30 October 2007
TRIMCOLL PTY LTD v DEPUTY COMMISSIONER OF TAXATION
Judgment
1 SPIGELMAN CJ: I agree with Basten JA
2 IPP JA: I agree with Basten JA.
3 BASTEN JA: The events which gave rise to this appeal occurred between 1 June 1994 and 30 September 1999. During that time, Trimcoll Pty Ltd (hereinafter "Trimcoll" or "the defendant") operated in the building and construction industry. According to the Respondent, a Deputy Commissioner of Taxation ("the Commissioner"), Trimcoll made payments to subcontractors but failed to deduct amounts which the Commissioner contended it was required to deduct pursuant to s 221YHDA of the Income Tax Assessment Act 1936 (Cth), as then in force. As a result of those failures, it incurred penalties totalling more than $3.75 million, which the Commissioner is seeking to recover by proceedings brought in the Common Law Division.
Issues raised
4 Those proceedings have not yet been completed, nor has the trial commenced. This appeal is brought from an interlocutory judgment delivered by Hall J on 16 December 2005. The Appellant required leave to proceed with the appeal, which leave was granted by the Court on 10 November 2006.
5 As will be explained below, the Commissioner's statement of claim in this matter was terse, to the point of being obscure. On their face, each of the payments made without deductions was made to a company or business which had supplied Trimcoll with an appropriate declaration, the effect of which was to permit payment in full of the sum payable under the contract, without a deduction under the Income Tax Assessment Act. The Commissioner's allegation appears to have been, adopting a somewhat unhelpful label, that these were "bodgie companies". By that the Commissioner meant the companies were not companies to which Trimcoll owed moneys under contracts involving the performance of work in the industry. Rather, she contended that the payments were due and payable to third parties who did not enjoy the benefit of a deduction variation certificate entitling them to receive payments without deduction of amounts on account of tax, but who nevertheless obtained the payments made by Trimcoll without deduction.
6 Interlocutory steps had reached the stage where affidavits had been prepared for Trimcoll, which attached invoices and "payee declarations", which referred to certificates provided to the businesses to which payments were made, permitting payment without deductions. These certificates were referred to as "deduction variation certificates". On 23 May 2005 the Commissioner made a "request" in accordance with Part 4.6 of the Evidence Act 1995 (NSW) that Trimcoll call as a witness at the trial each of the persons responsible for providing an invoice or a payee declaration that included reference to a deduction variation certificate providing that the permissible rate of deduction was 0%. On the understanding that Trimcoll did not intend to call those witnesses, on 30 June 2005 the Commissioner sought an order pursuant to s 169 of the Evidence Act that the evidence to which her request related not be admitted. In giving judgment on 16 December 2005, Hall J did not accede to that proposal but made the following order:
"Order pursuant to s 169(1) of the Evidence Act 1995 (NSW), that the defendant [Trimcoll] call as witnesses the persons specified in the letter dated 23 May 2005 … as persons believed to be concerned in the production or maintenance of the documents referred to in the schedule to this order for the purpose of determining questions that relate to either the previous representations made by those persons, or to the identity or admissibility of the documents."
7 Trimcoll seeks on this appeal to challenge the order made, both as an inappropriate exercise of the discretionary power conferred by s 169 of the Evidence Act and because, properly understood, the power to make such an order was not engaged. To put its submissions in their context, it is necessary to identify the key features of the statutory scheme upon which the Commissioner's claim was based.
