Federal Court of Australia
Le v Commissioner of Taxation  FCA 303
DATE OF ORDER:
THE COURT ORDERS THAT:
1. The appeal be allowed.
2. As a consequence:
(a) the cross-appeal be dismissed; and
(b) the matter be remitted to the Administrative Appeals Tribunal for rehearing according to law.
3. The applicants file such submission, if any, in respect of costs, including whether a certificate under s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) should be granted, as they may be advised, of not more than 4 pages, within 7 days and serve the same forthwith on the respondent.
4. The respondent file and serve such outline of submissions of not more than 4 pages in relation to costs as he may be advised not later than 7 days after the service on him of the applicants’ submission as to costs.
5. Thereafter, any question as to costs be determined on the papers.
6. Pending the receipt of submissions as to costs, costs be reserved.
1 Given the issues at large in this statutory appeal from the Administrative Appeals Tribunal (Tribunal), it is helpful to commence by recalling some basal features of the review of an objection decision by the Tribunal.
2 On an application for review of a reviewable objection decision in respect of an assessment, an applicant has the burden of proving that the assessment is excessive or otherwise incorrect: s 14ZZK(b)(i), Taxation Administration Act 1953 (Cth) (TAA). That is hardly a modern phenomenon. Like provision was found on enactment, and remained present for decades thereafter, in the now former s 190(b) of the Income Tax Assessment Act 1936 (Cth) (ITAA36), before being relocated, along with many revenue law procedural provisions once readily found and comprehended, into the TAA.
3 Even as enacted, the real point of s 190(b) of the ITAA36 was not to change the then existing income tax law, but rather to make explicit and to confirm a position already established under previous income tax law by judicial interpretation of the provision that the tendering on a taxation appeal or review of a notice of assessment was prima facie evidence that the amount and all particulars of that assessment were correct. Notably, in Trautwein v Commissioner of Taxation (1936) 56 CLR 63 (Trautwein), that the taxpayer carried the onus of proof was regarded as the implicit meaning and effect of such a provision, the then s 39 of the Income Tax Assessment Act 1922 (Cth) (ITAA22). There was, in s 177 of the ITAA36 as enacted, and there remained in that Act for decades until that section, too, was relocated into the TAA (as s 350(10), Sch 1, TAA), an equivalent of s 39 of the ITAA22. Hence my view that s 14ZZK(b)(i) of the TAA, as also with s 14ZZO(b)(i) of the TAA in relation to taxation appeals brought under s 14ZZ of the TAA, and before them s 190(b) of the ITAA36, have always had a confirmatory quality. That view coincides with the position stated in McAndrew v Commissioner of Taxation (1956) 98 CLR 263, at 271 by Dixon CJ, McTiernan and Webb JJ and, at 273, by Kitto J.
4 The explicit and implicit casting of an onus on an applicant in either a taxation appeal in this Court or an objection decision review in the Tribunal purposely negates any possible suggestion that, by the making of an assessment, the Commissioner of Taxation (Commissioner) assumes an onus of proving that the recipient of that assessment is indebted to the Commonwealth in the amount of the liability thereby created. There are policy and pragmatic reasons for this, arising from the first-hand knowledge of a taxpayer of the taxable events in comparison with the Commissioner, who is, necessarily, a stranger to the occurrence of those events.
5 In relation to a review proceeding in the Tribunal, any casting of a formal onus of proof on a party is truly exceptional. Ordinarily in a review in the Tribunal, and as has been repeatedly emphasised by the High Court, neither party carries any formal onus of proof: Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1, at . Usually, because an administrative decision must be grounded in material reasonably capable of supporting that decision, it will be in the interest of the party contending for a particular outcome to introduce or to point to such material in a review, but there is no formal onus. In the review of an objection decision by the Tribunal, the position is very different. If an applicant does not engender satisfaction on the part of the Tribunal that the assessment is excessive, the objection decision must be confirmed, because the onus of proof has not been discharged.
6 The provision for a formal onus of proof does not mean that, in a review in the Tribunal, as opposed to a taxation appeal in this Court, proof on the balance of probabilities in accordance with the rules of evidence is required. It remains the case in relation to a taxation review, as with other review proceedings in the Tribunal, that the use of such terms and related conceptions is inappropriate and “borrowed from the universe of discourse which has civil litigation as its subject”: Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259, at 282.
7 Related to this, although within Div 4 of Pt IVC of the TAA, there are provisions which render inapplicable, or modify, particular sections of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) in their application to the review of an objection decision by the Tribunal, s 33 of the AAT Act is not amongst them. Thus, the confirmation in s 33(1)(c) of the AAT Act of the general position in relation to administrative decision-making that the rules of evidence are inapplicable applies just as much to the review of an objection decision as it does in any other review conducted by the Tribunal. Further, the exhortation found in s 33(1)(b) of the AAT Act for a review to be “conducted with as little formality and technicality” as appropriate in the circumstances is likewise applicable.
8 His reasons for decision make it plain that the Deputy President who constituted the Tribunal for the purpose of hearing the review was well aware of s 14ZZK(b)(i) of the TAA. Further, in those reasons, the Deputy President, who had the singular advantage of observing the witnesses when they gave oral evidence, made very particular and adverse findings as to the credit of each of the applicants, Ms Thuong Thi Le (Ms Le) (referred to as HPML by the Tribunal) and her longstanding de facto spouse, Mr Phong Trieu (Mr Trieu) (referred to as NGFZ by the Tribunal), as well as a number of other witnesses called by them in their endeavour to discharge the onus of proof imposed on them. The anonymity afforded to each of the applicants by the Tribunal was the result of their taking up the right conferred by the TAA for the review proceeding to be conducted in private. No such right attends a consequential appeal to this Court on a question of law under s 44 of the AAT Act.
9 One might have thought, in light of s 14ZZK(b)(i) of the TAA and these adverse findings as to credit, that it would be difficult indeed for Ms Le and Mr Trieu to succeed in an appeal to this Court on a question of law, all the more so when the Deputy President had set out at length his reasons for his adverse findings. However, the submissions in support of the applicants’ case were advanced with consummate skill by their counsel, Mr May, on the hearing of the appeal and in related written submissions. That was all the more so skilful, given that the then prevailing public health restrictions dictated that the hearing be conducted by the impersonalising, technologically capricious, audio-visual medium of Microsoft Teams, rather than by the superior means of an appearance in person in the courtroom. One might also have expected, for like reasons, that such explained and limited conclusions as the Deputy President did reach in favour of the applicants might have made a cross-appeal by the Commissioner, likewise confined to a question of law, difficult. However, the Commissioner submitted that these favourable conclusions were the result of a misunderstanding by the Deputy President of the meaning and effect of s 14ZZK(b)(i) of the TAA.
10 By their amended notice of appeal, the applicants posed these questions on the appeal:
2. Whether the Tribunal’s decision was irrational, illogical, or not based on findings or inferences supported by logical grounds, such that its decision was not authorised by section 43 of the Administrative Appeals Tribunal Act 1975 (Cth).
4. Whether the Tribunal gave inadequate reasons such that its decision was not authorised by section 43 of the Administrative Appeals Tribunal Act 1975 (Cth).
