[1992] FCA 441; (1992) 63 A Crim R 180

Administrative Law - informations laid under Justices Act 1902 (NSW) alleging breaches by the appellant of Crimes Act 1914, s. 71 and Taxation Administration Act 1953, ss. 8P, 8T - application for an order of review under Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act") and for injunctive relief under Judiciary Act 1903, s. 39B - alleged improper purpose and abuse of process - whether Federal Court should exercise discretion in favour of intervention in committal proceedings - effect of s. 9 of ADJR Act.

Administrative Decisions (Judicial Review) Act 1977,

Judiciary Act 1903,

Crimes Act 1914,

Taxation Administration Act 1953,

Director of Public Prosecutions Act 1983.

Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23,

Williams v Spautz [1992] HCA 34; (1992) 107 ALR 635,

Newby v Moore (1988) 83 ALR 523, applied.

for Appellant: Mr B.J. Sullivan instructed by Ms Harris

for First and Second Australian Government Solicitor

for Third respondent: Commonwealth Director of Public

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an appeal from an order made by Davies J. dismissing an application for an order for review under the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act") and for relief pursuant to s.39B of the Judiciary Act 1903 ("the Judiciary Act").

The background to the application at first instance

2. The appellant, Phillip Murray Smiles, a member of the New South Wales Parliament, conducts a consultancy practice. During 1991, the Australian Taxation Office investigated the appellant's taxation affairs. In about October 1991, amended assessments were issued disallowing certain deductions claimed for the four years ended 30 June 1987 to 1990 inclusive. The amended assessments imposed additional tax under s.223 of the Income Tax Assessment Act 1936 ("the Assessment Act") which provides that a taxpayer is liable to pay, by way of penalty, additional tax (equal to double the amount of the excess tax involved) for statements which are false or misleading in a material particular. The additional tax imposed in each of the relevant years was:

$

1987 1,895.07

1988 2,863.48

1989 3,223.64

1990 251.13

3. In November 1991, the appellant paid the additional tax.

4. On 29 January 1992, the second respondent, Mr Ian Howard Tripet, an officer of the Australian Taxation Office, laid three informations under the Justices Act 1902 (NSW) against the appellant. The informations concerned matters which had been the subject of the amended assessments and penalties. One of the informations alleged a breach of s.7A of the Crimes Act 1914 ("the Crimes Act") which makes it an offence to incite, urge, aid or encourage the commission of an offence against a law of the Commonwealth. The information alleged that the appellant encouraged a person to knowingly make a statement to a taxation officer that was false in a material particular. The second information alleged breaches of s.8P of the Taxation Administration Act 1953 ("the Taxation Administration Act"), which makes it an offence to knowingly make a statement to a taxation officer that is false or misleading in a material particular. The third information alleged breaches of s.8T of the Taxation Administration Act. That section makes it an offence to keep accounting records that do not correctly record or explain the matters to which they relate with the intention, inter alia, of hindering, obstructing or defeating the administration, execution or enforcement of a taxation law.

5. Davies J. found that Mr Tripet was the officer in the Chatswood office of the Australian Taxation Office who had the task of laying such informations; that his duty was to lay informations as and when instructed to do so and that he was entitled "The Informing Officer". However, Davies J. also found that the prosecutions were in fact initiated by Mr Peter Smith of the Audit Prosecution Unit in the Chatswood office of the Australian Taxation Office; that this section was headed by Mr Bob Fitton and had three other members, including Mr Smith and Mr Tom Mitchell; and that, pursuant to arrangements which were in place between the Commonwealth Director of Public Prosecutions and the Australian Taxation Office, a potential prosecution was referred by the Australian Taxation Office to the Office of the Director of Public Prosecutions for its decision, inter alia, when a serious crime, such as an offence against the Crimes Act, was involved, or when the prospective defendant was a high profile person; and that the appellant was such a person. Accordingly, his Honour found, a submission on the matter was sent by Mr Smith, with the approval of Mr Fitton, to the Director of Public Prosecutions. Davies J. further found that the Office of the Director of Public Prosecutions decided that the informations already mentioned should be laid and instructed the Audit Prosecution Unit accordingly. The informations came into the hands of the Audit Prosecution Unit during January 1992 and they were laid by Mr Tripet on 29 January 1992. The informations and summonses were served on the appellant later that day. The application for judicial review in this Court was lodged on 6 March 1992. The application sought orders under the ADJR Act and under s.39B of the Judiciary Act which would bring the prosecutions to an end.

