FEDERAL COURT OF AUSTRALIA

Iannuzzi v Commissioner of Taxation [2019] FCAFC 39

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal from the orders made by the Hon Justice Perram on 16 July 2018 be refused.

2.    The applicant pay the respondent’s costs of and incidental to the application.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 1 September 2017, the Commissioner of Taxation filed an originating application seeking diverse orders by way of final relief, including that Mr David Iannuzzi be removed from the Register of Liquidators maintained under the Corporations Act 2001 (Cth) and that he be restrained for a period of ten years from applying to be a registered liquidator. At the same time, the Commissioner also sought interlocutory relief, including an order for an inquiry into Mr Iannuzzi’s conduct as a liquidator of some 23 companies.

2    On 16 July 2018, the primary judge ordered that the Commissioner’s claim for an inquiry into the conduct of Mr Iannuzzi as a liquidator be held at the same time as the hearing of the Commissioner’s claims for final relief. Also on that day, his Honour gave reasons for overruling Mr Iannuzzi’s objection to the admissibility of a large amount of documentary evidence obtained by the Commissioner in exercise of compulsory statutory powers.

3    This is an application by Mr Iannuzzi for leave to appeal from the interlocutory orders made by the primary judge on 16 July 2018. In support of his application, Mr Iannuzzi relied on an affidavit sworn by Mr Joseph Scarcella on 30 July 2018, which exhibited a draft notice of appeal disclosing one proposed ground of appeal. The proposed ground was that his Honour had erred by admitting into evidence the compulsorily-obtained documents “because the use which the [Commissioner] sought to make of those documents was contrary to the purpose for which they were obtained and/or the proceedings did not relate to a taxation law”. The Commissioner correctly accepted that it was open to Mr Iannuzzi to seek to challenge his Honour’s interlocutory orders in this way. There was also no dispute as to the applicable principles where leave is sought to appeal from an interlocutory judgment of the present kind: see Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397 at 398.

4    For the reasons set out below, we would refuse leave to appeal from the interlocutory orders of 16 July 2018, on the basis there is insufficient doubt about their correctness to warrant re-consideration on appeal. We reach this conclusion on the basis that we are not persuaded that any, or any sufficient, doubt attaches to the primary judge’s evidentiary ruling, which was integral to the making of the orders.

5    We would also note at this point that, at the hearing of this application, counsel for Mr Iannuzzi sought to raise a new ground to impugn his Honour’s evidentiary ruling and the ensuing interlocutory orders. This ground was not raised before the primary judge. For the reasons set out below, we do not consider that Mr Iannuzzi should be permitted to raise this new ground.

Background

6    As already indicated, the order for an inquiry into Mr Iannuzzi’s conduct as a liquidator was made under s 536 of the Corporations Act. Although now repealed, it is not disputed that, as the primary judge explained, this provision continues to apply to this matter.

7    Section 536 provided that:

536     Supervision of liquidators

(1A)    In this section:

liquidator includes a provisional liquidator.

(1)    Where:

(a)    it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:

     (i)    a requirement of the Court; or

(ii)    a requirement of this Act, of the regulations or of the rules; or

(b)    a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;

the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.

(2)    ASIC may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss that the estate of the company has sustained thereby and may make such other order or orders as it thinks fit.

(3)    The Court may at any time require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator.

8    The evidentiary ruling, which is the focus of this leave application, was made in the course of the hearing leading to the orders of 16 July 2018. Before the primary judge, both parties accepted that, if Mr Iannuzzi’s objection were upheld, this would have a significant impact on the Commissioner’s case and that it would be necessary to adjourn to “see how much of [it] could proceed”: Commissioner of Taxation v Iannuzzi [2018] FCA 1053 at [14].

9    The primary judge succinctly explained the evidentiary issue in these terms:

14.    When the matter was called on Mr Pike SC, who appeared for the Defendant, took a global objection to the Commissioner’s evidence. Both parties indicated that if the objection were to be upheld it would have a significant impact on the Commissioner’s case and the hearing would need to be adjourned to see how much of the case could proceed.

