Commissioner of Taxation v Warner

2. JURISDICTION 4 I accept the submissions for the Commissioner that there is a "matter" for the purposes of Chapter III of the Constitution. While the time for compliance has been extended to 28 days after service of the final orders in these proceedings, the notices are extant and the liquidators are refusing to comply with them in the absence of a Court order. Accordingly, I am satisfied that this Court has jurisdiction to determine the application.

3.1 Introduction 5 There being no dispute as to the facts, the factual background set out below is drawn from the affidavits of Shaoying Zheng, a Compliance Officer, and Shelley Remati, a Team Leader, within the Australian Taxation Office (ATO). Both officers work within the ATO's Phoenix Team of the Private Groups and High Wealth Individuals Business Line. The Phoenix Team investigates reports of suspected "phoenix activity", including circumstances where a company accrues tax liabilities and goes into insolvency administration without paying those liabilities. 6 Investigations by the Phoenix Team normally go through three phases, namely: (1) an internal ATO review of the information provided to the ATO; (2) a Comprehensive Risk Review (CRR) during which the ATO contacts the relevant taxpayer for further information; and (3) an audit of the relevant companies. 7 During the CRR phase, the ATO considers factors such as the amount of tax revenue at risk and the compliance rating of the relevant industry. After this phase, the ATO considers whether to proceed to an audit.

3.2 Liquidation of the third to eleventh respondent companies 8 The third respondent, TJT (No 1) Pty Ltd (TJT), is a head company in a consolidated group (the TJT Group) for the purpose of Part 3-90 of the Income Tax Assessment Act 1997 (ITAA 1997). That consolidated group commenced on 1 July 2008. The fourth to eleventh respondents are or were at various times subsidiary members of the TJT Group. TJT was also the representative of a GST Group within the meaning of Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). All of the current members of the TJT Group have changed their names since the group was formed. 9 The third to tenth respondents were wound up in a creditors' voluntary winding up on 11 June 2013 with the eleventh respondent wound up in a creditors' voluntary winding up on 23 October 2012. Messrs Warner and Kugel were appointed liquidators to all of the respondent companies (the liquidators). 10 Between 24 and 28 June 2013 and 4 April 2014, the Commissioner lodged proofs of debt in relation to four of the companies in the TJT Group in liquidation. The proofs of debt were in respect of certain business activity statement (BAS) liabilities, which include GST and Pay As You Go (PAYG) withholding liabilities. The proofs of debt were issued to the following companies and in the corresponding amounts: Company Amount TJT (No 5) Pty Ltd $328,727.08 TJT (No 7) Pty Ltd $63,593.04 TJT (No 8) Pty Ltd $289,926.00 TJT (No 13) Pty Ltd $322,153.02

3.3 Unassessed tax liabilities and the ATO audit 11 As the head company in the consolidated group, TJT was responsible for lodging the income tax returns of the TJT Group. No income tax returns were, however, lodged by TJT for the financial years ended 30 June 2010, 2011, 2012 and 2013. The Compliance Officer investigating the TJT Group, Shaoying Zheng, expects that members of the group may have income tax liabilities for these years although these cannot be assessed until the ATO completes an audit of the respondent companies. 12 The ATO commenced a CRR of TJT and the other respondent companies on or about 26 August 2013. This review, and the related tax audit, is required before the ATO can assess the income tax liabilities, and other unassessed tax liabilities such as GST liabilities, of the TJT Group. 13 The Reports as to Affairs lodged with the Australian Securities Investments Commission (ASIC) by the liquidators indicates that each of the respondent companies has tax liabilities, albeit that the type of tax liability is not specified. The amount of tax liability reported in the Report as to Affairs for each company is as follows: Company Amount TJT (No 1) Pty Ltd TBA TJT (No 2) Pty Ltd $5,261,243 TJT (No 3) Pty Ltd $68,888 TJT (No 4) Pty Ltd $1,622,122 TJT (No 5) Pty Ltd $2,188,347 TJT (No 7) Pty Ltd $69,911 TJT (No 8) Pty Ltd $8,801,740 TJT (No 9) Pty Ltd $69,215 TJT (No 13) Pty Ltd $1,511,465

14 Thus, the Reports as to Affairs quantify the total tax liability reported for the members of the TJT Group as approximately $20 million, even without taking account of TJT's tax liability which is yet to be advised.

3.4 Notices under s 264, ITAA 1936 and 353-10, Sch 1 of the TAA 15 On 10 January 2014, the Commissioner's delegate issued a notice to the liquidators requiring them to furnish information and produce documents under s 264(1) of the ITAA 1936 and s 353-10 of Sch 1 to the TAA. As the liquidators did not dispute their obligation to furnish information as opposed to documents, the notice issued on 10 January 2014 was withdrawn, and separate notices were issued by the Commissioner's delegate to the liquidators on 19 March 2014 to facilitate furnishing of the information as follows: (a) a notice under s 264(1)(a) of the ITAA 1936 and s 353-10 of Sch 1 to the TAA requiring the provision of information; and (b) a notice under s 264(1)(b) of the ITAA 1936 and s 353-10 of Sch 1 to the TAA requiring the production of documents, including financial statements, general ledgers, trial balances and other documents relating to the respondent companies (the s 264 document notice). 16 While the liquidators have complied with the notices requiring the furnishing of information, they have refused to comply with the s 264 document notice. The liquidators have taken the position in correspondence with the ATO that s 486 of the Corporations Act requires a creditor of a company in liquidation to obtain a court order before it can inspect the company's records held by its liquidator, and that s 264 of the ITAA 1936 is inconsistent with s 486 of the Corporations Act, the latter being the more specific provision to which the former would yield. As a result, the liquidators do not propose to produce the documents required under the s 264 document notice absent a court order.