Operation of prescribed payments scheme
8 It has long been an established part of legislative schemes for the recovery and collection of income tax that those responsible for making payments are required to deduct certain amounts for remission to the Commissioner, before making the payments concerned: see, eg, in relation to deductions from salaries and wages, Stergis v Boucher (1989) 86 ALR 174 at 183-184 (Hill J). That part of the scheme which was the subject of the present proceedings was found in Part VI, Division 3A of the Income Tax Assessment Act, as in force between 1994 and 1999 when the payments were made. The object of that Division was "[t]o provide for the collection of tax by deduction from certain payments for work ("prescribed payments") made by payers ("eligible paying authorities"): s 221YHAAF. A prescribed payment was defined by reference to the Regulations: s 221YHA(1). Regulation 126 provided the following definition:
"126(1) A payment, being a payment within the meaning of Division 3A of Part VI of the Act, that is made, or is liable to be made, under a contract the performance of which, in whole or in part, involves the performance of work that consists of the carrying out for a person who is a prescribed person of any activity to which subregulation (2) or (3) applies is declared to be a prescribed payment for the purposes of that Division."
9 By reference to the definition of "prescribed person" in sub-reg 126(4) and the identification of relevant activities in sub-reg 126(2), it may be understood that a prescribed payment is one made under a contract involving the performance of work for a business involved in the building and construction industry. It is not in dispute that Trimcoll was carrying on such a business and that the payments in issue were "prescribed payments".
10 A person who made or was liable to make a prescribed payment was defined as a "paying authority": s 221YHA(1). The Appellant was not a natural person and was thus an "eligible paying authority": s 221YHA(4). It was therefore a body to which s 221YHH(1) applied, that section relevantly providing:
"If an eligible paying authority … which makes a prescribed payment to a payee does not deduct from the payment the amount required to be deducted under this Division, the eligible paying authority is liable to pay to the Commissioner an amount, by way of penalty, equal to the amount not deducted."
11 The present proceedings were brought pursuant to s 221YHN(1) which provided in part:
"An amount payable to the Commissioner under this Division by a person other than the Commonwealth is a debt due to the Commonwealth and payable to the Commissioner and -
(a) that amount may be sued for and recovered in a court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name … ."
12 Section 221YHH gives rise to two related questions: first, who was the "payee" to which the prescribed payments were made and, secondly, was the amount claimed "required to be deducted"?
13 So far as the first question is concerned, "payee" is defined to mean "a person who receives, or is entitled to receive, a prescribed payment under a contract": s 221YHA(1). The answer to the second question is more complex and requires reference to provisions relating to the making of "payee declarations" the existence or otherwise of a "deduction variation certificate" and whether such declarations and certificates were in force at the time of the relevant payment.
14 Having pleaded that Trimcoll was "an eligible paying authority", an assertion which was admitted, the two key paragraphs in the statement of claim read as follows:
"4. During the period 1 June 1994 to 30 September 1999 the defendant made prescribed payments but failed to deduct amounts ('prescribed payment deductions') from those payments as required by s 221YHDA of the ITAA 1936.
5. By reason of the failure to make prescribed payment deductions the defendant became liable to pay penalties, pursuant to subsection 221YHH(1) of the ITAA 1936."
15 Trimcoll admitted that it had made prescribed payments during the period in question but denied its failure to deduct amounts from those payments and denied that it was liable to pay penalties. It further asserted in its defence that "each of the payees to which it made prescribed payments had provided the defendant with a completed and signed Prescribed Payments System (PPS) Payee Declaration which varied the prescribed payment deduction to be made to NIL".
16 Section 221YHH(1), referred to in par 5 of the statement of claim, is set out above at [10]. However, it is clear that there was no challenge to the assertion that the defendant was liable to pay penalties if it had been required to make appropriate deductions from the prescribed payments. Rather, Trimcoll asserted that it was not required to make deductions.
17 The obligation to make deductions was separately identified in s 221YHD, in a case where a payee declaration had been made and was in force when the payment was made, and in s 221YHDA, in the case where there was no payee declaration. The combined operation of these two provisions appears from the relevant parts of each, which read as follows:
" 221YHD (1) This section applies if:
(a) an eligible paying authority makes a prescribed payment (in relation to which the eligible paying authority is not a householder) to a payee; and
(b) a payee declaration made to the eligible paying authority by the payee is in force when the payment is made.
