FEDERAL COURT OF AUSTRALIA

Bai v Commissioner of Taxation (No 2) [2015] FCA 1083

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decision of Administrative Appeals Tribunal (the Tribunal) dated 29 August 2013 be set aside to the extent that the Tribunal decided that the amended assessment for the financial year ended 30 June 2005 was not excessive.

3.    So much of the application for review as relates to the question whether the amended assessment for the financial year ended 30 June 2005 was excessive by reason that there was no fraud or evasion within the meaning of item 5 of the table to s 170(1) of the Income Tax Assessment Act 1936 (Cth), be remitted to the Tribunal, differently constituted, for hearing and determination according to law consistent with the Court’s reasons for judgment published on 3 September 2015 and 8 October 2015.

4.    The respondent pay the applicant’s costs of the appeal as agreed or taxed, save that each party bear its own costs in relation to the notices to produce.

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

REASONS FOR JUDGMENT

1    On 3 September 2015, I published my reasons for concluding that the applicant’s appeal from the Administrative Appeals Tribunal succeeded on one of the three bases pressed in argument: see Bai v Commissioner of Taxation [2015] FCA 973.

2    I will use the same abbreviations that I used in those reasons in what follows here. I held that the Tribunal had applied the wrong onus of proof to the determination of the question of whether the assessment was excessive (i.e. wrong) when the taxpayer had attempted to satisfy it that there was no fraud or evasion within the meaning of item 5 in the table to s 170(1) of the 1936 Act, so as to justify the Commissioner’s original decision to issue the challenged amended assessment. I found that the Tribunal had required the taxpayer to negate beyond reasonable doubt that there had not been fraud or evasion, instead of considering whether she had satisfied it of this on the balance of probabilities.

3    Thus, if the taxpayer, on a remitter, can satisfy the Tribunal, when it applies the correct onus of proof, that there had not been fraud or evasion, the amended 2005 assessment must be set aside. I directed the parties to bring in short minutes of order to give effect to my reasons by 18 September 2015. Unfortunately, they could not agree on those orders and, after I made consent directions, each filed a competing form of orders and short submissions in support of it. The contentious issue is the substance of the conditions that the order for remitter should contain.

The parties’ positions

4    The taxpayer argued that the order should require the Tribunal to be differently constituted and hear the question de novo and that the Commissioner should also be ordered to provide particulars of why he had found fraud or evasion. The taxpayer argued that, since the Deputy President had made several adverse credit findings about her, the order for remittal should require the Tribunal to be differently constituted and that there be a discrete but complete rehearing on the remitted question.

5    The Commissioner contended that the remitter should be on the basis that that question be reheard and decided again on only the same evidence as had been before the Tribunal and that the taxpayer should not be allowed to call fresh or further evidence. He also resisted the application for particulars because it had not been an issue in this appeal.

Consideration

6    I do not consider either party’s approach to be suitable. As I said in my reasons (Bai [2015] FCA 973 at [84]) the President will need to consider, under s 44(6) of the AAT Act, how to conduct the further hearing of the review, taking into account that the Deputy President’s credibility findings in respect of the taxpayer preclude him from hearing the remitter. In the ordinary course, it is likely that when a different member of the Tribunal considers the material in the review to date, the Tribunal will decide that it should conduct a hearing de novo on fresh evidence, but that is a matter best left to the Tribunal particularly in respect of the nature and extent of any further evidence that it will take: cf Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at 526 [18]-[19] per Gleeson CJ, 533-534 [43]-[46] per McHugh J, 539-543 [66]-[79] per Gummow and Hayne JJ (although, unlike there, the present proceedings are adversarial in nature), see too May v Military Rehabilitation and Compensation Commission (2015) 322 ALR 330 at 379-380 [233] per Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ.

7    Once the President decides who is to constitute the Tribunal on the remitter, that member will be able to determine how best to hear and determine the question for decision. One course that the Tribunal may think appropriate is to allow the parties to rely on the fresh evidence that was before me in the appeal and to permit cross-examination on that evidence together with, so far as relevant, evidence that had been before the Deputy President.

8    In those circumstances, and having regard to the importance of the Tribunal being able to consider the matters of its own practice and procedure necessary to enable the further conduct of the review, I do not consider it appropriate to make orders tying its hand one way or other. The order in the nature of a writ of mandamus that I will make will ensure that the Tribunal retains its full discretionary powers to conduct the remitted part of the review as it considers appropriate.

9    For these reasons, I will order that the question of whether the 2005 assessment was excessive in respect of the precondition relating to the Commissioner’s opinion as to there having been fraud or evasion be remitted to the Tribunal, differently constituted, to be heard and determined according to law consistent with my original reasons and these.

Associate:

Dated:    8 October 2015