FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Cassaniti [2018] FCAFC 212

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed with costs as agreed or assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GREENWOOD J:

1    I have had the benefit of reading the reasons for judgment written by Justice Steward. I agree with the orders proposed by his Honour and the reasons in support of those orders.

Associate:

Dated:    30 November 2018

REASONS FOR JUDGMENT

LOGAN J:

2    I have had the advantage of reading in draft the reasons for judgement of Steward J. I agree that this appeal should be dismissed with costs. Subject to what follows, I agree with the reasons Steward J gives for proposing those orders. I also wish to make some additional observations.

3    In a general sense, the proceeding in the original jurisdiction was a species of revenue law litigation but that is not to say that it is to be assimilated for all purposes with a taxation appeal.

4    The present was a claim for the granting of declaratory relief in the exercise of the federal jurisdiction conferred on the Court by s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (Judiciary Act) “in any matter … arising under any laws made by the Parliament”. It was not an appeal to the Court under s 14ZZ of the Taxation Administration Act 1953 (Cth) (TAA) against an objection decision. Thus, though Mrs Cassaniti had the burden of proving by admissible evidence the facts upon which her claim for declaratory relief depended, the source of that burden was not s 14ZZO of the TAA. Rather, the source of her having the burden of proof was the common law of Australia.

5    At common law, it is for the party asserting a claim against another to prove that claim: Dickinson v Minister of Pensions [1953] 1 QB 228 at 232; Currie v Dempsey (1967) 69 SR (NSW) 116 at 125. Because the Court was exercising federal jurisdiction in hearing the proceeding and because there was neither express Commonwealth statutory provision on the subject, nor contrary provision in the Commonwealth Constitution, nor in New South Wales statute law (being the State in which the Court’s jurisdiction was being exercised), s 80 of the Judiciary Act made the common law applicable in relation to the burden of proof: Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161, at [132] per Hayne J, Gleeson CJ and McHugh J agreeing. Further, the Commissioner being a representative of the Commonwealth, the effect of s 64 of the Judiciary Act was that Mrs Cassaniti’s rights in the proceedings and those of the rhe had to be “as nearly as possible the same” “as in a suit between subject and subject”. One of the rights that a respondent in a civil case has is that it is for the applicant to prove the facts necessary to obtain the relief sought.

6    In a taxation appeal, the only pleading is the notice of objection which, either in its original form or as permissibly amended, identifies the grounds upon which the applicant taxpayer alleges that the assessment concerned is excessive. Ordinarily in a taxation appeal, the burden of proof imposed by s 14ZZO of the TAA must be discharged by reference to those grounds. In some instances this can be complicated and additional grounds for the discharge by a taxpayer of the burden of proof raised, because the Commissioner of Taxation (Commissioner), subject to the giving of due notice and provision of particulars, is entitled to defend an assessment on grounds which did not inform its making: Commissioner of Taxation v Australia and New Zealand Savings Bank Ltd (1994) 181 CLR 466, at 479; Federal Commissioner of Taxation v Wade (1951) 84 CLR 105, at 117. These complications are not applicable to the present case.

7    The burden of proof is to be distinguished from the standard of proof. In a civil proceeding in this Court, the Evidence Act 1995 (Cth) (Evidence Act) is applicable (s 4 and “dictionary” definition of “federal court”). In that Act, the standard of proof is the subject of express provision, found in s 140, which provides for proof on the balance of probabilities. The Evidence Act has nothing to say in relation to the burden of proof.

8    The combined effect of the common law as applied by the Judiciary Act and s 140 of the Evidence Act was that the Court was obliged to find Mrs Cassaniti’s case proved only if she proved on the balance of probabilities that withholdings had been made.

9    Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 was a taxation appeal in which a predecessor of s 14ZZO of the TAA (s 190(b) of the Income Tax Assessment Act 1936 (Cth)) was applicable. Even though it was not the common law, as applied via the Judiciary Act, which was the source of the burden of proof in that case, that does not render inapplicable the five propositions that Steward J has derived from the judgment of Hunt J.

10    Another effect of the application to the proceeding of the Evidence Act was that Mrs Cassaniti’s evidence did not need to be corroborated: s 164.

11    To the discussion by Steward J of Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel) I would add the following as additional reasons for rejecting the Commissioner’s submissions.

12    Whether or not there had been withholdings was a disputed question of fact. In support of her case that there had been withholdings, Mrs Cassaniti did not just adduce her own evidence (which was accepted). She also adduced PAYG payment summaries, payslips, letters of offer and bank records. The Court’s duty at trial was not to speculate about evidence which might possibly have been called but rather to consider that adduced by Mrs Cassaniti and any other evidence admitted in the proceedings and then to decide whether, having regard to the whole of the evidence, she had discharged, on the civil standard, the burden of proof that fell on her: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345, at [165] – [166].

13    In determining whether a case has been proved to the civil standard, demonstration that other evidence could have been called but was not can, in certain circumstances, of which Jones v Dunkel offers an example, be relevant. But, for the reasons given by Steward J, it was not open in this case to draw any adverse inference against Mrs Cassaniti on a Jones v Dunkel basis in deciding whether her case was proved to the required standard.

14    As an officer of the Commonwealth, the Commissioner was bound to act as a model litigant in the conduct of litigation to which he was a party: Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333. In relation to that obligation and for reasons which I gave in Shord v Federal Commissioner of Taxation (2017) 253 FCR 157 (Shord), I rather doubt that s 37M of the Federal Court of Australia Act 1976 (Cth) added anything to that obligation. If anything, the model litigant obligation was more onerous.

15    It is the Attorney-General for the Commonwealth who is responsible for the whole of the Commonwealth’s legal business. Proceedings in which the Commissioner is a party are but part of the Commonwealth’s legal business. In relation to court proceedings and long before a statement as to the “overarching purpose of the civil practice and procedure provisions” graced the statute books, it was settled that the Court and the Attorney (and those lawyers acting for the Commonwealth or an agency or officer of the Commonwealth), “have a joint responsibility for fostering the expeditious conduct of and disposal of litigation”: Kenny v State of South Australia (1987) 46 SASR 268, at 273. Those acting for the Commissioner in the present proceeding had a duty to ensure that the Commissioner observed his model litigant obligations and to do so irrespective of whatever tension that may have engendered with the Commissioner as a client.

16    Nothing in the model litigant obligation that fell on him required the Commissioner to concede Mrs Cassaniti’s claim to the benefit of withholding credits. Having regard to the evidence given, facts found and observations made in Cassaniti v Federal Commissioner of Taxation (2010) 186 FCR 480 and to Cassaniti v Federal Commissioner of Taxation [2010] FCA 642; 79 ATR 378, there was every reason for the Commissioner to be guarded about accepting that there had been any withholdings. Yet reflection on that same body of material, in conjunction with the evidence adduced in this case, ought also to have given the Commissioner pause for thought for about seeking to make anything of the absence of evidence in chief at least from Mr Sam Cassaniti and Mr David Cassaniti in her case. In order to avoid any effect of Jones v Dunkel, Mrs Cassaniti was not obliged to call these persons without the benefit of a proof of evidence and have them claim privilege against self-incrimination when asked questions in her evidentiary case in chief.

17    Further, while the Commissioner was entitled to put Mrs Cassaniti to proof, he had to do this fairly. That duty is present whenever the Commonwealth is a party to litigation but a recollection of our history, as I related in Shord, makes it especially important that the Commissioner, as the Commonwealth’s chief revenue officer, act and be seen to act in this way. For reasons which Steward J details, the Commissioner did not so act in relation to an allegation of recent invention and fabrication.