4.1 Section 264, ITAA 1936 and s 353-10, Sch 1 to the TAA 17 The Commissioner is charged with the general administration of the taxation laws: s 8, ITAA 1936; s 1-7, ITAA 1997; s 3A, TAA; and s 356-5, Sch 1 to the TAA (indirect tax laws). This includes a duty to make an assessment: see s 166, ITAA 1936; Denlay v Federal Commissioner of Taxation [2011] FCAFC 63; (2011) 193 FCR 412 at 433-434 [81] (Keane CJ, Dowsett and Reeves JJ); s 105-5, Sch 1 to the TAA (indirect tax). It also includes a duty to pursue the recovery of tax-related liabilities: see Part 4-15, Sch 1 to the TAA, and, in particular, s 255-5 (providing that a tax-related liability is a debt due to the Commonwealth payable to the Commissioner); see also e.g. Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 618 (Brennan J) and 629 (Toohey J); Piccinin v Deputy Commissioner of Taxation [2002] FCAFC 282 at [29] (Black CJ, Wilcox and Moore JJ); and Commissioner of Taxation v Darling [2014] FamCAFC 59; (2014) 285 FLR 428 (Darling) at 450 [134] (Thackray, Strickland and Murphy JJ). 18 In furtherance of the discharge of these duties, s 264 of the ITAA 1936 provides that: (1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority: a) to furnish the Commissioner with such information as the Commissioner may require; and b) to attend and give evidence before the Commissioner or before any officer authorized by the Commissioner in that behalf concerning the person's or any other person's income or assessment, and may require the person to produce all books, documents and other papers whatever in the person's custody or under the person's control relating thereto. (2) The Commissioner may require the information or evidence to be given on oath or affirmation and either verbally or in writing, and for that purpose the Commissioner or the officers so authorized by the Commissioner may administer an oath or affirmation. (3) The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend. (Emphasis added.) 19 The substance of s 264 has remained relevantly unchanged since its enactment. 20 The power in s 264 of the ITAA 1936 complements the power in s 263 of that Act authorising the Commissioner to have "full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act" and for that purpose to make copies of any such documents. 21 The power in s 264 may be delegated by the Commissioner in writing either generally or as otherwise provided by the instrument of delegation to a Deputy Commissioner or other person under s 8 of the TAA: Commissioner of Taxation v Australian and New Zealand Banking Group Ltd; Smorgon v Commissioner of Taxation (1979) 143 CLR 499 (Smorgon) at 517-518 (Gibbs ACJ); LHRC v Deputy Commissioner of Taxation (No 3) [2015] FCA 52 (LHRC) at [237] (Perry J). 22 The obligation to comply with a s 264 notice derives from s 8C(1) of the TAA pursuant to which a person who refuses or fails, when and as required under or pursuant to a taxation law, to give information or documents to the Commissioner is guilty of an offence. An offence under s 8C(1) is an offence of absolute liability as defined in s 6.2 of the Criminal Code 1995 (Cth) (Criminal Code) (s 8C(1A)). However, subs (1) does not apply to the extent that the person is not capable of complying with the requirement, the burden of proof of which lies on the person (see 8C(1B), TAA, and s 13.3(3), Criminal Code). 23 Section 353-10 of Sch 1 to the TAA is the "sister" provision to s 264 and applies for the purposes of indirect tax laws, such as the GST law (definition of "indirect tax law" in s 2(1), TAA, picking up the definition in s 995.1(1), ITAA 1997). When the notice issued, s 353-10 provided that: 353-10 Commissioner's power (1) The Commissioner may by notice in writing require you to do all or any of the following: (a) to give the Commissioner any information that the Commissioner requires for the purpose of the administration or operation of: (i) an *indirect tax law; or (ii) the *MRRT law; or (iia) the *Division 293 tax law; or (iii) this Schedule (other than Division 340); (b) to attend and give evidence before the Commissioner, or an individual authorised by the Commissioner, for the purpose of the administration or operation of: (i) an indirect tax law; or (ii) the MRRT law; or (iia) the Division 293 tax law; or (iii) this Schedule (other than Division 340); (c) to produce to the Commissioner any documents in your custody or under your control for the purpose of the administration or operation of: (i) an indirect tax law; or (ii) the MRRT law; or (iia) the Division 293 tax law; or (iii) this Schedule. Note: Failing to comply with a requirement can be an offence under section 8C or 8D. (2) The Commissioner may require the information or evidence: (a) to be given on oath or affirmation; and (b) to be given orally or in writing. For that purpose, the Commissioner or the officer may administer an oath or affirmation. (3) The regulations may prescribe scales of expenses to be allowed to entities required to attend before the Commissioner or the officer. (Emphasis added.) 24 Save where expressly limited, the term "you" applies to entities generally: s 4-5, ITAA 1997. Note 1 to s 4-5 explains in this regard that the expression "you" is not used in provisions that apply only to entities that are not individuals. By s 2-45, notes form part of the Act. As such, it is apparent that the expression includes natural persons, including officers of corporations or public bodies. 25 The Commissioner also has authority under s 353-15 of Sch 1 to the TAA for the purposes of, relevantly, an indirect tax law, to enter and remain on land, to full and free access to documents and other property, and to inspect and make copies of documents. 26 Sections 264 and 353-10, together with s 263 and s 353-15, confer power to undertake broad enquiries for the purpose of facilitating the proper discharge by the Commissioner of her or his duty to administer the tax laws and, more particularly, to accurately ascertain the extent of the tax liability, if any, and to pursue the recovery of tax-related liabilities. In short, the better the information before the Commissioner, the better the decision on the assessment: Binetter v Deputy Commissioner of Taxation [2012] FCAFC 126; (2012) 206 FCR 37 (Binetter) at 48 [37] (the Court). Thus, s 264 permits the Commissioner to undertake a "fishing expedition", there being no requirement that an issue or dispute first arise between the taxpayer and the Commissioner: Smorgon at 524 (Gibbs ACJ) and 546 (Murphy J). As Mason J (with whom Jacobs J relevantly agreed at 542) held in Smorgon at 536: There is simply no basis for the implication of such a limitation. The strong reasons which inhibit the use of curial processes for the purposes of a "fishing expedition" have no application to the administrative process of assessing a taxpayer to income tax. It is the function of the Commissioner to ascertain the taxpayer's taxable income. To ascertain this he may need to make wide-ranging inquiries, and to make them long before any issue of fact arises between him and the taxpayer. 27 Section 264 also abrogates contractual and equitable obligations of confidentiality, including those which the recipient might owe to third parties: Smorgon v Australia and New Zealand Banking Group Ltd (1976) 134 CLR 475 at 489-490 (Stephen J); Australia and New Zealand Banking Group Ltd v Konza [2012] FCAFC 127; (2012) 206 FCR 450 at 466 (the Court). Nor can a person examined under s 264 of the ITAA 1936 refuse to answer any question put to her or him on the grounds that the answer might tend to self-incriminate: Deputy Commissioner of Taxation v De Vonk (1995) 61 FCR 564 at 566 (Foster J) and 583-584 (Hill and Lingren JJ); Binetter at [30] (the Court). I accept the submission by the Commissioner that the same principles apply equally to s 353-10, given the similar language in, and purpose of, the two provisions and their statutory context. Nor did the amicus curiae contend otherwise.

