Federal Commissioner of Taxation v Smorgon

The further question that remains to be decided on the appeal brought by the Smorgons is whether the notices given to those parties were sufficient in form. Omitting immaterial words each of those notices read as follows:

I, Leo Thomas Fitzgerald, do by this Notice require you to attend and give evidence before Norman Leslie Peters concerning the following matters -

(b) the ascertainment of the taxable income and the tax payable thereon by -

the persons referred to in the Schedule annexed hereto and marked with the letter "A" for the years ended 30th June 1965 to 1976 inclusive and in connection therewith I do further hereby require you to produce at the said place and time all books, documents and other papers located in safety deposit box numbered These notices do not specifically describe the documents as relating to the income or assessment of the persons named. However, they make it clear that the evidence to be given is that concerning the income or assessment of the named persons and to that extent the notices are valid and sufficient. The documents required to be produced are said to be required "in connection therewith" - i.e., in connexion with the evidence which the recipient of the notice is required to give, namely evidence concerning the income or assessment of the named persons. The form of the notices could be improved, but the notices when properly construed are in my opinion within the ambit of the power conferred by s. 264 (1). The words of the notices indicate that all the documents contained in the safe deposit boxes are connected with the evidence which is to be given and which relates to the income or assessment of the persons named, and imply that the documents themselves relate to those matters. The notices, regarded alone, are in form sufficient, but if it were proved that the boxes contain documents which have no relation to the income or assessment of the persons named the notices would of course be too wide.

I would accordingly dismiss the Smorgons' appeal. However, for the reasons that I have given in relation to the declaration sought against the Bank, I respectfully consider that the declarations which his Honour made against the Smorgons were too wide. Those declarations were as follows:

(i) That each of the notices given by the Secondnamed Plaintiff as the delegate of the Firstnamed Plaintiff on 14th February 1977 to each of the first nine named Defendants, and the Eleventhnamed Defendant and Twelfthnamed Defendant and referred to in paragraph 9 of the Statement of Claim herein was validly given pursuant to the provisions of Section 264 (1) of the Income Tax Assessment Act 1936;

(ii) That each of the first nine named Defendants, the Eleventhnamed Defendant and the Twelfthnamed Defendant is required to attend before the Thirdnamed Plaintiff to give evidence concerning the income or assessment of the persons referred to respectively in the said notices and to produce all such books, documents and other papers contained in the safe deposit boxes numbered 800, 1019, 1370 and 1848 which are located at the premises of the Thirteenthnamed Defendant as relate to the income or assessment of any one or more of such persons.

The notices were validly given only if in fact all the documents in the boxes relate to the income or assessment of the named persons. Similarly the Smorgons were obliged to produce all the documents in the boxes only if they related to the income or assessment of the named persons. I would substitute declarations narrower in scope.

The final matter for decision is that which is raised by the cross-appeal of the plaintiffs. The additional relief which the plaintiffs sought against the Smorgons was rightly refused, since it has not been proved that any documents of the requisite description are contained in the lockers, or that any access to which the Bank is entitled has been denied it. It is therefore unnecessary to consider further the provisions of s. 263.

For the reasons that I have given, I would make the following orders:

(I) Allow with costs the appeal by the Commissioner of Taxation and others against the Australia and New Zealand Banking Group Ltd., order that orders numbered (1) and (2) made by Stephen J. be set aside and that in lieu thereof it be ordered as follows:

(1) Declare that two of the notices dated 23rd February 1977 and referred to in par. 10 of the statement of claim (being the notices which require the thirteenth defendant to produce certain books, documents and other papers in its custody or under its control relating to the income of and/or the ascertainment of taxable income and the tax payable thereon by the persons referred to in the schedule annexed thereto, namely all books, documents and other papers located in safe deposit boxes numbered 800, 1019, 1370 and 1848) were not invalid by reason of their form, or by reason of the fact that they require the production of books, documents and papers contained in safe deposit lockers at a branch of the thirteenth defendant, or by any insufficiency in the delegation of power to the second-named plaintiff.

(2) Order that the costs of and incidental to the action against the thirteenth defendant be taxed and paid by the thirteenth defendant to the plaintiff.

(II) Dismiss with costs the appeal by George Smorgon and others against the Commissioner of Taxation and others, but substitute the following declarations for those made by Stephen J.:

(i) Declare that none of the notices given by the second-named plaintiff as the delegate of the firstnamed plaintiff on 14th February 1977 to each of the first nine named defendants and the eleventhnamed defendant and the twelfthnamed defendant and referred to in par. 9 of the statement of claim was invalid by reason of its form or by any insufficiency in the delegation of power to the secondnamed respondent.

(ii) Declare that each of the first nine named defendants, the eleventhnamed defendant and the twelfthnamed defendant is required to attend before the thirdnamed plaintiff to give evidence concerning the income or assessment of the persons referred to respectively in the said notices.