5. Whether the Tribunal’s decision involved a failure to afford procedural fairness to the taxpayers and to witnesses giving evidence in the proceeding by:
a. failing to consider and respond to a substantial, clearly articulated argument relying upon established facts; or
b. making material findings against those persons without their having a fair opportunity to address them,
such that its decision was not authorised by section 43 of the Administrative Appeals Tribunal Act 1975 (Cth).
11 So expressed, these questions conceal more than they reveal in terms of the vices allegedly present in the Tribunal’s reasons. Precision was given in the applicants’ written submissions, as further developed in oral argument.
12 Before turning to the respective submissions, it is necessary first to detail the relevant assessments.
13 Each of the assessments was made after an audit. As necessary, the assessments were made on the basis of an opinion formed by the Commissioner that there had been an avoidance of tax by virtue of fraud or evasion. In part, the assessments were made on the basis of asset betterment calculations by the Commissioner. The Commissioner also made related assessments of administrative penalties, each based on there having been an intentional disregard to a taxation law under the TAA, in addition to the imposition of shortfall interest charges.
14 An objection by Ms Le to the assessments was allowed in part. In summary, the position in respect of Ms Le’s taxable income as returned for the income years in question and after the objection decision was as follows:
Taxable Income as disclosed in taxation return
Taxable income as a result of objection decision
15 The result of the allowance in part of Ms Le’s objection was that the administrative penalties and shortfall interest charges assessed in respect of the 2008 to 2012 income years were correspondingly reduced.
16 Mr Trieu’s objection to the assessments was allowed in part by the Commissioner, with the following results:
Year ended 30 June …
Taxable Income disclosed in tax returns
Taxable income as a result of objection decision
Discrepancy in taxable income
17 In addition to the assessments of income tax, the Commissioner also made in respect of Mr Trieu assessments of shortfall penalty under the TAA, each based on his view that there had been an intentional disregard by Mr Trieu of a taxation law, as follows:
Year ended 30 June
18 The allowing in part of the objection in respect of the assessments had consequential effects in respect of shortfall penalties. It is not necessary to detail these.
19 In relation to Ms Le’s review application (recalling the pseudonym used by the Tribunal and adopting the numbering used by the Tribunal in the formal decision), the Tribunal’s formal decision was:
3. For the 2005, 2006, and 2008 income years, the decision under review (including in respect of the administrative penalty assessments) is affirmed.
4. For the 2007 income year:
a. the part of the decision under review to exclude from HPML’s taxable income an amount of $20,000 is remitted to the Commissioner for reconsideration;
b. the decision under review (including in respect of the administrative penalty assessments) is otherwise affirmed.
5. For the 2009 income year:
a. the following parts of the decision under review are remitted to the Commissioner for reconsideration:
i. exclude from HPML’s taxable income an amount of $35,621;
ii. exclude from HPML’s taxable income an amount of $30,000;
b. the decision under review (including in respect of the administrative penalty assessments) is otherwise affirmed.
6. For the 2010 income year:
a. the following parts of the decision under review are remitted to the Commissioner for reconsideration:
i. exclude from HPML’s taxable income an amount of $30,535;
ii. exclude from HPML’s taxable income an amount of $15,000;
b. the decision under review (including in respect of the administrative penalty assessments) is otherwise affirmed.
7. For the 2011 income year:
a. the following parts of the decision under review are remitted to the Commissioner for reconsideration:
i. exclude from HPML’s taxable income an amount of $100,000;
ii. exclude from HPML’s taxable income an amount of $55,000;
8. For the 2012 income year:
i. exclude from HPML’s taxable income an amount of $171;
ii. exclude from HPML’s taxable income an amount of $13,000;
iii. exclude from HPML’s taxable income an amount of $10,000;
the decision under review (including in respect of the administrative penalty assessments) is otherwise affirmed.
20 In relation to Mr Trieu’s review application (recalling the pseudonym used by the Tribunal and adopting the numbering used by the Tribunal in the formal decision), the Tribunal’s formal decision was:
1. For the 2005, 2006, 2007, 2008, 2009, 2011, and 2012 income years, the decision under review (including in respect of the administrative penalty assessments) is affirmed.
2. For the 2010 income year:
a. the part of the decision under review to include NGFZ’s taxable income an amount of $15,000 is remitted to the Commissioner for reconsideration; and
b the decision under review (including in respect of the administrative penalty assessments) is otherwise affirmed.
21 As it came to be refined by the Commissioner at the time when the objection decisions were made, the approach he adopted in assessing Ms Le and Mr Trieu was as follows.
22 The Commissioner adopted a conventional, asset betterment, starting point. He identified assets – bank account balances, real estate and vehicles. He then identified liabilities – bank loans and credit card balances. He deducted the liabilities from the assets so as to derive net assets. Having so done, the Commissioner identified the annual change in net assets. That change then became a component of his assessment of the taxable income of the applicants.
23 Another component of the Commissioner’s assessing approach was to identify amounts paid from bank accounts, be these amounts particular to expenditures or cash withdrawals. It was assumed that, in order to make such payments, a corresponding amount of income must have been derived.
24 In relation to Ms Le, the Commissioner also assessed on the footing that amounts said to be contributions by her to various “hui” (explained below) were also sourced in equivalent income derived by her.
25 It was uncontroversial before the Tribunal that a “hui” was an informal money lending system, common among Vietnamese communities. Ms Le and Mr Trieu are each of Vietnamese origin. It was also uncontroversial that Ms Le was heavily involved in various hui.
26 A hui involves a group of people joining together to make contributions to form a pool of cash at regular intervals. Each contributor thereby becomes a member of the hui. Each member of the hui has a certain number of ‘shares’. Each share gives the holder a right to collect the pool of cash on one of the intervals. On each interval, the eligible holders of shares bid for the right to take the pool of money (with the bid in effect constituting a discount on what others are required to contribute to the pool on that occasion).
27 In assessing Ms Le, the Commissioner included as income the amounts that Ms Le said she paid by way of contributions towards hui (but not what she said she had withdrawn).
28 Yet another component of the Commissioner’s assessing approach was to include in the applicants’ assessable income expenditures at the Treasury Casino, Brisbane as derived by him from the records maintained by the Treasury Casino in relation to a ‘rewards card’. The Commissioner assumed that the source of the expenditures so recorded had been spent at the casino by the applicants and sourced in income derived by them.
29 There was evidence before the Tribunal that the Treasury Casino issued rewards cards to particular patrons. The holders of a reward card could then present the card when gambling at a table or on a poker machine at the casino and receive rewards ‘points’ based on their turnover.
30 In his assessing approach, the Commissioner made a number of adjustments in favour of the applicants before settling upon the taxable income for a given income year. He gave credit for income that had already been declared, and deductible expenses that had been paid in the course of earning that income, and for other non-assessable receipts by the applicants. These non-assessable receipts included certain gambling winnings that were proved by documents, and one loan that the Commissioner was satisfied was made.
