by the ATO that the information sought was information after that date. In fact, I repeat my earlier observation that the request could not have been clearer in its terms. At page five of the first letter, the information was sought specified "for the period commencing 1 July 2010".
3. In both the first and second requests, it was also made clear to the CITIA that there were investigations which included a number of years prior to 1 July 2010, as well as a real time review for the current financial year ending 30 June 2011.
4. Despite skilful questioning of both Mr Evans and Ms Richards, I am of the opinion that the intended use of the documents was as stated in the letter of request to the CITIA. I found both witnesses to be matter of fact and compelling in their evidence. I accept their evidence without reservation, not only because of the manner in which it was given, but because it is supported by the documentary evidence, particularly the actual requests made of the CITIA.
5. As previously stated I find that the request which sought the Disputed Documents and the reply which provided them conformed with the requirements of the TIEA and were both lawful and proper.
6. Accordingly, I find that the documents were not improperly obtained within the meaning of s138 EA.

Exercise of Discretion and s138(3) Factors

1. For completeness and, assuming for the purposes of what follows that the Disputed Documents were improperly obtained, I turn to consider the exercise of the Court's discretion under s138 EA. In those circumstances, the Disputed Documents are not to be admitted in the trial unless the desirability of admitting the evidence outweighs the undesirability of admitting the evidence. In determining that question the Court is to take into account all considerations relevant to the exercise of judicial discretion, including those referred to in s138(3).
2. In respect of the factors identified by s138(3), I make the following findings.
3. The evidence has a significant probative value (s138(3)(a)). That is because the Disputed Documents established that the beneficial owner of JAI and MHI was the Accused, in that he was the Appointor in respect of both companies and, as such, had unfettered discretion as to the appointment of directors and members/shareholders. It follows that by supplying the Q&A document to Mr Borgas and generally coaching him as to the evidence to be given in the FCP, the Disputed Documents would bear directly upon whether the Accused attempted to pervert the course of justice in the manner particularised by the Crown.
4. In view of my finding as to the probative value of the evidence, it is plain that the evidence is important in the present proceedings (s138(3)(b)). The evidence may corroborate the oral evidence of Mr Borgas that the ultimate beneficial owner of the two companies was the Accused, that the control and management of the TPC rested with the Accused in Australia and the Accused attempted, through Mr Borgas, to mislead the Court as to that matter in the FCP and pervert the course of justice.
5. Further, if it is assumed, contrary to my earlier finding that the ATO obtained the documents improperly, then the gravity of any impropriety was slight (s138(3)(d)). The impropriety may only be put as high as not being completely frank with the CITIA as to all intended uses of the documents. Whether this is in fact the case is debatable and I refer to my reasons above in that regard. In any event, the gravity of any impropriety is not such as to weigh against the admissibility of the evidence.
6. I turn to consider whether the impropriety was deliberate or reckless (s138(3)(e)). It was submitted for the Accused that the impropriety was a deliberate attempt by the ATO to mislead the CITIA and to obtain information improperly. I reject that submission. The highest the conduct of the ATO officers can be described in connection with this subsection is that it may have been reckless in that it did not fully explain to the CITIA all of its intended use for the documents. Even that argument is weak. It is plain from the documents requesting information that disclosures were made about transactions pre-dating 1 July 2010 and it was made clear that the investigation related to a number of financial years pre-dating 1 July 2010. If there was any impropriety in the manner in which the documents were obtained, I reject the suggestion that it was deliberate and would have difficulty accepting that it was even reckless.
7. It is also relevant to consider whether any proceedings have been or likely to have been taken in relation to the impropriety (s138(3)(g)). I am not aware of any proceedings being taken against the ATO in relation to their conduct, in terms of the manner in which they obtained the documents from the CITIA. The focus of the Cayman Islands Decision was as to the conduct of the CITIA, not the ATO. In my view, it is highly unlikely that any proceedings would ever be taken in relation to any aspect of the conduct of the ATO or its officers in obtaining the disputed documents.
8. It is also significant to consider the difficulty of obtaining the evidence without the request being made by the ATO of the CITIA, pursuant to the TIEA (s138(3)(h)). It was submitted on behalf of the Crown that the evidence could not otherwise have been obtained from within Australia or overseas. It was submitted that a subsequent request by the Attorney-General's Department to the Cayman Islands under the Mutual Assistance in Criminal Matters Act 1987 (Cth) for the records relating to JAI and MHI was made but did not yield the disputed documents.
9. In light of that evidence, I find that, had the documents not been obtained in the manner in which they were received by the ATO, pursuant to the TIEA, then the subject documents would have been extremely difficult, if not impossible, to obtain.
10. Accordingly, having regard to those matters, I find that, even if the documents were obtained through impropriety, the desirability of admitting the evidence considerably outweighs the undesirability of admitting the evidence, such that, in the exercise of the Court's discretion, the documents are admitted.

I certify that this and the previous 35 pages are the reasons for the Judgment of his Honour Judge D Wilson SC Associate 20 November 2019 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 November 2019