Has the addressee established a prima facie case?
16 The first issue is whether the addressee has made out a prima facie case for relief. She argued that the covering letter's reference to her having no right to invoke the privilege against self-incrimination was erroneous. In connection with that argument she sought to have the whole matter, or that issue, referred to a Full Court so that it could be in a position to determine, unlike a single judge, that De Vonk 61 FCR 564 had been wrongly decided. Indeed, as recently as 9 March 2012, Lander J noted that a single judge was bound by De Vonk until the Full Court or High Court said otherwise: Australia and New Zealand Banking Group Limited v Konza [2012] FCA 196 at [69]. In the circumstances, I agree with his Honour's view.
17 In my opinion, it is not appropriate at this stage of the proceedings to refer, or seek that the Chief Justice exercise his power under s 20(1A) of the Federal Court of Australia Act 1976 (Cth) to refer, this matter to a Full Court. First, such a reference would not dispose of the whole of the matter if it were only to deal with the issue of self-incrimination. It would tend to bifurcate the proceedings and leave them in an inconclusive state, generating further delay. Secondly, it would not be convenient for a Full Court to deal with the other issues in the proceedings that require resolution without that Court having had the benefit of a trial judge's reasoning and distillation of the issues. Accordingly, I will not refer the matter to a Full Court or to seek the Chief Justice's direction that it be heard by a Full Court either in a cognate way or with respect simply to the issue of self-incrimination. It follows that, however well-developed the addressee's arguments are with respect to the correctness of De Vonk 61 FCR 564, at a final hearing a single judge will not be likely to uphold that argument.
18 The second ground on which the addressee argued that the notice was bad was the vagueness of the covering letter's reference to the availability of a concession that she might not be required to disclose accounting advice. In my opinion, that is not a sufficient basis on which to grant interlocutory relief. There is no general privilege recognised by common law or statute for persons to protect advice received from financial advisers or accountants from compulsory disclosure, unlike the well-recognised ground of legal professional privilege. In the covering letter, the Commissioner offered to consider allowing the addressee to withhold accounting advice provided she could put forward some basis for his doing so. I do not consider that the offer to exercise a discretion that the law did not afford the addressee could be seen as a matter that would be likely, at trial, to be held to invalidate the notice.
19 The third and fifth grounds of the addressee's challenge to the notice should be considered together. Both deal with the reasonableness of the Commissioner seeking to invoke his power to issue the notice and provide for a time in which it be answered. First, given the history I have recited, I am not satisfied that the addressee has shown that it is likely she will succeed at trial in showing that the Commissioner had failed to seek from her voluntarily information of the kind she is required to provide in the notice. The onus is on a addressee to establish either before the Commissioner, when an objection is made to an assessment, or before the Administrative Appeals Tribunal on a review of an objection decision, that the assessment is excessive. That being so, it is in the interest of a taxpayer in the position of the addressee to provide the Commissioner with information going to support an objection. Nonetheless, the Commissioner is entitled to exercise powers conferred on him under the 1936 Act and other taxation laws for the purpose of administering those laws including in considering a taxpayer's objection to an assessment. The discretion to issue a notice conferred by s 264(1) is one that is unconfined. Indeed, in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (Smorgon's case) (1979) 143 CLR 499 at 524, 536 the High Court held that the Commissioner was entitled to, in the words of Gibbs ACJ, "make a roving inquiry" or in the words of Mason J, "fish".
20 Secondly, the addressee's argument that the time afforded for compliance in the notice was on its face "so manifestly unreasonable that no reasonable person in the position of the recipient could possibly comply with it", in my opinion, is unlikely to succeed at a trial. In the ordinary course, the onus is on the recipient of a notice to demonstrate why the time allowed is insufficient: Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187 at 198-199 per Lockhart J, and at 220 per Hill J, with whom Burchett J at 204 agreed on this point. The events preceding the issue of the notice can be taken into account when determining if the time allowed for compliance is reasonable: 25 FCR at 219 per Hill J. In light of the history of the dealings between the addressee and the Commissioner relating to the provision of the information, I am not satisfied that it is likely that the addressee will succeed at trial in demonstrating that, in all of the circumstances, she had not been given a reasonable time from the original issue of the notice on 24 February 2012 to respond to it by 23 March 2012.