31 Desirable though it is to understand the Commissioner’s assessing approach, the discharge of the statutory onus of proof entails rather more than just a critique of that approach: Bosanac v Commissioner of Taxation (2019) 93 ALJR 1327, at , confirming a like view expressed in the original jurisdiction of this Court: Bosanac v Commissioner of Taxation  FCA 946, at  – . In fairness to Mr May of Counsel, this proposition was accepted.
32 Before the Tribunal, the applicants had submitted that, on the evidence, they had demonstrated that the assessments were excessive in a way described by Burchett J in Ma v Commissioner of Taxation (1992) 37 FCR 225 (Ma), at 230:
But if a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved. Any other view would introduce a degree of arbitrariness into liability for tax.
33 There are, of course, other types of tax cases where the underlying taxable events are themselves uncontroversial and the onus of proof can be discharged by showing that the Commissioner has erred in his construction and application of the taxation legislation to those events. This is not such a case. The observations in Ma just quoted were directed to those tax cases where the occurrence of the underlying taxable events is controversial. Allegedly undisclosed income cases offer a paradigm of this type of case.
34 Save for conceding omission of interest from loans, the applicants denied that their income was other than declared in their taxation returns. In effect, the applicants’ case on appeal was that, given what they submitted Ma permitted, the Tribunal had failed to address key elements of the explanation which they had advanced and that the reasons provided contained an internal inconsistency and thus illogicality, as well as findings as to credit which were procedurally unfair to them. The applicants accepted, correctly (Rosenberg v Percival (2001) 205 CLR 434; Minister for Immigration and Multicultural Affairs v Rajamanikkam (2002) 210 CLR 222), that, if such a case were made out, the Court could not, given the nature of an appeal under s 44 of the AAT Act and the limited ability of the Court on such an appeal to make findings of fact, itself determine whether they had discharged the onus of proving the assessments to be excessive. Their contention was that the review application would have to be heard afresh, necessarily by a differently constituted Tribunal.
35 The applicants submitted that an error of law was to be found in a failure to “respond to a substantial, clearly articulated argument relying upon established facts”. That error, they submitted, might be characterised as a failure to afford procedural fairness or in a failure to discharge a statutory function of review, but the root cause was the same.
36 Based on this starting premise, the applicants’ submission was that the amount of each assessment was the result of the inclusion in assessable income and, after the deductions mentioned, taxable income of all debits from bank accounts on the basis they were unexplained income. On the merits in the Tribunal and, on the basis of an asserted omission of consideration, as part of their alleged error of law contention in the appeal, the applicants’ submission was that such an analysis did not give credit for cash deposits into the bank accounts. It was put that the effect was that if cash were withdrawn from one account and deposited into another, the withdrawal itself had been counted as an “expense” (which required income to make). This explanation for assumed wealth formed one basis as to why they submitted to the Tribunal that the assessments were excessive. They submitted that the Tribunal had not, as they submitted it was obliged to do, responded to this submission.
37 More particularly, the applicants’ case in the Tribunal was that:
a. It is wrong to assume that every withdrawal of cash from a bank account constitutes ‘expenditure’ because such withdrawals are equally consistent with transferring funds by withdrawing cash from one account and depositing it into another.
b. The [applicants’] evidence was that they frequently effected transactions in this way. Their evidence was that this was the means by which they transferred funds between accounts.
c. That evidence was supported by the bank statements for the accounts themselves which showed numerous transactions consistent with such explanation.
d. If that explanation were accepted, then a substantial portion of what the objection decision concluded to be ‘unexplained’ expenditure would be explained.
e. As to how significant this aspect of the case was, the following table [which had been put before the Tribunal] summarises [Ms] Le’s asset betterment assessment at the objection stage, showing the total taxable income the Commissioner concluded had been earned, and the extent to which ‘unexplained bank expenditure’, unexplained gambling expenditure, and all other sources contributed to that total.
Total taxable income
Other as %
f. [A table was] prepared in respect of Mr Trieu [and placed before the Tribunal], which shows that ‘bank expenditure’ was an even more significant component of the assessments [in respect of] him:
Total taxable income
38 The applicants submitted, and regard to the transcript and documents concerned confirms, that the submission just detailed was a central theme of their opening oral address and closing oral and written submissions. In the course of their closing oral submissions, the applicants provided the Tribunal with an aide memoire which summarised some of the underlying documents to show the significance of cash withdrawals for the expenditure calculation in the asset betterment analysis.
39 The applicants did not contend that the Tribunal was bound as a matter of law to accept the above explanation for the cash withdrawal “expenditure” attributed as income to them in the objection decision. What they contended was that the Tribunal was bound as a matter of law to consider and deal with the explanation.
40 The applicants submitted, and a fair reading of the Tribunal’s reasons confirms, that, notwithstanding its prominence in the applicants’ submissions, this particular argument is not addressed in the Tribunal’s reasons. There are, as the applicants submitted, passing references in the Tribunal’s reasons to their dealing in cash, particularly in the context of gambling and cash sales of fish (via a business operated in partnership but with Mr Trieu as the active fisherman and vendor): at , , , , , , . However, the applicants’ submission that none of these passages refers to or deals with this particular argument must be accepted.
41 That conclusion is, as the applicants submitted, reinforced by the Tribunal’s comments at . There, the Tribunal mentioned Mr Trieu’s evidence about deposits of casino winnings potentially “assist[ing]” in explaining “the source of monies flowing into their bank accounts”, but that it was not sufficiently precise to “adequately explain what was going on” (emphasis added). As the applicants submitted, it is possible that, if the Tribunal had considered and decided to accept the argument detailed above, it would have been satisfied that that, together with Mr Trieu’s evidence about deposits of casino winnings, there was an adequate explanation as to explain “what was going on”. The Tribunal’s adverse assessment of the applicants’ explanation as to why the assessments were excessive was indeed, as the applicants submitted, grounded in an adverse assessment of the adequacy of their explanation as a whole. Given this, the applicants submitted that the Tribunal’s omission from consideration of a significant part of their explanation involved an error of law.
42 There are certainly cases which, at a general level of abstraction, support the applicants’ starting premise. Amongst them are Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088 (Dranichnikov), at  (Gummow and Callinan JJ); SZLGP v Minister for Immigration and Citizenship (2009) 181 FCR 113 (SZLGP), at , referring to “failing truly to engage with the claim as presented”; NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) (2004) 144 FCR 1 (NABE), at  – . However, it is necessary to read these cases in the context of the particular, applicable statutory regime.
43 The AAT Act itself confers no jurisdiction on the Tribunal. Rather, it provides for the establishment, membership and administration of the Tribunal, its practice and procedure and, in s 43, for its “core function” (Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123, at ) of review. Section 43 adopts a model for administrative review the constitutional validity of which was vindicated in Shell Co of Australia Ltd v Federal Commissioner of Taxation (1930) 44 CLR 530. The essence of that review model is that, in cases where jurisdiction is conferred upon it, the role of the Tribunal is to decide for itself what the correct or preferable decision is, being invested for that purpose with the powers and discretions of the person who made the decision under review: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409, at 419.