4.2.1 Context in which s 486 appears 28 Section 486 of the Corporations Act appears in Part 5.4B which is concerned with three types of winding up, namely: those initiated by an application for a court order under s 459P that a company be wound up in insolvency; those initiated by an application for a court order under s 462 that a company be wound up on other grounds (e.g. that it is just and equitable); and those initiated by a court order on the application of ASIC pursuant to s 464 (collectively, court ordered or compulsory windings up). As the amicus submits, the unifying feature of windings up under Part 5.4B is that they are conducted pursuant to, and under the authority of, the Court, in contrast to a members' or creditors' winding up under Part 5.5 (a voluntary winding up). As Austin J explained in Clutha Ltd (in liq) v Millar (No 5) [2002] NSWSC 833; (2002) 43 ACSR 295 at 300 [17]-[18]: …The distinction between modes of liquidation is between liquidation commencing by compulsion under a court order on established grounds, and liquidation commencing consensually. Under the Act only an official liquidator registered under s 1283 may act in the former case (ss 472(1) and 532(8)) while any registered liquidator may act in the latter case. The distinctions in the modern statute reflect the history of the law of company liquidation… They reflect the fundamental proposition that in a winding up by court order, it is the court that conducts the winding up, and the official liquidator acts as an officer of the court on its behalf: Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 695; Cresvale [Far East Ltd (in liq) v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 622] at [22]. That is not the case in a voluntary winding up, which is purely a statutory process. The liquidator in a voluntary winding up is not regarded as an officer of the court carrying out tasks under the supervision of the court, notwithstanding the substantial statutory and general law duties imposed on such a liquidator and the court's statutory power to review some aspects of the performance of the administration. 29 Similarly, in Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99, the Court of Appeal (Spigelman CJ, Hodgson JA and Austin J) explained at 121 [62] that: In a compulsory winding up by the court, the liquidator's office stems from the appointment by the court. The winding up is conducted by the court and the decisions the liquidator makes from time to time are in effect made under the authority of the court by the liquidator as an officer of the court… On the other hand, voluntary winding up is a statutory process and the liquidator is not an officer of the court carrying out tasks on the court's behalf… 30 Thus, in Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 696, Marks J said that in a compulsory winding up, the liquidator "is clearly not an employee of the court but the nature of the appointment makes him a representative of it." 31 Despite the differences between a compulsory and voluntary winding up, Part 5.6 of the Corporations Act contains provisions for the conduct of the winding up of a company which apply to both kinds of winding up. These provisions include ss 530A and 530B relating to possession and inspection of company books by a liquidator. The term "books" is widely defined in s 9 of the Corporations Act to include a register, any other record of information, financial reports or financial records, however compiled, recorded or stored, and a document. 32 Section 530A requires each officer of the company to deliver the companies' books to the liquidator appointed for the purposes of the winding up. As Barrett J explained in Criminale v TRN Security Services Pty Ltd (In Liq) [2008] NSWSC 562 (Criminale) at [29], on a winding up: …the rights of possession that would be an ordinary incident [of the company's ownership of the books] and be exercised for the company by its officers is replaced by the statutory rights of possession created in the liquidator. After winding up begins, the officers are no longer able to exercise their functions. Such custody as they had of company books comes to an end and they are obliged by statute to put the liquidator into possession of those books. 33 As to persons other than officers of the company in possession of company books, s 530B(1) relevantly provides that "[a] person is not entitled, as against the liquidator of a company: (a) to retain possession of books of the company". However, s 530B(1) is not absolute and does not, by virtue of subsection (2), apply "in relation to books of which a secured creditor of the company is entitled otherwise than because of a lien, but the liquidator is entitled to inspect, and make copies of, such books at any reasonable time". Nor is a person entitled as against the company and the liquidator to retain possession of the books, required to comply with a notice from the liquidator for delivery of company books: s 530B(4), (6) and (6A). Manifestly, where a person has company books in her or his possession, that person has no need for permission to be given before she or her may inspect them. 34 Sections 530A and 530B exist in aid of the liquidator's duty in s 474 of the Corporations Act to take all of the company's property into the liquidator's control and, where the winding up is voluntary, are ancillary to the equivalent asset collection function of the liquidator: Criminale at [28] (Barrett J).