18    In making his amended assessments, the Commissioner did act fairly, although he may have, to use the phrase, put all of his eggs in the one basket. He reduced Mrs Cassaniti’s taxable income to the total of the net weekly payments and assessed the tax payable thereon accordingly, but then disallowed any withholding credits against those assessed tax liabilities. That symmetry in approach was fair, even though the overall effect was to increase her tax liabilities beyond those resulting from the original assessments. Neither the primary judge nor we are concerned in the present case with the resolution of any anomaly whereby, success for Mrs Cassaniti in relation to her entitlement to withholding credits, would see those credits applied as against tax liabilities resulting from amended assessments, which did not assess her on the gross income, on her own case, she must be taken to have derived.

Associate:

Dated:    30 November 2018

REASONS FOR JUDGMENT

STEWARD J:

19    The respondent sought a declaration that she was entitled to tax credits pursuant to s 18-15(1) of Sch 1 of the Taxation Administration Act 1953 (Cth) (TAA) and related relief for the years of income ended 30 June 2012, 30 June 2013 and 30 June 2014. The credits arise from amounts said to have been withheld by the respondent’s alleged former employers. It is not in dispute that these amounts were not remitted to the appellant (Commissioner). The issue for determination is whether the amounts were in fact withheld in the required way. At first instance, the respondent succeeded in demonstrating this and the Court made the declaration sought and ordered the related relief. The Commissioner now appeals that judgment to this Court.

Legislative Scheme

20    The applicable legislative scheme is not in dispute and is set out at [3]-[12] in the reasons for judgment of the primary judge. Section 18-15 of Sch 1 of the TAA is the applicable operative provision. It provides:

18-15    Tax credit for recipient of withholding payments

(1)    An entity is entitled to a credit equal to the total of the amounts withheld from withholding payments made to the entity during an income year if an assessment has been made of the income tax payable, or an assessment has been made that no income tax is payable, by the entity for the income year.

(2)    To the extent that the entitlement to a credit is in respect of an amount withheld from a withholding payment to which paragraph 16-155(2)(aa) applies, the entitlement is treated as arising for the income year preceding the income year in which the withholding payment is made.

21    Section 995-1 of the Income Tax Assessment Act 1997 (Cth) (1997 Act) defines the terms “amount withheld” and “withholding payment” relevantly as follows:

amount withheld by an entity from a withholding payment means:

(a)    an amount that the entity withheld from the payment under Division 12 in Schedule 1 to the Taxation Administration Act 1953;...

...

withholding payment means:

(a)    a payment from which an amount must be withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld);...

...

withholding payment covered by a particular provision in Schedule 1 to the Taxation Administration Act 1953 means a withholding payment consisting of:

(a)    a payment from which an amount must be withheld under that provision (even if the amount is not withheld);...

22    Section 12-35 of Sch 1 of the TAA imposes the obligation to withhold. It provides:

12-35    Payment to employee

An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

23    Subdivision 16-A of Sch 1 of the TAA is entitled “To withhold”. Section 16-5 sets out the rules for when an employer should withhold. It provides:

16-5    When to withhold an amount

If Division 12 requires an entity to withhold an amount from a payment, the entity must do so when making the payment.

24    Subdivision 16-B of Sch 1 of the TAA is entitled “To pay withheld amounts to the Commissioner”. Section 16-70 sets out the liability of an employer to remit withheld amounts to the Commissioner. It relevantly provides:

16-70    Entity to pay amounts to Commissioner

(1)    An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision.

25    Section 16-140 of Sch 1 of the TAA requires an entity, which is obliged to remit withheld amounts to the Commissioner, to be registered. Subdivision 16-C of Sch 1 of the TAA is entitled “To provide information”. Pursuant to s 16-150 an entity required to remit to the Commissioner must notify the Commissioner of the amount that is to be paid using an approved form. Pursuant to s 16-155, within 14 days after the end of a financial year an employer must give an employee a payment summary of the amounts which have been withheld from that person’s salary or wages. Section 16-170 then describes the form and content of a payment summary. An annual report must also be given to the Commissioner.

Meaning of “to withhold”

26    Whilst the term “amount withheld” in s 18-15 is defined, the word “withheld” is not. The parties accepted that the judgment of Edmonds J in Cassaniti v Federal Commissioner of Taxation (2010) 186 FCR 480 (David Cassaniti) authoritatively determined the meaning of that word in s 18-15. Edmonds J said at [161]-[169]:

While the term “amount withheld” by an entity from a “withholding payment”, and that term itself, are defined (by s 995-1(1) of the [Income Tax Assessment Act 1997 (Cth) (the “ITAA 97”)]), the word “withhold” is not defined. Its meaning must be considered in the legislative context in which it exists. The previous (PAYE) system that existed used the term “deduct”. It was this expression which was considered in Sargon 16 ATR 355 where Ormiston J concluded that a deduction involved an arithmetic subtraction from a gross amount and the payment of a net amount, but did not specifically require the retention of the amount so deducted in any identifiable form: see [26] above.

The expression “withhold” is relevantly defined by the Oxford English Dictionary to mean:

To keep back; to keep in one’s possession (what belongs to, is due to, or is desired by another); to refrain from giving, granting, or allowing. Formerly with dat. of person. (The current sense.)

It is clear that the prevailing sense is one of deprivation, the holding back of something due to the employee, resulting in the reduction of a gross amount to a net amount which is paid to the employee. Accordingly, no credit will be available to the payee if they have received a gross amount. There must be a process by which this withholding takes place. It may be reflected in actual funds held by the payer on behalf of the employee pending payment to the Commissioner; on the other hand, and more usually, it may only be reflected in the wage records and books of account of the payer as an accounting entry.

Where an amount has been set aside by the payer and is quarantined in a bank account pending its remission to the Commissioner clearly the presence of the funds so designated will demonstrate that a withholding has been made. Indeed the remission of the amounts withheld will invariably lead to the same conclusion.

Where in the usual case the withholding process is represented only by accounting entries the question whether a legitimate process of withholding has ensued will depend upon a close examination of those books and records and the surrounding circumstances to see whether it may be inferred from those records and circumstances that a withholding has occurred. At one end of the spectrum, a mere journal entry in the absence of other evidence may not be sufficient evidence, having regard to the surrounding circumstances, that there has been a payment of salary and wages and a withholding from that payment. The authorities make it plain that entries of this kind, standing alone, are not conclusive evidence of the transaction: see, Temples Wholesale Flower Supplies Pty Ltd v Federal Commissioner of Taxation (1991) 29 FCR 93 at 100-103.

It is clear that what was said by Barwick CJ, Mason and Jacobs JJ in Barnes [(1975) 133 CLR 483] at 494 (see [25] above), was predicated on deductions having in fact been made.

Where there is a controversy about the occurrence of a withholding the surrounding circumstances may either support or detract from the drawing of an inference that a withholding was in fact made. There are a number of reporting requirements where an employer makes a PAYG withholding. In particular, pursuant to s 16-150 of Sch 1 to the TAA the payer is required to give notification to the Commissioner of the amounts it was required to pay to the Commissioner under s 16-70(1) on or before the day on which the amount is due to be paid (regardless of whether it is paid).

The notification must be in the “approved form” and lodged with the Commissioner. This will usually be by way of lodgement of the Business Activity Statements (“BAS”). Further, pursuant to s 16-153(2) the payer is required to give an annual report to the Commissioner in the “approved form” being a summary of payments withheld not later than 14 August after the end of the financial year.

These provisions govern and describe the obligations of the payer of salary and wages. Compliance with those provisions will constitute contemporaneous documentary evidence from which it may be inferred that a withholding has occurred. Conversely, where there has been little or no compliance with those provisions, it may be an open question whether in fact a withholding was made.

I respectfully agree with the foregoing.