44 As s 25 of the AAT Act contemplates, the Tribunal’s review jurisdiction is sourced in a plethora of statutes. In relation to the review of a “reviewable objection decision”, of which the objection decisions in the present case are exemplars, the source of the Tribunal’s jurisdiction is s 14ZZ(1)(a)(i) of the TAA. In such a review, s 14ZZJ of the TAA modifies s 43 of the AAT Act in relation to the review of a reviewable objection decision so as to achieve consistency with the elective right of an applicant taxpayer to a private hearing in the Tribunal, but otherwise preserves the review model for which s 43 of the AAT Act provides. However, the conduct of that review is, as has already been noted, affected by the express provision in s 14ZZK of the TAA for an onus of proof.
45 Cases such as Dranichnikov, SZLGP and NABE were decided against the background of a statutory regime which required the making of an administrative decision responsive to an application that a decision-maker should be satisfied, for reasons claimed by the applicant in the application, that particular statutory criteria were met. In these circumstances, not to advert to an essential element or “integer” of a claim in an application is not to discharge according to law the statutory function of deciding the application as made. Against the background of such a statutory regime, the same obligation is then applicable to the Tribunal, sitting in place of the original decision-maker.
46 Whether a like conclusion should follow in relation to the review of a reviewable objection decision depends on the meaning and effect of s 14ZZK. Addressing that subject will also expose whether there is any substance in the Commissioner’s contention that such adjustments as the Tribunal did make evinced a misunderstanding of the meaning and effect of s 14ZZK.
47 As it happens, the subject was given detailed consideration by a specially constituted Full Court in Haritos v Commissioner of Taxation (2015) 233 FCR 315 (Haritos). In Haritos also there had been a concerted endeavour in the Tribunal by the applicant, in a way similar to that of the applicants in the present case, to prove that the assessments were excessive. Haritos is thus not just a binding authority as to the meaning and effect of s 14ZZK of the TAA but also peculiarly instructive as to how that section is to be applied in practice in a review in the Tribunal.
48 To give context to the Full Court’s observations in Haritos about the effect on the review by the Tribunal of a reviewable objection decision of the statutory prescription in s 14ZZK, it is essential first to set out a passage from the Tribunal’s reasons in that case which came under particular scrutiny in the Full Court. It is reproduced, at , of the Full Court’s reasons:
222 The Tribunal put forward a further reason or reasons for placing no weight on Mr Dalla Costa’s evidence. It said that his evidence did not point to information that could show the company’s costs and assessment of its on-costs. In the next paragraph of its reasons under the heading, “Consistency with industry benchmarks”, the Tribunal said that even if it was satisfied that the assessments were excessive, it would not be satisfied of the extent to which they were excessive because it had no factual foundation upon which it was able to come to a conclusion. The Tribunal said, at :
696 I have assessments as to whether they would seem to have come within industry benchmarks but I have no verification of whether they did or did not. It is not enough to reach a conclusion that the assessments might have been excessive. I need to know the extent to which it is excessive for, if I do not, I would become engaged in a guessing game as to the amount of [Mr Haritos’] and [Mr Kyritsis’] assessable income.
49 Against this background, the immediately following observations in Haritos, at , as to the import of the leading ultimate appellate level case of the modern era in relation to the onus of proof in a taxation case, Commissioner of Taxation v Dalco (1990) 168 CLR 614 (Dalco), at 626, and the root authority, Trautwein, at 88, per Latham CJ, are of particular present importance:
The precise meaning of this passage is not clear. Subject to the appellants’ arguments in relation to question 2, they accepted that Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, at 626 and earlier cases (see, for example Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63, at 88, per Latham CJ) provide that, in order to succeed, a taxpayer must show not only that an assessment is excessive, but also the extent to which it is excessive. The benchmarking figures did not establish the precise figures for this particular company and, on the case advanced by the appellants before the Tribunal, only acceptance of Mr Haritos’ evidence could establish, with the required degree of precision, the amount by which the assessments were excessive. All of this may be accepted, but it does not answer the point that Mr Dalla Costa’s evidence was capable of corroborating Mr Haritos’ evidence, and was not to be put to one side because it did not corroborate the precise figures put forward by Mr Haritos. The process of consideration of Mr Haritos’ evidence, and the review itself, was incomplete without a consideration of the effect of the evidence of Mr Della Costa that was of a character which was capable of amounting to corroboration.
50 The emphasised proposition about the onus of proof in the excerpt just quoted was, as it is so often in cases of this kind, at the forefront of the Commissioner’s submissions. That is what makes the rejection by the Full Court in the next succeeding paragraph in Haritos, , of a further proposition advanced by the Commissioner, so pertinent:
224 In his outline of submissions filed before the hearing, the respondent sought to meet the appellants’ argument by reference to the principle that, in this case, the appellants were required to prove not only that the assessments were excessive, but also the extent to which they were excessive. We reject that argument for the reasons given in the previous paragraph. As it happened, during the course of the hearing of the application for leave to appeal, counsel for the respondent conceded (correctly in our view) that it was “not wrong” to say the Tribunal’s reasoning was illogical to the extent that it said that Mr Dalla Costa relied on Mr Haritos’ evidence.
51 Ma was the subject of particular discussion in Haritos in relation to exactly what was entailed in proving that an assessment was excessive. Because of the reliance on Ma by the applicants, and the Commissioner’s submission that proof of what was a taxpayer’s true taxable income was required, it is desirable to set out that discussion, at  – , at some length:
233 The second way in which the appellants put their argument that the Tribunal had misconstrued or misapplied the burden of proof section was to contend that the section did not, contrary to the Tribunal’s view, require exact proof of the amount by which the assessment was excessive. The appellants referred to Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 where Burchett J, after referring at length to the decision of the High Court in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, said, at 233:
Furthermore, the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments. To refuse to consider the credit, not only of the applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support his accountant’s generalisations about double-counting rather than to hit upon a precise figure, was to fall into an error of law.
234 The proposition which the appellants sought to derive from this passage was that in performing its review function, the Tribunal may be required to make an estimate upon inexact evidence, and it cannot avoid its responsibility to make findings by relying on the burden of proof section. This proposition may be accepted for present purposes. The difficulty for the appellants is that, subject to the third argument dealt with below, they are unable to identify the estimate they contend the Tribunal should have made and the evidence by reference to which the estimate should have been made. It is true that the Tribunal appears to have thought it likely that there were subcontractor expenses of a reasonably substantial amount, but the appellants have not identified any findings of the Tribunal, or evidence referred to by it, that could form the basis of even an estimate upon inexact evidence. At one point the appellants foreshadowed a challenge to the Tribunal’s decision on the basis that it had not provided adequate reasons, but that line of attack was not pursued. The appellants did not suggest that the Tribunal erred in not selecting a figure advanced by one of the witnesses who gave evidence which potentially corroborated Mr Haritos’ evidence and, of course, a rational basis for the selection would need to be identified.
235 The third way in which the appellants put their argument that the Tribunal had misused the burden of proof section is related to the second. The appellants submitted that even if Mr Haritos’ evidence was correctly rejected, they had nevertheless established subcontractor expenses of at least a certain amount. The Tribunal was not entitled to adopt what the appellants described as an “all or nothing” approach. If an “at least” figure was established on the evidence, then the Tribunal should have made a finding in accordance with that evidence.