4.2.2 Section 486, Corporations Act 35 Section 486 of the Corporations Act provides that: The Court may make such order for inspection of the books of the company by creditors and contributories as the Court thinks just, and any books in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise. 36 There is no definition of a "creditor" in the Corporations Act and it bears its ordinary meaning, being a person to whom a debt is owing by the company. A "contributory" is relevantly a person liable as a member or past member to contribute to the property of the company if it is wound up and, for a company with share capital, a holder of fully paid shares in the company (s 9, Corporations Act). 37 While s 486 applies only once the books are in the liquidator's possession, the provision refers to "books in the possession of the company". However, it has been held that s 486 applies only to books in the possession of the liquidator: Criminale at [31]-[32] (Barrett J) (following Re North Brazilian Sugar Factories (1887) 37 ChD 83); see also Nut Trading Co (Aust) Pty Ltd v KKL (Kangaroo Line) Pty Ltd (1997) 25 ACSR 580 (Nut Trading) at 604 (Einstein J) holding in relation to the predecessor provision to s 486 that "books in the possession of the company" means books in the possession of the company at the commencement of the winding up. 38 As to the construction of s 486, I would note at this stage the following additional matters. 39 First, s 486 has two aspects: (1) to vest power in the Court to permit inspection by creditors and contributories; and (2) to preclude any inspection of the company books by creditors and contributories save where, and to the extent, that any such inspection is authorised by an order of the court (IACS Pty Ltd v Australian Flower Exports Pty Ltd (1993) 10 ACSR 769 (Australian Flower Exports) at 771-772 (Rowland J)). 40 Secondly, the power conferred by s 486 is discretionary and empowers the Court to permit inspection where the court considers it "just", including on conditions: Nut Trading at 604-605 (Einstein J); W M Scollay & Co Ltd (in liq) v South Pacific Energy Trading Pty Ltd (in liq) (1996) 21 ACSR 42 (Scollay) at 43 (Heerey J); Re Addstone Pty Ltd (In Liq); ex parte Macks (1998) 30 ACSR 177 (Addstone) at 185 (Mansfield J). The Court will not, however, permit a "fishing expedition" under s 486: Nut Trading at 605 (Einstein J); Australian Flower Exports at 774 (Rowland J). It follows that the power under s 486 is more constrained than the Commissioner's power to require production of documents under s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA which extends to a "fishing expedition". 41 Thirdly, given that, relevantly, creditors have no general right to inspect the company books, it is apparent that s 486 is intended to create a mechanism whereby such persons may be permitted to inspect the company books recognising that they may have a legitimate interest in doing so where the debtor company is in liquidation. The role of the words "but not further or otherwise" is, in my view, to make it clear that any such inspection is limited to the extent and for the purposes permitted by the court order. As such, the provision does not purport to deal with the subject of inspection by any person but only with that by creditors and contributories. The consequence is that the general powers vested in a liquidator under s 477 of the Corporations Act on a court ordered liquidation, including to do all things necessary for winding up the affairs of the company and distributing its property, does not extend to the power to permit creditors and contributories to inspect the company books. 42 In short, s 486 vests exclusive power in the court in the case of a compulsory winding up to permit the inspection of the company's books by creditors and contributories, so that the court not only determines whether those persons may inspect the company's books, but the conditions on which any such inspection is permitted. By these means, the court can ensure that access by creditors or contributories is not permitted otherwise than in the pursuit of their legitimate interests in the winding up, as opposed to some other agenda.