27    The Commissioner relied upon the final paragraph above as supporting a proposition that where there has been non-compliance with an employer’s obligation to remit, it may be inferred that there had been no withholding. He also relied upon, for that purpose, Perdikaris v Deputy Commissioner of Taxation (2008) 172 FCR 412 (Perdikaris) at [36]. Here, it was not disputed that the three alleged employers had failed to comply with their remission obligations. Both parties nonetheless accepted that, as a matter of law, remission to the Commissioner was not a pre-condition to the obtaining of credits for the purposes of s 18-15 of Sch 1 to the TAA. Rather, what was critical was whether the act of withholding had taken place contemporaneously with the payment of salary or wages.

The Judgment Below

28    The primary judge, having identified the applicable principles of law, none of which are disputed, found for the respondent. In particular, his Honour found that there had been a withholding for the purposes of s 18-15 in respect of the payment of salary to the respondent. That factual finding is disputed by the Commissioner.

29    The respondent gave evidence and was cross-examined. The primary judge accepted that evidence “as truthful” (at [52]) and made findings that she was employed as a clerk for three entities successively: namely, by Ultra Nova Financial Services Pty Ltd as trustee of the Ultra Nova Discretionary Trust (Ultra Nova) from about June 2010 to about 20 May 2012; by Darlinghurst Properties (NSW) Pty Ltd as trustee for the Darlinghurst Financial Services Trust (Darlinghurst) from about 21 May 2012 to about April 2014; and by United Financial Pty Ltd as trustee for the United Financial Trust (United) from about April 2014 onwards. His Honour also found that these entities, in turn, had hired out the respondent’s labour to an accountancy practice, styled CAP Accounting, but owned by Armstrong Scalisi Holdings Pty Ltd (Armstrong Scalisi). The respondent’s husband, Mr David Cassaniti, was associated with this practice. The respondent’s role was limited to such things as greeting clients, answering calls, filing and photocopying, making coffee and making clients welcome. The primary judge also found that the respondent had been paid a gross salary of $65,000 by Ultra Nova, in accordance with an offer of employment, which she had accepted, and her net weekly pay had been paid into a bank account that she had nominated. She was also given an offer of employment by Darlinghurst and then by United upon the same terms of remuneration, which she had accepted.

30    The respondent exhibited to her affidavit payslips she had received during the period in dispute which set out her gross weekly pay, her net pay and her “PAYG withholding”. She also exhibited her PAYG payment summaries. These were admitted into evidence by the primary judge. His Honour, who decided that the payslips had been received contemporaneously by the respondent, accepted their accuracy. His Honour also accepted that the respondent was given each PAYG payment summary shortly after the expiration of each financial year. The primary judge found that the respondent was only ever paid the amounts recorded as net pay in the payslips; she never received the amount identified as gross pay. Banking account records of the respondent, which were also before his Honour, confirmed the receipt by her of only the “net pay”. In the case of Ultra Nova and Darlinghurst, the respondent’s bank accounts revealed that she had in fact been paid salary by Armstrong Scalisi. The primary judge found that this showed that these two employers had paid the respondent “indirectly”.

31    The primary judge also made findings about the three employers. United had never been registered for PAYG withholding as required by the TAA; had not lodged payment summaries as required; had not filed tax file number (TFN) declarations; and had remitted no PAYG amounts to the Commissioner. Similar findings were made in respect of both Ultra Nova and Darlinghurst.

32    In relation to the foregoing findings I make the following further observations:

(1)    first, consistently with authority, such as Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402; 11 ATD 108 and Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81, the primary judge examined the respondent’s evidence with “particular scrutiny” (at [90]);

(2)    secondly, medical evidence produced to the Court revealed that the respondent had been seeing a doctor about problems she had been having with her memory, such as difficulty in concentration;

(3)    thirdly, having had the benefit of both seeing and hearing the respondent, the primary judge preferred her testimony as “more direct evidence as to the provenance of the records” as against the allegations made by the Commissioner that the records relied upon by the respondent were “recent inventions”;

(4)    finally, the primary judge was not prepared to infer from the failure by the respondent to call Mr Sam Cassaniti (cousin of Mr David Cassaniti), Mr David Cassaniti and Mr Michael Lowe (another director of CAP Accounting), that their evidence would not have assisted the respondent’s case.

Grounds of Appeal

33    The Commissioner’s grounds of appeal were as follows:

1.    The learned primary judge erred in holding that the respondent was entitled to tax credits pursuant to s 18-15 of Sch 1 to the Taxation Administration Act 1953 (Cth), by     finding that Ultra Nova Financial Services Pty Ltd, Darlinghurst Properties (NSW) Pty Ltd and United Financial Pty Ltd withheld amounts from withholding payments made to her in the 2012, 2013 and 2014 financial years.

2.    The learned primary judge erred in fact by holding at [89] that payments to the respondent by Armstrong Scalisi Holdings Pty Ltd were, for the purposes of ss 12-35 and 18-15 of Sch 1 to the Taxation Administration Act 1953 (Cth), withholding payments indirectly made by Ultra Nova Financial Services Pty Ltd and Darlinghurst Properties (NSW) Pty Ltd.

3.    The learned primary judge erred in law by declining to infer (at [91]) that the evidence of David Cassaniti, Sam Cassaniti, Michael Lowe, Karen Foster, Sue McKellar and “Kirsten” would not have assisted the respondent.

The Appeal

Ground 1

(i)    Introduction

34    A fundamental plank of the Commissioner’s appeal was his contention that the primary judge erred in accepting the veracity of the PAYG payment summaries, the payslips, and the written offers of employment which contained the respondent’s terms of employment. It was the Commissioner’s case that these documents had either not been properly proven, or, as already mentioned, were a recent invention of the Cassaniti family. For the purposes of reviewing the findings of fact made by the primary judge, senior counsel for the Commissioner urged us to apply the following well known passage from the judgment of the High Court in Warren v Coombes (1979) 142 CLR 531 at 551:

[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it.

See also: Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93 at [47].

35    In the Commissioner’s submission, this was not a case in which material findings had been made which turned upon acceptance of the credit of the respondent. If that had been the case, the role of this Court would have been more confined. The respondent disagreed. She submitted that the key findings of fact depended upon approval of her evidence as “truthful”.

36    Where findings of fact turn upon an assessment of credit, a court of appeal should not interfere with those findings unless they are demonstrated to be wrong by incontrovertible facts or uncontested testimony, or they are glaringly improbable or contrary to compelling inferences: Robinson Helicopter Co Inc v McDermott [2016] HCA 22; 90 ALJR 679 (Robinson Helicopter) at [43]. The justification for this more limited role was explained by the High Court in the earlier decision of Fox v Percy (2003) 214 CLR 118 where Gleeson CJ, Gummow and Kirby JJ said at [23]:

On the one hand, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.

(Footnotes omitted.)

37    Here, the respondent swore in her first affidavit as follows:

18.    Annexed hereto and marked:

a.    “MC10” is a bundle of documents consisting of:

i.    Group certificates for the financial year ending 30 June 2012, and

ii.    My payslips.

b.    “MC11” is a bundle of documents consisting of:

i.    Group certificate for the financial year ending 30 June 2013, and

ii.    My payslips.

c.    “MC12” is a bundle of documents consisting of:

i.    Group certificates for the financial year ending 30 June 2014, and

ii     My payslips.

19.    At all times during the Relevant Period, I have only received remuneration after tax has been withheld from my gross income. The amounts of PAYG credits are deducted from my gross income.

38    In my view, the Commissioner’s contention that the foregoing documents were a recent invention involved an attack upon the credit of the respondent. It follows, that this Court’s function and role is limited in the way described by the High Court in Robinson Helicopter, supra.

39    However, that limitation did not apply to the other ground upon which the Commissioner relies in relation to the sufficiency of the evidence before the court. In particular, it does not apply to the contention that the provenance and authenticity of the business records exhibited to the respondent’s first affidavit had not been properly proven.