6. The learned trial Judge first dealt with the question of jurisdiction. He referred to the decision of the Full Federal Court in Newby v Moore (1988) 83 ALR 523 where it was held that a decision taken by the Director of Public Prosecutions to prosecute was a decision to which the ADJR Act applied. However, Davies J. expressed doubt whether, in the light of the reasoning of Mason C.J. in Australian Broadcasting Tribunal v. Bond [1990] HCA 33; (1990) 170 CLR 321 at 335-9, this was still the position. But, in any event, his Honour held that the present matter fell within s.39B(1) of the Judiciary Act, since injunctions were sought against the three respondents as officers of the Commonwealth.

7. However, Davies J. went on to say that "the Court will not interfere by way of judicial review...(although) it may be appropriate for the Court to make an order of review affecting a prosecution where, for example, the decision or conduct sought to be reviewed was beyond jurisdiction or an abuse of process". He added that whilst, in a special case, "it may be proper for a court to overturn a decision not to prosecute...a decision to prosecute stands in a different light." After referring to the authorities in this area, including Jago v District Court of New South Wales [1989] HCA 46; (1989) 168 CLR 23, Davies J. said:

"Mr Bloom (Senior counsel for the appellant) put his case on

two bases which, in the end, seemed to coalesce into one.

Mr Bloom submitted that the prosecutions had been brought

not for their own sake but to achieve an improper purpose or

collateral advantage, that of obtaining the publicity which

would flow from the prosecution of (the appellant). Mr

Bloom said that it was an abuse of power to prosecute (the

appellant), a high profile person, the prosecution of whom

would result in publicity, when the circumstances were such

that, had (the appellant) been just an ordinary taxpayer and

not a member of the New South Wales Parliament, he would not

have been prosecuted.

The approach taken in the cases I have mentioned is that a

decision to prosecute taken by or on behalf of the Director

of Public Prosecutions is unexaminable, but this does not

prevent a court, certainly a higher court, from controlling

legal proceedings so as to prevent abuse of process.

Section 5 of the ADJR Act and s.39B of the Judiciary Act are

not, however, appropriate vehicles for the general control

of abuse of process in the court of a State. This is a

matter for the courts of the State. As neither provision

would avail the (appellant), the application must fail."

8. However, his Honour added that it was nevertheless appropriate that he should deal with the substance of the case as presented.

"It is not in doubt that officers of the Australian Taxation

Office take into account in deciding whether or not to

institute a prosecution and have regard to the fact that a

successful prosecution which attracts publicity is likely to

have a greater deterrent effect on taxpayers generally than

a prosecution which does not attract publicity."

9. His Honour referred to, inter alia, the Office's Ruling IT 2246 setting out its prosecution policy. He said:

"...(P)aragraph, 1.5, IT 2246 provides that, in determining

whether an administrative penalty would be more appropriate

than prosecution, regard should be had inter alia to 'any

publicity which the case may attract.' Paragraph 6.1 of IT

2246 specifies criteria relevant to the choice between

prosecution and statutory penalties for false and misleading

statements. Criteria (f) reads as follows:-

'f. The prevalence of the particular offence and the

extent to which the publicity of a prosecution would

help to promote a greater level of compliance. This

factor should never be the sole reason for

prosecution. Care must be taken to ensure that the

charge is not being brought simply to make an example

of the defendant or simply to treat the defendant as a

sacrificial victim.'

'In the Compliance Branch, the majority of audit or

special examination cases would not be suitable for

prosecution under sec. 8K, 8N and 8P.

...

6.22 However, there would appear to be a minority of

cases in which prosecution action would be justified

and cost effective having regard to the value of the

deterrent effect that the resulting publicity would

have'

10. Davies J. also referred to the Office's "Audit Prosecution Publicity Guidelines", which included the following:

"When Should There be Publicity

...

(ii where the audience is investors, salary and wage

earners, etc.

- just prior to end of financial year

- around return preparation time

- following court action

. if possible, activities should be planned so that cases

are in court around return preparation time

. use pre-court publicity just prior to end of financial

year to remind taxpayers of obligations and advise of up

and coming cases

. follow up pre-court publicity with post-court publicity,

preferably around return preparation time, to show 'we

mean business' and thus reinforce messages."

11. Davies J. then dealt with a submission by Mr Rozenes QC, the Director of Public Prosecutions, as follows:

"Mr Rozenes suggested that the above policy of the

Australian Taxation Office was irrelevant as the decision to

prosecute had been taken in the Office of the Director of

Public Prosecutions. Mr Rozenes tendered a document

entitled 'Prosecution Policy of the Commonwealth' which sets

out the principles which the Director of Public Prosecutions

applies. There is nothing in that policy which refers to

the question of publicity. The policy accepts in paragraph

2.8 that 'It is not the rule that all offences brought to

the attention of the authorities must be prosecuted.' The

deciding factor is that stated in paragraph 2.1 and

paragraph 2.9, namely 'whether the public interest requires

a prosecution.' The policy recognises in paragraphs 2.11(j)

and 2.12 that the alternative penalties that can be levied

under various Taxation Acts should be taken into account as

possible alternatives to prosecution.