(2) In such a case, the eligible paying authority must, subject to this section, deduct the ordinary percentage of the payment. …
(3) … [I]f:
(a) a deduction variation certificate number and deduction variation certificate percentage are stated in the payee declaration form; and
(b) the eligible paying authority reasonably believes the certificate is in force;
the eligible paying authority must deduct the deduction variation certificate percentage of the payment. …"
" 221YHDA (1) This section applies if an eligible paying authority makes a prescribed payment to a payee and:
(a) no payee declaration made to the eligible paying authority by the payee is in force when the payment is made; and
(b) the eligible paying authority is not a householder in relation to the prescribed payment; and
(c) the payee has not quoted a reporting exemption number to the eligible paying authority before the payment is made, or has done so but the eligible paying authority reasonably believes the approval to quote it is not in force when the payment is made.
(2) If this section applies, the eligible paying authority must deduct the non-declaration percentage of the payment. …"
18 The "ordinary percentage" payable under s 221YHD was 20% and the "non-declaration percentage" was 48.5%: a deduction variation certificate could reduce the required deduction of the "ordinary percentage" to a figure specified in the certificate.
19 The scheme for making payee declarations and reliance upon them was set out in s 221YHB, which provided as follows:
" 221YHB (1) Subject to subsection (2), a payee who becomes entitled to receive a prescribed payment from an eligible paying authority may, for the purposes of this section, at any time before the payment is made give a payee declaration form, completed and signed by the payee, to the eligible paying authority.
(2) Subsection (1) does not apply if:
(a) the eligible paying authority is a householder in relation to the prescribed payment; or
(b) the payee has quoted a reporting exemption number… .
(3) A ' payee declaration form ' is a document, in a form approved by the Commissioner for the purposes of this subsection, that (in addition to anything else that it requires or permits):
(a) requires the payee completing the form:
(i) to state his or her tax file number …; and
(b) permits the payee completing the form:
(i) to state a deduction variation certificate number and deduction variation certificate percentage … .
(4) If the payee gives the form to the eligible paying authority, the payee is said to make a ' payee declaration ' to the eligible paying authority.
(5) A payee declaration made to an eligible paying authority is in force at all times after it is made until any of the following happens:
(a) 1 year passes after the eligible paying authority makes a prescribed payment to the payee (being a payment made when the declaration is in force) without the payee again becoming entitled to receive a prescribed payment from the eligible paying authority;
(b) the payee makes another payee declaration to the eligible paying authority … ."
20 Where a payee declaration form is given to an eligible paying authority, the latter must sign the form, make and retain a copy of it until the end of the financial year after that in which the payee declaration ceases to be in force and send the form, within 28 days of receipt, to a Deputy Commissioner: s 221YHC.
21 The Commissioner asserted that the companies or businesses which provided the relevant payee declarations to Trimcoll were not in fact those entitled to receive the prescribed payments, nor were they the real recipients of the prescribed payments. If they did in fact receive the prescribed payments, they were merely agents or conduits for third parties, who were contractually entitled to receive the moneys for work performed. Who those third parties were, the Commissioner was unable to say. However, the Commissioner contended that she was entitled to have those persons responsible for creating the certificates called by Trimcoll as witnesses. It is convenient to turn next to the provisions of the Evidence Act under which that claim was raised.
Request to call evidence: Evidence Act
22 Part 4.6, Division 1, was primarily intended to provide certain procedural protections to a party whose interests might be adversely affected by the broader scope provided by the Evidence Act for the admissibility of documents which are not originals or which might previously have been rejected as offending the rule against hearsay and not falling within any relevant exception: see The Law Reform Commission (Cth), Report No. 26 Interim Evidence (AGPS, 1985) pars 343, 648, 658 and 707, and see Anderson, Hunter & Williams, The New Evidence Law (2002, Lexis Nexis) at pp 579-580. One question raised on this appeal is whether the relevant provisions are so confined or whether they have a broader operation.