5.1 The correct approach to statutory construction 43 Under established principles of statutory construction, "[t]he language which has actually been employed in the text of legislation is the surest guide to legislative intention": Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27 (Alcan) at 47 [47] (Hayne, Heydon, Crennan and Kiefel JJ). This does not exclude a "consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy": Alcan at 47 [47]; see also Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; (2013) 250 CLR 523 at 539-540 [47] (the Court); and Quickfund (Australia) Pty Ltd v Airmark Consolidators Pty Ltd [2014] FCAFC 70; (2014) 222 FCR 13 at 30 [75] (the Court). Nor does it exclude the possibility that a purposive construction may permit reading a provision as if it contained additional words (or omitted words) with the effect of expanding or contracting its field of operation: Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 88 ALJR 473 (Taylor) at 482-483 [37] (French CJ, Crennan and Bell JJ). However, as French CJ, Crennan and Bell JJ held in in Taylor at 483 [38]: The question whether the court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgment of matters of degree. That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision. It is answered against a construction that fills "gaps disclosed in legislation" or makes an insertion which is "too big, or too much at variance with the language in fact used by the legislature". (Citations omitted.) 44 This approach respects the proper limits of judicial power and considerations of fairness, being "dictated by elementary considerations of fairness, for, after all, those who are subject to the law's commands are entitled to conduct themselves on the basis that those commands have meaning and effect according to ordinary grammar and usage": Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319 at 340 (Gaudron J) (cited with approval in Alcan at 31 [4] (French CJ)). 45 In the present case, as I explain, a purposive construction of the provisions in issue, including s 486 of the Corporations Act, does not justify reading s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA as if they contained an exception in favour of liquidators from the obligation to comply with a notice issued under those provisions. This is, in other words, a case where the natural and ordinary meaning of the language used is in alignment with the purposes of the provisions.

5.2 Does s 486 apply in the context of a voluntary winding up? 46 While s 486 applies in the case of a court ordered winding up, the present case involves a company in liquidation through a creditors' voluntary winding up. By virtue of s 506 of the Corporations Act, a liquidator on a voluntary winding up may exercise any of the powers that the Corporations Act confers on a liquidator in a winding up in insolvency or by the court. However, absent a court order, a liquidator on a voluntary winding up cannot exercise any of the powers conferred on the court in a court ordered winding up. Specifically, s 511(1) of Division 4 of Part 5.5 dealing with voluntary winding up generally, provides that: (1) The liquidator, or any contributory or creditor, may apply to the Court: (a) to determine any question arising in the winding up of a company; or (b) to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court. (Emphasis added.) 47 If satisfied that the determination of the question or exercise of the power will be just and beneficial, the Court may accede wholly or partially to any such application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just (s 511(2), Corporations Act). 48 The Commissioner contended that s 486 is "to be understood as a general prohibition on access to books and records by the persons that it speaks to - that is creditors and contributories - subject to a power in the court to relieve against the effect of that prohibition". However, while not raised in the written submissions, the Commissioner submitted at the hearing that s 486 did not apply to a voluntary winding up unless a court order was made under s 511(1)(b) permitting the liquidator to exercise the power in s 486. 49 In my view, it is apparent from s 511 that, if the liquidator is to permit inspection of the company books by a creditor or contributory, the liquidator must first apply under s 511(1)(b) to exercise the power in s 486. As such, the cumulative effect of ss 486 and 511(1)(b) is to preclude the liquidator on a voluntary winding up from permitting inspection of the company books by a creditor or contributory save where the liquidator has successfully applied under s 511(1)(b) for a court order permitting it to exercise the power in s 486. While their Honours did not expand upon their reasons, this construction would seem to accord with the views expressed by Barrett J in Criminale at [33] and Heery J in Scollay at 42-43 that s 486 was rendered applicable to a voluntary winding up by reason of s 511(1)(b) of the Corporations Act. This construction is also supported by the fact that the interest of other creditors and the company itself in ensuring that any creditor permitted to inspect the company's books may do so only in furtherance of the legitimate interests of the winding up is no less in the context of a voluntary winding up, than in the context of a court ordered liquidation. 50 Ultimately, however, it is unnecessary for me to reach a final view on this issue as, in my view, the powers in s 264(1)(b) of the ITAA 1936 and s 353-10 of Sch 1 to the TAA are exercisable against a liquidator, irrespective of whether the liquidation is voluntary or is court ordered.