236 We think that proposition is correct. If a taxpayer claims his or her expenses were $10, but fails to prove that fact because their evidence is rejected, this does not prevent the Tribunal from finding that the expenses were $5 where there is other satisfactory evidence establishing expenses of at least that amount. In our opinion, the burden of proof section does not dictate a different conclusion.
52 Neither in Haritos itself nor in subsequent authorities has the understanding in Ma of the statutory onus of proof as explained in Dalco or Trautwein been gainsaid. Indeed, the understanding of the operation of the onus of proof evident both on the passage from Ma relied upon by the applicants and in the further passage cited by the Full Court in Haritos coincides with an understanding earlier expressed by Walsh J in the original jurisdiction in Krew v Commissioner of Taxation (1971) 45 ALJR 324 (Krew). Krew was also an asset betterment assessed case. In describing how the taxpayer might discharge the onus of proof, Walsh J stated, at 327:
He gave evidence of his ordinary business activities and of his gambling activities and of the way in which these were interrelated. If his account of the matter had been accepted in full, it would have been shown that the disputed accruals to his wealth were not assessable income and that the assessments were wrong. … But the explanations of the appellant were not accepted and that meant that he had not discharged the onus of showing that the assessments were wrong.
This statement also underscores the importance of engaging with the explanation proffered by a taxpayer to explain, in each income year, why there is no unexplained wealth such that the taxable income as declared (or additionally conceded) is indeed the true taxable income with the consequence that the contested assessment for that year is excessive.
53 Against this background, particularly the emphasised parts of the observations in Haritos, the applicants’ allegation that the Tribunal failed to advert to one of their central arguments as to why in each year the amount of the assessment was excessive does not just have force, it should be accepted. The flow of funds into and out of bank accounts was in evidence, as was an explanation as to why outgoings from accounts were not income. The applicants gave precision in their tabulations as to the resultant excess in the amount of each assessment. A failure to consider that explanation is, truly, a failure to undertake the statutory review function. Further, the impact of that failure is not explicable by findings as to credit, because those findings themselves were made without considering the explanation.
54 The observations made by the Full Court in Haritos offer, with respect, elucidation about the operation of the statutory onus of proof in practice. If the material before, and accepted by, the Tribunal shows that the assessment is excessive in a particular amount, it is nothing to the point that an applicant contends that it is excessive to an even greater extent. Section 14ZZK does not have the effect that, because that contention fails, the applicant has not shown the assessment to be excessive or, related to that, that the Tribunal is thereby relieved from concluding, based on the material it has accepted, that the assessment is excessive to the extent revealed by that material.
55 Absent the elucidation offered in Haritos, certain observations made by Latham CJ in Trautwein, at 92, are, unless closely read, apt to mislead. In Trautwein, at 92, Latham CJ stated:
It is at least clear that sec. 39 places upon the taxpayer the burden of showing in relation to a particular year … that the amount or some of the particulars of the assessment are incorrect and that their incorrectness operates to his prejudice. The same question arises separately in relation to each year. Most probably all the estimates of the income of the taxpayer are wrong, some in his favour, some against him. But has the taxpayer shown that he is prejudiced in relation to any particular year? In my opinion he has not. Of course the chances are that each particular year is wrong, but, if each year is taken by itself, all that the taxpayer has shown is that the method adopted by the commissioner is such that it is very unlikely that he has reached an accurate result. He has not shown positively that the total amount, or that any particular item going to make up that amount, is wrong.
An argument, even if it were completely well-founded, that there must be something wrong somewhere in respect to some years, does not displace the statutory presumption created by sec. 39. If the appellant adduced evidence that any particular item was wrong, then (upon the assumed interpretation of sec. 39, an interpretation less strict than that suggested in Moreau’s Case), the result would be that the presumption would disappear as to that item and the matter would (so far as sec. 39 is concerned) be open for decision on all the evidence submitted by appellant and respondent. As a general rule, proof that a particular item was wrong would also show what should be substituted for it. In other words, proof of what is right is the ordinary method of disproving what is wrong. But in some cases, mere proof of error might be adduced, without showing what, if anything, should be substituted in order to produce an accurate statement. If this were a case of that kind, it would be necessary to consider quite definitely the applicability of the statement quoted from Moreau’s Case. In my opinion, however, as I have already said, this is not such a case—the taxpayer has not, so far as this aspect of the case is concerned, shown that there is any error in respect of any particular year.
Similar reasoning applies when consideration is given to sec. 36, imposing an onus of proof on the taxpayer heavier than that which I have assumed to be imposed by sec. 39. The facts stated in the case do not establish that in any particular one of the years in question the assessment is excessive. The assessment for a particular year may or may not be so excessive. Upon the facts stated no one can say whether it is so or not. The result of the statutory provision is that, as the taxpayer has not established, in respect of any year, that the assessment is excessive, he is liable (upon the basis of the facts stated, i.e., no more appearing than those facts) to pay tax upon the assessment for each year.
[Emphasis added, footnote references omitted]
56 These observations in Trautwein support the view, expressed above by me, that it is insufficient for an applicant merely to offer a critique of the Commissioner’s assessing approach, even a critique which suggests that it is likely to be wrong. However, it is also the effect of what Latham CJ stated in this passage from Trautwein, and the importance of Haritos is in the elucidation of this, that if, in addition to such a critique, the applicant introduces evidence, which is accepted and which shows that the assessment is wrong by a particular amount, that applicant will have discharged the statutory onus of proof.
57 The reference by Latham CJ in the passage quoted from Trautwein to Moreau v Commissioner of Taxation (1926) 39 CLR 65 (Moreau) and his apprehension that his views about the statutory onus of proof might be “less strict” than those expressed in Moreau warrants further exploration in light of the issues raised on the present appeal and cross-appeal.
58 Moreau was a taxation appeal decided by Isaacs J in the original jurisdiction once exercised by the High Court in such cases. In referring, at 70 – 71, to s 39 of the ITAA22, Isaacs J stated:
The statutory probative force of the notice of assessment must be overcome by the taxpayer. Sec. 39 makes the notice of assessment prima facie evidence on an appeal of this nature. That is, it throws the burden on the appellant to establish his right to the benefit he claims. It is apparent that the weight of the statutory evidence must vary according to the circumstances. The weight of all evidence is subject to that consideration. It was laid down a century and a half ago by Lord Mansfield in Blatch v. Archer that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.” Here the circumstances are that the taxpayer's method of keeping accounts, the shortcomings of a former employee and the taxpayer's own unfortunate destruction of books and vouchers, though explained to me so as to exonerate him from bad faith, have seriously complicated the inquiry. Some explanations on his behalf, while operating in one direction in his favour, tell necessarily against him in another.