(ii)    Notice

40    A related issue concerned whether the respondent had been given proper notice of the contention of recent invention. This is an important issue for the respondent who submits – in answer to the Commissioner’s invocation of the rule in Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel) – that had she known about this allegation she may have been able to have addressed it with more evidence. The contention did not appear in the Commissioner’s notice of objection decision. That document merely said:

You have not provided sufficient evidence or other documentation to prove that tax was withheld from your payments from any of the employers listed in your 2012, 2013 and 2014 tax returns.

41    With respect to senior counsel for the Commissioner, this language fell far short of giving notice to a taxpayer that a reason for disallowing the objections was a serious allegation of fabricating evidence. Nor did the contention appear anywhere in the Commissioner’s “Respondent Summary of Case” dated 6 September 2017. Moreover, the Commissioner did not make, as he could have, any request of the respondent about the authenticity of the documents exhibited as “MC10” to “MC12” pursuant to s 167 of the Evidence Act 1995 (Cth) (Evidence Act). That provision relevantly provides:

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.

42    The contention was also not put to the respondent in cross examination. It was not put to her that her business records were a recent invention; nor was it put to her that they were a fabrication. If these matters were only hinted at by the cross-examiner, then the cross examination suffered from the same shortcoming as that observed by Middleton J in Visy Packaging Holdings Pty Ltd v Federal Commissioner of Taxation [2012] FCA 1195; 91 ATR 810 where his Honour said at [194]:

However, to some extent in the course of cross-examination, there was put to the witnesses… imputations only half hinted at by the cross-examiner. These imputations were not followed up in any meaningful way. It brought to mind the conduct described by Alexander Pope in his 1734 poem “Epistle to Dr Arbuthnot” in which he referred to those “willing to wound, and yet afraid to strike”.

The allegation of recent invention only first emerged in closing submissions before the primary judge, and after each party had closed their case.

43    In my view, notice of such a serious allegation should have been given at the earliest possible stage. Here, it was not. The Commissioner is under a duty fairly to give proper notice of a case he intends to put against a taxpayer. The duty exists in order to ensure the “just determination” of a proceeding for the purposes of s 37M of the Federal Court of Australia Act 1976 (Cth). That duty was not discharged.

44    This proceeding was an application for a declaration within the Court’s jurisdiction pursuant to s 39B of the Judiciary Act 1903 (Cth). The same foregoing observation would apply equally to a tax appeal made to this Court pursuant to Pt IVC of the TAA. The duty of disclosure is not diminished in such an appeal because the onus is on the taxpayer to demonstrate excessiveness: cf Rio Tinto Ltd v Federal Commissioner of Taxation [2004] FCA 335; 55 ATR 321 at [30] and [31] per Sundberg J.

45    In addition, in my view, the allegation of recent invention should have been put to the respondent in cross examination. In Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 (Allied Pastoral), Hunt J expressed the rule in Browne v Dunn (1894) 6 R 67 (Browne v Dunn) in the following way at 16:

It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross-examiner’s intention to rely upon such matters, it is necessary to put to opponent’s witness in cross examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witnesses the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference or to be drawn. That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial in which are generally regarded as being established by the decision of the House of Lords in Browne v Dunn (1894) 6 R 67.

The consequences of a failure to comply with this rule were then explained by his Honour at 26:

The consequence of that non-compliance does not, of course, mean that I cannot accept the submission by the Commissioner that, by reason of the inferences available from the evidence as a whole, I should disbelieve the evidence led on behalf of the taxpayer. It is clear from all the cases that it does not mean that but, as was said by the Court of Appeal in Poricanin’s case [1979] 2 NSWLR 419 at pp 426, 427, it would in many cases be wrong, unreasonable or even perverse for a tribunal of fact to reject evidence upon which there has been no relevant cross examination. I am satisfied with the description that it would usually be unfair to do so where the rule in Browne v Dunn has not been complied with, and where the witness has not otherwise been given the opportunity to deal with that suggestion now may for the first time in final address.

46    In MWJ v The Queen [2005] HCA 74; 80 ALJR 329, Gummow, Kirby and Callinan JJ observed that in civil proceedings, unfairness arising from a failure to observe the rule in Browne v Dunn could be cured by recalling the relevant witness. Their Honours said at [40]:

Reliance on the rule in Browne v Dunn can be both misplaced and overstated. If the evidence in the case has not been completed, a party genuinely taken by surprise by reason of a failure on the part of the other to put a relevant matter in cross-examination, can almost always, especially in ordinary civil litigation, mitigate or cure any difficulties so arising by seeking or offering the recall of the witness to enable the matter to be put. In criminal cases, in many jurisdictions, the salutary practice of excusing witnesses temporarily only, and on the understanding that they must make themselves available to be recalled if necessary at any time before a verdict is given, is adopted. There may be some circumstances in which it could be unfair to permit the recalling of a witness, but in general, subject to the obligation of the prosecution not to split its case, and to present or make available all of the relevant evidence to an accused, the course that we have suggested is one that should be able to be adopted on most occasions without injustice.

47    Here, of course, the allegation was made only after the evidence had closed. There thus appeared to have been no real opportunity to re-call the respondent. It follows that, in my view, the rule in Browne v Dunn was, if it matters, breached here. The consequence is that the finding made that the respondent’s evidence was “truthful” is probably buttressed by the failure to put the adverse allegation to the respondent.

(iii)    Findings Based on Credit

48    Returning to the contention pressed by the Commissioner that the payslips, offers of employment and PAYG payment summaries were a recent invention, that submission was rejected by the primary judge at [90] in the following terms:

I have taken into account the surrounding circumstances in what is ultimately a fact-finding exercise. While I accept the applicant’s submission that the non-payment to the Commissioner of amounts withheld does not show that the amounts were not withheld from the payments made to the applicant, that non-payment invites particular scrutiny of the facts and matters relied on by the payee. So also does the fact that the applicant and Mr David Cassaniti are wife and husband. Having considered the surrounding circumstances, in particular the evidence of the applicant, I have not accepted the respondent Commissioner’s submission that the Court could not be satisfied on the balance of probabilities that the letters of offer, the payslips, the summaries and the payroll advice were the true records of the three companies. Neither have I accepted the respondent Commissioner’s submission that those documents were recent inventions by some or all of Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe or that those documents were falsely prepared. It also follows that I do not accept the Commissioner’s submission that there was not sufficiently clear contemporaneous evidence of the PAYG being withheld from payments to the applicant.

49    Bearing in mind that the primary judge found that the respondent’s evidence was “truthful”, I am not persuaded that I should interfere with this finding. It was not suggested, nor could it have been, that the primary judge had palpably misused his advantage of seeing the respondent, or had acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or that the rejection of the contention of recent invention was glaringly improbable: Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479. It follows that this limb of the Commissioner’s appeal must fail.

(iv)    Authenticity of the Business Records and Other Evidentiary Issues

50    I turn now to consider the Commissioner’s alternative attack on the evidentiary foundation for the respondent’s case. It may be grouped into two areas:

(1)    contentions concerning the admissibility or probative value of the business records relied upon by the respondent; and

(2)    submissions concerning payments made by Armstrong Scalisi and the placing of Ultra Nova into administration.

51    As to the first submission, the respondent relied upon the three affidavits she had sworn. In the first, she exhibited the PAYG payment summaries and the payslips in the way set out above. The provenance of these documents was not, at that stage, identified. In the second affidavit, the respondent gave evidence concerning how she came to be employed by the three employers. At [12] of that affidavit the respondent deposed as follows:

On about 25 July 2017, Sam told me in words to the effect, “Maz, we found your employment contracts with Ultra Nova, Darlinghurst Property and United Financial for your court case. Here they are. Kirsten had put them in one of the boxes in the storage area in the garage.” At this point Sam handed me the following:

a.    a copy of employment contract with Ultra Nova dated 7 June 2010, which is annexed and marked “MC13” (Ultra Nova Contract);

b.    a copy of the employment contract with Darlinghurst dated 21 May 2012, which is annexed and marked “MC14” (Darlinghurst Contract); and

c.    a copy of the employment contract with United Financial dated 31 March 2014, which is annexed and marked “MC15” (United Financial Contract).