(III) Dismiss with costs the cross-appeal by the respondents, the Commissioner of Taxation and others.

There are here two appeals and a cross-appeal brought from the decision of Stephen J. delivered on 9th December 1977, in which his Honour dismissed an action for a declaration that certain notices issued by the Commissioner of Taxation ("the Commissioner") pursuant to the powers conferred by s. 264 (1) of the Income Tax Assessment Act 1936, as amended ("the Act") directed to The Australia and New Zealand Banking Company Limited ("the Bank") were valid, but declared that similar notices directed to the Smorgons were valid. The decision arose out of a further attempt by the Commissioner to require the production of documents relating to the income and assessment of the Smorgons, following Stephen J.'s judgment in Smorgon v. Australia and New Zealand Banking Group Ltd. [29] .

In the present case each notice was issued by the Commissioner under s. 264 (1) and sought to compel the person to whom it was directed to produce for inspection by the Commissioner's delegate the contents of certain safe deposit boxes situated in the Bank premises. The Commissioner issued several notices to the Bank, each in slightly different form, so that the Court has to consider the validity of various forms of notice.

Three main classes of objection were taken by the Bank and the Smorgons in relation to the validity of all the notices. First, the ambit of the Commissioner's investigatory powers under ss. 263 and 264 (1) was canvassed and it was argued that certain conditions precedent to the exercise of the Commissioner's rights under each section should be implied so as to prevent the Commissioner from undertaking a "fishing expedition". Secondly, it was argued that the notices were defective in form as they were each expressed too widely and therefore on their face exceeded the Commisioner's power under the section. Thirdly, in relation to the notices directed to the Bank, it was submitted that the Bank lacked "custody" or "control" of the documents within the safe deposit boxes and could therefore not be compelled to produce them.

It is convenient to deal with this third point first. Section 264 (1) of the Act provides:

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 him with such information as he may require; and

(b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.

The rights of the customer and the Bank with respect to each safe deposit box are regulated by pro forma written agreements to which the Bank and individual members of the Smorgon family are parties. Each agreement provides:

I/We hereby acknowledge having received from the Bank two identical keys numbered as in the schedule in respect of the said Safe Deposit Locker (herein referred to as "the Locker") the Bank holding a third and different key by means whereof the Locker may be double locked and in consideration of the Bank granting me/us the use of the Locker upon the terms and conditions herein contained I/we agree with the Bank as follows: -

To retain one of the said identical keys under my/our own control at all times until the same is returned to the Bank

To place the other of such identical keys (herein called "the duplicate key") in a packet to be sealed by me/us and to deliver the same into the custody of the Bank to be retained by the Bank in safe keeping and during the continuation of this agreement to be used only to replace the key held by me/us upon my/our written request in the event of the loss or destruction of the latter key. The Bank shall be responsible for the safe keeping of the duplicate key and for prevention of improper use thereof.

The key handed to me/us is to remain the property of the Bank and is returnable on demand and shall in any event be returned to the Bank upon termination of my/our use of the Locker. Any repairs to the keys are to be solely by the Bank.

Subject to this agreement I/we may have access to the Locker at any time or times during the normal hours in which the said Safe Deposit facilities are open to the public for business and my/our access to and use of the Locker shall be in accordance with and subject to such Rules and Regulations as the Bank shall from time to time think fit to make.

In case of emergency (of which the Bank shall be the sole judge) the Bank shall be entitled to close the said Safe Deposit facilities to me/us or to all customers for such period as in the circumstances the Bank shall consider reasonably necessary.

8. The Bank is entitled in its discretion to terminate my/our use of the Locker at any time by notice in writing signed by the Manager for the time being of the said Branch or any other officer of the Bank authorised in that behalf. Upon determination of my/our use of the Locker, I/we shall remove all property from the Locker and surrender the key thereof to the Bank whereupon the Bank is to refund to me/us any unexpired portion (calculated on a monthly basis) of the charge paid in advance for the use of the Locker. In default of my/our removing such property the Bank may remove the same and make such arrangements for the custody thereof at my/our risk and expense as the Bank shall think fit.

Clause 1 authorizes the Bank to charge for the use of the box, cl. 7 prohibits the placement of dangerous goods in the box and by cl. 9 the Bank accepts and limits its responsibility to that "legally required of gratuitous bailees having the custody of the property of other persons".

Clearly in the circumstances of this case, where no action to terminate any of the agreements has been taken by any of the parties to them, the Bank is contractually bound not to use the duplicate key which it holds (cl. 3). However, it was not contested that if on its true construction the Act required the Bank to deliver up the contents of the boxes to the Commissioner pursuant to the notices then the Bank would commit no breach of contract by doing so. The real question is whether, given the disposition of keys and location of the boxes within the premises of the Bank, together with the exercise by the Bank of what Stephen J. called "negative superintendence as guardian of the security of the boxes", the Bank has the contents of the boxes in its custody or under its control within the meaning of s. 264.

