FEDERAL COURT OF AUSTRALIA

Strachans SA v Attorney-General [2008] FCA 553

ADMINISTRATIVE LAW  –  application for request for assistance in a criminal matter to be declared invalid, set aside or quashed – whether the request lawfully made –  whether the request was made by the Attorney General (Cth) or the Attorney General’s delegate –  whether the maker of a request is under an obligation to disclose all material facts –  whether alleged factual defects in the request rendered the request invalid - whether reasonable grounds to believe the preconditions for making the request were satisfied – whether inclusion of allegedly privileged material rendered the request invalid - whether the involvement of the Director of Public Prosecutionsrendered the request unlawful – whether the involvement of the Australian Crime Commission rendered the request unlawful –  application dismissed

Mutual Assistance in Criminal Matters Act 1987 (Cth)

Dunn v Australian Crime Commission [2008] FCA 424

STRACHANS SA v ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA

VID 271 OF 2006

TRACEY J

24 APRIL 2008

MELBOURNE

THE COURT ORDERS THAT:

1.                  The application be dismissed with costs.

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

REASONS FOR JUDGMENT

1                     This proceeding was heard immediately after argument had concluded in Dunn v Australian Crime Commission [2008] FCA 424.  It was convenient to follow this course because the applicant sought, and had been granted leave, to rely on the same evidence which had been tendered in the Dunn case in this proceeding and because, apart from two additional matters, the same grounds and argument as had been advanced in Dunn were pursued in this case.

2                     Dunn was concerned with a challenge to the lawfulness of a request, made by a delegate of the Commonwealth Attorney-General, to Swiss authorities.  The request was made under the Mutual Assistance in Criminal Matters Act 1987 (Cth) (“the Mutual Assistance Act”) and the Treaty between Australia and Switzerland on Mutual Assistance in Criminal Matters done at Berne in Switzerland on 25 November 1991 (“the Treaty”).  It asked the Swiss authorities to obtain and execute search warrants to seize documents which were sought in relation to an investigation known as “Operation Wickenby”.  The mutual assistance request suggested that relevant documents might be found in the applicant’s premises in Switzerland upon the execution of search warrants.

3                     The grounds of the present application which are common to the grounds relied on in Dunn are that:

·                    Necessary preconditions (under the statutory regime and the Treaty) for the making of a valid application for assistance under the Mutual Assistance Act were not observed.

·                    The request misstated a number of important facts.

·                    The involvement of the Commonwealth Director of Public Prosecutions in the making of the request was unlawful.

·                    The involvement of the Australian Crime Commission (“the ACC”) and the making of the mutual assistance request was also unlawful.

These grounds are dealt with in the reasons for judgment in Dunn at [15] to [80].  Each fails for the reasons given in Dunn.

4                     The two additional grounds which are peculiar to the present proceeding concern certain factual allegations which were made in the mutual assistance request and in correspondence sent by Australian authorities to Swiss authorities in December 2005 which is referred to in the reasons for judgment in Dunn as “the November letter” because the documents were written and dated in that month.  It is contended that:

·                    It was implied in the mutual assistance request that two persons, who were identified in that document as being subject to criminal investigation, were at relevant times Australian residents for taxation purposes when this was, in fact, not the case.

·                    A letter, written by solicitors, was wrongly described in the November letter as a “False or Fictitious Document[s] produced by Strachans SA.”

These alleged defects, together with those referred to in paragraph [3] above, it was contended, caused the mutual assistance request to have been made “without authority, outside jurisdiction or unlawfully.”  The consequence was said to be that it was “invalid” and that it must, therefore, be set aside or quashed.

5                     The persons whose residential status for tax purposes was said to have been misstated in the mutual assistance request may be referred to as H and C.  The passages in the mutual assistance request on which the applicant relies to found the implied statement that H and C falsely stated to be Australian residents at relevant times are the following:

“7.        Australian authorities are investigating a number of Australian residents for using companies, trusts and bank accounts administered by Strachans S.A., an accountancy services firm in Switzerland, to disguise their involvement in tax fraud schemes and money laundering.

8.                  In February 2004, Philip Egglishaw, one of the principals of Strachans, travelled to Australia.  While in Australia, the ACC compelled Egglishaw to produce documents and his personal computer and to attend an ACC hearing to answer questions.  From this, the ACC learnt that Strachans administers various companies, trusts and bank accounts based in foreign countries on behalf of, and for the benefit of, a number of Australian residents and their families.

9.                  The ACC believes the services provided by Strachans enables Australian residents to:

(a)                accumulate substantial assets overseas in companies and trusts hidden behind an impenetrable veil of incorporation

(b)               create misleading documents which assist in defrauding the Commonwealth of Australia, and

(c)                access their funds administered by Strachans from anywhere in the world by the use of debit or credit cards linked to bank accounts opened and operated for them by Strachans outside Australia, including at Corner Banca, SA in Lugarno, Switzerland.