52    Importantly for the Commissioner, the evidence of the conversation with “Sam” was admitted into evidence, but, pursuant to s 136 of the Evidence Act, only as evidence of the fact of the making of that conversation and not as proof of the provenance of the documents thereafter exhibited.

53    In her third affidavit, filed the day before the hearing, the respondent deposed as follows:

3.    With respect to the documents contained from pages 278 to 406 (exhibit MC10 to exhibit MC 12) to my affidavit of 23 May 2017, shortly before I swore my affidavit, I was at work and Sue McKellar, a filing clerk of CAP Accounting (now Accolade Advisory) for about 10 years, put these documents together for me from various client folders and client boxes stored at the office. At or about this time, I said to Michael Lowe words to the effect: “I need some documents for my case with the ATO – I need my wage records from the 2012-2014 financial years” and he said words to the effect “Sue will do a search and get together a copy of records for you.”

4.    With respect to page 278 of the exhibit MC10 of my affidavit of 23 May 2017, in the 2012 financial year, Michael Lowe had a boss called Karen Foster, but I never met her. My other PAYG payment summaries for the 2012-2014 financial years are in evidence. In those years, Mr Lowe gave me a copy of my payment summary in hard copy shortly after each financial year. In the 2012-2014 financial years, Michael Lowe managed payroll issues for staff at work.

5.    I refer to the documents contained in the exhibit MC13 to MC15. To the best of my recollection, these are copies of letters that I was given by Mr Lowe at or about the time of the conversations referred to in paragraphs 5, 7, and 9 in my affidavit of 8 August 2017. I always read these letters when I was given them to make sure I understood them. I don’t remember ever keeping my copy of the letter.

54    The final sentence of [3] was admitted into evidence, but again pursuant to s 136 of the Evidence Act, not as proof of as to where the documents exhibited at “MC10” to “MC12” had come from.

55    The Commissioner submitted that it followed that the respondent had failed to discharge her onus of proof because she had not adequately proven the authenticity of the business records she relied upon. There was no evidence of their provenance. There are two answers to that proposition.

56    First, the respondent deposed in her last affidavit that every week she received from Mr Michael Lowe a hardcopy payslip, and that to the best of her knowledge the payslips exhibited to her first affidavit, supra, were those documents. The primary judge accepted that evidence at [60].

57    In cross examination the respondent also gave answers which constituted direct evidence as to the provenance of at least some of the payslips. Thus, she gave the following answers when shown some of the payslips:

MR McLURE: ….

Could I just ask you just to quickly just familiarise yourself not necessarily with the detail, but between pages 281 and pages 300. Have you seen those?---Yes.

Have you seen those documents before?

MR McGOVERN: Before today?

MR McLURE: Before now?---Yes.

When did you first see these documents?---When I was at the office.

At which office?---Liverpool.

At CAP Accounting?---Yes.

And what was the reason for you seeing these documents?---It was my payroll advice slip.

Well, do you think this is a payslip that you were receiving periodically from your employer?---Yes.

So how often did you receive a document like this?---Weekly. Every week.

Right. And would you receive it for – I will start again. So if you just look at page 281?---Yes.

Do you see in the right-hand column at the top it says:

Payment date 4 July 2011.

?---Yes.

And then you go about halfway down the page:

Payment date 11 July 2011.

Do you see that?---No. I can’t see the – the second date.

So it’s about halfway down the page on the right-hand side. It has got cheque number, payment date, gross - - -?---Yes.

Yes?---Yes.

Do you see the second payment date, 11 July 2011?---Yes.

And then about two-thirds of the way down the page, the right hand side, the payment date 18 July 2011?---Yes.

So do you still tell his Honour that you received a document like this once a week?---Yes.

And would it be a page with all of that information on it like we’ve just looked?---Yes.

58    In my view, the identification of the payslips as being documents the respondent saw at the offices of CAP Accounting, which she remembered receiving every week, sufficiently establishes the provenance of those documents, at least in respect of those shown to the respondent in cross examination.

59    The respondent was cross-examined about the PAYG payment summaries and conceded that she did not know if they were the documents supplied by Mr Lowe to her solicitors. However, she did give evidence that she obtained these annually. I shall return to those documents. She was also cross-examined about the letters of offer from each employer which she claimed in her second affidavit to have received. She was shown the letters of offer from Ultra Nova, from Darlinghurst and from United. On each occasion she recognised each document as one she had received at the time. For example, the following exchange concerned the letter of offer from Darlinghurst:

Yes. Again, will you accept that bearing in mind the problems that you’ve had with your memory and the fact that your signature doesn’t appear anywhere on this document that you couldn’t accurately say that this was a letter that was provided to you in 2012?---No. It was because now that I’m looking at it I – I do remember.

60    Similar answers were given in relation to the letters from Ultra Nova and United. In my view, it was open for the primary judge to consider the answers given by the respondent as “truthful” and as sufficiently establishing the provenance of each letter. And that is so notwithstanding the ostensible admission secured by counsel for the Commissioner in cross examination concerning the way in which the respondent came to be employed by each of her three employers. In the course of cross examination, the respondent agreed, for example in relation to her employment with Ultra Nova, that the papers she signed comprised a pink form and that a similar form had been signed when she commenced working with Darlinghurst. The following exchange took place:

MR McLURE: So Mrs Cassaniti, in relation to the forms, you agree, don’t you, that what we are talking about are forms that you think you remember signing in 2010 and 2012; correct?---Yes.

And would it be fair to say that you wouldn’t be able to accurately identify that form now unless someone could put it in front of you and you could see your signature on it?---Yes.

So without your signature, you couldn’t be certain that it was a document that was presented to you by Mr Lowe back in 2010 and 2012; correct?---Yes.

And that would be the same for any form that was provided to you like that by Mr Lowe any time after 2012; correct?---Yes.

61    Given the answer “Yes” to the question – “without your signature, you couldn’t be certain that it was a document that was presented to you” – it was submitted that the respondent’s evidence concerning the letters of offer contained in her second and third affidavit should have been rejected. She had not signed any of those letters of offer. The primary judge rejected the submission. His Honour said at [56]:

I do not accept the submission on behalf of the respondent Commissioner that I should find on the basis of the applicant’s oral evidence that the applicant was not given these documents at the times to which I have referred. In my opinion, the cross examination on those issues was, for a person of the applicant’s education and understanding, too oblique to found the conclusion for which the respondent Commissioner contended. For example, to refer in questions to a “form” would not readily induce recollection of a letter.

62    In my opinion, that finding was open to his Honour to make, especially having regard to the fact that the respondent had been apparently having difficulty in concentrating. There is no necessary inconsistency in the answers given by the respondent in relation to the pink forms and her memory of receiving the letters of offer. A lay witness can sometimes all too readily agree with a precise proposition put to her or him in cross examination. It is then a matter for the trial judge to assess the weight to be given to such answers. Here, the primary judge did just that and gave less weight to the answers concerning the pink form because the issue was “too oblique” for the witness given her level of education and understanding.

63    The second answer to the Commissioner’s submission is that, leaving aside the answers given by the respondent in cross examination, and the finding by the primary judge concerning her truthfulness, the authenticity of the documents relied upon here was discernible by the drawing of inferences from their appearance and context without the need to call their makers as witnesses. This was the respondent’s submission below. Section 58 of the Evidence Act provides:

(1)    If a question arises as to the relevance of a document or thing, the court may examine it and may draw any reasonable inference from it, including an inference as to its authenticity or identity.