The primary definition of "custody" in the Shorter Oxford English Dictionary is "Safe keeping, protection; charge, care, guardianship". Without more, the degree of protection for the security of the contents of the boxes which the Bank provides justifies the conclusion that the documents were in the custody of the Bank. It is of no consequence that the Smorgons have rights of access (specifically provided by cl. 5 of the agreements) to the contents of the boxes, though it may be that during any period of time when the customer actually avails himself of his right of access to the box and has it open the contents are no longer in the custody, or at any rate the sole custody, of the Bank. In my opinion the Bank has custody of the contents of a locked safe deposit box situated on its premises.

The content of "control" is somewhat different from that of "custody"; however, both are "wide enough to include many types of possession which are not commensurate with full ownership" (Johnston Fear & Kingham v. The Commonwealth [30] , per Rich J.). It is difficult to ascribe a precise meaning to control in s. 264 as the content of the word is normally dictated by its context and can vary from sole absolute dominion over the object "controlled" to "something weaker than "restraint", something equivalent to "regulation" " (Bank of New South Wales v. The Commonwealth [31] , per Dixon J.). Although the use of the composite expression "in his custody or under his control" does not assist us in determining the precise limits of the meaning of "control", it does evidence a legislative intention to employ the words in their widest sense.

1. (1943) 67 C.L.R. 314, at p. 324. 2. (1948) 76 C.L.R. 1, at p. 385.

In the circumstances of this case where the Bank has the actual ability to open the boxes without damage to them, though contractually bound not to do so, and where no box can be opened without the Bank first providing access to it and a key, it is my opinion that the Bank does have "control" over the documents to a sufficient degree to come within the scope of that word as it is used in s. 264 (1) (b).

There is to my mind no reason to limit the scope of "custody and control" to "exclusive custody and control". The decision in Dollfus Mieg et Compagnie S.A. v. Bank of England [32] is of no assistance in this case. The decision of Jenkins J. that the bailor (the Tripartite Commission which represented the governments of the United Kingdom, France and the United States) retained possession, for the purpose of the rules relating to sovereign immunity, of certain gold bars held on a bailment by the Bank of England in a "Gold set-aside Account" (that is, held in a vault with other gold but kept separate for the purpose of returning it in specie) was in no way inconsistent with the exercise of custody or control by the bank. The decision said nothing about the nature of the bailment from the bank's point of view.

Even the view that custody, or possession, must reside exclusively in one person at any given time (Paton, Bailment in the Common Law (1952), pp. 6-9) does not relieve the Bank from compliance with a lawful notice to produce documents under s. 264. Whether or not Professor Paton is right in his suggestion that on true analysis the bank in the Dollfus Mieg Case [33] had exclusive possession yet the Tripartite Commission retained control over the disposition of the gold bars, it seems clear that in that case, as in the present case, there was scope for the exercise of some "control" by both the bailor and bailee. In these circumstances the Bank falls, at the least, within the ambit of the exercise of "control" under s. 264 whether or not it also has possession or custody of the documents.

Section 264 appears in Pt VIII of the Act - " Miscellaneous ". The section is preceded by ss. 262A and 263. Section 262A, which was introduced into the Act in 1943, requires every person carrying on a business to "Keep sufficient records in the English language of his income and expenditure to enable his assessable income and allowable deductions to be readily ascertained" and to retain such records for at least seven years. Sections 263 and 264 then arm the Commissioner with rights and powers to inspect documents. The rights and powers so conferred are not limited to the records which a person carrying on a business is obliged to keep by s. 262A.

By s. 263 the "Commissioner, or any officer authorized by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers" for any of the purposes of the Act. This right of access is not confined to documentary records which relate to the income of the person in whose possession they are at a given time. The Commissioner's right of access extends to documentary records for any of the purposes of the Act. He may therefore examine, but not seize, documentary records relating to the income of a person other than the person who has possession of the records.

The power conferred upon the Commissioner by s. 264 to require a person to furnish information, to attend and give evidence and to require the production of books, documents and other papers enables him to obtain information and inspect documents when the "full and free access" given by s. 263, for whatever reason, is inadequate to enable him to inspect documentary records, though I can see no reason why the exercise of the power should be restricted to these circumstances. Section 264 makes no reference back to s. 263; nor does s. 264 condition the power which it confers upon an exercise of the right of access given by the earlier section, or an attempt to exercise that right. The later section should therefore be construed according to its terms. They are not to be cut down and distorted by the making of a vague and indefinite implication based on the existence of the earlier provision. The fact is that ss. 263 and 264 serve two different purposes. Section 263 is a general provision giving the Commissioner a right of access. It makes lawful that which otherwise would be unlawful, e.g. entry upon premises, the examination of a document. The succeeding section arms the Commissioner with inquisitorial and coercive powers. However, this difference supplies no reason for departing from the language of s. 264 which is expressed in the widest terms.

