Grant v Deputy Commissioner of Taxation Commonwealth of Australia

REASONS FOR JUDGMENT 1 The short point which arises on this application for interlocutory relief is whether, for the purposes of s 264(1)(b) of the Income Tax Assessment Act 1936 (Cth) ("the Act') a person required to attend and give evidence before officers authorised by the Commissioner can be asked questions and be required to answer questions asked by independent counsel instructed by the respondent ("the Deputy Commissioner") although the counsel is not an officer authorised by the Commissioner for the purposes of s 264(1)(b) of the Act. 2 Section 264 is in the following terms: "(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 or affirmation and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath or affirmation. 3 The issue arises in the following circumstances. By three notices dated 11 August 2000 the Deputy Commissioner of Taxation, pursuant to s 264 of the Act, required each of the applicants: "to attend and give evidence on oath 1. concerning the income or assessment of all persons or companies as shown on the list enclosed as Attachment 1 for the period 1 July 1997 to 30 June 2000 in relation to their investment in the 'Australian Beach Tales' Film Project, 2. at the office of the Australian Government Solicitor at 21st Floor 200 Queen Street MELBOURNE VIC 3000 3. on 11 September 2000 at 10 am and until you are excused from further attending, 4. before Anthony Gleeson, Ron Collingridge and Margaret Lau or any one or combination of these officers, whom I authorise for the purpose, and 5. I further authorise Anthony Gleeson, Ron Collingridge and Margaret Lau to administer any oath or affirmation." (Emphasis in originaldocument). The notices were sent under cover of letters to each of the applicants which stated, inter alia: "Enclosed is a notice issued pursuant to section 264 of the Income Tax Assessment Act 1936. The notice has been issued in order to obtain further information in relation to the 'Australian Beach Tales' Film Project, including the development, promotion and implementation of the Project and your own participation as an investor. The examination will be conducted by officers of the Australian Taxation Office (ATO) as named in the enclosed notice. Also in attendance and instructed by the ATO officers will be Mr Michael Cashion SC and Mr Richard Lancaster of counsel". 4 By letter dated 28 August 2000 the solicitors for the applicants notified Ms Margaret Lau, one of the officers authorised by the Deputy Commissioner, that Mr Bongiorno, the third applicant, would not be available until after 2 October 2000 and also sought advice as to the purpose of the attendance of Mr Cashion SC and Mr Lancaster of counsel. 5 By letter dated 31 August 2000 Ms Lau re‑scheduled the attendance required of Mr Bongiorno to 5 October 2000, withdraw the notice dated 11 August 2000 and enclosed a further notice requiring Mr Bongiorno to attend and give evidence, pursuant to s 264 of the Act, on 5 October 2000. The letter stated, inter alia: "The examination will be conducted by officers of the Australian Taxation Office (ATO) as named in the enclosed notice. Also in attendance and instructed by the ATO officers will be Mr Cashion SC and Mr Richard Lancaster of counsel. You are entitled to legal representation at the examination if you so require". 6 By letter dated 1 September 2000 the Deputy Commissioner's solicitors responded to the applicants' solicitors' letter of 28 August 2000, inter alia, in the following terms: "3. The section 264 interviews are to be carried out in private. 4. Counsel have been engaged to facilitate a professional, expeditious and economical course of questioning and to provide advice to the ATO officers conducting the interviews. 5. The Commissioner considers it desirable and proper, given the complex nature of the transactions being considered, that the role of counsel at the interviews will include asking questions of the interviewee. 6. The Commissioner has no objection if your clients desire to have legal representation during the conduct of the interviews." 7 By letter dated 5 September 2000 the applicants' solicitors informed the Deputy Commissioner's solicitors that they did not consider counsel were permitted to ask questions of the applicants and sought an undertaking that counsel engaged would not ask questions of the applicants during the examination. On the same day the Deputy Commissioner's solicitors informed the applicants' solicitors that they had been instructed that no such undertaking would be provided. 8 The applicants now seek the following relief: 1. A permanent injunction restraining the Respondent's counsel questioning the Applicants during the interviews scheduled by the Deputy Commissioner of Taxation under notices served on the Applicants pursuant to section 264 of the Income Tax Assessment Act 1936. 2. A declaration that the Respondent cannot require the Applicants to answer questions put to them by counsel retained on behalf of the Respondent during an examination under section 264 of the Income Tax Assessment Act 1936." Interlocutory relief is sought restraining the Deputy Commissioner's counsel from questioning the applicants during the interview. 