(2)    Subsection (1) does not limit the matters from which inferences may properly be drawn.

64    In Australian Competition and Consumer Commission v Air New Zealand Limited (No 1) (2012) 207 FCR 448, Perram J at [92] said:

It is useful to begin with some basic propositions:

1.    There is no provision of the [Evidence Act (the “Act”)] which requires that only authentic documents be admitted into evidence. The requirement for admissibility under the Act is that evidence be relevant, not that it be authentic. On some occasions, the fact that a document is not authentic will be what makes it relevant, i.e., in a forgery prosecution. In other cases, there may be a debate as to whether a particular document is or is not authentic, for example, a contested grant of probate where it said that the testator’s signature is not genuine.

2.    In cases of that kind, the issue of authenticity will be for the tribunal of fact to determine. In cases heard by a judge alone, this will be the judge at the time that judgment is delivered and the facts found. In cases with a jury, it will be the jury.

3.    The question of what evidence will be admitted is a question of law for the tribunal of law, which will be the Court.

4.    Since authenticity is not a ground of admissibility under the Act, the issue of authenticity does not directly arise for the tribunal of law’s consideration at the level of objections to evidence.

5.    What does arise for its consideration is the question of relevance under s 55. If the evidence is relevant it is admissible: s 56. It will be relevant under s 55 0if the evidence is such that “if it were accepted, [it] could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue”.

6.    The question of a document’s authenticity is relevant only to the tribunal of law’s consideration of relevance under s 55. It has no other role.

7.    In that inquiry, the question for the tribunal of law is not whether the document is authentic but whether receipt of the document could, to paraphrase s 55, rationally affect the assessment of the probability of a fact.

8.    If there is raised a question about the authenticity of a document (and assuming that, if authentic, it would otherwise be relevant to an issue) then there will be an issue in the proceedings about its authenticity. This will be a question for the tribunal of fact to resolve, if the document is admitted.

9.    The question for the tribunal of law, by contrast, will be whether the document is relevant to a fact in issue under s 55. That is, the question will be whether the document can rationally affect the assessment of the probabilities of the fact, including its authenticity.

10.    What materials may be examined in answering this question? The answer is provided by s 58:

58 Inferences as to relevance

(1)    If a question arises as to the relevance of a document or thing, the court may examine it and may draw any reasonable inference from it, including an inference as to its authenticity or identity.

(2)    Subsection (1) does not limit the matters from which inferences may     properly be drawn.

11.    The position then is clear. In answering the only question before the tribunal of law — relevance — the tribunal may examine the document to see what may be reasonably inferred from it (s 58(1)). It may also examine other material (s 58(2)).

12.    The tribunal of law does not find that the document is authentic. It finds that there is, or there is not, a reasonable inference to that effect and hence that the document is, or is not, relevant. If there is a reasonable inference that the receipt of the document will rationally affect the probability of a finding of fact, then the matter may go to the tribunal of fact which will then determine at the end of the trial whether the document is authentic and whether the fact is proved.

13.    At no time does the tribunal of law determine that the document is or is not authentic because this is not a question for it. It may, however, determine that no reasonable inference to that effect is open and thereby conclude that it is not relevant. In a jury context, that will be similar to taking the question of authenticity away from the jury. Analytically, it will be the same where the tribunal of fact is a judge.

14.    In deciding relevance (ie whether the tribunal of fact could reasonably infer that the document (otherwise relevant) was authentic), the tribunal of law is explicitly authorised by s 58(1) to ask what inferences as to authenticity are available from the document itself. That is what s 58(1) says.

65    From these observations, his Honour concluded that the provenance of a document could be inferred from its contents, and for that purpose, declined to follow the earlier decision of National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309. I respectfully agree with Perram J: see also Australian Securities and Investments Commission v Flugge (No 10) [2015] VSC 690 per Robson J.

66    In addition, business records may be admitted and used as proof of the truth of any facts they recite without the need to identify the author of the document. As Heerey J observed in Guest v Federal Commissioner of Taxation [2007] FCA 193; 65 ATR 815 (Guest) at [25]:

The terms of s 69(2)(a) do not suggest that it is an essential precondition of admissibility that the “person” in question be identified. The ordinary meaning of the language is that it is sufficient that the person who made the representation, whoever he or she is, had or might reasonably be supposed to have had, personal knowledge of the asserted fact. The policy behind the provision is clear enough. Routine business records, made before any legal proceeding arises or is contemplated (cf the exception in s 69(3)), have an inherent likelihood of reliability which outweighs the common law’s aversion to hearsay evidence where the maker of a statement cannot be tested by cross-examination. The utility of s 69 would be greatly diminished if it were necessary to locate among large organisations, perhaps over a long period of time, persons who made representations, often in circumstances where the practical needs of the organisation did not require any identification at the time the representations were made.

67    Examining the contents of the PAYG payment summaries and payslips, I would have agreed with the respondent’s submission that it should be inferred that they are authentic. The PAYG payment summaries appear to use the Commissioner’s own form, are addressed to the respondent at her residential address, disclose amounts consistent with her salary, as agreed to be paid in accordance with her letters of offer, and they either bear the name of Ms Karen Foster, who was a director of Ultra Nova, or Mr Michael Lowe. The payslips are headed with the name and letterhead of each employer, are again addressed to the respondent, contain amounts which are consistent with her letters of offer of employment, and contain additional details concerning the number of hours worked, the accrual of holiday leave, the accrual of personal forward/carer’s leave and the amounts of superannuation guarantee paid. In my view, the contents of these documents is consistent with them having a provenance from each of the three employers. Consistently, with Guest, I do not need to know the identity of the maker of each document in order to be satisfied that each said document is admissible and may be given probative weight.

68    In addition, there is s 1305 of the Corporations Act 2001 (Cth) (Corporations Act) which also supports the findings below. It provides:

(1)    A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.

(2)    A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1).

69    The term “books” is defined by s 9 of that Act to include “financial records”. That term is then defined by the same provision to mean:

financial records includes:

(a)    invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and

(b)    documents of prime entry; and

(c)    working papers and other documents needed to explain:

(i)    the methods by which financial statements are made up; and

(ii)    adjustments to be made in preparing financial statements.

70    Section 286 of the Corporations Act sets out what documents a company must keep. It provides:

(1)    A company, registered scheme or disclosing entity must keep written financial records that:

(a)    correctly record and explain its transactions and financial position and performance; and

(b)    would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

71    In my view, the payslips and the PAYG payment summaries are probably “financial records” which are required to be “kept” by s 286 (in addition to any other obligation to retain records). This conclusion is supported by the decision in Australian Securities and Investments Commission v Rich [2005] NSWSC 417; 216 ALR 320 (Rich). In that case, a question for determination was whether “financial records” extended beyond documents of prime entry, such as a cashbook and journal, to derivative documents, such as “business plan summaries and budgets”, a “spreadsheet relating to gross margin” and a certain email attaching a graph. Austin J decided that “financial records” are documents created as part of the process by which the company discharges its statutory obligation under s 286. That would include, for example, documents which record the company’s financial position or facilitate the preparation or auditing of annual or half yearly financial statements. It thus included the documents in issue in Rich. It also included the “farm books” considered by Malcolm CJ in Caratti v The Queen (2000) 22 WAR 527 and the “monthly sales reports” which were considered by Brownie AJ in Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2003] NSWSC 876; 47 ACSR 261. In my view the payslips and the PAYG payment summaries here are financial records, as these documents would at least facilitate the auditing of the record of the salary and wages paid by a company to its employees as disclosed in its annual report. In that respect a court is entitled to infer from the contents of a document whether it is a “financial record”: Rich at [311].