15.    The Commissioner’s evidence included two affidavits by Mr Aris Zafiriou, an official with the Australian Taxation Office. Exhibited to those affidavits was a large body of documentary evidence relating to the affairs of the 23 companies.

16.    Objection was taken to this material on the basis that most of the material had been obtained by the Commissioner using compulsory powers under s 263 of the Income Tax Assessment Act 1936 (Cth) … and s 353-10 of Schedule 1 to the Taxation Administration Act 1953 (Cth) … . There was no dispute that this was true. The debate was confined to the legal consequences of that fact.

10    The parties accepted that there was no material difference between s 263 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) and s 353-10 of the Taxation Administration Act 1953 (Cth) (TAA 1953). Both provisions permitted documents obtained thereunder to be used only “for any of the purposes of this Act” (s 263) or “for the purpose of the administration or operation of a taxation law” (s 353-10). According to the submissions for Mr Iannuzzi, however, the real or operative purpose of the proceeding was to discipline him (see [1] above and para 6 of the originating process), which was not for the purpose of the administration or operation of a taxation law.

11    In response to Mr Iannuzzi, the Commissioner contended that the application for an inquiry was for the purpose of the administration of a taxation law and, even if it were not, the Commissioner was entitled to disclose the information obtained under the Commissioner’s compulsory powers pursuant to Subdivision 355-B of Schedule 1 to the TAA 1953.

12    The primary judge rejected Mr Iannuzzi’s submissions, saying:

24.    As to the first argument, Mr Pike submitted that an inquiry into Mr Iannuzzi under s 536 with a view to disciplining him was clearly not an activity which was for the purpose of administering a taxation law. If that were truly all that the Commissioner sought to do then, without deciding the issue, I might be disposed to see some force in this argument. However, it is not a complete or entirely accurate description of the Commissioner’s proceeding. In particular, it omits reference to the Commissioner’s claim for compensation from Mr Iannuzzi for his alleged defaults. The losses claimed are for unpaid tax which the Commissioner has been unable to recover allegedly because of defaults of Mr Iannuzzi. As such, I think it very difficult to say that the proceeding is not for the purpose of the administration or operation of a taxation law. In particular, the recovery of compensation from a liquidator where alleged phoenixing has resulted in revenue being lost appears to be centrally concerned with that concept. The question may be tested by observing that if Mr Pike’s submission about this were correct, then the Commissioner would never be able to seek compensation from persons whose actions have resulted in tax not being paid by a taxpayer. This seems unlikely.

25.    That the Commissioner’s interest arises through the prism of an insolvency proceeding does not detract from the purpose he pursues. This is why it has always been accepted that the Commissioner may pursue insolvency proceedings: see Bluehaven Transport Pty Ltd v Commissioner of Taxation [2000] QSC 268; 157 FLR 26 at 22 [32]; approved Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; 237 CLR 473 at 496 [58]. From this it follows that the principle of statutory interpretation in Johns [v Australian Securities Commission [1993] HCA 53; 178 CLR 408] has no work to do in this case because the Commissioner is not seeking to use the information for a purpose alien to the power under which it was gathered.

13    The primary judge also would have accepted the Commissioner’s other argument, explaining this as follows:

26.    Had it arisen I would also have accepted the Commissioner’s second argument. This was that the principle in Johns had been outflanked by Subdivision 355-B of the TAA 1953 … .

14    The primary judge identified the relevant provisions in Subdivision 355-B as s 355-25 (which creates the offence of disclosure of protected information by taxation officers), s 355-30 (which defines protected information), and s 355-50 (which creates exceptions to the offence provision). Relevantly, s 355-50 provides that:

(1)    Section 355‑25 does not apply if:

(a)     the entity is a *taxation officer; and

(b)     the record or disclosure is made in performing the entity’s duties as a taxation officer.

