Nov 13

Is the Taxation Commissioner to become the invisible man in family law money cases?

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Having watched Rosie Batty’s inspiring challenge to Jo Hildebrand after his comments that “to say that you’re going to not report a case of child abuse or child sex abuse by your partner because you are scared for your own safety, I’m sorry it’s not an excuse”, was inspiring because of her deep personal tragedy which lies beneath her courage to speak out in the way she has.
Luke Batty’s murder was a tragedy. In response the Victorian Parliament is considering a law, which could see a mum incarcerated for not reporting abuse.

Watching the exchange between Rosie and Jo highlights the complexity of child abuse, but it is difficult to predict a situation where locking up the primary care giver of a child would be consistent with the paramount consideration of meeting a child’s best interests.

As Rosie identified, there are several multi-layered factors as to why an individual reasonably, might fear leaving a toxic relationship. These factors include:

Serious threats made to that person’s personal welfare and liberty;

Economic considerations;

Social or geographic isolation;

Fear of not being believed;

Lack of government and community resources.

Luke’s tragedy must not pass without reform. It is immediately apparent that all of the following shoud be adopted:

Strengthening mandatory reporting requirements;

Increasing the resources of the Department of Human Services;

Increased education and community awareness;

Increased availability to a fleeing parent of funding, housing and support;

Restoration of funding taken away from the single parent support payment.

Luke’s tragedy and Family Law
The Sydney Morning Herald reported on 24 April 2014, “Taxman gets access to documents in Family Court feud,” the author opining “warring couples may think twice about airing their dirty laundry in the Family Court after it ruled the Tax Office could use financial information filed in one dispute to audit the parties for potential tax evasion.”

The article refers to the recent Full Court of the Family Court’s decision reported as Commissioner of Taxation & Darling [2014] FamCAFC 59 (“Darling”). Whether that prediction turns out to be correct, time will tell, noting however, that there were several unique and distinguishing factual features in Darling’s case. [1]

The central issue for their Honours’ in the Full Court was to resolve a tension between the policy imperatives of, on the one hand, parties’ obligation in family law property matters to make a full and frank financial disclosure of their financial affairs; versus, the Commissioner’s vital concern of maintaining the public purse. In seeking to use the documents, the Commissioner was further seeking an exemption from the application of the rule set down by the High Court of Australia in Hearne v Street [2008] HCA 36, this rule being:

“Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence.”[2]

In Darling, the husband and wife had filed several documents as part of their family law proceedings and the Taxation Commissioner commenced an audit of the husband’s financial affairs in June 2009.

In December 2009, ATO officers attended the Family Court Registry and were given permission to examine the parties’ Court file. On 3 June 2010, they returned and made copies of documents.

In early December 2010, the husband and wife settled their family law proceedings by consent.

In mid-December 2010, ATO officers returned again to the Court’s Registry, and were shown more recent documents, and again they made copies.

On 3 July 2012, the Commissioner sought an order from the Family Court permitting it to use the parties’ documents for purposes other than for those which they were prepared and filed, namely family law proceedings. That application was refused causing the Commissioner to appeal to the Full Court.

The Full Court exercised their discretion in favour of granting the Commissioner use of the documents, noting in so doing that, when proceedings are commenced in the Family Court:

Parties should be aware that information they swear to in their in their pleading statements could end up in the hands of investigating agencies. [3]

There remains the reality that in an adversarial domain, one party to a case may perceive it as being “to their personal advantage to make a full and frank disclosure of their knowledge of tax evasion.”[4]

It is important to remember that the process of audit involves testing the veracity and reliability of information provided by an individual to the Commissioner, therefore any information collected as part of that process would be subjected to rigorous testing in any subsequent proceedings brought by the Commissioner against the husband or the parties’.[5]
And whilst the Full Court did not venture into it, there are common law protections against self-incrimination and certificates able to be sought pursuant to section 128 Evidence Act 1995 Cth which are options to be considered by litigants.

Further, note that:

The Family Court has the authority, and does, refer matters to relevant statutory bodies like ASIC, the ATO and the DPP, Commonwealth or State. Parties must make sure that prior to swearing or affirming their pleading statements that they check them carefully for accuracy.

A good recent example of referral happening, was in Ceballos & Ceballos [2013] FamCA 879. In that case Justice Foster, who currently sits at the Parramatta Registry of the Family Court, referred the papers from that case so the Husband could be considered for the prosecution of the offence of bigamy, the penalty for bigamy being imprisonment of five years.
The Herald article notes a “spokesman for the Tax Office said it did not expect an increase in the number of cases in which the Commissioner sought access to Family Court documents.”

It would appear there is weight in these comments provided by the ATO spokesman. In Darling’s case, the Commissioner was only at the audit stage, so he was in effect testing the veracity and reliability of those documents and statements made by the husband and the wife to the Commissioner as part of that audit process. This was not a ‘fishing’ exercise being undertaken by the Commissioner. Further, as identified by their Honours, “the cogency of the evidence would be the subject of scrutiny in any proceedings that may be instituted after the Commissioner completes the audit and makes assessments.”[6]

Ultimately then, if litigants approach the conduct of their matter from the starting position of ‘the truth will set me free’ they should have nothing to fear, and for that reason, should not feel reserved or restrained from presenting their case in its most forthright and robust form. That is not to say however, that such issues should not be considered strategically, particularly prior to the swearing or affirming of a pleading statement, and if you are involved in a family law property settlement, then we welcome the opportunity to assist you and discuss with you such considerations.

[1] Commissioner of Taxation & Darling [2014] FamCAFC 59, see for example at paragraph 198 (1)-(10)

[2] Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 at [96]

[3] Darling par 201

[4] Ibid Par 201

[5] Ibid Par 198

[6] Ibid Par 198 sub (4)