Except in one respect the powers given by s. 264 should be circumscribed only by reference to the limitations which are expressed in that section. Thus, in s. 264 (1) (b) the power to compel evidence is restricted to evidence "concerning his or any other person's income or assessment" and the power to require production is confined to documentary records "relating thereto", that is, to "his or any other person's income or assessment". However, the power to require information contained in par. (1) (a) is not similarly limited. As it is a power given to the Commissioner for the purpose of enabling him to perform his functions under the Act it must be circumscribed by reference to this purpose.

The expression "relating thereto" refers back to "his or any other person's income or assessment", not to "attend and give evidence", despite the somewhat inappropriate setting out of the sub-section. It is therefore within the Commissioner's power to require a person, who is not required to attend to give evidence, to produce books, documents and other papers pursuant to s. 264 (1) (b). In this respect I agree with the remarks of Stephen J. in the earlier Smorgon Case, when he said [34] : "the second part of par. (b) is independent of what immediately precedes it; it is not a power ancillary to, and only capable of exercise in aid of, the first part. On the contrary it is a self-contained provision. It depends for its effective meaning upon the opening words of s. 264 (1), but not upon anything in the first part of par. (b)."

The consequence of all that I have said is that the Commissioner is at liberty to choose to require the production of documents or the attendance of persons pursuant to s. 264 without first exhausting his right of access pursuant to s. 263.

And, for a similar reason there is nothing in the suggestion that an issue or dispute of fact must first arise between a taxpayer and the Commissioner before the Commissioner can invoke s. 264. 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. Such an issue will in general, if not always, only arise after the process of assessment has been completed. It is to the process of investigation before assessment that s. 264 is principally, if not exclusively, directed.

What I have already said about s. 264 also determines the view I take of the formal objections to the Commissioner's notices which were raised by the Smorgons in this case. As Stephen J. has pointed out, the notices to each of the Smorgons are in the same form. Each requires the addressee to attend and give evidence before a Mr. Peters, whom the notice authorizes for that purpose. The evidence to be give is stated to concern the income of, and the ascertainment of the taxable income and the tax payable thereon by, a large number of named individuals, firms, funds and companies in respect of a period of twelve years of income. The notices go on to require the production of all books, documents and papers in one or more of four numbered safe deposit boxes.

Four notices were addressed to the Bank. Three of them, the long form of notice, one dated 14th February 1977 and two dated 23rd February 1977 require the Bank, by its proper officer, to attend before Mr. Peters, again authorized for that purpose, and, in connexion with the income of, and the ascertainment of the amount of taxable income and the tax payable thereon by, the taxpayers for the same twelve years, to produce all books, documents and papers in the four safe deposit boxes. The fourth notice to the Bank (the short form), also dated 23rd February 1977, without referring to anyone's income or tax, simply requires the production by the Bank of all books, documents and papers in the four safe deposit boxes.

The Commissioner's power to require production under s. 264 (1) (b) is limited to documents relating to a person's income or assessment. Consequently, the Commissioner may not legally require the production of all the contents of a specified box or even all the documents therein, but only such of them as relate to a person's income or assessment. For this reason there is a fatal defect in the short form of notice addressed to the Bank dated 23rd February 1977 as it does not describe the documents required to be produced except by reference to their location.

What par. (1) (b) has in mind is that a notice may be given requiring the recipient to produce "all books, documents and other papers" in his custody or control "relating thereto", that is, to the income or assessment of the person whose name is stated in the notice. 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. And there will be cases in which a recipient who is not the taxpayer will lack the degree of knowledge of the taxpayer's affairs and of the Commissioner's approach to his assessment that is necessary to determine whether the documents relate to the taxpayer's income or assessment. Not only would the suggested requirement frustrate the object of conferring the power, it would be inconsistent with the section as I have explained it.

It is not in dispute that a notice given under par. (1) (b) may validly require the production of something less than all the books, documents and other papers in the custody or control of the recipient relating to the income or assessment of the named person. It may, for example, specify particular documents. Such a notice, if correctly drawn, will make it clear that the requirement extends to the particular documents because they are included in the class of documents of which the Commissioner is authorized to require production.