Read in context and with respect, this statement is not, in my view, inconsistent with anything stated either by Latham CJ in Trautwein or by the Full Court in Haritos. It is just confirmation that a taxpayer must, ordinarily, introduce evidence which, if accepted, shows that the assessment is excessive by a particular amount. If such evidence is introduced but its weight is such that it is not accepted then the onus of proof will not have been discharged. In the present case, the difficulty never was an absence of evidence. The bank accounts were in the material before the Tribunal and the applicants gave evidence of their practice of shifting funds from one account to another. If accepted, the evidence was quite capable of demonstrating, for the explanation given, that the assessments were excessive to the extent for which the applicants contended. The difficulty is that the explanation was not addressed. As the applicants correctly contended, it is not that their explanation had to be accepted. But in the circumstances of the present case, it did have to be considered by the Tribunal.
59 None of this is to gainsay what was stated by the Full Court in Gashi v Commissioner of Taxation (2013) 209 FCR 301 (Gashi), a case emphasised by the Commissioner, along with Trautwein and Dalco, in his submissions. In Gashi, at , the Full Court stated, with reference to Dalco and Trautwein:
A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her “actual taxable income” and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623 – 625 and Trautwein at 88. The taxpayer must show that the unexplained accumulated wealth was from the non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified — it varies with circumstances: Dalco at 624.
60 The whole point of the applicants’ explanation, offered but not considered by the Tribunal, was, as the emphasised passage from Gashi highlights, to show that what to the Commissioner was unexplained accumulated wealth was from the non-income sources. The importance of addressing this explanation was that it was given in the context of uncontroversial evidence that the applicants had, before the period under assessing scrutiny, enjoyed a very large windfall gain ($500,000) from gambling.
61 It may well be that the vice exposed by the applicants in relation to the Tribunal’s decision is revealed by the opening paragraphs of the Tribunal’s reasons ( – ):
1. Where did the money come from? That is the key question in a case like this where the taxpayers appeared to have lots of cash flowing through their hands during the years of income under review – more than one would expect having regard to the amounts they returned as assessable income.
2. The applicants produced a large amount of evidence to substantiate their claim that nothing was amiss: (almost) all of their income has been correctly disclosed to the Commissioner of Taxation, they say. The Commissioner has his own theory of what the applicants were up to, and where the monies came from.
3. Neither account is particularly satisfying. The evidence provided at the hearing often hinted at alternative explanations for the cash that tended to tantalise rather than persuade or clarify. I was left with the uncomfortable sensation that I was never given the whole story.
The rhetorical question posed in the first sentence is instantly engaging but it does, with respect, have a tendency to distract from the task ordained by s 14ZZK of the TAA, which is not “Where did the money come from?” but rather, ‘Has the applicant proved the assessment to be excessive?’ Further, the question posed by the Tribunal contains an unarticulated premise, namely, that there was “money” there at all to the extent treated as income. The explanation offered by the applicants, would, had it been addressed by the Tribunal, have forced consideration of whether there was double counting, or more, of “the money” and at least to this extent resultant, excessive assessments.
62 I do not accept the Commissioner’s submission that the asserted explanation was put at such a generalised level of abstraction that the Tribunal was justified in not engaging with it.
63 The error of law in the present case is different to that revealed in Haritos. There, it lay in a failure to appreciate that evidence of another witness was capable of corroborating the evidence (and the explanation in that evidence) given by Mr Haritos. If accepted, Mr Haritos’ evidence would have shown the assessments concerned to be excessive. Here, the error was in not considering the explanation as to why the debits in the bank account statements should not be equated with income.
64 Thus, the application to a taxation review proceeding in the Tribunal of the statutory onus proof for which s 14ZZK of the TAA provides does not render the authorities of which Dranichnikov is a paradigm inapplicable. Rather, it provides the required prism though which the application, if any, of those authorities in a given taxation objection review case is to be viewed. That section always provides the ultimate question which must be answered in a taxation review in relation to an assessment. The grounds of objection ought to express the bases upon which a taxpayer seeks to prove that assessment excessive. Those bases may be amplified in the statement lodged with the Tribunal in accordance with its general practice. But the ultimate question, as with a taxation appeal in this Court’s original jurisdiction, remains the statutory one: Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466, at 479. However, a comparison between the Tribunal’s reasons and objection grounds, practice statements and submissions may reveal that, in the circumstances of a given case, the Tribunal did not discharge its statutory review function because it did not consider a material basis upon which an applicant sought to prove an assessment to be excessive. That is this case.
65 An alternative way of characterising this type of error, as was recognised in Dranichnikov, at , is, as the applicants contended, a denial of procedural fairness.
66 However characterised, the error is not one which could have made no difference to the outcome of the review. It has crossed the “threshold of materiality”: Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123, at .
67 A separate basis upon which the applicants submitted that the Tribunal had denied them procedural fairness or that its ultimate decision was unreasonable was that its conclusion as to their credibility was premised upon a false factual conclusion as to the acknowledgment of an understatement of interest income.
68 The submission was put in this way.
69 In its reasons, at , the Tribunal stated:
50. The Commissioner says there is no doubt interest was paid by borrowers on a number of loans made by the applicants. He says there is no doubt interest payments are assessable income. The applicants insisted until comparatively late in the day that they had declared all of their sources of income. They finally conceded in the statement of facts, issues and contentions that they had received interest income which should have been declared, but which was not. The concession was probably inevitable but it was subsequently qualified. During cross-examination, Mr Applicant claimed he did not receive any interest on loans after all. He said any interest that was earned had been earned by Ms Applicant. When asked during cross-examination why a concession was made on his behalf in the statement of facts, issues and contentions, he claimed he had not read the document before it was submitted. He explained his wife handled the loan transactions. His response to questions about one of those loans (transcript at p 423) illustrates the thrust of his evidence:
To tell the truth, that loan was made by my wife. She did tell me she was taking the money from my money to advance that loan, so really I don’t have a lot of knowledge or information as to how it was made.
[Emphasis by applicants]
70 The Tribunal further stated, at :
53 Ms Applicant claimed during cross-examination that she derived the interest, not Mr Applicant: see also, Loan Interest Overview (Exhibit A46). That evidence is at odds with the concession made on her behalf in the statement of facts, issues and contentions: applicant’s consolidated statement of facts, issues and contentions dated 18 November 2016 at . Dr Schulte also pointed out Ms Applicant’s cross-examination occurred following evidence given by Mr Applicant. In those circumstances, and in light of criticisms I make of her credit elsewhere, I am not inclined to give her evidence any weight.
[Emphasis by applicants]
71 The emphasised parts of these extracts from the Tribunal’s reasons contain what the applicants submitted were the false factual premises.
72 There were earlier disclosures with respect to the undeclared derivation of interest income the material before the Tribunal:
(a) Ms Le’s first statement dated 29 October 2014 (her first substantive statement, provided after the audit and well before the objection decision) admitted the earning of interest income.
(b) A written response to questions by the Commissioner provided by Ms Le’s solicitors on 13 February 2015 (also before the objection decision) noted, under the heading “INTEREST EARNED FROM LOANS MADE”, that, “In her statement, Ms Le has provided a breakdown of interest earned each income year”.