21 The final ground of objection also complained that the terms of the notice were misleading or confusing in respect of the four categories that I identified at [11]-[13] above. First, the addressee argued that the requirement to provide "full details concerning the terms and history of each purported loan", in the first category of information in the notice was misleading and confusing. Once again, I am not satisfied that this argument is likely to succeed at a final hearing. It is important that a notice identify with sufficient clarity the subject matter that is sought to be produced. In Fieldhouse 25 FCR at 208 Hill J said (with whom on this point Burchett J agreed at 204, and Lockhart J came to a similar conclusion at 197):
"Where information is required by the section to be furnished, the request for information should be so framed as to be sufficiently clear to convey to the addressee what information is sought and a notice which was unintelligible would obviously be bad. However, it does not follow from this that the question of the validity of a notice should be approached carpingly by engaging in a narrow analysis of each word in an attempt to find some latent ambiguity in it. Rather the approach to be adopted is to ask in respect of any particular request whether a reasonable man in the position of the addressee of the notice can fairly comply with it and not be thereby exposed to the possibility of penalty for non-compliance having regard to the manner in which the notice is formulated."
22 The first category of schedule A of the notice required the addressee to provide full details concerning the terms and history of each purported loan including a number of particular items. Her objection had raised the assertion that relevant deposits represented loan repayments in respect of loans she had been party to making. That provided the context in which that requirement complained of was made. I am not satisfied that the addressee has shown that it is sufficiently likely that at trial a judge would find that a reasonable person in her position could not fairly comply with the notice. The scope of the power conferred under s 264(1) was explained by Mason J in Smorgon's case 143 CLR at 535-537 in terms that have been subsequently approved on a number of occasions. He said that the power contained in s 264(1)(a) to require information to be furnished was given to the Commissioner for the purpose of enabling him to perform his functions under the Act, and had to be circumscribed by reference to that purpose. Here, the covering letter referred, in a conventional way, to the information being required for the purposes of the 1936 Act and the Income Tax Assessment Act 1997 (Cth).
23 Mason J then went on to explain that the power of the Commission to issue a notice under the section was not limited to any issue or dispute of fact arising between a taxpayer and the Commissioner, and that the power was a far-ranging one. His Honour discussed the extent of the power to require production under s 264(1)(b). He noted the limitation in that provision to documents relating to a person's income or assessment but that no such limitation was present in s 264(1)(a). Mason J discussed the position when a notice under s 264(1)(b) required a recipient to produce "all books, documents and other papers in his custody or control relating" to the income or assessment of the person whose name was stated in the notice, saying (with Jacobs J's and Murphy J's agreement at 541, 542 and 547):
"It is then for the recipient to decide for himself, difficult though the task may be, which of the documents answer the description. If his decision is wrong he exposes himself to prosecution and penalty.
The existence of this hazard is not a sufficient basis for the conclusion that the section requires the Commissioner to give a notice in such terms as would enable the recipient on reading it and on examining the documents in his custody or control to determine whether they fall within the ambit of the Commissioner's powers. To so hold would be to impose an impossible burden on the Commissioner. In many, if not most, cases he will be unaware of the contents of the documents of which he seeks production." (emphasis added)
24 Accordingly, Mason J held that it would frustrate the object of conferring the power, and be inconsistent with the purpose of s 264(1)(b) as he had explained it, to create some limitation on the scope of the Commissioner's power in that regard. I think similar considerations must also inform the construction of s 264(1)(a), particularly since that power can apply to situations well beyond the income or assessment of a particular taxpayer. In the present case it is tolerably clear that the Commissioner requires information concerning the circumstances in which the loans, the subject of the addressee's objections, were made, how they performed and what their terms were. In my opinion the way in which the notice has been framed is not likely to be found at trial to exceed the power conferred by s 264(1)(a).