As the Commissioner's coercive power to require production is limited, any notice given in exercise of the power must in terms conform to the statutory limitations if it is to be valid. It will in my view conform to those limitations only if it clearly confines the documents to be produced to the class of which the Commissioner is authorized to require production, though it may go on to include particular documents on the footing that they fall within that class. If not so limited, the notice fails on its face to express the limitation which the section places on the Commissioner's authority. Because the exercise of the power casts onerous obligations on the recipient of a notice, and because the recipient (not being the taxpayer) is only justified, vis-à-vis the taxpayer, in producing the taxpayer's documents without his consent in response to a valid demand, it is for the Commissioner so to formulate his notice that this limitation on his authority is drawn to the attention of the recipient.

The two notices to the Bank dated 23rd February 1977 in the long form contain an appropriate description of the documents to be produced and are valid. The class is limited to documents relating to the income of, and/or the ascertainment of the amount of taxable income of, and the tax payable thereon by, the named persons, though this description of the class is immediately followed by the assertion that the class consists of all the documents in the safe deposit boxes. However, the notice dated 14th February 1977, which is also in the long form, merely describes the documents to be produced as those which are located in the safe deposit boxes, without in any way asserting that they are documents which relate to the income or assessment of the named persons. It is therefore invalid.

All the notices to the Smorgons use a third formula for describing the documents and a more difficult question arises in relation to them. After calling upon the addressee to give evidence before Mr. Peters concerning the income and/or the ascertainment of the taxable income and tax payable by the persons who are named, the notices state:

and in connection therewith I do further hereby require you to produce at the said place and time all books, documents and other papers located in safety deposit box numbered [number] situate at the Australia and New Zealand Banking Group Limited, Stock Exchange Branch, 351 Collins Street, Melbourne.

In my view the demand to produce documents contained in this form of notice goes beyond that which the Commissioner may legally make. The words "in connection therewith" refer back to the investigation, that is, the investigation of the income and taxable income of the persons named and the tax payable thereon, and do not seek to define the relationship between the subject matter of the investigation and the documents. A person receiving such a notice may deduce that certain documents in the safe deposit box need not be produced because their character is so remote that they can have no relevance to the investigation. However, the notice itself in terms purports to require the production of "all books, documents and other papers" in the box without indicating that they relate to the income or assessment of the persons named. It is not to the point that all the documents in the box may, for all we presently know, fall within the ambit of the Commissioner's power. I have given my reasons for concluding that the demand for production must be so formulated that it expresses the limitation imposes by the section.

Another matter raised by the Smorgons relates to the delegation by the Commissioner to the Deputy Commissioner, Melbourne, of his powers under s. 264, for the notices were executed by the Deputy Commissioner, Melbourne, as the delegate of the Commissioner. The actual instrument of delegation was dated 8th December 1976 and was executed by the Commissioner pursuant to s. 8 of the Taxation Administration Act 1953. Th instrument was expressed to be a delegation under that Act of "such of my powers and functions under the Acts specified in the Schedule to this Delegation, or under those Acts as amended from time to time, as are respectively specified in that Schedule". In the Schedule, against the marginal heading " Income Tax Assessment Act 1936 " there appear the words "All of my powers and functions except those under", followed by a list of sections and subsections which do not include s. 264.

It was submitted, first, that the delegation was not authorized by s. 8 of the Taxation Administration Act because it permits the Commissioner to delegate "in relation to a matter or class of matters, or in relation to a State or part of the Commonwealth all or any of his powers or functions" under a taxation statute and not otherwise. What the Commissioner has done is to delegate his powers under s. 264 to the Deputy Commissioner in relation to each and every matter. None the less it is a delegation in relation to a class of matters, the class being the whole of the matters. It was argued, secondly, that the reference in the delegation to "those Acts as amended from time to time" constituted it as a delegation of prospective powers. There are a variety of answers to this argument of which only the most obvious need be mentioned. First, the reference is intended to do no more than correctly describe the statutes by their current titles from time to time so as to negative the suggestion which might otherwise be made that the delegation has no application to the statute once it is amended. Next, s. 264 has not been amended at any time, so that the delegation is not relevantly of a prospective power.

The cross-appeal by the Commissioner, the Deputy Commissioner and Mr. Peters against the Smorgons seeks, first, a declaration that they or one or more of them are entitled under s. 263 to access to the documents in the safe deposit boxes. There is an allegation in the statement of claim filed by the cross-appellants that they were refused access to the boxes. This allegation was traversed by the Bank and the Smorgons. At the hearing before Stephen J. no evidence was directed to this issue. It is therefore not surprising that no mention of it is made in his Honour's judgment. When asked, Mr. Liddell, for the cross-appellants, though at first disavowing reliance on s. 263, later in the argument reluctantly embraced the section, despite the absence of evidence on the point. For this reason alone it is inappropriate that any declaration should now be made upon the question. However, in the light of my earlier comment on s. 263 that its effect is to make lawful what otherwise would be unlawful, I would go on to say that the section does not impose an obligation on the owner or occupier of premises or on the person having custody or control of a safe deposit box, to produce a key to the Commissioner or his representative to enable him to gain access. It is not a section which arms the Commissioner with a coercive power or which imposes obligations on persons to make the statutory right of access effective.