5.3 The submissions of the amicus 51 The amicus put careful and considered submissions that a conflict arose between s 264 and s 353-10, on the one hand, and s 486 of the Corporations Act, on the other hand, which should be resolved by reading down the words "person" and "you" in s 264 and s 353-10 respectively so as to exclude a liquidator. 52 In essence, the amicus submitted that, given that a court appointed liquidator is a representative of the court, including in the holding of the company's books, these words should be interpreted as excluding a court appointed liquidator by analogy with the authorities which hold that a court is not a "person". Specifically, the amicus submits that s 486: …reflects the representative role of the liquidator. It manifests a legislative policy that it is not for the liquidator, holding the books and records of the company in that position and for that purpose, to decide for themselves to provide inspection of them to creditors and contributories. On the contrary, it is the function of the Court, under whose authority and by whose representative the winding up is being carried on, to make that decision. 53 The amicus also submits that, while a liquidator on a voluntary winding up (such as here) is not an officer of the court, nonetheless the court exercises a supervisory jurisdiction over voluntary liquidators under s 536 of the Corporations Act which authorises the court (and ASIC) to investigate possible breaches of duty by a liquidator and to take such action as it thinks fit. The derivative application of s 486 by operation of s 511(1)(b) of the Corporations Act to voluntary liquidations is said to be another aspect of this supervisory role. Given this, the amicus submitted that it would be anomalous if a liquidator on a voluntary winding up was subject to the Commissioner's powers under s 264 of the ITAA 1936, but not an official liquidator on the court ordered liquidation. The question of whether any such anomaly arises turns, therefore, in the first instance on whether the amicus' submission as to the construction of the relevant provisions vis a vis a court appointed liquidator are accepted. 54 The amicus contends that this construction is consistent with the nature of s 486 as a provision specific to the insolvency context, investing jurisdiction in a court, in contrast to the general powers to require production of documents in s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA. This submission relies upon the approach in Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia Ltd (1932) 47 CLR 1 at 7 (Gavan Duffy CJ and Dixon J). That approach may apply, as the amicus submitted, with particular force where the tension or conflict arises between two sections of the same Act, although it may still assist where the tension or conflict arises between two provisions in different Acts: The Ombudsman v Laughton [2005] NSWCA 339; (2005) 64 NSWLR 114 at 118 [20]-[21] (Spigelman CJ). This approach, described as "one of 'obvious good sense'… [l]ike all principles, however, …must be applied subject to the particular text, context and purpose of the statute to be construed": Plaintiff M70/2011 v Minister for Immigration and Citizenship (Malaysian Declaration Case) [2011] HCA 32; (2011) 244 CLR 144 at 177 [50] (French CJ). 55 Finally, the amicus submits that in cases such as the present where the Commissioner seeks to exercise her or his compulsive powers as a creditor of the company in liquidation, she or he should be treated in the same way as other creditors of the company seeking to recover money, including with respect to access to the company books. This accords, so it is said, with the tendency to assimilate the Commissioner to the position of an ordinary creditor in an insolvency context.

5.4 Assuming that s 486 applies to a voluntary winding up, are s 264 and s 353-10 to be read so as to exclude a liquidator?

5.4.1 The construction of "person" and "you" in ss 264, ITAA 1936 and s 353-10, Sch 1 to the TAA 56 The first obstacle to the construction identified by the amicus is that the proposition that a liquidator cannot be the subject of a notice under either s 264 of the ITAA 1936 or s 353-10 of Sch 1 to the TAA finds no foothold in the text of either provision. The word "person" is defined in s 995-1(1) of the ITAA 1997 simply as including a company (see also the definition of person in s 6(1), ITAA 1936), albeit subject to a contrary intention. As earlier mentioned, the definition of "you" for the purposes of s 353-10 is equally broad. No intention is therefore evident to adopt a narrow construction of either word and, in their ordinary meaning, both words would include a liquidator. To read either provision in the manner suggested by the amicus would therefore require that the obligation to comply with s 264 or s 353-10 notice be read as subject to an implied exception in the case of a liquidator. 57 The amicus submits that the words "person" and "you" in s 264 and s 353-10 should be read down in this manner. The amicus points in this regard to the authorities holding that the word "person" has not been construed as including a court (Canadian Pacific Tobacco Co Ltd v Stapleton (1952) 86 CLR 1 (Canadian Pacific) at 6 (Dixon CJ)) and the powers in s 264 and s 353-10 do not empower the Commissioner to require the production of documents by a court relying upon Darling at [142]. By analogy, the amicus submits that those powers should not include a court appointed liquidator because such a liquidator acts as an officer of the Court on its behalf (see above at [28]-[30]) including in the holding of documents as an aspect of undertaking her or his duties in that capacity. 58 While the authorities establish the special status of a court appointed liquidator, the amicus' submission with respect overlooks the reasons why such general powers are not exercisable against a court. In this regard, it has been held that a court is not a "person" as a matter of ordinary language: Hilton v Wells (1985) 157 CLR 57 at 87 (Mason and Deane JJ); Miller v Miller (1978) 141 CLR 269 at 277 (Gibbs J); Canadian Pacific at 6 (Dixon CJ). However, as a matter of ordinary language, a liquidator is a person. Furthermore, while a court appointed liquidator has been described as a representative of the court, it is not a court and does not (and could not validly) exercise federal judicial power. Nor is a liquidator taking part in proceedings before the court in undertaking the liquidation (cf Rogers v Nationwide News Pty Limited [2003] HCA 52; (2003) 216 CLR 327 at 337 [21] (Gleeson CJ and Gummow J) and 373-374 [151] (Heydon J) in relation to court officials undertaking administrative acts involved in the publication of reasons for judgment). 59 The liquidator also seeks to rely upon the decision in Darling in aid of the submission. In that case the Court found that any purported use of the powers in ss 166 and 167 of the ITAA 1936 by the Commissioner to require production and make use of documents from a Family Court file for purposes unrelated to the proceedings would prima facie constitute a contempt of court and a legislative intention to permit a contempt was not to be inferred lightly (at [142]). However, there is no suggestion here that the use of the powers in s 264 against the liquidator could constitute a contempt of court. Nor is there any suggestion of an interference of any other kind with the exercise of judicial power such as in Queensland Trustees Ltd v White & Gardiner Pty ltd (1987) 72 ALR 287 at 289. In that case, Pincus J found that the Queensland legislature could not have intended that the predecessor provision to s 264 in the Companies (Queensland) Code would inhibit the court's power to issue subpoenas and permit inspection in the ordinary course of litigation.