10.              Based on the information obtained from Egglishaw, the ACC commenced criminal investigations into suspected fraud and money laundering by a number of Australian residents who have utilised the services provided by Strachans and Corner Banca.

            …

31.              A schedule that was recovered from Egglishaw listing the Australian clients and the intermediaries provides a key link that identifies the offshore companies and trusts that Strachans operates on behalf of individual clients.  Each entity operated by Strachans is given a name and a four figure reference number.  The names of the individual clients believed to be in criminal activity are:

            …

            (j) H    

            (k) C

            …

32.              Each of these clients and their respective entities are discussed in detail below.”

Between paragraphs 69 and 83, the mutual assistance request detailed various allegations against TS (an accountant and financial adviser), H and C.  In paragraph 70 it was said:

“[TS] is an accountant and financial adviser.  He is also a principal of the [S] group of companies located in Sydney, Australia.  He has a number of clients who are very prominent in the film industry including [H] and [C], who he has been associated with since 1989.  He also has clients who live in the United Kingdom and the United States of America who are prominent in the motion picture industry, namely [E] and [S]…”

The principal allegations against H and C were said, by the applicant, to relate to the non-disclosure and non-payment of tax on income earned overseas in relation to non-Australian property. 

6                     The applicant submits that these passages imply, contrary to the fact, that H and C were both residents of Australia between 1995 and 2005 for taxation purposes.  The implication is said to arise from the distinction drawn, in paragraph 70, between E and S on the one hand and H and C on the other, suggesting that H and C are Australian residents because the overseas residency status of E and S is expressly referred to.  A more general contention is also made, namely, that the mutual assistance request was made on an unstated premise that the persons who were the subject of allegations made in it were, at relevant times, Australian residents unless the contrary was expressly stated.  The unstated premise is said to arise because, so it is said, offences of the kind alleged against H and C could not be committed by non-resident tax payers.

7                     Having considered the terms of the request, the Swiss authorities, by letter dated 10 October 2005, sought clarification of the residency status of both H and C.  Specifically the question asked was “Do [H and C], had (sic) their residence in Australia and/or were they Australian taxpayers during the period for which the investigation is lead (sic)?”

8                     The November letter responded to this query as follows:

“Income Tax Returns show that Mr [H] declared himself to be a non resident of Australia for the financial years ending 30 June 1995, 1996, 1997, 1998, 1999, 2000, 2001 and 2002.

Income Tax Returns show that Mr [H] declared himself to be a resident of Australia for the financial years ending 30 June 2003 and 2004.  As yet he has not lodged an Income Tax Return in respect of the 2005 year.

Notwithstanding him being a non resident for a number of years he was still an Australian taxpayer and lodged Income Tax Returns for each of the years 1995 to 2004 as non residents of Australia are subject to tax on income sourced in Australia.  While resident outside of Australia Mr [H] continued to be a director and shareholder in a number of Australian resident companies.

In a statement believed to have been provided by [H] to the Internal Revenue Service in the United States of America in 2003/2004 he stated that his personal and economic relations were closest to Australia where he maintains his permanent home.

Income Tax Returns show that Mr [C] declared himself to be a non resident of Australia for the financial years ending 30 June 1996, 1997, 1998 and 1999.

Income Tax Returns show that Mr [C] declared himself to be a resident of Australia for the financial years ending 30 June 1995, 2000, 2001, 2002, 2003 and 2004.  As yet he has not lodged an Income Tax Return in respect of the 2005 year.

Notwithstanding him being a non resident for a number of years he was still an Australian taxpayer and lodged income tax returns for each of the years 1995 to 2004 as non residents of Australia are subject to tax on income sourced in Australia.  While resident outside Australia Mr [C] continued to be a director and shareholder in a number of Australia resident companies.”

9                     The applicant contends that the information contained in the November letter relating to H and C accurately states the residency position of H and C.  It says further that these were material facts which should have been, but were not, disclosed in the request. 

10                  In Dunn at [45] to [52] I considered, and rejected, a submission that the Commonwealth Attorney-General was under an obligation, when making a mutual assistance request, to disclose to the Requested State all material facts relevant to the request.  Given that any request would be made in the course of an investigation, I assumed that the alleged obligation could only extend to material facts known to the Requesting State at the time at which the request was made.  For the reasons given in Dunn I do not consider that the Commonwealth Attorney-General was under an obligation to disclose to the Swiss authorities the residential status of H and C when making the request.