The case for the order for production by the Smorgons of the documents in the safe deposit boxes hinges on the validity of the notices directed to them. As I have held them to be invalid, the order should not be made.

The third order sought in the cross-appeal is an injunction restraining the Smorgons from taking possession of material in the boxes pending production. No argument was addressed to this topic and for that reason I would not make the order sought. The question is none the less a live question. Can the Smorgons remove the documents from the boxes after a valid notice for production under s. 264 has been given to the Bank? I do not think that they can. The Bank's obligation to produce attaches to documents in its custody and control at the time when notice to produce was given to the Bank and by reason of the existence of that obligation the Bank cannot disable itself from performing its statutory obligation. It is not to the point that the Smorgons have contractual rights as against the Bank; they are overriden by the statutory obligation.

For these reasons I would allow the Commissioner's appeal and the appeal by the Smorgons. I would dismiss the cross-appeal. I would make appropriate declarations of invalidity on all the notices issued by the Commissioner except the two notices in the long form directed to the Bank dated 23rd February 1977.

In my opinion the two notices to the Bank in the long form (as it has been described) dated 23rd February 1977 were valid notices. I agree with the reasons of Mason J. for this conclusion, and there is nothing that I wish to add to his reasons. I also agree that the other two notices to the Bank were defective in the manner and for the reasons which Mason J. describes. I would therefore allow the appeal of the Commissioner and his officers in respect of the two notices first referred to.

On the appeal by the Smorgons against the finding of Stephen J. that the notices to them under s. 264 (1) were valid I take a different view from Mason J. I would dismiss the Smorgons' appeal. The notices each required the particular member of the Smorgon family to attend and give evidence

(b) the ascertainment of the taxable income and the tax payable thereon by -

the persons referred to in the Schedule annexed hereto and marked with the letter "A" for the years ended 30th June 1965 to 1976 inclusive (including income derived by the said persons as trustees or income tax payable by the said persons in the capacity of trustees during the said period, except where all the beneficiaries are persons not listed in the said Schedule A) and in connection therewith I do further hereby require you to produce at the said place and time all books, documents and other papers located in safety deposit boxes numbered 1019 and 1848 situate at the Australia and New Zealand Banking Group Limited, Stock Exchange Branch, 351 Collins Street, Melbourne. The question is whether the words sufficiently or at all indicate that the books, documents and other papers required to be produced are all those relating to the income or assessment of the persons referred to in the annexed schedule. The answer turns on the effect of the words "in connection with". These words refer back to the attending and giving evidence, not evidence generally but evidence on the specified matters. There is therefore a requirement that in connexion with the giving of evidence concerning the income of and/or the ascertainment of the taxable income and the tax payable thereon by the specified persons the addressee of the notice should produce all books, documents and other papers in and at the specified place. In my opinion each notice thus sufficiently indicates that the books, documents and papers required to be produced are those relating to the matters upon which evidence is required to be given, and the requirements of s. 264 (1) are met.

As to the other objections to the notices, I find none of them sustainable for the reasons which Mason J. has given.

In the statement of claim the Commissioner and other plaintiffs alleged that the Smorgons and the Bank refused to permit them to have access to the safe deposit boxes or to the books, documents and other papers contained in the boxes. A declaration was claimed that the plaintiffs were entitled to access to the documents contained in each of the boxes. The Smorgons and the Bank each denied the allegation that they had so refused. The Smorgons by counterclaim sought a declaration that they were not obliged to give the Commissioner and the other plaintiffs access to the safe deposit boxes or to the books, documents or other papers contained therein. Stephen J. made neither declaration. The issue whether or not access had been denied does not appear to have been litigated before him. The Commissioner and his officers do not, as against the Bank, appeal against the fact that Stephen J. did not make the declaration sought, but in their cross-appeal to the Smorgons' appeal they seek a declaration of entitlement to access under s. 263. I am not satisfied that the matter was litigated before Stephen J. There can be no doubt that the Commissioner and his officers are entitled to access because s. 263 distinctly says so. Of the precise rights or duties given or incurred as a consequence of his statutory right I do not propose to attempt any exposition. There is no proof that the Commissioner or his officers made particular requests to the Bank or the Smorgons which were refused. Much could turn on the nature of the request and the nature of the refusal to permit access when considering whether the refusal was of a kind which could amount to the obstruction of a public officer in the exercise of his statutory power and thus be a misdemeanour at common law. (See Halsbury's Laws of England 4th ed., vol. 11, par. 928: R. v. Smith [35] .) If it were so, this would in my opinion entitle the Commissioner and his officers to invoke the assistance of the civil courts to prevent continued obstruction of the exercise of his statutory power. Whether or not a refusal to open locked doors to which a person has the key or keys amounts to obstruction is a question upon which I express no opinion without evidence that these things have happened and in what circumstances they happened. In the circumstances I would dismiss the cross-appeal.