9 The applicants submitted that the requirement in s 264(1)(b) to "give evidence … before any officer authorised by [the Commissioner]" is a requirement to give evidence in response to questions asked by an authorised officer and that any questions asked of a person required to attend must be asked by authorised officers and not simply asked in their presence. It was said that s 264(1)(b) does not allow for questions to be asked by counsel who is not an officer authorised by the Commissioner 10 The applicants submitted that in order for counsel to be allowed to ask questions in a s 264 hearing it was necessary for there to be an express statutory provision to that effect. They referred by way of contrast to other statutory situations involving investigatory powers where counsel was specifically given such a role and submitted that where Parliament had intended that an administrative body have power to engage counsel to assist it, it had specifically made provision for such assistance. Reference was made to s 6FA of the Royal Commissions Act 1902 (Cth) which relevantly provides: "Any legal practitioner appointed by the Attorney‑General to assist a Commission … may, so far as the Commission thinks proper, examine or cross‑examine any witness on any matter which the Commission deems relevant to the inquiry …" They also referred to s 50 of the National Crime Authority Act 1984 (Cth) which provides: "The Chairperson may appoint a legal practitioner to assist the Authority as counsel, either generally or in relation to a particular matter or matters" and to s 46(2) of the Coroners Act 1985 (Vic) which provides that: "A coroner may be assisted by a legal practitioner, by the Director of Public Prosecutions if the Director wishes to assist or by such other persons as the coroner determines." 11 I do not consider that the contrast sought to be drawn between s 264 and these statutory provisions is of any assistance in interpreting s 264 and resolving the issue whether counsel retained by the Deputy Commissioner may ask questions of a person required to attend and give evidence before the Commissioner or any such authorised officer. Those provisions arise in different statutory contexts and are attended with quiet different considerations. 12 The applicants submitted that Dunkel v Commissioner of Taxation (1990) 27 FCR 524 supported the proposition that s 264 did not authorise or allow a hearing at which independent counsel could ask questions of the person required to attend and give evidence. In that case a solicitor was given a notice pursuant to s 264 requiring him to attend and give evidence before officers authorised by the Commissioner. Before the notice was served the solicitor had, in response to an earlier notice served on him, raised the question as to what might happen if he claimed to be entitled not to answer a question on the ground of legal professional privilege. The solicitor had suggested that it would be desirable if some procedure could be agreed upon to deal with that situation, in particular where he objected to answering a question on the ground of legal professional privilege and the authorised officers disputed the objection and refused to withdraw the question. 13 The Commissioner responded by saying that he proposed to engage counsel to advise in relation to any claims of legal professional privilege which may be raised. At the time the solicitor was served with the second notice pursuant to s 264 he was informed that the Commissioner had retained counsel to be present at the examination. The solicitor objected to giving evidence before any person other than the authorised officers and his own legal advisers. 14 Sheppard J paraphrased the solicitor 's submission in these terms: "It was the clear implication from the section that the examination was to be held before one of the Commissioner's officers, and not before another person, such as counsel." His Honour rejected this submission in the following terms at 527: "In my opinion this submission must be rejected because the course which the Commissioner's officers propose does not involve, and will not involve, the examination being held before Mr Slater or any other counsel. The only purpose of Mr Slater being present will be to advise the person who holds the examination, who is apparently to be Mr Herbert, on matters connected with legal professional privilege; he has no other function to perform and it could certainly not be a correct assessment of the proceedings that the examination was being conducted before counsel." The applicants submitted that in this passage Sheppard J was saying that s 264 did not allow counsel to ask questions of the person required to attend and give evidence. I do not read the passage in this way. In my view, Sheppard J was not addressing or resolving the issue whether counsel could be present and ask questions. Rather, his Honour was explaining the purpose for which counsel was to be present and the function he was to perform. His Honour was saying that the situation, of counsel conducting the examination, did not arise because the only purpose of counsel being present was to give advice. Sheppard J said that it was not a correct analysis of the facts to say that "the examination was being conducted before counsel" and he therefore did not address the issue whether s 264 allowed for counsel to conduct the examination of the person required to attend and give evidence. 15 The solicitor in Dunkel v Commissioner of Taxation (supra) raised a further objection in relation to the presence of counsel at the examination which was that the implication from s 264 was that the examination was to be carried out in private. The solicitor submitted that the presence of counsel to advise the authorised officers on matters connected with legal professional privilege was not something that was reasonably necessary for the conduct of the examination. Sheppard J rejected this submission in the following terms at 529: "It seems to me, particularly bearing in mind that the applicant himself is likely to be represented by counsel, that it is not only something which the Commissioner is entitled to do, but it is also highly desirable in the public interest that the Commissioner's officer be advised by a competent and responsible counsel. It is only in that way that I think there is a chance that the examination may proceed with a sufficient degree of economy and expedition. I therefore reject the submission which has been made, that the presence of counsel is not necessary or reasonable in the circumstances. On the contrary, I think that the presence of counsel may, as I have indicated, facilitate the proper conduct of the examination." 