11                  The applicant may also be understood to have advanced the alternative submission that the mutual assistance request contained misleading information by implying that H and C were Australian residents when, in fact they were not.  I do not accept these contentions.  In the first place the contentions are founded on a mistaken assumption that H and C, had they not been Australian residents, could not have committed offences against Australian law.  They were obliged to comply with Australian taxation law in respect to income sourced in Australia during the period of their non-residency.  Secondly, H and C were resident, for taxation purposes, in Australia during at least part of the period covered by the investigation.  That period, as the Swiss authorities were advised in the November letter, ran from 1 January 1995 to 31 May 2005.  Thirdly, when the Swiss authorities sought further details about the residency of H and C, the Australian authorities advised that H and C had “declared” themselves to be non-residents for some (but not all) of the financial years falling within the period covered by the investigation.  The applicant says that this information was correct.  There is some ambiguity here because the Australian authorities did no more than tell the Swiss authorities what H and C had declared in their taxation returns.  There can be no doubt that this information was uncontentious.  I do not understand the Australian authorities to be asserting, as I think the applicant would have it, that the declaration was correct in fact and law.  I also note that this part of the applicant’s submission is at odds with the submissions made in Dunn that the November letter formed part of the request.  If it did then the Swiss authorities were advised of the relevant information in the request.

12                  The second complaint, which is peculiar to the present application, is that, in the November letter, a letter dated 1 February 2005 from Barminco Investments Pty Ltd’s legal advisers was wrongly described as a “False or Fictitious Document[s] produced by Strachans”.

13                  The mutual assistance request advised the Swiss authorities that two of the persons, under investigation in Operation Wickenby were B and S.  It was alleged (at paragraphs 94 to 100) that B and S were involved in fraudulent transactions which were devised for the purposes of defrauding the Commonwealth.  In their letter of 10 October 2005 the Swiss authorities asked, in respect of the matters raised in the mutual assistance request concerning B and S:  “Is it possible to have more details about the modus operandi used by [B and S] to defraud the Commonwealth?”  In the part of the November letter headed “Status of Criminal Investigations” the Australian authorities responded to this request.  They did so in a section of the document headed “False or Fictitious Documents produced by Strachans located in Australia”.  Immediately below this heading there was a subheading “Dunn” under which there were six paragraphs dealing with Mr Dunn.  Three of those paragraphs are set out in the Dunn reasons at [12].  There then followed another subheading “[B and S]” under which the following passages appeared:

“A letter from Strachans dated 10 April 2005 to Robin Anderson of Barminco enclosing a receipts and payments statement for Barminco and stating that payments of $800,000 and $2,500,000 to be paid out of Barminco Investments Pty Ltd are not to be treated as repayments of the promissory notes to Crossline but will be shown as payments to one of our in-house companies.   (See tab 25).  Evidence obtained by the ACC confirms that $2,500,000 was to be paid to Dunn and the $800,000 to be paid to Dunn, [B and S].

Strachans receipts and payments statement for Barminco (see tab 26).

Letter dated 1 February 2005 from Barminco Investments Pty Ltd’s legal advisers to Strachans outlining that customers will pay invoiced amounts into the bank account Strachans will open for Barminco and 25% of the payments are to be retained in the account and the balance forwarded to the bank account of Barminco in Australia.  (See tab 27)

Letter from Strachans dated 13 December 2004 to Barminco Investments Pty Ltd’s legal representatives enclosing account opening documents for an account with Credit Suisse Crans-Montana Switzerland.  (See tab 28)

Two versions of a Strachans receipts and payments scheduled in respect of Crossline Overseas Limited (5041) (See tab 29)”

The letter that appeared at tab 27 was a letter prepared and sent by solicitors Mallesons Stephen Jacques. 

14                  The applicant correctly asserts that this letter was not a “False or Fictitious Document[s] produced by Strachans.”  That may be accepted.  What is in issue, however, is whether, on a fair reading, the November letter suggested that it was.  I do not consider that the relevant passages can be so understood. 

15                  Those passages are set out above at [13].  The reference to the 1 February 2005 letter makes it plain that that letter was sent by the legal advisors of Barminco Investments Pty Ltd to Strachans.  As the next paragraph records, that letter was responsive to the matters raised by Strachans in its letter to Barminco’s legal representatives dated 13 December 2004.  The clear words of the text cannot be and are not varied merely because they appear under a general heading which suggests that Strachans created false and fictitious documents.  No reasonable reader and, in particular the Swiss authorities, would have or could have so construed the plain words.

16                  Even had the applicant’s proposed description of the solicitor’s letter been correct, the wrong characterisation of one letter could not provide a ground for invalidating the request as a whole even if, contrary to my finding in Dunn, the November letter formed part of the request.

DISPOSITION

17                  As in Dunn the respondents objected to the application being commenced out of time and opposed any extension of time being granted.  The findings which I have made in relation to the grounds relied on in the application make it unnecessary to deal with these disputed issues.

18                  The application should be dismissed with costs.

Associate:

Dated:         24 April 2008