Blanch & Ors v Deputy Commissioner of Taxation

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40576/04

GILES JA HODGSON JA IPP JA

Friday 10 December 2004 BLANCH & ORS v DEPUTY COMMISSIONER OF TAXATION Judgment 1 GILES JA: In 2002 the New South Wales Bar Association ("the Association") brought proceedings seeking the removal of Mr Clarence Stevens from the Roll of legal practitioners. The proceedings invoked the Court's inherent jurisdiction, and were returnable and conducted in the Court of Appeal. Mr Stevens brought other proceedings appealing against a decision of the Association to cancel his practice certificate. They were returnable in the Common Law Division of the Court. 2 For the purposes of both proceedings a number of subpoenas were issued, formally in the proceedings in the Court of Appeal, requiring the production of documents relating to Mr Stevens' financial affairs. Documents were produced, access to them was granted and copies were taken. Copies passed into the custody of the first claimant, Mr Alan Blanch, the solicitor for the Association, and were provided to the second claimant, Mr Dennis Robertson, an accountant retained by the first claimant to provide expert accounting reports in respect of the proceedings. 3 The proceedings in the Court of Appeal concluded in late 2003, when an order was made adverse to Mr Stevens. Mr Stevens' own proceedings became redundant and were terminated. 4 In April 2004 the claimants were served with notices under s 264 of the Income Tax Assessment Act 1936 (C'th) requiring them to provide to the opponent documents they held relating to the financial affairs of Mr Stevens. By arrangements which need not be recounted the notices were later replaced, the current notices being those dated 28 June 2004 served in July 2004. They require the production of - "Those documents which are under your custody or under your control for the purposes of your acting on behalf of the New South Wales Bar Association in relation to Mr Clarence J Stevens and which relate in any way to the income and assessment of Mr Clarence J Stevens." 5 Under what is sometimes called the principle in Harman v Secretary of State for the Home Department (1983) 1 AC 280, the information in the documents obtained from the third parties by the Court's compulsory process of subpoena was subject to an implied undertaking that the information would not be used for any purpose other than the proceedings in which the documents were obtained. The principle is well-established, and the undertaking was taken to extend to the claimants. They were understandably concerned that compliance with the s 264 notices would breach their undertakings, but also that they should not incur the penalty for non-compliance provided in s 8C of the Taxation Administration Act 1953 (C'th). 6 The claimants wrote to the third parties asking for consent to providing to the opponent the documents for which the s 264 notices called. Some consented, some did not, and some did not reply. By a summons filed in the Court of Appeal in July 2004 the claimants claimed: "1. A declaration that the receipt of Notices dated 28 June 2004 pursuant to section 264 of the Income Tax Assessment Act 1936 by the First and Second Claimants does not in itself release the First and Second Claimants from any implied undertaking to the Court in relation to documents obtained in the context of proceedings in the New South Wales Court of Appeal No 41003/02 and in the Supreme Court of New South Wales, Common Law Division No 13263/02.