23 Section 166 of the Evidence Act defines the nature of a "request" which can be made to another party as covering requests to produce the whole or part of a specified document, to permit the examination, testing or copying of the document, or to call a witness concerned in the production or maintenance of the document, or in whose possession or under whose control it is believed to have been at any time. Importantly in the present context, the request need not be concerned with a document at all. That may be relevant because, as will be noted below, a representation may be inferred from conduct. Thus paragraph (f) in s 166 permits a request:
"(f) in relation to evidence of a previous representation - to call as a witness the person who made the previous representation."
24 The nature of such a request must be consistent with the purpose identified in s 167 in the following terms:
"167 A party may make a reasonable request to another party for the purpose of determining a question that relates to:
(a) a previous representation; or
(b) evidence of a conviction of a person for an offence; or
(c) the authenticity, identity or admissibility of a document or thing."
25 Section 168 provides time limits for the making of requests, but these have no relevant application for present purposes. Section 169 provides for the orders which can be made where a party has "without reasonable cause, failed or refused to comply with a request" which include orders of the kind sought and made in the present case.
26 It is the operation of s 167, read in its statutory context, which lies at the heart of the present dispute, and in particular the scope of paragraphs (a) and (c). The application of the provision is conveniently addressed by identifying the "question", the determination of which must be "the purpose" of the request. In doing so, it is necessary to bear in mind that the connection between the question and the document need not be direct and immediate. The purpose of the request need not be to determine the authenticity of a document, for example, but merely to determine a question that "relates to" the authenticity of the document.
27 The first basis on which the request was sought to be justified was that there was a question to be determined relating to "a previous representation". The Dictionary to the Evidence Act contains a definition of "representation" but it is inclusive and not determinative of the present issue. It includes a representation "to be inferred from conduct" and one "not intended by its maker to be communicated to or seen by another person": pars (b) and (c) of definition. The term "previous representation" is defined to mean "a representation made otherwise than in the course of giving evidence in the proceedings in which evidence of the representation is sought to be adduced".
28 These terms are also used in s 59 of the Evidence Act, dealing with the hearsay rule. That section identifies the rule in the following terms:
"59(1) Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation."
29 The exclusionary rule does not apply "to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of the fact intended to be asserted by the representation": Evidence Act, s 60. Nor does it apply, for example, to certain business records: see s 69. For the purposes of the exclusionary rule (and therefore its exceptions) the broad scope of the term "representation" is constrained. The first constraint is that it be a "previous representation" being, in the general law parlance, an out of court statement. Secondly, although a representation may be inferred from conduct, it will only be inadmissible to prove a fact that the person intended to assert by the representation (or conduct). These limitations may give rise to their own difficulties of application: see Regina v Hannes [2000] NSWCCA 503; (2000) 158 FLR 359; 36 ACSR 72 at [257]-[361] (Spigelman CJ). That is so in the present case because, as will be discussed below, the Commissioner seeks to treat the documents in question as evidence of sham transactions. However, their admissibility may not depend on that intended use, but may as Trimcoll contended, depend on its proposed use, namely to provide a justification for making prescribed payments without deductions.