5.4.2 The amicus' construction of s 264, ITAA 1936 and s 353-10, Sch 1 to the TAA, would undermine the purpose of those provisions 60 Secondly, no submission was made that there were any contextual matters within the taxation laws suggesting an intention to exclude liquidators from the scope of s 264 or s 353-10. To the contrary, to exclude liquidators would undermine the purpose of the provisions in enabling the Commissioner to undertake wide-ranging inquiries in the discharge of her or his obligation to administer the taxation laws. Yet s 15AA of the Acts Interpretation Act 1901 (Cth) requires that the interpretation that would best achieve the purpose or object of the Act be preferred; see also Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 (Project Blue Sky) at 381-382 [69]-[70] (McHugh, Gummow, Kirby and Hayne JJ). Thus earlier attempts to read the obligation in s 264 down otherwise than by reference to its purpose have been resisted by the courts. The same approach should apply by analogy to its "sister" provision, s 353-10 of Sch 1 to the TAA. 61 In this regard, I have referred already to the decision in Smorgon. In that case, the Court held that there was no basis for implying a limitation upon s 264 so as to restrict the powers of inquiry to circumstances in which a dispute had arisen between the tax payer and the Commissioner as to an issue of fact. An attempt subsequently to constrain the power in s 264(1) beyond the express limitations in subs (1)(b) and the purposes of the taxation laws was again firmly rejected by the High Court in Industrial Equity Limited v Deputy Commission of Taxation (1990) 170 CLR 649. In that case, the appellants sought judicial review of the Deputy Commissioner's decisions to require production of documents pursuant to s 264(1) solely in furtherance of the ATO's then policy of auditing the top one hundred companies. The appellants contended that, in implementing that policy, the Commissioner was engaged in a "random audit, an exercise which, it was said, the Act did not authorise, and therefore that any power exercised to that end could not be for a purpose of the Act" (at 660). In rejecting that submission, the majority (Mason CJ, Brennan, Deane, Dawson, Toohey and McHugh JJ) held at 659-660 that: … the powers contained in s. 264(1), like those contained in s. 263, must be exercised for the purposes of the Act. The question whether a purpose is a purpose of the Act should be considered in the context of s. 17 [of the ITAA 1936]. That section provides for the levy of tax upon the taxable income of a person derived during a year of income and it is by reference to this primary purpose that all other purposes of the Act are to be determined. Section 8 charges the Commissioner with the general administration of the Act which includes the due making of assessments to tax (s. 169 [ITAA 1936]) and the recovery of tax payable by taxpayers pursuant to the Act (Pt VI, Div. 1 [ITAA 1936]). Sections 263 and 264(1) each confers on the Commissioner a power to enable him to perform his functions under the Act. Therefore, the power "must be circumscribed by reference to this purpose": Smorgon's Case. (Emphasis added.) 62 Thus, their Honours held that "… the Commissioner will still be acting for the purposes of the Act so long as he is endeavouring to fulfil his function of ascertaining the taxable income of taxpayers" (at 661). No further limitation on the exercise of the Commissioner's powers under s 264 was therefore held to be warranted notwithstanding that there may be a random aspect in selecting the affairs of particular taxpayers or categories of taxpayers for closer examination (at 660-661). While some of the provisions referred to in the passage quoted above now appear in a different location, nonetheless the essential features of the tax laws remain the same: LHRC at [263]. Equally, in my view, there is no warrant for limiting the Commissioner's powers otherwise than by reference to the purposes of the taxation laws merely because a company is in liquidation. Indeed, the fact that the company is in liquidation may give rise to a circumstance in which it is imperative that the Commissioner is able to require production of documents for the purposes of the taxation laws in protection of the revenue.