In summary, therefore, I would allow with costs the Commissioner's and his officers' appeal against the Bank; I would dismiss with costs the Smorgons' appeal against the Commissioner and his officers and the latter's cross-appeal against the Smorgons.

This appeal concerns the power of the Commissioner of Taxation to have access to papers and to obtain information and evidence. The Income Tax Assessment Act 1936, as amended, provides:

153. The Commissioner, or any officer authorized by him in that behalf, shall at all times 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 may make extracts from or copies of any such books, documents or papers.

(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 him with such information as he may require; and

(b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.

(2) The Commissioner may require the information or evidence to be given on oath and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath.

(3) The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend.

The powers under s. 263 enable the Commissioner to have full and free access. This is a very wide power. In D'Emden v. Pedder [36] the Full Court said:

where any power or control is expressly granted, there is included in the grant, to the full extent of the capacity of the grantor, and without special mention, every power and every control the denial of which would render the grant itself ineffective. This is, in truth, not a doctrine of any special system of law, but a statement of a necessary rule of construction of all grants of power, whether by unwritten constitution, formal written instrument, or other delegation of authority, and applies from the necessity of the case, to all to whom is committed the exercise of powers of government. This passage was referred to by O'Connor J. in Jumbunna Coal Mine, N. L. v. Victorian Coal Miners' Association [37] . 1. (1904) 1 C.L.R. 91, at p. 110. 2. (1908) 6 C.L.R. 309, at p. 356.

Like all powers, it must be exercised in good faith, for the purposes for which it was conferred, and having regard to those affected by its exercise (see British Equitable Assurance Co. Ltd. v. Baily [38] ; Isles v. Daily Mail Newspaper Ltd. [39] per Isaacs J.). In those cases, the expression used was "having regard to the rights of persons affected". I would not confine the requirement to "rights" in any strict sense and for that reason I omit any reference to "rights". These implied limitations on the power in s. 263 serve to safeguard the extremely important social value of privacy which must be balanced against the necessities of administration of the revenue laws. They moderate what would otherwise be a power capable of oppressive use. The Commissioner of Taxation is not only expected, but bound, to observe those limitations on the power. There is not the slightest indication that he has not done so in this case.

1. [1906] A.C. 35, at p. 42. 2. (1912) 14 C.L.R. 193, at p. 202.

There is a long history of the granting of such wide powers to those with duties to carry out revenue laws of the Commonwealth. The Distillation Act 1901 provided that "officers shall at all times have complete access to every part of all distilleries or premises on which a still is kept" (s. 60). (See also: Excise Act 1901, s. 86; Beer Excise Act 1901, s. 50.) A number of primary industry levy collection Acts contained the full and free access provision. An example of the common form of the provision then used is found in the Cattle Slaughter Levy Collection Act 1960, s. 9. See further, Tobacco Charges Assessment Act 1955, s. 41; Wool Tax (Administration) Act 1964, s. 90; Sales Tax Assessment Act (No. 1) 1930, s. 71; Pay-roll Tax Assessment Act 1941, s. 69; Pay-roll Tax (Territories) Assessment Act 1971, s. 68; Estate Duty Assessment Act 1914, s. 44; Honey Levy Collection Act 1962, s. 11.

During the 1960s, a controversy arose over the width of such powers (see Parliamentary Debates 1965, Session 32, pp. 1516-1540 and 1969, Session 41 pp. 1989-1994). Acting on the view that the "full and free access at all times" clause was a "mischief" which gave too much authority to officers authorized under the industry Acts, Parliament declined to allow such access, and limited the power in those Acts. For example, the Meat Chicken Levy Collection Act 1969, s. 9, provides for entry and search at all reasonable times and on production of authority. A power in the same or similar terms is included in the Metal Working Machine Tools Bounty Act 1972, s. 15; Dried Fruits Levy Collection Act 1971, s. 15; Dried Vine Fruits Stabilization Act 1971, s. 26; Export Incentives Grants Act 1971, s. 33; Gold Mines Development Assistance Act 1962, s. 21; Gold Mining Industry Assistance Act 1954, s. 16; Honey Export Charge Collection Act 1973, s. 8; Insurance Act 1973, s. 53; Dairying Industry Act 1962, s. 9.

The granting of such wide powers was further restricted by the adoption of a common form which provides for entry by warrant for access to papers (see Pig Slaughter Levy Collection Act 1971, s. 15; and similar powers in Meat Export Charge Collection Act 1973, s. 15; Dairying Industry Equalization Act 1970, s. 15; Dairying Industry Levy Collection Act 1970, s. 17; Dairying Research Levy Collection Act 1972, s. 10).

In the Income Tax Assessment Act, Parliament has chosen to continue to grant the Commissioner "at all times full and free access".

Section 263 enables the Commissioner to "fish" for information. In Southwestern Indemnities Ltd. v. Bank of New South Wales [40] Barwick C.J. held that:

s. 263 is not limited in its application to the affairs of a person who in fact is in receipt of assessable income. It suffices that the exercise of the power given by the section is for the purposes of the Act, which of course include an investigation into whether or not a person is or has been in receipt of assessable income. Such an investigation cannot be limited to buildings, books, etc. of a person who is liable to taxation but must extend to any person.

Section 264 authorizes the giving of a notice to any person to furnish information. It was appropriate in such a provision to make it clear that the notice could be given to persons who were not taxpayers as defined in the Act. In contrast with s. 264 in this respect s. 263, in giving to the Commissioner a right to access, gave rise to no similar need. It was quite sufficient to use universal expressions such as "at all times" and "to all buildings", etc. No further emphasis was required. No limitation could be suggested. As I have indicated, the sole limitation or qualification is that the access should be sought for "the purposes of the Act".

It would seem that full and free access extends to the use of reasonable force in order to gain access for the same reason that a power of entry extends to the use of reasonable force to gain entry (see Grove v. Eastern Gas Board [41] ):

A power of entry conferred by a statute is, prima facie, at any rate, a power of forcible entry if necessary. There would be no need for statutory authorisation if all that the representatives of the gas board were allowed to do was to enter and read the meter if the consumer was willing to admit them to the place where the meter was, so that they could read it. (See also Fowler v. Taylor [42] and Egg Marketing Board (N.S.W.) v. Cassar [43] .) 1. [1952] 1 K.B. 77, at p. 82. 2. [1957] V.R. 593, at p. 596. 3. [1978] 1 N.S.W.L.R. 90.

The Commissioner may invoke the assistance of the courts to enforce his full and free access. Apart from exceptional circumstances, this course would be preferable to any use of reasonable force.

The powers in s. 264 are not qualified by s. 263 and their exercise is not conditioned upon a previous attempt to use the powers under s. 263. I agree with Stephen J.'s construction of s. 264 (1) (b) that the Commissioner may require a person to produce papers irrespective of whether he is or has been required to attend and give evidence (see Smorgon v. Australia and New Zealand Banking Group Ltd. [44] ).

The power in s. 264 may be exercised without regard to whether an issue of fact has arisen between the Commissioner and the taxpayer. It empowers the Commissioner to "fish" for information to enable him to ascertain the amount of taxable income of any person and the tax payable on it. As Stephen J. said in Smorgon's Case [45] :

Just as s. 263 gives to the Commissioner full and free access to "all buildings, places, books, documents and other papers" so s. 264 is expressed in no less wide and emphatic terms; any person, whether a taxpayer or not, may be required to furnish information, to attend and give evidence and to produce all books, documents and other papers. 1. (1976) 134 C.L.R., at p. 489.

On the facts, the Bank has custody of the contents of the safe deposit box on its premises, and also has control of its contents within the meaning of s. 264 (1) (b). The Bank clearly has physical control. It can produce the contents of the box. The contractual arrangements between it and the Smorgons cannot prevail against s. 264 or s. 263 of the Act; it is immaterial whether they are read as subject to the provisions of the Act, or treated as invalid in so far as they are inconsistent with the Act. If the box does not contain any documents to which the notices refer, the notices under s. 264 are not invalid, but simply inoperative.

I agree with the conclusions of Mason J. in regard to the notices to the Bank and the Smorgons which are the subject of the appeal by the Commissioner. The Commissioner's appeal should be allowed in respect of the two notices to the Bank dated 23rd February 1977.

The appeal by the Smorgons in respect of the notices to attend and give evidence and to produce papers should be dismissed. The notices stated that the papers required to be produced were those "in connection with" the evidence to be given concerning the income or the ascertainment of the taxable income and the tax payable thereon by the persons named in the notice and it therefore sufficiently indicated that the papers required were those relating to those persons' income or assessment within the meaning of s. 264. The notices are valid. I agree with Mason J. in rejecting the other objections to the notices.

This would seem to be enough to dispose of the matters really in dispute. I would if necessary (but it does not seem to be necessary) be prepared to make a declaration that the Commissioner is entitled to "full and free access" to the deposit box and its contents, if any, and appropriate orders for giving effect to this access.

Solicitor for the Commissioner and his officers, Alan R. Neaves , Crown Solicitor for the Commonwealth . Solicitors for the Bank, Blake & Riggall . Solicitors for the depositors, Barker Harty & Co.