30 The scope of the trinity in s 167(c), "authenticity, identity and admissibility", is reasonably clear as to its core, but imprecise at the periphery. For example, a party may seek to tender a handwritten file note, the relevance of which may be obscure unless one knows the author of the document, when it was created and whence it was extracted. These may be considered questions of "identity" in relation to a document or thing. If the nature of the document, its author and its time of creation is apparent on its face, there may be a question as to whether it is indeed what it purports to be, which might be categorized as a question of "authenticity". Those matters may determine whether it is relevant, whether it is a business record, and may thus be matters affecting its admissibility. There is thus no entirely clear dividing line between questions of authenticity and identity and each may provide a basis for admissibility: see National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309 at [17]-[19] (Bryson J). The connection was identified by Heydon JA in Daw v Toyworld (NSW) Pty Ltd [2001] NSWCA 25 at [46], noting that "if the document was of unknown origin, it could have been objected to as unauthenticated and irrelevant". Indeed, the caselaw discussed by Austin J in Australian Securities and Investments Commission v Rich (2005) [2005] NSWSC 417; 216 ALR 320 at [93]-[121], is devoted to the question of authentication as a precondition to admissibility. Of more direct relevance for present purposes, Austin J referred to a distinction drawn by Hidden J in New South Wales Crime Commission v Trinh [2003] NSWSC 811 at [14] between authenticity and accuracy. Austin J stated at [118]:
"Hidden J's reasoning in Trinh , distinguishing between authenticity and accuracy, identifies part of a wider distinction, between matters of authenticity going to the adducing of evidence, and matters going to the credibility and weight of documentary evidence once it has been authenticated and judged admissible. Authentication is about showing that the document is what it is claimed to be, not about assessing, at the point of the adducing of the evidence, whether the document proves what the tendering party claims it proves."
31 Two questions may be identified as arising from this consideration of the scope of s 167(c): first, because the business record exception to the hearsay rule (contained in s 69 of the Evidence Act) operates only in the field of documents containing previous representations (that being the scope of the exclusionary rule), does s 167(c) operate in relation to business records which are tendered otherwise than by way of an exception to the hearsay rule? Secondly, if the issue in the proceedings is not that the records were in fact created, but that they were created as evidence of a sham transaction, does that matter raise a question of "authenticity" or as to the inferences which should properly be drawn from them, once they are admitted in evidence?
32 The scope of s 167 may be identified by reference to the definition of a "request" in s 166. That provision has been summarised at [23]. So far as s 166 permits a request to call a witness, paragraphs (c) and (d) deal respectively with persons believed to be "concerned in the production or maintenance of a specified document or thing" and persons "in whose possession or under whose control a specified document or thing is believed to be or to have been at any time". Questions of maintenance, possession and control, are primarily directed to the authenticity or provenance of a document in a mechanical or physical sense. They extend in terms to "things" and would allow a request, for example, designed to test the integrity of the procedures by which a blood sample may have been taken and preserved. However, the use of the term "production" may go further. Read in context (the term "produced" also appears in par (e)) it would clearly extend to the creation of the document, as opposed to its production to the Court or to the other party. This would at least include matters going to the admissibility of the document which, in relation to the exception provided from the operation of the hearsay rule with respect to business records, requires that any representation made or recorded in the document not have been "prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding": s 69(3)(a).
33 If a request based on s 167(a) (or (b)) were limited to previous representations admissible by way of an exception to the hearsay rule there is no reason why par (c) should not permit a request as to the characteristics of the document in which they are contained, but because par (c) extends to "things" it is clearly not limited to exceptions to the hearsay rule. It may therefore cover characteristics of documents which do not contain previous representations and which are not tendered pursuant to an exception to the hearsay rule.
Issues
34 The issue in dispute (though not pleaded as such), was whether there was a contractual relationship between Trimcoll and each of the nominal payees, involving the performance of work in the building industry. If there were no such arrangement, the existence or otherwise of a payee declaration completed by the recipient of the moneys and the entitlement of the recipient to payment without deduction pursuant to a "deduction variation certificate" were entirely irrelevant. However, on the understanding of the Commissioner's case as set out above, it was necessary for her to establish the absence of such a contractual arrangement, in order to succeed. To that end, she sought to require Trimcoll to have available for cross-examination persons involved in the business which was the recipient of each prescribed payment, so as, no doubt, to cross-examine them as to the existence of any contractual arrangement involving the performance of building or construction work, in relation to which the prescribed payment was received. Such evidence would undoubtedly be relevant to the Commissioner's case and one can understand why the Commissioner, even if she had access to such witnesses, would not wish to call them, but would wish to cross-examine them. The question agitated below was whether she could achieve that object by reliance upon Trimcoll's refusal to comply with her request that it call such witnesses.