72    It follows that the payslips and the PAYG summaries are probably prima facie evidence of the matters stated in them by reason of s 1305 of the Corporations Act. That includes the respondent’s entitlement to gross salary, the payment to her of a net amount, and the withholding of amounts from her. If that is so, then for practical purposes, the onus probably shifted to the Commissioner to prove otherwise. On this basis, it would have been incumbent upon him to lead evidence showing that the matters stated in the business records were false or mistaken. This he did not do.

73    The three letters of offer of employment are not “financial records” for the purposes of the Corporations Act and s 1305 does not apply to them. However, if it were necessary to do so, their authenticity and provenance may again be inferred from an examination of their contents. Each appears to be written on the letterhead of each respective employer. Each is addressed to the respondent and each bears the signature of Mr Michael Lowe. Each document bears a date consistent with the respondent’s periods of employment; they contain terms consistent with her position as an employee, including promises to pay her a wage consistent with what is disclosed in the PAYG payment summaries and payslips. In such circumstances, I would have inferred, had there not otherwise been direct evidence of provenance, that each letter was prepared by each employer, or upon their behalf, and constituted a correct record of the terms of employment.

74    It follows that the primary judge was correct, in my view, when his Honour ruled as follows at [50]:

I admit paragraph 18 of the applicant’s first affidavit, including MC10, MC11 and MC12. These were, respectively, the group certificates for the financial year ended 30 June 2012 and the applicant’s payslips; the group certificate for the financial year ended 30 June 2013 and the applicant’s payslips; and the group certificates for the financial year ended 30 June 2014 and the applicant’s payslips. In my opinion a sufficient basis was established in the evidence of the applicant as to their source for them to be admitted into evidence, and I so rule.

75    It also follows that the primary judge was correct when his Honour found as follows at [55]:

I find that the applicant was given an offer of employment at Ultra Nova in early June 2010 and that her annual gross salary or wages was $65,000, with her net weekly pay being paid into a bank account that she nominated. I also find that the applicant was given an offer of employment by Darlinghurst in late May 2012 with the same terms of remuneration. I also find that the applicant was given an offer of employment by United in late March 2014, again on the same terms as to remuneration. I find she accepted these offers at those times and that she was employed in accordance with those terms of remuneration.

76    I turn now to the second area of attack on the respondent’s case. It comprised again two parts. The first concerned the fact that the respondent’s bank records showed that her salary in the case of Ultra Nova and Darlinghurst was paid, at least in part, by Armstrong Scalisi. As the primary judge observed at [73]:

By reference to those records the respondent Commissioner submitted, by way of example, that the payment for 4 July 2011 into the applicant’s account was not made by Ultra Nova but by Armstrong Scalisi. There was no evidence to explain why it was that Armstrong Scalisi was making that payment. The respondent Commissioner submitted that a finding should be made that Ultra Nova did not make that payment. The same applied to the pay dated 8 August 2011, 7 September 2011, 4 October 2011, 14 November 2011, 6 December 2011, 2 January 2012, 6 February 2012, 5 March 2012, 2 April 2012, 30 April 2012 and 5 June 2012. Those records then showed the payer as Darlinghurst from the pay dated 2 July 2012 to, but not including, the pay dated 4 November 2013. Thereafter the payer was shown as Armstrong Scalisi up to, but not including, the pay dated 5 May 2014 which, along with the pay dated 3 June 2014 showed the payer as United. In each instance the records required to be produced on subpoena were by reference to monthly intervals. The respondent Commissioner submitted that the applicant was in the insuperable difficulty of being paid by someone other than the payer she claimed. The documents did not support any withholding by Armstrong Scalisi. The same analysis, it was submitted, applied to Darlinghurst and United but without the added feature of an Administrators’ report referring to the difficulties with records.

77    The primary judge inferred that Ultra Nova and Darlinghurst were paying the respondent indirectly via Armstrong Scalisi. His Honour found at [89]:

The inferences I draw are that Ultra Nova and Darlinghurst, for the periods where the subpoenaed records show that the payer was Armstrong Scalisi, were paying their employees indirectly and thus in each instance were the relevant payer of the salary or wages of the applicant.

78    I respectfully agree with that finding when regard is had to the totality of the evidence, which included acceptance of the fact that the respondent was employed by each of Ultra Nova and Darlinghurst, acceptance of the authenticity of each letter of offer of employment from those employers, the PAYG payment summaries and payslips, and acceptance of the fact that the respondent worked at an accounting firm owned by Armstrong Scalisi. The inference drawn by the primary judge was, with respect, obvious. It was also supported in part by the following statement contained in the administrator’s report to the creditors of Ultra Nova (Ultra Nova had been placed into administration on 20 March 2012 – as to which, see below) where at [4.1] the following appears:

Whilst the company provided exclusive employment services to Armstrong, the company did not maintain a bank account and as such did not pay the employees directly.

79    In that respect, it does not appear to have been disputed that the legislative scheme did not require the actual payer of the salary or wages to be the relevant employer with the obligation to remit. If that were not so, a payment of salary or wages by cheque might not satisfy the requirements of s 18-15 of Sch 1 to the TAA, an outcome Parliament could hardly have intended. At most, payments by Armstrong Scalisi to the respondent arguably imposed on that entity the obligation to withhold rather than Darlinghurst or Ultra Nova. That is because s 12-35 of Sch 1 imposes an obligation to withhold in relation to payments made to an individual “as an employee (whether of that or another entity)” (my emphasis). That conclusion does not here affect the respondent’s entitlement to a credit.

80    The second part of the attack concerned evidence that Ultra Nova had ceased trading prior to 20 March 2012, yet the respondent’s evidence was that she continued to be employed by that entity until at least 21 May 2012. The Commissioner relied upon this contended for inconsistency to undermine the primary judge’s acceptance of the respondent’s testimony. The report to creditors dated April 2012 noted that Ultra Nova terminated the employment of employees prior to the appointment of the administrator. The primary judge nonetheless found at [81]-[82]:

In my opinion the Administrators’ report is evidence to be taken into account, but I do not conclude from that material that Ultra Nova had no records. The Administrators’ report was: “prepared from our investigations to date, which has relied on the available books and records of the Company and information provided by the Company’s director. Due to the time constraints imposed by the Act, this information has generally been accepted without conducting an audit or obtaining independent verification of its accuracy.” The company’s sole director at that time was Ms Karen Foster. I have considered and weighed that evidence against the evidence of the applicant and prefer the applicant’s more direct evidence as to the provenance of the records.

As to Ultra Nova ceasing to trade and terminating the employment of the employees by 20 March 2012, I prefer the direct evidence of the applicant and the documentary evidence on which she relies, given that the Administrators were drawing inferences from incomplete information. I find that the applicant continued to be paid wages or salary as an employee of Ultra Nova until on or about 20 May 2012.

81    I respectfully agree with those findings, which were open to his Honour to make and which are supported by the contents of the report itself. The findings made by the administrator in his report were based upon incomplete information and contained the following disclaimer at [1.3]:

This report has been prepared from our investigations to date, which has relied on the available books and records of the Company and information provided by the Company’s director. Due to the time constraints imposed by the Act, this information has generally been accepted without conducting an audit or obtaining independent verification of its accuracy.

82    At [3.2] the report states:

The director of the Company has failed to provide any books and records in respect of the Company’s financial affairs. It is likely that the lack of proper record maintenance may have contributed to the Company’s demise.

83    At [4.2] the report appears to state that Ultra Nova was still in business at the time of the appointment of the administrator. It states:

As at the date of our appointment the company was providing employment services at the trading premises of Armstrong…

84    At [5] the report states:

Despite numerous request for financial records, the director of the Company has failed to provide any historical financial and/or management accounts for the Company. Based on initial discussions with the Company’s management, it is advised that the Company has not maintained proper financial records and as such, financial accounts for the Company were never prepared.

85    Finally, at [10.3] the report states:

The only records provided to assist with our investigation has been a ledger of outstanding leave and superannuation entitlements owing to the former employees of the Company.

86    In my view, given the foregoing contents of the report to creditors, it was appropriate for the primary judge to prefer to rely upon the direct testimony of the respondent, together with the payslips and PAYG payment summaries, as being more reliable than selected excerpts from that report.

87    I should finally address a more general submission made by the Commissioner that the evidence “was insufficient”. The Commissioner relied upon the fact that the respondent had failed to call any other witness to corroborate her claims such as Mr Michael Lowe, Mr Sam Cassaniti, described by the Commissioner as a “convicted tax fraudster”, Ms Karen Foster, who “purportedly” signed a payment summary for Ultra Nova, and perhaps also Ms Sue McKellar (a filing clerk at CAP Accounting who retrieved documents for the respondent).

88    Contending that evidence was “insufficient” in the face of three sworn affidavits of the respondent, together with the exhibits attached thereto, and her answers in cross examination, may suggest that a taxpayer bears a special burden of proof. However, other than the necessity to scrutinise evidence given by the taxpayer him or herself with care, no such special burden exists. This is a case in which the taxpayer seeks declarations. The following propositions, derived from the judgment of Hunt J in Allied Pastoral, apply equally to a tax appeal made to this Court pursuant to s 14ZZ of the TAA as well as to other forms of revenue proceedings, such as here, the seeking of declarations against Commissioner:

(1)    first, where the onus is on the taxpayer (whether pursuant to s 14ZZO of the TAA or otherwise) the degree or standard of proof required is that which ordinarily applies in civil proceedings. The direction given to a jury in civil cases aptly describes that onus by reference to a pair of scales and to the arguments of each party being placed at each end. As Hunt J said in Allied Pastoral:

…if the plaintiff succeeds… in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries…

(2)    secondly, for that purpose it is not obligatory for a taxpayer, in order to discharge his burden of proof, to call all material witnesses and to produce all material documents which support her or his or its position;

(3)    fourthly, there is no requirement that evidence can only be accepted as admissible and probative if it is corroborated;

(4)    fifthly, the tribunal of fact is free to accept the evidence of the taxpayer alone if it finds the taxpayer to be truthful;

(5)    finally, it would usually be prudent to corroborate the evidence of a taxpayer. It is also prudent to adduce contemporaneous objective evidence. But prudence should not be confused with the requirements of the law.

89    Here, the respondent adduced contemporaneous objective evidence comprising her terms of employment, her payslips, her PAYG payment summaries and her banking records. She also relied upon three affidavits she had sworn. It follows that it was open for the primary judge to accept the respondent’s evidence as truthful and to accept the business records she exhibited as authentic, and thus as a proper discharge of her onus of proof without the need to call other witnesses for corroboration.

90    For these reasons the first ground of appeal fails.

Ground 2

91    The second ground of appeal addresses the payments made by Armstrong Scalisi. It contends that there had been no withholding because of the failure of Ultra Nova and Darlinghurst to be the actual payers of the respondent’s salary. I have already addressed that submission above, giving reasons why this ground is rejected.

Ground 3

92    The third ground was that the primary judge should have drawn an inference from the failure to call Mr Sam Cassaniti, Mr David Cassaniti, Mr Michael Lowe, Ms Karen Foster, Ms Sue McKellar and “Kristen” that their evidence would not have assisted the respondent. How such a generalised inference could have affected the outcome below, if it could have been drawn, is not apparent to me. In any event, the primary judge addressed this issue at [91] as follows:

I have taken into account the submissions made on each side as to the claimed and respective failures to call further witnesses. In the circumstances of this case I do not draw the inferences I was invited to draw either by the applicant or by the respondent Commissioner. In my opinion, in light of my findings on the present evidence, to the civil standard, suggestive of possible offences by officers of the three companies, Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe, I would not draw the inference that their evidence would not have assisted the applicant’s case: see Fabre v Arenales (1992) 27 NSWLR 437 at 449-450.

93    The rule in Jones v Dunkel is premised on the existence of an inference which is available to be drawn from the material before the court. If such an inference is open to be drawn, the rule may then be deployed to strengthen the drawing of that inference. This was explained by Hill, Dowsett and Hely JJ in Kordan Pty Limited v Federal Commissioner of Taxation [2000] FCA 1807; 46 ATR 191 at [47]-[48] as follows:

The rule in Jones v Dunkel is no more than a statement of common sense. It is regularly referred to but often mistakenly applied. It is regularly formulated in two different, albeit related ways. One formulation, derived from the judgment of Dixon J at 304-5 is that where a party having the onus adduces evidence in support of his or her case which gives rise to a positive inference which is more probable than another inference which is also open, that more probable inference if left unexplained will be accepted. It is important to note that his Honour, referring to an unreported judgment of the High Court in Bradshaw v McEwans Pty Ltd (27 April 1951), firmly rejected the rule that failure to give evidence permits an inference to be drawn where the state of evidence is such that there are “competing inferences of equal degree of probability” so that the choice between them is a mere matter of conjecture. The other formulation, derived from the judgment of Kitto J at CLR 308 is that where there is an inference favourable to a plaintiff and the defendant choses to call no evidence to rebut it, it can be concluded that that evidence would not have assisted the case of the defendant and an inference favourable to the plaintiff, for which there are grounds in the evidence, might then be more confidently drawn. Both formulations are to be found linked in the judgment of Menzies J at CLR 312 where his Honour, explaining what a proper direction to the jury in that case would make clear:

(i)    that the absence of the defendant... as a witness cannot be used to make up any deficiency of evidence;

(ii)    that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence;

(iii)    that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.

…

However, what is important to note is that the rule, however expressed, does not permit an inference to be drawn by reason of the failure of the other side to call a witness where that inference is not otherwise open. Put another way, the failure to call evidence does not provide positive evidence, nor does it fill up any gap in evidence.

(My emphasis.)

94    Counsel for the Commissioner said that the inference which was available to be drawn arose from the failure to remit to the Commissioner; that failure supported an inference that there had also been a failure to withhold. He cited the passages from Edmonds J in David Cassaniti at [169], supra, and from Perdikaris. In my view, those passages do not suggest that a failure to remit necessarily grounds an inference that there had been no withholding. Whether such an inference could or should be drawn from the fact that there was no remittal would depend upon the particular circumstances of the case and the evidence before the court. Here, the inference contended for by the Commissioner could not be drawn because of the acceptance of the respondent’s evidence as “truthful”, and the receipt into evidence of the PAYG payment summaries, payslips, the letters of offer and the bank records, and the acceptance in each case of the authenticity of these records by the primary judge. This evidence precludes the inference sought to be drawn by the Commissioner.

95    Moreover, the primary judge found that there was a reason for why at least Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe would not have been willing to give evidence. This is because the giving of their evidence might have involved each admitting facts suggestive of the commission of possible offences under the TAA. In that respect, the primary judge referred to Fabre v Arenales (1992) 27 NSWLR 437, where at 449-450, Mahoney JA said:

I have to this point dealt with what the judge did on the assumption that an inference was properly to be drawn from the fact that Mr Arenales was not called. But, in my opinion, that assumption is not correct: at least, it did not appear to the judge necessarily to be so. The significance to be attributed to the fact that the witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called because the party expected to call him fear to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness “blind”.

96    I respectfully agree with the foregoing passage, and the reasons and conclusion of the primary judge in relation to this issue. I am fortified in my conclusion by the lack of notice given by the Commissioner concerning his allegation of recent invention. Had proper notice been given, it is possible that some of the suggested possible witnesses might have been called.

97    The appeal should be dismissed with costs.

Associate:

Dated:    30 November 2018