However, the fact that the prosecution policy of the

Commonwealth does not refer to the question of publicity

would not make the contents of the Guidelines irrelevant.

These prosecutions arose out of an investigation by the

Australian Taxation Office of (the appellant's) taxation

affairs. The prosecutions were initiated by the Australian

Taxation Office and the informant is an officer of the

Australian Taxation Office. In this circuMstance, it seems

to me that the policy as enunciated in the Guidelines would

have played a part in the course taken by Mr Smith to

recommend to the Director of Public Prosecutions that (the

appellant) be prosecuted. The element of publicity, one of

the criteria specified by the Guidelines, was satisfied in

(the appellant's) case, as extracts from newspapers tendered

in evidence show. (The appellant's) tax affairs are

newsworthy."

12. His Honour next referred to evidence given by Mr T.W. Moon, the appellant's tax agent, of a conversation with Mr T.I. Mitchell, an officer in the Audit Prosecution Unit of the Australian Tax Office. Mr Mitchell also gave evidence of this conversation which differed, to some extent, from the version given by Mr Moon. Davies J. made the following finding:

"I do not think I should accept the evidence of one of them

in preference to that of the other. It seems to me more

likely that the conversation was somewhat between the two

versions, that Mr Mitchell did say that the fact that (the

appellant) was a high profile person played a part in the

decision to prosecute and that Mr Moon expressed the view

that that was unfair and discriminatory."

13. Davies J. then referred to a "brief of evidence" which Mr Smith had submitted to the Office of the Director of Public Prosecutions. His Honour said:

"It is unnecessary to set out the contents of the brief of

evidence. It is sufficient to say that what was alleged

against (the appellant) was the deliberate evasion of tax in

circumstances, which if proved, would seem to justify the

prosecution of any taxpayer.

Accordingly, Mr Bloom's submission that the advantage of

obtaining publicity was the sole or predominant factor

influencing the prosecution of (the appellant) should not be

accepted.

But that is not to say that the advantage of publicity

played no part in the decision of the officers of the

Taxation Office to initiate and to carry through the

prosecution. Publicity is one of the factors which the

Guidelines specify as criteria to be taken into account in a

decision to prosecute. Furthermore, there was the

conversation between Mr Mitchell and Mr Moon from which Mr

Moon certainly gained the impression that (the appellant's)

position as a Parliamentarian played a part in the decision

to prosecute. Then there is the fact that the amended

assessments imposed additional tax and it was not until

later that a decision was taken to prosecute (the

appellant). Moreover, no relevant officer who decided that

(the appellant) should be prosecuted, the only person who

would know the precise reasons for the prosecutions, was

called to deny the allegation."

14. Davies J. concluded that "(the appellant's) position as a high profile person was a factor which led to the institution of the prosecutions".

15. Turning to the authorities, Davies J. went on to say that the "proper exercise of power may necessarily involve some discrimination." Later, his Honour said:

"It is not wrong to take account of the publicity likely to

arise from and the deterrent effect of a prosecution when

considering whether or not a prosecution for a taxation

offence should be instituted. I see no element of abuse of

power in that consideration, rather good administration.

Publicity which makes known to the community that an

offender has been convicted and a penalty imposed is not in

itself in conflict with the criminal justice system."

16. Davies J. expressed his conclusion as follows:

"Of course, it would not be appropriate for a prosecution to

be instituted merely for the purpose of the publicity which

might be gained. Rather the emphasis should be placed on

the imposition of administrative penalties on offenders

whenever prosecution does not seem to be in the public

interest. Prosecution action should be proportionate to the

offence...But the quantum of the publicity likely to follow

could be a relevant factor in the assessment of the public

interest.

I am satisfied that the officers of the Audit Prosecution

Unit and the officer of the Office of the Director of Public

Prosecutions concerned with this matter had such evidence of

significant offences by (the appellant) that it was, in

their view, in the public interest that he be prosecuted.

There was no abuse of power. For this reason also, the

challenge to the prosecutions must fail."

17. The appellant's grounds of appeal are, in essence, that it should have been held at first instance that (1) relief was available under both the ADJR Act and the Judiciary Act; (2) the advantage of obtaining publicity was the sole or dominant factor influencing the decision to prosecute; (3) it was not permissible for the respondents to take publicity into account; (4) there was an abuse of process.