35 On 27 August 2003, before filing its defence, Trimcoll, through its solicitor, wrote to the Commissioner seeking the following particulars in relation to paragraph 4 of the statement of claim:
"1. Please specify each amount paid in respect of which it is alleged that the defendant should have made prescribed payment deductions.
2. In respect of each payment referred to in 1. please specify:
(a) date of payment;
(b) payee;
(c) purpose of the payment;
(d) reason it is alleged that the payment was a prescribed payment;
(e) whether the payment was to a company, person or entity that had been granted by the plaintiff Deduction Variation or Exemption Certificate pursuant to the Prescribed Payments System that was in effect at the time of the payment;
…"
36 The Commissioner replied on 18 September 2003 setting out details of the payments made, the date and the payee, in response to pars 1, 2(a) and 2(b) of the request for particulars. From that information it may be seen that the amounts to be deducted were 48.5% of the payment which was the "non-declaration percentage". In answer to the particulars requested in pars 2(c), (d) and (e), the Commissioner responded:
"2(c) The purpose of the payments was to enable payment to be made to subcontractors in consideration for the performance of work.
2(d) The payments were made to enable workers to receive money in consideration for the performance of work where the work was undertaken in the building and construction industry and where the payment related to an agreement by those workers to perform building or construction work.
2(e) No."
37 There was a degree of ambiguity in these questions and answers. First, the Commissioner identified a number of businesses by name as the relevant payees for the specified payments. If the term "payee" was being used in the statutory sense of a person who received or was entitled to receive a prescribed payment under a contract, it might be inferred that payment was made under a contract which involved the performance of work in the building or construction industry, for the purposes of sub-reg 126(1). It would follow that, if those business had made payee declarations which included deduction variation certificates varying the percentage to 0%, no deductions would have been required. The answer to question 2(d), possibly when read with the answer to 2(c), suggested that the payments were being made so that the recipients could in turn make payments to "subcontractors" or "workers" who had actually undertaken work in the building and construction industry. The answer to particular 2(e) was also ambiguous, although the ambiguity may have arisen from the question, as once it appeared that the recipients were not the persons to whom payment for work in the building industry was being made, it was unclear whether question (e) applied to the nominated recipients or their subcontractors or workers.
38 Following receipt of that response, the defence was filed. No reply has been filed to the defence. The result is that issue is deemed to have been joined: Uniform Civil Procedure Rules 2005 (NSW), r 14.27(2). However, that is an unsatisfactory state of pleadings because one is left to speculate as to whether the Commissioner's case is that no payee declarations were received, that payee declarations were received but were not in force at the relevant time, or that the payments were not made to the companies which supplied the payee declarations, because there was no contract between Trimcoll and those companies involving work in the building and construction industry.
Case as presented before primary judge
39 The primary judge found that "the factual issue which the plaintiff seeks to rely upon in answer to the defence of Trimcoll does not appear from the pleadings": at [65]. His Honour accepted that the case sought to be run by the Commissioner was that identified by senior counsel for the Commissioner before his Honour as summarized in the judgment at [66]:
"The central issue is whether or not payments which were made by the defendant were in respect of … genuine sub-contracting services provided by particular companies which were the payee entities … or whether the actual services were provided by third party contractors … ."
The Commissioner's case was further explained as involving the assertion that the recipient companies were "companies that obtained variation certificates to nil and were companies that provided things such as, in this instance, the defendant with invoices showing services were provided such as labour or plant hire where such services were not provided": Judgment at [68].