(2)    Without limiting subsection (1), records or disclosures made in performing duties as a *taxation officer include those mentioned in the following table:

…

While reference was made to item 1 of the table in s 355-50(2), for the reasons stated below, it is unnecessary for present purposes to consider that item.

15    At [31] the primary judge said:

Both parties submitted that their position was supported by what had been said by Dixon CJ in Canadian Pacific Tobacco Company Limited v Stapleton (1952) 86 CLR 1. That case concerned the meaning of the words ‘except in the performance of any duty as an officer’ which is close to the language of s 355-50(2). However, the words to be interpreted are those in item 3. These are ‘are related to’ and they are words of broad connection. The present proceeding has as one of its endpoints an attempt to have compensated a number of defunct companies of which the Commissioner is a creditor. If that enterprise were to succeed it is certainly possible, although perhaps not inevitable, that the Commissioner will ultimately secure the payment of unpaid tax as a result of the proceeding. That easily means that the present proceeding is related to a taxation law. The matter is therefore covered by item 3. The prohibition in s 355-25(1) does not apply and the Defendant’s objection fails.

16    The Commissioner filed a notice of contention in the current proceeding supporting the primary judge’s order on this second basis.

The proposed appeal

17    It is relevant to the resolution of the issues in the proposed appeal, including an argument as to whether leave to raise a fresh argument not put to the primary judge should be granted to Mr Iannuzzi, to note a few matters about the course of the hearing below.

18    Before the hearing, by letter dated 16 April 2018, Mr Iannuzzi’s lawyers put the Commissioner on notice of the objection to the evidence being used in the proceeding on the basis that this constituted an “impermissible purpose”. When the matter came on for hearing it was put for Mr Iannuzzi that the relief sought by the Commissioner in para 5 of his originating process, that Mr Iannuzzi compensate each of the companies for any loss sustained because of his breach of duty as liquidator, “will not … withstand proper analysis” as, amongst other things, the “prospect of compensation in respect of … any of the companies being a realistic outcome in these proceedings is so remote as to be ignored”. In other words, what was being put orally was that a part of the proceeding which, on its face, would appear to be a permissible purpose, was not the Commissioner’s “real” or “true” purpose.

19    By this time, however, the Commissioner had already filed the affidavits of Mr Zafiriou, Director in the Australian Public Service employed in the Significant Debt Management Area in the Australian Taxation Office (ATO). Mr Iannuzzi had also notified the Commissioner before the hearing that Mr Zafiriou was not required for cross-examination, so he was not available to be called by the Commissioner and was not cross-examined on his affidavits which annexed the compulsorily-obtained documents and contained his evidence that he was authorised to make the affidavits on the Commissioner’s behalf (by necessary inference, in support of all of the relief sought in the originating process) and that he made the affidavits based on his own knowledge and belief from his review of the records of the ATO.

20    This was the context in which the primary judge was asked to find that, insofar as para 5 of the originating process may disclose a permissible purpose for the proceeding directed to the recovery of compensation from the companies, which it may then be inferred might possibly be available for taxation revenue (the Commissioner being a creditor of all but six of the companies, the affairs of which the Commissioner alleged were inter-related), it should be inferred that this seeming purpose was not in fact the Commissioner’s real, operative or substantial purpose for bringing the proceeding. Rather, despite the appearance of para 5 in the originating process, Mr Zafiriou deposing that he was authorised by the Commissioner to make the affidavits which supported the application based on his knowledge as a taxation officer (a fact about which there was no debate), and Mr Zafiriou not being asked any question about the relief sought in the originating process, Mr Iannuzzi contended that other objective evidence demonstrated that para 6 of the originating process, seeking to discipline Mr Iannuzzi, was the real, operative or substantial purpose of the Commissioner.