18. The appellant seeks orders (a) declaring void and setting aside the relevant decisions of the respondents; (b) restraining the Director of Public Prosecutions ("the Director") from continuing the prosecutions; (c) that the Commissioner and the Director discontinue the prosecutions.

19. A notice of contention has been filed on behalf of the Commissioner and Mr Tripet challenging the findings: (1) that the appellant's position was a factor which led to the decision to prosecute him; (2) that the prosecution guidelines played any particular part in the decision of Mr Smith to recommend to the Director that the appellant be prosecuted; and (3) that Mr Mitchell was the person in the Taxation Office in charge of the prosecution and that the admissions he made could bind the Commissioner.

20. On behalf of the Director, a notice of contention has been filed disputing the findings (a) that the appellant's position as member of Parliament would have been taken into account in the deliberations of the office of the Director in deciding to prosecute; and (b) that the appellant's position "as a high profile" person was a factor which led to the prosecution.

21. It is convenient to deal first with the question of jurisdiction.

22. In order to identify whether the relevant jurisdiction of this Court is attracted, it is necessary, in the first place, to characterise the nature of the present matter in terms of the kind of relief sought by the appellant. By his amended application, the appellant sought judicial review of several decisions of the respondents, some in the alternative, as follows:

(a) The decisions of the Commissioner: (i) to recommend that the

appellant be prosecuted; (ii) to communicate to the Director

information concerning the affairs of the appellant; (iii) to prosecute

the appellant; and (iv) to lay the informations.

(b) The decisions of Mr Tripet: (i) to prosecute; and (ii) to lay

the informations.

(c) The decision of the Director to prosecute.

(d) The decisions of the Commissioner and the Director: (i) to

prosecute; and (ii) to lay the informations.

23. It is now common ground, and, in our view, properly so, that in entertaining these claims, this Court had jurisdiction vested in it by the provisions of s.39B(1) of the Judiciary Act. A separate question, whether as a matter of discretion, this jurisdiction ought to be exercised in the circumstances of this case, remains to be considered. But it follows that it is not necessary for us to consider whether jurisdiction was also available by virtue of the provisions of the ADJR Act, and we express no opinion on this point.

The second issue: Discretionary considerations apart, was a case for relief made out by the appellant?

24. We propose next to turn to the question whether, apart from any matters going to discretion under s.39B(1) (and it is common ground that there is a judicial discretion to grant or refuse relief), the appellant made out a case for relief at first instance.

25. As has been seen, although many of the facts were not disputed, on some crucial issues, in particular, the communications which took place between the Australian Taxation Office and the Office of the Director, there were areas of contention between the parties. In order to put this controversial material into its proper context, it will be necessary to restate some of the relevant history of the matter which was as follows.

26. As has been noted, it was the practice of the Taxation Office to follow the prosecution policy described in Ruling IT 2246; and it was the practice of the Director to follow the policy outlined in the guidelines set out in the document entitled "Prosecution Policy of the Commonwealth" to which reference has already been made. As Davies J. mentioned, the Director and the Australian Taxation Office jointly produced liaison guidelines for investigation and prosecution that were in evidence. Relevant extracts from these guidelines are as follows:

"1. INTRODUCTION

Purpose

1.1 These guidelines regulate the relationship between the

Australian Taxation Office (ATO) and the Director of Public

Prosecutions (DPP) in the investigation and prosecution of

tax fraud and other taxation offences

...

Roles

1.5 The primary responsibility for prosecuting offences against

Commonwealth law rests with the DPP. However, the DPP has

agreed that ATO officers may conduct prosecutions for some

offences against taxation laws. Part 4 deals with the types

of matter that may be prosecuted by ATO officers.

2. GENERAL PRINCIPLES

Purpose of Prosecution

2.1 It is not the rule that all offences which come to the

attention of ATO must be prosecuted. Parliament has

provided a regime of administrative penalties for

dealing with tax offences and in many cases it will be

appropriate to dispose of the matter by the imposition

of an administrative penalty without prosecution.

2.2 However, prosecution and conviction can have

consequences over and above the individual case. In

particular, it can have a deterrent effect upon both

the defendant and other potential offenders. There

are also some cases where the relevant misconduct is

so serious that prosecution is the only appropriate

response irrespective of any deterrent effect the

proceedings may have.

2.3 Accordingly, there are cases in which prosecution is

warranted notwithstanding the possible cost and the

fact that other remedies may be available. In such

cases, ATO and DPP recognise that is their

responsibility to pursue the matter and to commit the

resources needed for the proper investigations and

prosecution of the alleged offences.

Cases Warranting Prosecution

2.4 ATO's Prosecution Policy (Income Tax Ruling No. 2246)

addresses the question of when alleged offences should

be prosecuted under a taxation law, as opposed to

being disposed of by the imposition of an

administrative penalty. That Policy has been endorsed

by the DPP. The Policy does not address the question

of when alleged misconduct should be prosecuted under

the more serious offences provided in the Crimes Act

1914 and the Crimes (Taxation Offences) Act 1980.

2.5 In general terms, charges under the Crimes Act or the

Crimes (Taxation Offences) Act should be reserved for

matters involving:

(a) serious fraud against the revenue as defined

below; and

(b) cases in which there is a circuMstance of

aggravation, such as the bribery of an ATO

officer or corruption on the part of an ATO

officer.

Serious Fraud against the Revenue

2.6 For the purpose of these guidelines, serious fraud

should be taken to have been committed if a taxpayer

has engaged in a deliberate or organised course of

conduct to evade a substantial amount of tax by

preparing and presenting false information or by

deliberately withholding relevant information. It

will generally be appropriate that conduct of this

nature be prosecuted under the Crimes Act or the

Crimes (Taxation Offences) Act.

...

3. THE INVESTIGATION STAGE: REQUESTS FOR ADVICE

...

General

3.2 ATO should always seek advice from the DPP before a

decision is made on how to deal with any matter which

falls into one of the following categories:

. a matter that appears to involve serious fraud

against the revenue (as defined above);

. a matter in which there is a circuMstance of

aggravation such as the bribery of an ATO

officer or corruption on the part of an ATO

officer;

. a matter that involves a persistent offender;

. a matter that appears likely to attract public

or media attention, for whatever reason, if the

facts become known;

. a matter involving a tax planning scheme of

questionable validity; and

. a matter involving, directly or indirectly, a

case that is being investigated by the AFP or

prosecuted by the DPP, or in which civil

recovery action is being brought or co-ordinated

by the DPP.

...

Formal Matters

3.15 Requests for advice should be made to the DPP

through the appropriate APU (or in appropriate

matters through an Audit Chief or the Internal

Investigation Section).

...

3.22 In providing advice in these matters, DPP will

have regard to the guidelines set out in the

Prosecution Policy of the Commonwealth. In

particular, it will pay due regard to the fact

that administrative penalties will normally be

available if charges are not laid and to any

genuine contrition which may be evidenced by a

taxpayer's conduct in the course of an audit or

settlement negotiations.

. . .

4. THE CONDUCT OF PROSECUTIONS

4.1 DPP has agreed that ATO officers may conduct

summary prosecutions for offences against the

Taxation Administration Act 1953 and other

taxation laws provided cases which fall into any

of the categories listed in paragraph 4.2 are

referred to the DPP for prosecution.

4.2 The categories of matters which should be

referred to the DPP are:

(a) all prosecutions for offences against the Crimes

Act 1914 or the Crimes (Taxation Offences) Act

1980;

(b) all offences where the maximum penalty available

includes a term of imprisonment exceeding 12

months. These include:

. second and subsequent offences against

sections 8T and 8U of the Taxation

Administration Act (incorrectly keeping

false records, falsifying identity etc.);

. offences against section 221Y of the

Income Tax Assessment Act (forging stamps

and dies);

(c) any case where, in ATO's view, there is a

realistic possibility of a court sentencing the

defendant to a term of imprisonment in the event

of conviction;

(d) all prosecutions where the Commissioner elects

to treat an offence otherwise than as a

prescribed taxation offence;

(e) all cases which involve novel or difficult

questions of law or previously untested sections

(once a precedent has been established, referral

may not be necessary in future matters);

(f) all appeals against a decision of a court,

either by the person convicted or by the

Commissioner;

(g) all applications under the Administrative

Decisions (Judicial Review) Act 1977 which seek

to challenge a ruling made in the course of the

criminal process;

(h) cases which involve prominent or high profile

figures or which, for any other reason, are

likely to attract public attention;

(i) any matter involving, directly or indirectly, a

case that is being investigated by the AFP or

prosecuted by the DPP or in which civil recovery

action is being brought or co-ordinated by the

DPP (even if the later prosecution does not

involve a matter of any great substance);

(j) all cases in which the defendant's previous

history indicates that the matter should be

handled by the DPP (eg the person has behaved in

a violent manner in the past, has a history of

defending cases or is a 'bush lawyer');

(k) defended cases in which the person will be

represented by legal counsel or it is apparent

that the issues raised by the defence are of

substance; and

(l) any other matter where, in the opinion of the

ATO officer, the prosecution should be handled

by the DPP.

4.3 ATO officers may only prosecute cases that fall into

any of the categories listed in paragraph 4.2 by

agreement with the appropriate regional office of the

DPP, which may be reached on a case by case basis or

in relation to specified types of matter.