40 The case for the Commissioner thus bore some relationship to that found in Trylow Pty Ltd v Federal Commissioner of Taxation [2004] FCA 446; (2004) ATC 4406. One difference was that in Trylow the question was whether Trylow failed to make deductions from payments made in respect of salary and wages of its employees. As explained by Hill J at [16]:
"The circumstantial case was that the real relationship between Trylow, each company and the person claimed to be an employee of it was that the person in question was an employee of Trylow. Further, the person had directed Trylow to pay his salary to the relevant contentious company, which company then returned in cash to the person … what had been paid to the company less a fee or commission of 7% or 8%. Invoices which had been rendered by the contentious companies to Trylow purporting to be for employees of the contentious company made available by it to Trylow were, it was submitted, a sham in the legal sense of that word: Snook v London and West Riding Investments Ltd [1967] 2 QB 786, Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. They were, it was submitted, a disguise for the real relationship which I have set out above."
41 Before the primary judge, Trimcoll complained that no reply had been filed formally raising any ground of fraud: Judgment at [106]. His Honour expressed doubt as to whether the matters in issue should have been specifically pleaded, but noted that "the parties are well aware of the basis upon which the plaintiff proposes to dispute Trimcoll's defence": Judgment at [107].
42 His Honour's treatment of the pleading issue may have been partly based upon a peripheral question as to which party bore the onus of proof in relation to the fraudulent nature of the contractual arrangements. The Commissioner claimed that she could rely upon the pleadings in the statement of claim as prima facie evidence of the matters averred, in reliance on the Tax Administration Act 1953 (Cth), s 255-50 of which provided:
" 255-50 Certain statements or averments
(1) In a proceeding to recover an amount of a tax-related liability, a statement or averment about a matter in the plaintiff's complaint, claim or declaration is prima facie evidence of the matter.
(2) This section applies even if the matter is a mixed question of law and fact. However, the statement or averment is prima facie evidence of the fact only.
(3) This section applies even if evidence is given in support or rebuttal of the matter or of any other matter.
(4) Any evidence given in support or rebuttal of the matter stated or averred must be considered on its merits. This section does not increase or diminish the credibility or probative value of the evidence.
(5) This section does not lessen or affect any onus of proof otherwise falling on a defendant."
43 The primary judge held at [85]:
"The effect of the s.255-50(1) provision is to effectively shift the burden or onus to the defendant as it will be for the defendant to adduce evidence sufficient to displace the prima facie evidence of the plaintiff. In seeking to do so, Trimcoll in the present matter puts forward an evidentiary case based in part upon the payee declarations and invoices. In seeking to do so, it seeks to go behind the imposition of the penalties to establish particular factual circumstances which, if accepted, would assist it in establishing that there was no obligation in Trimcoll to make the prescribed payment deductions in question."
44 This passage appears to refer to the imposition on the defendant of an evidentiary burden, rather than a shift in the legal burden of proof. However, in dealing with the question of proper pleading of a claim in fraud, his Honour said that these were "not what might be termed conventional proceedings in that the plaintiff's allegations set out in the statement of claim constitute, by virtue of the statutory provisions discussed above, prima facie evidence in support of its claim": at [107]. He continued:
"In order to meet such prima facie evidence, it is for the defendant to both plead and prove grounds of defence, which establish that there was no basis in law for the imposition of penalties."
45 This approach was challenged on two bases. First, it was said to be wrong in so far as it treated s 255-50(1) as reversing the onus of proof. That such a provision did not have that effect was established by such authorities as Ex parte Ryan; Re Johnson (1943) 44 SR(NSW) 12 at 17, relying upon The King v Hush; Ex parte Devanny (1932) 48 CLR 487 at 507-508. In the passage relied upon, Dixon J stated:
"Sec 30R(1) of the Crimes Act [1914 (Cth)] provides that in a prosecution of the present description the averments of the prosecutor contained in the information shall be prima facie evidence of the matter averred. It is to be noticed that this provision, which occurs in a carefully drawn section, does not place upon the accused the onus of disproving the facts upon which his guilt depends but, while leaving the prosecutor the onus, initial and final, of establishing the ingredients of the offence beyond reasonable doubt, provides, in effect, that the allegations of the prosecutor shall be sufficient in law to discharge that onus."