73 This earlier disclosure accepted, the applicants’ contention that the concession as to understated interest income was made much earlier than in the applicants’ consolidated statement of facts, issues and contentions filed for the purposes of the review in the Tribunal fails to come to grips with an inconsistency as between the oral evidence of Ms Le and Mr Trieu at the hearing as to who derived the interest income. As the Commissioner highlighted in his submissions on the appeal, and as is apparent from  of the Tribunal’s reasons, this particular credibility finding was informed by internal inconsistency in the oral evidence and when compared with the earlier filed practice statement.
74 It may be accepted that an adverse credibility finding may manifest jurisdictional error on one or more of grounds of unreasonableness or reaching a finding without a logical, rational or probative basis. The relevant authorities were summarised by the Full Court in DAO16 v Minister for Immigration and Border Protection (2018) 258 FCR 175 (DAO16), at . I incorporate, without here reproducing, that summary.
75 Perhaps the applicants’ particular reference to SZLGP was an appeal to judicial vanity, for the case was one decided by me. However that may be, SZLGP is amongst the authorities cited with approval in the authorities summarised by the Full Court in DAO16. In SZLGP, at , I found jurisdictional error in a Tribunal’s decision in “a process of reasoning which damns a man’s credibility by reference, materially, to a false factual premise concerning a critical document”. Here, the applicants’ credibility has been damned not by a process of reasoning based on a false factual premise concerning when they made disclosures of understated interest income but rather, permissibly, by the inconsistencies mentioned. This particular asserted error of law is not made out.
76 A further basis upon which the applicants submitted that the Tribunal’s decision was vitiated by an error of law evident in the Tribunal’s reasons was that there was an inherent and illogical inconsistency between accepting on the one hand the applicants’ concession that they had derived but not declared in their income tax returns interest income on loans on the one hand and, on the other, not accepting that the transactions which yielded these interest payments were loans rather than income. The source in the material before it of the Tribunal’s satisfaction as to the derivation of interest was Ms Le’s evidence. She admitted that she had earned interest income and identified particular source transactions as the related loans upon which that interest had been earned. Yet in the Tribunal’s analysis of the applicants’ sources of funds in the income years in question, the Tribunal was not satisfied that the very same transactions were loans.
77 The following table (which gives the name of the debtor as well as the pseudonym adopted by the Tribunal), put forward by the applicants in their submissions on the appeal, highlights how pervasive was the inconsistency between accepting the derivation of interest and the rejection of the related asserted loan:
Substantive finding [in Tribunal’s reasons]
Thi Mong Hang Nguyen and Thanh Phu Phanh [Debtor Three / Mr and Mrs Farmer]
Chung Thanh Pham [Debtor Seven]
Thi Ngan Nguyen [Debtor Ten]
Thi Ngoc Anh Tran [Debtor Fifteen]
Nam Thi Tran (Lam Mai) [Debtor Eight]
Cuc Kim Thi Nguyen [Debtor Five]
Mai Thanh Bui (Xuan Thanh Nguyen aka An Thuy Bui) [Debtor Seventeen]
Anh Vui [Debtor Nine]
Do Thi Kieu Trang [Debtor Sixteen]
Tran Thi Anh Thu [Debtor Eighteen]
Sao Thi Nguyen [Debtor Six]
Qua Van Nguyen [Debtor Fourteen]
[accepted, at , as loan]
Minh Tam Le [Debtor Thirteen]
Yen Phi Nguyen [Debtor Twelve]
78 The Commissioner’s submission that there was no logical inconsistency depended for its acceptance on whether there was association between these loans and the conceded derivation of interest. But the Tribunal did not offer that reason as the discriminator in its reasons. And Ms Le’s evidence identified the particular debts tabulated above as the source of the conceded interest. That association was the whole point of the “Loan Interest Overview” particularisation of the interest concession in the material before the Tribunal.
79 Once the internal inconsistency between acceptance of the confessed derivation of interest from a particular, identified loan and the rejection of that same transaction as a loan is established, a further, derivative inconsistency is revealed as between the acceptance of the transaction with Qua Van Nguyen (Debtor Fourteen) as a loan and the rejection of the other tabulated transactions as loans. Yet further, there is an inherent tension between accepting Ms Le’s acknowledgment that transactions with identified persons were loans from which confessed interest was derived and rejecting the evidence of these persons, where given, they entered into loans.
80 The Tribunal was not bound to accept Ms Le’s evidence on the subject of the derivation of interest and the sources of that interest, or any other subject for that matter. It was, however, bound to decide the review by a logical process of reasoning. In Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, at , Hayne, Kiefel and Bell JJ observed of the remarks of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation  1 KB 223 concerning the jurisdictional error ground of unreasonableness, “The legal standard of unreasonableness should not be considered as limited to what is in effect an irrational, if not bizarre, decision – which is to say one that is so unreasonable that no reasonable person could have arrived at it – nor should Lord Greene MR be taken to have limited unreasonableness in this way in his judgment in Wednesbury”. Unconfined though that error ground is, it does embrace the illogical.
81 The statutory onus of proof in s 14ZZK of the TAA is no panacea for illogicality of reasoning.
82 On this basis also, the Tribunal’s decision must be set aside.
83 The applicants also raised a separate denial of procedural fairness issue in relation to another basis upon which an adverse finding as to Ms Le’s credibility was made by the Tribunal. Given that, for reasons already given, the case will have to be heard again by the Tribunal, there is something of an academic quality to this further issue. However, it was fully argued and should therefore be determined.
84 The issue was said to arise from the following highlighted finding at  of the Tribunal’s reasons:
Ms Applicant was not a reliable witness. As I will explain below, she has a track record of misrepresenting her income to financial institutions. On her own story, she has a history of welching on responsibilities she incurred when participating in hui. She was prepared to deceive members of her own community by participating in hui using shares in the names of other people, including her daughter. The evidence she gave about her interaction with casino buddies strained credulity. I will explain these findings in more detail as I explore the evidence.
[Emphasis by applicants]
85 The applicants submitted that the emphasised sentence “involves a critical adverse finding made without procedural fairness”. They submitted that, the “notion that participating in hui under the names of others bore adversely upon [Ms] Le’s credit by indicating that she was ‘deceptive’ is one that [Ms] Le did not have a fair opportunity to dispute”. The applicants also drew attention to  of the Tribunal’s reasons, which, in the context of consideration one of the alleged loan transactions, contains an assumption about Ms Le’s daughter’s role in assisting her mother to “disguise” her participation in a hui.
86 It was submitted that it was not self-evident that Ms Le “stood to be criticised as ‘deceptive’ based on her participating in hui under other people’s names, particularly having regard to the evidence as it stood before the Tribunal”. A further submission, born out by the transcript of the hearing, was that the suggestion was neither put to Ms Le in cross-examination nor even raised in the Commissioner’s submissions to the Tribunal in respect of Ms Le’s credit.
87 The applicants contrasted the Tribunal’s criticism of Ms Le’s use of a false name with the Tribunal’s apparent acceptance (at ), without any associated criticism, that another witness participated in hui using another name. The applicants also pointed to  of the Tribunal’s reasons, where the Tribunal stated that:
There was some evidence provided (mostly in the form of accounts provided by other witnesses) that suggested it was common for participants in a hui to trade or borrow shares and make withdrawals. For the purposes of the exercise, I will accept that was the case, although it does rather suggest a hui is something of a free-for-all that is open to easy and regular abuse. (It would be surprising if that were so.) …
88 The applicants submitted, that, in light of these references, “the forensic setting in which the adverse finding was made was one which did not involve any suggestion of deception by participation in hui using another’s name”.
89 There can be no doubt, having regard to  of the Tribunal’s reasons, that Ms Le’s participation under a false name in hui was one basis upon which the Tribunal reached an adverse conclusion as to her credibility. That assessment was multi-factorial.
90 The applicants were astute to concede, as they had to in light of Sullivan v Civil Aviation Safety Authority (2014) 226 FCR 555 (Sullivan), that it was no part of their submission that Browne v Dunn (1893) 6 R 67 had any direct application to the proceeding such that the Commissioner was under a formal obligation to put his case. The applicants’ point was that, notwithstanding Sullivan and s 33 of the AAT Act, like consequences can nonetheless follow from the Tribunal’s obligation to conduct proceedings, including making its decision, in a procedurally fair way.
91 The submission was, therefore, similar to that advanced in VN Railway Pty Ltd v Commissioner of Taxation (2013) 211 FCR 188 (VN Railway). In the circumstances of that case, Tracey J, having referred to a leading modern explanation by Hunt J in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation  1 NSWLR 1, at 16 – 17, of the so-called “rule in Browne v Dunn”, observed that it was based on the affording of fairness by due notice and stated, at :
The requirements of the rule may be satisfied prior to a hearing if one party provides to the other notice of the case which it proposes to make in reliance on documents to which the other party has access and of the inferences proposed to be drawn from them: see White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 at 220 (Goldberg J).
92 In the circumstances of VN Railway, the challenge failed, because they revealed due notice.
93 On analysis, this particular asserted denial of procedural fairness is really an impermissible appeal to conduct a form of merits review. The use of a false name by Ms Le on occasion in a hui was admitted. What to make of that concession was a matter for the Tribunal in the evaluation of the evidence. That others might also have used a false name on occasion was a consideration which could be highlighted in submissions as an ameliorating factor in relation to Ms Le’s concession. But there was nothing more which fairness dictated needed to be put to Ms Le before it was permissible to draw a conclusion that the use of a false name was deceptive. Prima facie, it was and the contingency that such a conclusion might be drawn was obvious. There is therefore no merit in the applicants’ submission as to this particular asserted procedural fairness denial error.
94 Given that the matter must be remitted and heard afresh, there is also an academic quality about the Commissioner’s cross-appeal. I reiterate that I accept that the authorities concerning the onus of proof, discussed above, establish that it is insufficient for an applicant taxpayer just to critique an assessing approach, as opposed positively to satisfying the Tribunal that the assessment is excessive, because their taxable income is a different amount. Not to appreciate that is indeed, as the Commissioner submitted, an error of law.
95 The adjustments made by the Tribunal as set out above in the formal decision were the result of a “critique”. However, the applicants’ endeavour to discharge their onus of proof was in this case derailed by a failure on the part of the Tribunal to consider a central explanation as to why their taxable income was only in a particular, lesser amount and also by a logical inconsistency between a conceded component (interest) of that asserted true taxable income and a related reason why that was their true taxable income (because the related loans were not income sourced). Were the applicants’ appeal to be devoid of merit, I should therefore have allowed the cross-appeal. As it is, the allowance of the appeal means that the cross-appeal must be dismissed.
96 There was an overarching contention by the applicants that the Tribunal had failed to discharge its statutory duty of furnishing reasons compliant with the requirement in s 43 of the AAT Act, as modified by the TAA. In this case, that is not a stand-alone error of law. Rather, the reasons as given expose errors of law which, for the reasons given above, vitiate the Tribunal’s reasons.
97 The applicants also made reference in submissions to the delay between the conclusion of the hearing and related reservation of the decision (13 December 2017) and when the Tribunal made its decision and published the related reasons (25 October 2019). However, having so done, they did not directly associate any of the asserted errors with this delay.
98 The Deputy President was, as his reasons explicitly reveal conscious of, and regretful in relation to, the delay. He stated, at :
7. I am conscious there has also been a substantial and regrettable delay between the date of the hearing and the delivery of my reasons for decision. I have relied on my extensive notes that were made during the course of the hearing, and I have also carefully reviewed the transcript and the documents provided in evidence. As it happens, the transcript was always going to be important as I prepared my reasons because most of the witnesses gave evidence through an interpreter. The parties were careful to make corrections to the transcript at the beginning of the hearing each day. I am satisfied the passage of time has not prevented me from dealing effectively with all of the evidence.
99 In this Court, in Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17 and in the Supreme Court of Queensland, Bulsey & Anor v State of Queensland  QCA 187, each in relation to judicial proceedings, the need in cases of lengthy delay to look with special care at findings of fact, especially those derived from the supposed advantage of a trial judge in observing the oral evidence of witnesses, has been emphasised. Unlike in the two cases just mentioned, this appeal was not by way of rehearing. The permissible challenge could only be on a question of law. Nonetheless, like principles might conceivably explain in an appeal so limited why a particular credibility based finding of fact had no rational foundation.
100 The explanation offered by the Deputy President demonstrates an awareness of the potential difficulty caused by delay and why it is that he considers that difficulty is diminished. The errors of law which I have found are errors based on the exposed reasoning of the Tribunal. It is difficult to attribute those errors to delay, given that the Tribunal had the written submissions of the parties and the transcript of the oral submissions.
101 Lest it be thought otherwise, and in fairness to the Deputy President, I should also record that I am aware from personal experience of the burden under which full time members of the Tribunal’s Taxation Division operated over the period in question in this case. The workload in that division was heavy for the full time members appointed and assigned to that Division. Some of that workload could, and was, relieved by calling on the Tribunal’s part time membership, when available. But it was also a period when there was a more than usual need for the Tribunal’s President or his delegates to seek assistance from members of this Court who, at the time, also held appointments as Deputy Presidents. It is the responsibility of the government, not of the Tribunal’s President or a Divisional Head such as the Deputy President, to ensure that adequate expertise is found in the Tribunal’s membership to allow reviews to be concluded with reasonable expedition.
102 For these reasons, the appeal must be allowed and, as a consequence, the cross-appeal dismissed. The matter must be remitted to the Tribunal for rehearing. It will be for the Tribunal’s President, informed by the reasons why the appeal has been allowed and in the ordinary course of his administration of the Tribunal, to determine by whom the Tribunal should be constituted for the purposes of the rehearing.
103 Whether that rehearing occurs is a matter for the parties. The allowance of the appeal in no way prevents, even at this stage, an evaluation of whether there is in the material now to hand an acceptable explanation as to the applicants’ true taxable income and the reaching of a consensual position to promote to the Tribunal under s 42C of the AAT Act.
104 It will be necessary to hear from the parties as to costs, including whether an order ought to be made under s 8 of the Federal Proceedings (Costs) Act 1981 (Cth).
QUD 728 of 2019