4.4 The above categories are not intended to be

exhaustive. Matters which do not fall within them may

still be referred to the DPP for prosecution. Some

matters may also fall into more than one category.

Such matters should be referred to the DPP.

4.5 Matters should be referred to the DPP as soon as it

becomes apparent that the case falls within a relevant

category. (ie. Referral should not be left until the

matter has been set down for hearing or is about to be

heard by a court).

4.6 If it is clear from the outset that a prosecution is

likely to be complex, will raise difficult issues or

is likely to attract public attention, the DPP should

be consulted before charges are laid (assuming the DPP

has not already provided advice in the matter)."

27. At a later stage, there was put into evidence before Davies J. a "brief of evidence" addressed to the Director prepared by the Audit Prosecution Unit of the Taxation Office. It appears that the brief was delivered to the Director some time after the appellant had paid the additional tax assessed. The brief contained the following information: offence details, including the relevant legislation; the evidence available; the identity of the action officer (Mr Smith); the amount of tax sought to be avoided (a total of $15,735.89); the additional tax which "may" be imposed under the Assessment Act (a total of $6,356.02) (in fact, additional tax had already been assessed and paid); and the nature of the offences. The brief also contained a synopsis which summarised the history of the audit and investigation of the matter.

28. The "submission to prosecute" in the brief was as follows:

"SUBMISSION TO PROSECUTE

It is submitted that the taxpayer be prosecuted under:-

Section 8P of the T.A.A. for knowingly making false and

misleading statements in his income tax returns for the

years ending 30th June 1987, 1988, 1989 and 1990 for

claiming the nannies as secretaries/personal assistants.

(folio's E15-E18)

Section 8T of the T.A.A. for Incorrectly keeping records in

his cash book records with the intention to deceive or

mislead the Commissioner for the years ending 30th June

1987, 1988, 1989 and 1990. (E5-E8)

Section 8P of the T.A.A. for knowingly making false and

misleading statements in correspondence in response to a

substantiation request for information for the years ending

30th June 1987, 1988, 1989 and 1990. The taxpayer falsely

states that the nannies were secretaries/personal assistants

(folio's 87-93)

Section 8P of the T.A.A. for knowingly making false and

misleading statements in an interview with two taxation

officers in relation to a substantiation audit for the years

ending 30th June 1987, 1988, 1989 and 1990, by stating that

the nannies were secretaries/personal assistants (folio's

46-57)

Section 7A(a) for inciting another person/persons to

fraudulently fill out an Instalment Declaration Form with

false details. (folio's E11 and E12)"

29. The brief then contained an "observation" in these terms:

"OBSERVATION

From the information gained by former employees of Mrs

Smiles and Mrs Smiles herself it can be shown that the

claims made by the taxpayer in respect of personal

assistants/secretaries are fraudulent. All the nannies were

recruited from nanny agencies and only for incidental

moments of answering the phone or running an errand they all

state with a minor exception from Nicole Tamblyn that they

provided Mr Smiles with no secretarial or business services.

With Nicole Tamblyn she states that she provided an average

of 3-5 hours a week in helping Mr Smiles but it can be seen

in her case that after she had left the Mosman address and

proceeded to provide her services as a nanny to Mrs Smiles,

she was still being paid and claimed by Smiles Management

Services as a secretary but with no decrease in salary."

30. The brief also included the following handwritten comments by Mr Fitton, the Manager of the Taxation Office's Audit Prosecution Unit, as follows:

"MANAGERS COMMENTS:

The attached submission is supported. It is felt that in

view of the seriousness of the offences committed and the

continuing utterances by Mr Smiles that these claims are

"normal" in business, that he had shown no remorse at all in

respect to these serious offences.

It is recommended therefore that the taxpayer be charged

under section 29D of the Crimes Act however if this is not

considered suitable then under the T.A.A. as outlined

above."

31. (By s.29D of the Crimes Act, it is provided that a person who defrauds the Commonwealth or a public authority under the Commonwealth is guilty of an indictable offence. The penalty is $100,000 or imprisonment for 10 years, or both.)

32. No mention was made in the brief of the likelihood, or otherwise, of publicity should a decision to prosecute be made. Nor was any mention made of the fact that additional tax had been assessed and paid.

33. By letter dated 22 January 1992, Mr Michal Poberezny, an officer in the Office of the Director (who had spoken with Mr Mitchell on that day or the day before) wrote to the Deputy Commissioner, for the attention of Mr Mitchell, as follows:

"PROSECUTION OF P SMILES

As discussed I am of the view that the brief of evidence in

this matter is capable of supporting charges in relation to

incorrectly keeping accounts and the making of false

statements contrary to the Taxation Administration Act. I

am also of the view that in the circumstances prosecution is

warranted for an offence against s.7A of the Crimes Act.