21    The other objective evidence said to support this conclusion was summarised in Mr Iannuzzi’s submissions in support of his application for leave to appeal as follows:

(a)     in relation to the companies listed at items 4 to 22 of the [Originating Process], there is no prospect of compensation being paid to those companies, alternatively, being recovered by the Commissioner, because of one or more of the following reasons:

i.     each of the companies was deregistered and, as noted, do not exist as a legal entity for which compensation might be sought;

ii.     no relief was sought for the re-registration of those companies;

iii.     no evidence was adduced as to any intention to re-register those companies;

iv.     no evidence was adduced as to any intention to seek compensation for those companies;

v.     the unchallenged evidence – as summarised in the table at 16 above - was that, even if (i)-(iv) was incorrect, the prospect of any dividend being paid to the Commissioner was extremely low.

(b)     in relation to the companies listed at 2 and 3 of the [Originating Process], there was no prospect of compensation being paid to those companies, alternatively, being recovered by the Commissioner, because of one or more of the following reasons:

i.     no evidence was adduced as to any intention to seek to compensation for those companies; and

ii.     the unchallenged evidence – as summarised in the table at 16 above - was even if (i) was incorrect, the prospect of any dividend being paid to the Commissioner was extremely low.

(c)     in relation to the company listed at item 1 of the [Originating Process] – North Shore – there is no prospect of the inquiry the subject of the orders yielding any compensation being paid to that company because, on the Commissioner’s application, Robyn Erskine had been appointed liquidator of that company in place of Mr Iannuzzi, such that any compensation would be paid to that company by reason of the exercise of the powers of a liquidator under the Corporations Act. The Commissioner had obviously chosen an alternative route – namely funding a new liquidator – to achieve that purpose.

22    It was also submitted for Mr Iannuzzi that:

If compensation truly was the Commissioner’s purpose, evidence to that effect could have been given. It was not. Further, applications to reinstate should have been made. They were not. The failure to take these steps cannot be put down to some oversight. The inutility of taking these steps is manifest from the circumstances relevant to each company as summarised in the table.

23    The table referred to in the passage extracted above is an aide memoire handed up to the primary judge by Mr Iannuzzi’s counsel, which summarised information in the compulsorily-obtained documents to the effect that, apart from one company, RC Group Aust Pty Ltd, there was no or little prospect of recovery by the Commissioner.

24    Mr Iannuzzi sought, and continues to seek, a finding about a question of fact, being the Commissioner’s purpose in bringing the proceeding. Before the primary judge, Mr Iannuzzi’s argument was that the sole real, operative or substantial purpose was as stated in para 6 of the originating process (the disciplinary action) and not as stated in para 5 (the compensation action). Although the terms were not used, what was being put was that para 5 was “colourable”, or mere “window dressing”. But para 5 was (and is) in the originating application, and a taxation officer (Mr Zafiriou) had given evidence in support of the application as a whole. He had not been asked any question about the application, and, indeed, his evidence had not been challenged in any way. In these circumstances, it may be accepted that:

(1)    Para 5 of the originating process seeks compensation to be paid to all of the companies, and this is clear evidence of the Commissioner’s purpose.

(2)    The Commissioner’s case was that the dealings of the companies were inter-related so the fact that the Commissioner is or appears not to be a creditor of six of the companies does not mean that the affairs of those companies are able to be separated from the affairs of the other companies of which the Commissioner is a creditor. It must be inferred that one purpose of the inquiry is to identify the inter-relationships between the companies.

(3)    The aide memoire was a document summarising the financial position of the very companies in respect of which it was alleged that Mr Iannuzzi was in breach of his duties as a liquidator. These allegations included that Mr Iannuzzi made knowingly false and misleading statements to creditors of these companies and failed to investigate unfair preferences and uncommercial transactions in connection with them. In this circumstance, it cannot be accepted that the aide memoire was or is a reliable foundation for any inference about the outcomes that may be achieved from an inquiry.

(4)    It makes sense for the Commissioner to seek reinstatement of the one company which the evidence already indicated may well be a source of funds for the revenue and to defer seeking reinstatement of any other company until the outcome of the inquiry becomes apparent. The fact that the originating process seeks the reinstatement of one company does not support the inference urged by Mr Iannuzzi that the Commissioner accepted there would be no point in reinstating the other companies because there were no prospects of recovery. This too will be appropriately resolved through the inquiry.