5.4.3 If s 264, ITAA 1936 and s 353-10, Sch 1 to the TAA, are construed so as to apply to the liquidator, does this create a conflict with s 486 of the Corporations Act? 63 If, however, s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA confer power to require a liquidator to produce the company books, does the amicus correctly submit that this creates a conflict with s 486 of the Corporations Act because the Commissioner is a "creditor" of TJT and prima facie must obtain a court order before she or he may inspect the company books? In my view, the answer to that question is "no". 64 First, s 486 of the Corporations Act purports in terms to deal only with the inspection of books by creditors and contributories. It does not deal with the possession of the company books. Both s 264 and s 353-10 impose relevantly an obligation upon the recipient to "produce" documents. That requirement, as the Commissioner contends, involves a relinquishment of possession over the documents in question by the liquidator in favour of the Commissioner, even if the Commissioner ultimately does not retain them. The Commissioner's right to require production of company books under s 264 and s 353-10 respectively therefore is an example of a superior right to possession, the existence of which is not an anathema to the legislative scheme governing liquidations given that a liquidator's right to possession must already give way to that of a secured creditor under s 530B of the Corporations Act. 65 Secondly, the reference to a "creditor" in s 486 of the Corporations Act describes a person whose relationship with the company is encapsulated within the concept of debtor and creditor. However, it does not capture and, in my view, is not intended to capture, the added dimensions of the relationship between the company and an officer of the ATO seeking to utilise compulsive powers in the exercise of an independent discretion against the liquidator in the administration of the tax laws, even though the company may have a tax liability. 66 Against this construction, the amicus submitted that to construe "creditor" in the context of s 486 of the Corporations Act as not including the Commissioner of Taxation, would run counter to the legislative intention evident in other provisions to place the Commissioner so far as possible on an equal basis with creditors in the private sector. The amicus relied in particular upon the decision of the High Court in Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation [2009] HCA 32; (2009) 239 CLR 346. In that case the High Court held that the Commissioner's general power in s 260-5 of Sch 1 to the TAA to issue a notice to a third party for the recovery of an amount that the third party owed to the company who was indebted to the Commonwealth for tax, did not apply in relation to the assets of the company in liquidation. Rather, the Court held that s 260-45 of Sch 1 to the TAA created a specific regime for the collection and recovery of tax liabilities of the company in liquidation which excluded the operation of the general provisions of s 260-5 (at 353 [17] (French CJ, Gummow, Hayne, Heydon and Bell JJ)). One factor to which the Court referred as supporting this conclusion, and which the amicus stressed, was the abolition of Crown priority for tax debts by the Taxation Debts (Abolition of Crown Priority) Act 1980 (Cth). Prior to this Act, a company liquidator was bound to apply the company's assets in payment of tax in priority to all other unsecured debts. The Court also referred to the proportionate system established by s 260-45 for liquidations, finding at 354 [20] that that system: … would be subject to adventitious disruption if the circumstance that a third party was indebted to the company gave to the Crown full garnishee rights under s 260-5; the extent of recovery of a tax debt owed by an insolvent company would depend upon the extent to which the assets of the company comprised debts owed by third parties and the speed with which the liquidator gathered them in; once so gathered the debts would be beyond the scope of the notice provisions and within the scheme of Ch 5 of the Corporations Act. 67 In my view, however, the fact that the Commissioner is as far as possible placed on a par with other creditors with respect to the ultimate distribution of the company's assets, does not mean that it should be on a par with other creditors insofar as access to the company books is concerned. The position of the Commissioner is relevantly different in a number of respects which in my view confirm a contrary intention. 68 First, s 486 of the Corporations Act recognises that ordinarily a creditor has no right to inspect the books of a company but may have a legitimate interest in doing so when a company is being wound up. For example, Mansfield J observed in Addstone at 185, after observing that before a winding up, members of a company have certain statutory rights to certain categories of company documents and a right to apply for a court order authorising inspection of the company's books: After the winding up, the court's power to authorise access to the books of the Company under s 486 is extended, first because creditors are eligible to apply for such access, and second because the conditions upon which such access may be given either to creditors or contributories is only limited by the court being satisfied that the access sought is "just". The court may permit access only to the extent that it is just to do so. Any such order could, no doubt, contain express conditions as to the use to which that material may be put… There are obvious reasons why, following the liquidation of the company, a creditor may have a legitimate interest in the operation of the affairs of the company prior to its winding up but which did not exist prior to the winding up. (Emphasis added.) 69 By contrast, the Commissioner has a legitimate interest irrespective of the winding up in access to the company's books in order to discharge her or his statutory duty to ascertain the tax liability, if any, and to do so irrespective of whether any dispute has arisen as is apparent from s 264 and s 353-10. In this regard, unlike an ordinary creditor who will know the extent of the debt owed by the company in liquidation, that is information which will, in general, be uniquely in the taxpayer's knowledge. The Commissioner's interest in access to the company books does not therefore arise only on a winding up and is broader than that of an ordinary creditor. 70 Nor, in the second place, does it make sense to provide for the Court to impose conditions on such access given that the Commissioner can use the documents produced in answer to a s 264 or s 353-10 notice only for the purposes authorised under, and subject to the duties imposed by, the tax laws in any event. It is not the case that the Commissioner might have some other purpose in mind unrelated to the proper exercise of those statutory powers which the court might seek to limit. No reason is therefore apparent as to why, in the context of liquidations, the Parliament would wish to restrict the Commissioner's capacity to require production and use of such documents because the person from whom production was sought had gone into liquidation.

6. CONCLUSION 71 For these reasons, I consider that a declaration should be made that the obligation of the first and second respondent liquidators to comply with the notice issued under s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA served on them in their capacity as liquidators of the TJT group is not subject to, or affected by, s 486 of the Corporations Act, including as applied by s 511 of that Act. The question of costs is reserved in order to allow an opportunity to the parties to be heard given that the First and Second Respondents against whom the Commissioner seeks his costs, submitted to any order that the Court may make save as to costs. I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.