Informations and summonses relating to the following

offences are enclosed for your attention.

1. S.8T, Taxation Administration Act: incorrectly keep

the 1987 cash book.

2. S.8T, Taxation Administration Act: incorrectly keep

the 1988 cash book.

3. S.8T, Taxation Administration Act: incorrectly keep

the 1989 cash book.

4. S.8T, Taxation Administration Act: incorrectly keep

the 1990 cash book.

5. S.8P, Taxation Administration Act: make a false

statement in the 1987 return.

6. S.8P, Taxation Administration Act: make a false

statement in the 1988 return.

7. S.8P, Taxation Administration Act: make a false

statement in the 1989 return.

8. S.8P, Taxation Administration Act: make a false

statement in the 1990 return.

9. S.7A, Crimes Act: encourage the commission of an

offence against a law of the Commonwealth.

Charges (1) to (4) are joined in the one information,

charges (5) to (8) are joined in a separate information and

charge (9) is contained in a third information.

Please arrange for each combined information and summons to

be laid before a Justice of the Peace at the St James Local

Court and for each to be served on Mr Smiles. If possible,

subject to the court's convenience, please try to have the

summonses returnable for either March 9 or March 23."

34. After giving advice on evidence, the letter concluded as follows:

"Please let me know when the informations have been laid and

the summonses served."

35. As has been noted, the informations were laid on 29 January 1992 and the proceedings in this Court were instituted on 6 March 1992. On 13 April 1992, the day before Davies J. was to undertake the final hearing of the application, the Taxation Office wrote to the appellant's tax agent, Mr Moon, as follows:

"INCOME TAX

The attached cheque for the sum of $8233.32 represents a

payment of ARISING FROM REMITTANCE OF PENALTIES."

36. It appears that this payment was made pursuant to s.8ZE of the Taxation Administration Act which provides that penalty taxes are to be alternative to prosecution for certain offences as follows:

"8ZE(1) Where -

(a) but for this subsection, an amount is payable by a

person under a penalty tax provision by reason of an

act or omission of the person; and

(b) a prosecution is instituted against the person for an

offence against section 8C, subsection 8K(1) or

section 8N or 8P of this Act or section 262A of the

Income tax Assessment Act 1936 constituted by the act

or omission,

the amount is not payable unless and until the prosecution

is withdrawn.

(2) Where -

(a) a person is liable to pay an amount (in this

subsection referred to as the 'penalty tax amount')

under a penalty tax provision by reason of an act or

omission of the person;

(b) an amount (in this subsection referred to as the

'relevant amount') is paid, or applied by the

Commissioner, in total or partial discharge of the

liability; and

(c) a prosecution is instituted against the person for an

offence against section 8C, subsection 8K(1) or

section 8N or 8P of this Act or section 262A of the

Income Tax Assessment Act 1936 constituted by the act

or omission,

the relevant amount shall be refunded to the person or

applied by the Commissioner in total or partial discharge of

a tax liability of the person, but, if the prosecution is

withdrawn, the person shall again become liable to pay the

penalty tax amount."

37. The proceedings in the Local Court have been adjourned pending the outcome of these proceedings. The Local Court proceedings have been taken over by the Director pursuant to the provisions of s.6(1)(d) of the Director of Public Prosecutions Act 1983.

38. On behalf of the appellant, it is submitted that the prosecution was an abuse of process in the sense explained in Williams v Spautz [1992] HCA 34; (1992) 107 ALR 635. Mason C.J., Dawson, Toohey and McHugh JJ. there said (at 648-49):

"Predominant purpose

It has been suggested that the criterion for abuse of

process is whether the improper purpose is the sole purpose

of the moving party...However, in more recent times it has

been said, in our view correctly, that the predominant

purpose is the criterion. That was the test applied by Lord

Denning in Goldsmith v. Sperrings Ltd...and by the English

Court of Appeal in Metall and Rohstoff v. Donaldson Lufkin and

Jenrette Inc. In giving the judgment of the Court in the

latter case, Slade L.J. observed...:

'(A) person alleging such an abuse must show

that the predominant purpose of the other party

in using the legal process has been one other

than that for which it was designed.'

It is, of course, well established that the onus of

satisfying the court that there is an abuse of process lies

upon the party alleging it. The onus is 'a heavy one', to

use the words of Scarman L.J. in Goldsmith v. Sperrings

Ltd...and the power to grant a permanent stay is one to be

exercised only in the most exceptional circumstances..."