(5)    If it is truly a defect in the Commissioner’s case not to have sought reinstatement of all of the companies before the inquiry commences, then that defect can and will be rectified by the Commissioner. It would not be a reason to grant leave to appeal to Mr Iannuzzi.

(6)    As to the company, North Shore Property Developments Pty Ltd, Yates J only granted leave to the new liquidator to proceed in respect of certain transactions. While that decision is subject to appeal, it demonstrates that there may well be utility in the Commissioner continuing in this proceeding in relation to that company.

(7)    It is objectively unlikely that the Commissioner would file the originating process including para 5 seeking compensation, authorise an ATO officer to support the application on affidavit, and instruct his lawyers that he intends to seek compensation if, in fact, para 5 of the originating process was colourable in the sense that it was not part of the Commissioner’s actual purpose, and the Commissioner’s real, operative or substantial purpose was confined to para 6.

25    These factors do not incline us to accept Mr Iannuzzi’s characterisation of the Commissioner’s purpose.

26    As already noted, Mr Zafiriou was not required for cross-examination. It is not an answer to this to refer, as Mr Iannuzzi did, to the absence of any express statement of purpose in Mr Zafiriou’s affidavits. As noted, Mr Zafiriou gave his affidavit evidence in support of the whole of the originating application, including both paras 5 and 6, and he did so based on ATO records. These facts alone are evidence that compensation “truly was the Commissioner’s purpose” (to use the language of the submissions for Mr Iannuzzi).

27    Even if, as Mr Iannuzzi contended, the Commissioner’s actual purpose is to be determined wholly objectively (an issue that need not be determined here) statements of purpose as understood by the ATO officer directly involved would remain relevant to the objective ascertainment of the purpose.

28    In these circumstances Mr Iannuzzi has failed to discharge the onus of proof. He has not proved that the alleged improper purpose of disciplinary action was the real, operative or substantial purpose in the necessary sense of proving that without that purpose the proceeding would not have been brought at all: LHRC v Deputy Commissioner of Taxation (No 3) [2015] FCA 52; 326 ALR 77 at [147]-[151]. As the Commissioner submitted, “[t]he recovery of tax-related liabilities includes the taking of any legally permissible step to recover or obtain satisfaction for sums which are or may be owing to the Commonwealth from the operation of the tax laws”. The use of documents obtained in exercise of compulsive powers in a proceeding that includes a claim for compensation in respect of all of the companies has not, therefore, been proved to be for an impermissible purpose.

29    We would also uphold the Commissioner’s notice of contention. It is clear from the table to s 355-50(2) of Schedule 1 to the TAA 1953 that item 3, in particular, is an expansive provision. We do not accept that the proceeding, which in para 5 of the originating application sought amelioration of the companies’ financial position (for, it may be inferred, the benefit of the revenue) is not one “related to a taxation law” merely because that application also sought, in para 6, disciplinary action against Mr Iannuzzi. In this event, it is unnecessary to determine whether, as the Commissioner submitted, para 6 alone would suffice to make the proceeding one related to a taxation law. We accept that Canadian Pacific Tobacco Company Limited v Stapleton (1952) 86 CLR 1 is not authority for that proposition.

30    In the circumstances, we have no difficulty in concluding that the proceedings are related to a taxation law. As the primary judge said at [31], the words “are related to” involve a “broad connection”. Further:

The present proceeding has as one of its endpoints an attempt to have compensated a number of defunct companies of which the Commissioner is a creditor. If that enterprise were to succeed it is certainly possible, although perhaps not inevitable, that the Commissioner will ultimately secure the payment of unpaid tax as a result of the proceeding. That easily means that the present proceeding is related to a taxation law. The matter is therefore covered by item 3.

the proposed new ground

31    In the course of the hearing of Mr Iannuzzi’s leave application, counsel for Mr Iannuzzi submitted that, even if the Commissioner’s use of the compulsorily-obtained documents was partly for a proper purpose (to obtain compensation for the relevant companies, with the consequence that they were able to meet their taxation liabilities), the Commissioner also had an improper purpose (to discipline Mr Iannuzzi). Counsel submitted that, as a result, unless the Commissioner abandoned the latter purpose, he was seeking to use the documents for a mixture of purposes and this was impermissible. It followed, so Mr Iannuzzi’s argument ran, that his objection to the admissibility of the compulsorily-obtained documents should have been upheld.

32    This “mixed purposes” argument was not put to the primary judge. For the reasons we are about to state, we accept the Commissioner’s submissions that leave to raise this as a new ground should be refused, because it would raise a new question of fact as to what is the Commissioner’s operative or substantial purpose in using the compulsorily-obtained documents, which might have been the subject of direct evidence at the hearing before the primary judge had it been raised at that time.

33    As we have seen, the basis of Mr Iannuzzi’s objection to the admissibility of the compulsorily-obtained documents was that the Commissioner was proposing to use the documents for an improper purpose, and this was the basis on which the primary judge correctly proceeded: see Commissioner of Taxation v Iannuzzi [2018] FCA 1053 at [20]-[22]. As the Commissioner noted, the authorities establish that, in a case of mixed purposes, it must be shown by the person seeking to impugn the proposed conduct that the alleged improper purpose was a “substantial” purpose in the sense that no attempt to pursue that conduct would have been made if it had not been for that alleged improper purpose: see LHRC at [150] and the authorities cited there; Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467 at 468-469; Binetter v Deputy Commissioner of Taxation (No 3) [2012] FCA 704; 89 ATR 296 at [113]-[115]. The authorities also indicate that the relevant principles are not limited to cases concerning the obtaining of information. Rather, they are principles of general application. It is, moreover, accepted in the present statutory context that the restrictions that govern the compulsory obtaining of documents also govern the use of such documents: see Johns v Australian Securities Commission (1993) 178 CLR 408 at 424 (Brennan J), 435-436 (Dawson J), 452-453 (Toohey J), 458 (Gaudron J), 468-469 (McHugh J).

34    Mr Iannuzzi relied on the reasons for judgment of McKerracher J in Apache Northwest Pty Ltd v Agostini [2009] FCA 534; 177 FCR 449, in support of the proposition that a use for mixed purposes, one of which was improper, is not permissible; and, in consequence, the Commissioner could not use the compulsorily-obtained documents to pursue his disciplinary purpose against Mr Iannuzzi, since that was an improper purpose. Apache does not, however, support Mr Iannuzzi’s case, as he would have it. The question his Honour was called on to consider in that case arose out of the fact that the State of Western Australia had obtained certain documents under compulsive powers in a State statute for the purpose of its own inquiry into a particular incident. The Federal Government subsequently established its own inquiry (the 2009 Inquiry) and a question arose as to the use of the documents that the State had obtained earlier. As reference to [13] of McKerracher J’s reasons show, the question calling for his Honour’s decision was whether “disclosure … for the purposes of the 2009 Inquiry by the Panel” was “for the purposes” of the relevant State Act and Regulations under which the documents had been obtained. His Honour held (at [111]) that the purposes were not the same, and (at [112]) he referred, albeit indirectly, to the substantial purpose test to which we have referred. Apache does not, however, support Mr Iannuzzi’s position because it was not a case about mixed purposes and therefore sheds no light on the circumstances in which a court may determine that an impermissible purpose vitiates a use of compulsorily-obtained documents, notwithstanding that the documents are also to be employed for a permissible purpose.

35    Having regard to the authorities referred to in [33], it must be accepted that, for Mr Iannuzzi’s new argument to succeed, he must establish on the balance of probabilities that, as a matter of fact, the Commissioner’s disciplinary purpose was the substantial purpose for his using the compulsorily-obtained documents in this case, in the sense that the Commissioner would not have sought to use those documents for the purpose of obtaining compensation if he did not also have his allegedly improper disciplinary purpose.

36    As we have already indicated, there is no direct evidence that the proceeding would not have been instituted in the absence of para 6 of the originating process. Had the new argument been raised before the primary judge, it would have been open to the Commissioner to have adduced evidence expressly and directly to contradict the assertion that the disciplinary purpose was a substantial purpose in the relevant sense. There was, however, no occasion to adduce such evidence on the case made by Mr Iannuzzi before the primary judge. Indeed, prior to the hearing before the primary judge, the Commissioner had, as noted earlier, filed two affidavits of Mr Zafiriou (an ATO officer) exhibiting the compulsorily-obtained documents and, by implication, supporting the Commissioner’s claims for the whole of the relief that he sought. In this context, Mr Iannuzzi’s notification that Mr Zafiriou was not required for cross-examination is significant.

37    Further, in conformity with that notification, Mr Zafiriou was not in fact cross-examined and it was never put to him that the disciplinary purpose was the Commissioner’s substantial purpose in instituting his originating process and that the originating application would not have been made in the absence of para 6.

38    In Commissioner of Taxation v De Vonk (1995) 61 FCR 564 at 579, Hill and Lindgren JJ made two statements of relevance to the present application. First, their Honours said that “[i]t would suffice to invalidate the notice [issued under s 264 of the ITAA 1936] if one of the purposes for which it was issued was an improper purpose provided that such purpose was a not insignificant purpose”. We do not assume that their Honours intended to state a different test from that affirmed by the authorities mentioned in [33] above, but if they did, then this statement, which was merely obiter dictum, contained error. Secondly, and more importantly here, their Honours said that, since the relevant tax officer was not cross-examined on his affidavit evidence, “it would be conducive of injustice for … an inference” to be drawn that the notice was issued for an improper purpose “where he has not been cross-examined and where the inference has not been put to him”. This second statement is self-evidently correct. As their Honours went on to observe (also at 579):

If it is intended to suggest something which is directly or by inference contrary to a witness’s testimony or which has not been covered by that testimony, then an opportunity must be given to the witness to meet the case which is proposed to be raised so that the witness has an opportunity to explain or destroy that case: Browne v Dunn (1893) 6 R 67 … .

In the circumstances of this case, we think it would be impermissible to draw an inference of the kind for which Mr Iannuzzi wishes to contend, given that Mr Zafiriou was not cross-examined and it was not put to him that the disciplinary purpose was a substantial purpose in the relevant sense, so far as the Commissioner was concerned.

39    It is well established that the parties are bound by the way their case is conducted at trial. As the Full Court said in Siegwerk Australia Pty Ltd v Nuplex Industries (Australia) Pty Ltd [2013] FCAFC 130; 305 ALR 412 at [97]:

It is axiomatic that parties are bound by the way the case is conducted. If a case is conducted in a particular way and opposing counsel say, in opposition to a ground of appeal or an application to add a ground of appeal, that they would have responded differently at trial if the point had been put or remained live then usually that is sufficient to have the consequence that the point cannot be raised on appeal.

40    A point cannot be raised for the first time on appeal when it could possibly have been met by calling evidence at trial: Coulton v Holcombe (1986) 162 CLR 1 at 7-8 (Gibbs CJ, Wilson, Brennan and Dawson JJ); Water Board v Moustakas (1988) 180 CLR 491 at 497 (Mason CJ, Wilson, Brennan and Dawson JJ). The Commissioner might have sought to adduce further evidence from Mr Zafiriou or another ATO officer had this new argument been raised before the primary judge. The Court will not, moreover, permit a new point to be raised where to do so would occasion an injustice. In these circumstances leave to raise the new argument in the application for leave to appeal should not be granted.

disposition

41    The application for leave to appeal should be refused, with costs.

Associate:

Dated:    8 March 2019