25 The notice's second requirement for information obliged the addressee to explain how the amounts of the repayments were calculated, the documents used to do so, how the outstanding balance of the loans were determined, and the documents used to determine that process. The addressee argued that this requirement was ambiguous in terms of what would suffice. In my opinion it is unlikely that this argument will find success at trial. Lockhart J said in Fieldhouse 25 FCR at 197 that the use of the word "explained" in a notice in relation to a requirement for an addressee to explain certain events, incidents, circumstances or the nature of certain relationships did not suggest that in that case the word had been employed unduly widely. He said (see too per Hill J at 211-212):
"I suppose it is always possible for a draftsman to use a different word to "explain", but I see no vice in its use in this context."
26 The question here is whether the addressee has established a prima facie case that a reasonable person in her position could fairly be obliged to comply with the requirement in the notice to "explain" how amounts, that she asserted in her objection were loan repayments, had been calculated, the documents that had been used to do so and what the balance of the loan was. In my opinion, it is unlikely that a trial judge would find, in this context, that requirement to be an ambiguous or unduly onerous obligation such as would invalidate the notice.
27 The third category of information sought in the notice was a requirement to explain why there were significant variances in the amounts of the purported loan repayments, having regard to an analysis of the relevant bank statements, that the Commissioner did not identify in the notice. Doubtless, the bank statements were ones that had been provided to the Commissioner by the addressee. They are not in evidence. The addressee has the onus of demonstrating that a reasonable addressee of the notice would not be able to comply with the requirement. In my opinion, it is likely that, on the state of the evidence before me, if that were the evidence at a trial, the addressee would not be able to persuade the trial judge that this aspect of the notice was insufficiently precise. That is because the addressee was aware of what the contents of the bank statements were but has not demonstrated how, having regard to the illustration the Commissioner made of a variance of almost $1 million between deposits, she would be unable to identify those variances which were significant in the amounts of deposits that she claimed in her objection were loan repayments.
28 In this regard, I am mindful that this requirement to give information was imposed on the addressee in circumstances where she had made an objection to assessments. She had been aware, from the history that I have outlined, of the nature of the difficulties with which both she and the Commissioner have been grappling over the loans. She was aware, that through no fault of her own, there were inadequacies in the documentation now available to deal with her objections. There was no evidence that the bank statements referred to in the notice left open a suggestion that the addressee would be confronted with difficulties in explaining the relevant variances. Accordingly, I am not satisfied that she has demonstrated a sufficient prima facie case that would warrant a grant of interlocutory relief.
29 The fourth category of information sought required the addressee to advise whether Erma Nominees or Ligon 158 were unable to meet their obligations under the purported loan arrangements, had failed to make repayments or were unable to make repayments to her in full. The addressee argued that this required her to form a legal opinion or a conclusion of fact about the solvency of the borrowers. She also argued that the second sentence of the requirement required her to provide full details of how the purported loan agreement "dealt with such default payments".
30 It is not clear to me what the reference to "such default payments" related to or whether there was a suggestion in the dispute that there were some default payments. There is a sense of ambiguity in the requirement in this category as to what advice the addressee had to give the Commissioner concerning whether "at any time during the relevant period" either of the two debtors was "unable to meet their obligations under the purported loan arrangement and failed to make repayments." This could require the addressee to assess whether she had to identify and then made a judgment about whether she had to explain the state of solvency of two debtors over a long period or any particular point or points in time. In addition, there is a lack of clarity about what the reference back to "such default payments" was intended to mean.
31 Where a notice requires a person to provide information in exercise of a compulsory power to do so, and a failure to comply with it creates an offence, it is incumbent upon the drafter to specify with sufficient clarity precisely what information is sought. I think that it is arguable that the fourth category lacks sufficient clarity to be a valid exercise of the power to require the addressee to furnish information under s 264(1)(a). This is because the rolled-up way in which the fourth category is expressed and its references to default payments, that are otherwise unexplained in the evidence, and the provision of information about the solvency of the two debtors has the potential to confuse or mislead the addressee about what was required.