"Nevertheless, the fundamental purpose of criminal action

for defamation, as with other criminal proceedings, is to

decide whether the accused has engaged in conduct which

amounts to an offence and is deserving of punishment...

Consequently, we do not regard to primary judge's finding

that vindication of his reputation was a subsidiary motive

of Dr Spautz as detracting from the overall finding that his

predominant purpose was improper in that he sought to use

the threat of proceedings and the maintenance of them as a

means of securing his reinstatement."

39. The application of the test for abuse of process laid down in Spautz is essentially a question of fact. In the present case, its application is a matter of some difficulty.

40. On the one hand, it is said, on behalf of the appellant, particularly with reference to the charge under the Crimes Act, that when regard is had to all the circumstances, the bringing of the prosecution can only be explained, or can predominantly be explained, by reference to the fact that the appellant was a member of Parliament and, the argument runs, this establishes that the prosecution was brought for an improper purpose.

41. On the other hand, it is contended on behalf of the respondents that the evidence discloses no more than a legitimate purpose in the bringing of the prosecutions.

42. As we have noted, the primary Judge concluded that the appellant's "position as a high profile person was a factor which led to the institution of the prosecutions." It is contended that that conclusion was not properly open to his Honour.

43. The resolution of these issues is a matter of some complexity. In our view, it is neither necessary nor appropriate that we attempt to do so. We have reached that conclusion for the following reasons.

44. It is clear that, in an appropriate case, the Local Court has the power to stay civil or criminal proceedings before it which are an abuse of process (see Jago per Mason C.J. at 25-6; Spautz at 640-42; Newby v Moodie at 526). Thus, it is open to the appellant to apply to the Local Court for a stay if so advised.

45. The power of a court to stay a proceeding as an abuse of its process is an essential attribute of the exercise of the jurisdiction with which it is invested; see Spautz at 641-42. If the court in question is exercising federal jurisdiction, as is the Local Court here, the ordering of such a stay against the Director or the informants would not be an order to which there would apply the limitations upon jurisdiction imposed upon State courts by s.9 of the ADJR Act.

46. This is because the decision would not be a decision of an administrative character. Nor would it be an order by an officer of the Commonwealth made in the exercise of judicial power as specified by s.9(1)(d) of the ADJR Act. The judicial officers of State courts, including inferior courts, which are invested with federal jurisdiction are not officers of the Commonwealth for the purposes of s.75(iv) of the Constitution, and therefore are not officers of the Commonwealth for the purposes of s.9 of the ADJR Act; see The King v Murray and Cormie; Ex parte The Commonwealth [1916] HCA 58; (1916) 22 CLR 437.

47. On the other hand, there are strong discretionary reasons why this Court should not intervene in the Local Court proceedings. As Mason C.J. said in Vereker v O'Donovan (1988) 6 Leg Rep SL 3:

"The undesirability of fragmenting the criminal process is

so powerful a consideration that it requires no elaboration

by us."

48. A similar statement was made by Mason C.J. in Yates v Wilson [1989] HCA 68; (1989) 168 CLR 338 at 339.

49. Authorities such as Foord v Whiddett [1985] FCA 158; (1985) 60 ALR 269 at 278-280; Murphy v Director of Public Prosecutions [1985] FCA 177; (1985) 60 ALR 299 at 302-3; Newby v Moore, above, at 528-9; Stergis v Boucher (1989) 86 ALR 174 at 192-3; and Thorp v Abbotto [1992] FCA 112; (1992) 106 ALR 239 at 250-251 establish that only in exceptional circumstances should this Court intervene in criminal proceedings pending in another court. See also Conwell v Tapfield (1981) 1 NSWLR 595, Anderson v Attorney-General for New South Wales (1987) 10 NSWLR 198, Imperial Tobacco Ltd v Attorney-General (1981) AC 718 at 742, 746, 752.

50. Given the power of the Local Court to grant a permanent stay of proceedings, if an abuse of process is established, there is no reason why this Court should become involved in the matter at all. In our view, the application for relief had to fail for discretionary reasons.

51. It must follow that the appeal be dismissed, with costs.

52. A separate ground of appeal was argued with respect to the order made by Davies J. that the appellant pay the respondent's costs at first instance.

"In my view, the applicant should pay the respondents' costs

of the proceedings. I have considered the fact that the

brief of evidence put by the Audit Prosecution Unit to the

Office of the Director of Public Prosecutions was not

produced until a very late stage in the hearing. It was a

very significant piece of evidence and, in view of the

pre-trial directions given by a Judge of the Court, ought to

have been produced and verified at an early stage.

Nevertheless, it does not seem likely that the nature of its

contents would have taken the applicant by surprise."

54. We see no proper reason for disturbing the exercise of his Honour's discretion on this matter.