2. An order that the Claimants be released from any undertaking(s) to the Court so as to permit themselves, their servants and agents to comply with the Notices dated 28 June 2004 issued to the First and Second Claimants pursuant to section 264 of the Income Tax Assessment Act 1936." 7 The return of the initiating process in the Court of Appeal was said to be because the undertakings arose in proceedings in the Court of Appeal. Whether the claimants took the correct procedural course was not raised, and there is no occasion to enter upon it. 8 Prior to the hearing of the summons the claimants wrote again to the third parties who had not given consent. There were some more consents, but still a number of third parties did not consent or did not reply. In the further letters these third parties were told that the claimants were applying to be released from their undertakings and were told that the summons would be heard today. Invitations were extended to inspect the summons and the affidavits in support, excluding confidential exhibits. One of the third parties, the wife of Mr Stevens, took up the invitation, although whether personally or on behalf of a corporate entity was not clear. 9 At the hearing of the summons the claimants in effect invited us to proceed directly to the question of release of the undertakings. They had filed written submissions as to the interaction between an implied undertaking and s 264, and were willing to argue for the former prevailing over the latter, but they had no interest in doing so if they could be released from the undertakings so as to permit compliance with the s 264 notices. The opponent asked that we decide which of the undertakings and s 264 prevailed over the other, and had filed written submissions supporting the primacy of s 264, but he also submitted that the claimants should be appropriately released from their undertakings. 10 None of the third parties appeared and sought to participate in the hearing. We received submissions on the course we should take and on release from the undertakings. For the reasons which follow, an order releasing the claimants from the undertaking should be made without deciding which of the undertaking and s 264 prevails. 11 In my opinion it is not appropriate to decide in this case the important question of the relationship between a Harman v Secretary of State for the Home Department undertaking and s 264. Even if s 264 trumps the undertakings, release of the undertaking will have to be considered, although the result may be automatic. The claimants made plain that, in furtherance of good citizenship, their preference lay in providing the documents to the opponent, and they were really not a contradictor on the prior question. None of the non-consenting third parties sought to come to argue that the claimants should not be released from their undertakings. The claimants' counsel would of course have fully put a contradictor's case, but if the holding were adverse to the claimants they should not be put in the unwanted position of contemplating an application for special leave to appeal. Finally, and perhaps principally, it is not necessary to decide the prior question if in any event there can be compliance with the s 264 notices. 12 The implied undertaking can be released or modified by the Court. Whether there should be release or modification depends on the circumstances. In Esso Australia Resources Limited v Plowman (1985) 183 CLR 10 at 37 Brennan J said: "That dispensing power is not freely exercised, but it will be exercised when special circumstances appear. In the Federal Court, special circumstances have been held to exist where 'there is a special feature of the case which affords a reason for modifying or releasing the undertaking and the feature is not usually present.' It is unnecessary to consider whether the dispensing power should be so broadly defined. It is relevant to note only that the obligation enforceable as an undertaking to the Court in the case of a curial order is not unqualified." (citations omitted) 13 In the present case a number of the third parties have consented. The non-consenting third parties had notice that the claimants were asking to be released from their undertakings, and as I have said none of them came to argue against that occurring. The opponent's course of s 264 notices to the claimants rather than to the third parties who originally produced the documents relating to the financial affairs of Mr Stevens has been explained by the progression of the opponent's investigation, and I do not think it can be said that the opponent is improperly taking advantage of the Court's compulsory processes in the course it has taken. The information gained by the opponent will not become generally available, but will be subject to the confidentiality provisions of the Income Tax Assessment Act. 14 The implied undertaking is an endeavour to balance the intrusion into privacy by the compulsory production of documents necessary to do justice, with maintenance of privacy otherwise. It is not unqualified, and can properly be moulded where outside the Court's processes there can be intrusion into privacy. Even on the assumption that s 264 does not prevail over the undertaking, the capacity given by s 264 to afford intrusion into privacy where the public interest requires it is a relevant matter, particularly where none of the third parties appears concerned to resist provision of the documents to the opponent. 15 In these circumstances, I consider that the second order sought by the claimants should be made. 16 HODGSON JA: I agree. 17 IPP JA: I agree. 18 GILES JA: That order is made. Now what about costs?

ROBB: I think it is the paragraph numbered 3 on that page which we ask your Honours to consider. GILES JA: Do I have it correctly, that you would ask us to note the matter that's in paragraph 1, to make order 2 in the summons as the appropriate order in the space provided for that, and then to make by consent the order in 3? Follow the format in this document?

19 By consent the Court notes that the first, second and third claimants and the opponent have entered into an agreement (the Agreement) under which the first, second and third claimants are not required to pay the opponent's costs and under which the opponent has agreed to pay the first, second and third claimants' costs on an agreed basis. The terms of the Agreement provide for the opponent to pay the first, second and third claimants' reasonable costs on a solicitor/client basis, subject to certain limits. 20 The Court orders that the claimants be released from any undertaking(s) to the Court so as to permit themselves, their servants and agents, to comply with the notices dated 28 June 2004 issued to the first and second claimants pursuant to s 264 of the Income Tax Assessment Act 1936. 21 By consent the Court orders that the opponent pay the first, second and third claimants' costs on the basis provided for in the Agreement as agreed or taxed.

HODGSON JA: I think it is clear that the true construction of that order is to the extent necessary to enable them to comply. It is not merely stating a purpose of a general release. It is stating the extent of a very limited release. ROBB: Yes, it's a limited release enabling them to comply in precise terms with the s 264 orders that are extant, and no more.

HODGSON JA: And no more. That's as I read it and I'm just making it clear so as everyone understands it.

ROBB: I'm grateful to your Honour. That is accepted.

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