46 If the primary judge intended to find that s 255-50 placed any legal burden of proof on the defendant, he was in error. No doubt he was entitled, for the purpose of giving directions under the Evidence Act, to identify the issue in the proceedings by taking account of the matters identified as being in issue, otherwise than by reference to the pleadings. However, in order to assess the reasonableness of the request made under s 167 and in order to determine whether there had been a failure or refusal to comply and, if so, whether that occurred without reasonable cause, Trimcoll stated that it was entitled to have the case against it properly pleaded.
47 The second objection was that paragraph 4 of the statement of claim, as set out at [14] above, did not contain any statement or averment upon which s 255-50 could operate. The fact that prescribed payments were made was admitted and, to the extent that deductions were not made, if that was not explicitly admitted, it might be inferred from paragraph 6 of the defence which sought to rely upon payee declarations which varied the prescribed payment deduction to 0%. Accordingly, the real question was whether Trimcoll was required to make deductions because of the operation of s 221YHDA. The assertion that it was is, at best, a conclusion involving both facts and law. No fact was expressly stated and it may be doubtful whether the assertion in paragraph 4 of the statement of claim was one which constituted prima facie evidence of any particular fact or facts: compare the more conventional form of pleading discussed in Chief Executive Officer of Customs v Hajje (2005) 224 CLR 159 at [15]-[18]. Had there been only one factual basis, it might have been open to rely upon s 255-50, even though the fact could be identified only by implication, so long as it could properly be described as "a statement or averment about a matter … in … the plaintiff's claim". That would be so even if the fact were an 'ultimate fact in issue': see Hajje at [4]. However, that is not this case; as noted above, there were a number of possible bases upon which the conclusion might arise. The statement of claim did not include any averment of the fact upon which the Commissioner now seeks to rely, namely that the recipients of moneys paid by Trimcoll did not receive the moneys pursuant to any contractual entitlement of a kind which satisfied the terms of reg 126(1).
48 Accepting that the Commissioner had put that matter in issue, she bore the onus of proving it by evidence, without the benefit of any prima facie evidential effect provided by s 255-50. This would need to be borne in mind in considering the discretionary factors relevant to the exercise of the power to make orders under s 169 of the Evidence Act, if that provision were engaged, quite apart from its relevance to the adequacy of the pleadings.
Application of principles
49 Because the case was pleaded under s 221YHDA, the Commissioner must establish that, in relation to each payment, there was no payee declaration which had been made to Trimcoll and was in force when the payment was made. That pleading was ambiguous, because, as appeared from the particulars supplied by the Commissioner, she knew and accepted that payments had been made to identified recipients each of which, it may be assumed for present purposes, had made to Trimcoll a payee declaration which was in force when the payments were made because it had not ceased to be in force by reason of any event referred to in s 221YHB(5). It is possible that the Commissioner sought to prove that there was no payee declaration properly made in the sense that none of the payees were persons who had become "entitled to receive" the relevant prescribed payments and therefore the payee declarations were not properly made for the purposes of s 221YHB(1). Put another way, the recipients identified by the Commissioner were not the payees to whom the prescribed payments were due, but mere agents or conduits for those who had carried out the work. In that sense, they were in no different position to a bank, building society or credit union which might have been the nominated recipient of funds, to be paid into the account of the third party who carried out the work. As with those institutions, whether the recipients held a valid deduction variation certificate, and whether they had made a payee declaration, were matters of no relevance.
50 On that approach, the Commissioner needed to demonstrate the limited role of the recipients and the fact that any contract involving the performance of work in the building industry involved the performance of work by third parties and not by the recipients.
51 The primary judge dealt with the application under s 169 of the Evidence Act by reference to the first three documents annexed to the affidavit of Mr Liam O'Gorman, a director of Trimcoll, dated 5 May 2005. The documents were: