Commissioner of Taxation v Rawson Finances Pty Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 09 June 2023
• Neutral Citation: [2023] FCA 617
• Date: 09 June 2023
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Rawson Finances Pty Ltd [2023] FCA 617

File number(s):	NSD 1329 of 2014
Judgment of:	PERRY J
Date of judgment:	9 June 2023
Catchwords:	TAXATION – application by Commissioner of Taxation to set aside judgment of the Full Court of the Federal Court on the basis it was procured by fraud – where Commissioner of Taxation issued assessments on basis that alleged loans by the taxpayer from Mercantile Discount Bank (MDB), Israel, should be characterised as income – where assessments challenged in Administrative Appeals Tribunal under Part IVC, Taxation Administration Act 1953 – where Tribunal accepted taxpayer’s case that limited loan documentation only was available and an inference should be drawn that the taxpayer’s loans were obtained in line with a “business practice” whereby related family companies obtained loans from Israeli banks on the basis of personal guarantees only – where Tribunal decision overturned on appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) to the Federal Court – where Tribunal decision overturned in the Federal Court on basis that its finding was not open on the evidence – where Tribunal decision upheld by Full Court on basis that the findings were open on the evidence before the Tribunal despite inherent implausibility of the Tribunal’s finding that the loans were genuine – where new evidence, including from liquidators of other family entities and from Israeli banks and bank officers pursuant to letters of request to Israeli authorities, unequivocally established existence of back-to-back deposit accounts held in code names securing the “loans” to the taxpayer and related family entities – where evidence disclosed extraordinary lengths by taxpayer to conceal fraud – where evidence led by, and submissions made on behalf of, the taxpayer before the Tribunal was known to be false and misleading – where knowledge of director attributed to taxpayer in the circumstances – where no legitimate reason as to why a genuine loan might be sought, when monies borrowed by taxpayer were already available to it by way of security – where loan terms were uncommercial – fraud established – whether fraud was material – decision of the Full Court of the Federal Court set aside ; BANKING AND FINANCIAL INSTITUTIONS – where taxpayer’s “business practice” case contended that all related entities took out loans on the basis of personal guarantees – where evidence established that related entities acquired loans on the basis of linked deposit accounts – where related entities discontinued proceedings in light of new evidence – where business practice engaged in by related entities was directly contrary to the case advanced by the taxpayer in Tribunal proceedings – new evidence establishes that taxpayer’s “business practice” case before the Tribunal was false and misleading ; BANKING AND FINANCIAL INSTITUTIONS – where the taxpayer utilised back-to-back loan arrangement whereby loans were secured by a corresponding cash deposit held in code name – where funds from MDB would not have been advanced to the taxpayer without security of cash deposit – where interest was regularly paid by deposit account – where the taxpayer’s director was principally involved in facilitating back-to-back arrangement – where evidence establishes that funds were not genuine loans ; EVIDENCE – principles of fact-finding – application of Briginshaw principle – Jones v Dunkel adverse inferences drawn from failure to call key witnesses ; PRACTICE AND PROCEDURE – principles of impeaching a judgment on the ground of fraud in independent proceedings – where unnecessary to establish that reasonable diligence must have been exercised to discover the fraud in the course of the proceedings – whether false evidence was an operative cause of the Tribunal’s (and the Full Court’s) decision and whether fresh evidence have changed the Tribunal’s approach or decision – whether the new evidence is so material that it is reasonably probable that it would lead to a different result if the matter were reheard by the Tribunal – where only operative decision to be set aside is Full Court’s decision
Legislation:	Administrative Appeals Tribunal Act 1975 (Cth) Pt IV; s 44 Evidence Act 1995 (Cth) ss 55, 122(3), 128, 140(2) Federal Court of Australia Act 1976 (Cth) s 43 Foreign Evidence Act 1994 (Cth) Income Tax Assessment Act 1936 (Cth) pt IVA; ss 8-1, 166, 167, 167(b), 175A, 264, 264A Taxation Administration Act 1953 (Cth) pt IVC; ss 14ZZK, 14ZZK(a),14ZZK(b); Sch 1 ss 353-10, 353-25 Federal Court Rules 2011 (Cth) r 39.05(b) ; Legitimacy Declaration Act 1858 (UK) s 8
Cases cited:	Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] FCA 248; (1986) 12 FCR 14 Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 247 B.C.I Finances Pty Ltd (in liq) v Commissioner of Taxation [2015] FCA 679 BCI Finances Pty Ltd (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 104 ATR 248 BCI Finances Pty Ltd (in liq) v Binetter [2018] FCAFC 189; (2018) 362 ALR 592 BCI Finances Pty Ltd (in liq) v Commissioner of Taxation (No 3) [2014] FCA 958; (2014) 320 ALR 747 BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861 Beach Petroleum NL & Anor v Johnson, MK & Ors [1993] FCA 392; (1993) 43 FCR 1 Binetter v BCI Finances Pty Ltd (in liq) [2015] FCAFC 122; (2015) 235 FCR 410 Binetter v BCI Finances Pty Ltd [2016] HCATrans 33 Binqld Finances Pty Ltd (in liq) (ACN 119 243 220) v Israel Discount Bank (No 2) [2020] FCA 1208; (2020) 384 ALR 148 Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Clone Pty Ltd v Players Pty Ltd (In Liquidation) (Receivers & Managers Appointed) [2018] HCA 12; (2018) 264 CLR 165 Commissioner of Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436 Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163 Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333 Dickson v Commissioner of Australian Federal Police [2019] NSWSC 1293 Dickson v The Queen [2020] NSWCA 125 Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614 Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; (2013) 209 FCR 301 Gauci v Federal Commissioner of Taxation [1975] HCA 54; (1975) 135 CLR 81 Gould v Vaggelas [1984] HCA 75; (1984) 157 CLR 215 Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 Haritos v Federal Commissioner of Taxation [2015] FCAFC 92; (2015) 233 FCR 315 Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 IMM v The Queen [2016] HCA 14; (2016) 257 CLR 300 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 McCormack v Federal Commissioner of Taxation [1979] HCA 18; ...