16 A similar issue, albeit in a different statutory context, was considered by Mathews J in Australian Securities & Investments Commission v Loiterton [2000] FCA 973 ("Loiterton"). The issue in that case was whether inspectors appointed under Pt 3 of the Australian Securities & Investments Act 1989 (Cth) ("the ASIC Act") to carry out an investigation could require an examinee to answer questions put to the examinee by counsel retained on behalf of the inspectors. Her Honour answered this question in the affirmative. The Commission had commenced an investigation pursuant to s 13(1) of the ASIC Act and had authorised three staff members of the Commission to conduct the investigation. Those staff members signed a notice requiring Mr Loiterton to appear before them to answer questions put to him in relation to the investigation. One of the inspectors informed Mr Loiterton that counsel would ask questions on behalf of the inspectors. Mr Loiterton's solicitor objected to the first question put on the basis that counsel, not being an inspector or a delegate of the Commission, had no power to conduct the examination. 17 Her Honour accepted the submissions of the Commission that s 21(3) of the ASIC Act was an indication of the legislature's intention that a person other than an inspector might put questions to an examinee which the examinee was required to answer. Section 21(3) is in the following terms: "The inspector may require the examinee to answer a question that is put to the examinee at the examination and is relevant to a matter that the Commission is investigating, or is to investigate, under Division 1". Her Honour accepted the Commission's submission that the inspectors were not delegating or abrogating their powers under the ASIC Act when they authorised counsel to ask questions of an examinee as they retained control of the examination in the same way as a Royal Commissioner retained control of the proceedings of a Royal Commission, notwithstanding the active participation of counsel assisting the Commission. 18 The applicants sought to distinguish Loiterton on the basis of what they said was a concession made by Mr Loiterton which made her Honour's decision inevitable. That concession was noted by her Honour at 22 in the following terms: "Mr Loiterton's solicitor had indicated to the inspectors that he would have no objection to Mr Hammerschlag asking 'half a dozen questions' throughout the proceedings. His objection was to Mr Hammerschlag being the primary questioner. But at what point does one assume the role of the primary questioner?" However, her Honour did not rely upon this statement in reaching her conclusions and it does not form any part of her Honour's reasoning process. 19 Her Honour reasoned that the position was similar to that of a Royal Commission or a coroner's inquiry where counsel assisting will frequently be the primary questioner. But as pointed out earlier, the legislation in relation to a Commonwealth Royal Commission and the Victorian Coroner contains specific provisions for the participation of counsel assisting a Royal Commissioner in the Royal Commission and the Victorian Coroner in the coronial inquiry. 20 The applicants submitted that the reasoning in Loiterton was of little assistance in the present case as her Honour's analysis in relation to Royal Commissions was misplaced. It may well be that the analogy with Royal Commissions drawn in Loiterton is of little value having regard to the provisions contained in s 6FA of the Royal Commission Act. Although Loiterton is of interest, it is concerned with a different statutory regime and is therefore of little assistance in determining the scope of s 264. 21 The applicants submitted that the better view, to be preferred over the reasoning in Loiterton, was that found in Ozmanian v Minister for Immigration, Local Government and Ethnic Affairs (1996) 137 ALR 103 where Merkel J said at 121: "Traditionally the courts have been reluctant to imply a statutory authorisation to act by others where the exercise of the power may have serious or drastic consequences on an individual …" The applicants referred to the approach by the Full Court of the Federal Court in Holmes v Deputy Federal Commissioner of Taxation (1988) 88 ATC 4906 at 4909 that: "if two constructions are fairly available, the Court ought to adopt that construction which least interferes with the rights of affected persons". I accept these statements of principle but they have little scope for application in the present context. I do not consider that it is correct to say that the authorised officers will "act by" counsel nor do I consider that a construction which allows for counsel to ask questions interferes more with the rights of a person required to attend and give evidence than a construction which does not allow that right. It is not a correct analysis of the present situation to say that allowing counsel, rather than the authorised officers, to ask questions of the persons required to attend and give evidence will have serious or drastic consequences for those persons. Insofar as the rights of a person given a s 264 notice are affected, those rights are affected by the statutory power given to the Commissioner and the Commissioner's authorised officers rather than by the manner in which the power may be exercised. Although counsel may be more skilled in the art of asking questions than authorised officers, it is difficult to see what serious or drastic consequences will follow from answering counsel's questions rather than questions asked by authorised officers. Counsel may be more adept at eliciting answers on particular issues but the consequences of those answers are, in the present context, speculative. 22 If counsel is allowed to ask questions, the answers will not be given "before" counsel but will be given "before" the authorised officers in the terms of s 264(1)(b). Those officers will then be able to consider and evaluate the answers. Section 264(1)(b) is not couched in terms that the person required to attend and give evidence is to answer questions asked or put by the authorised officers. I do not consider that s 264, in its terms, requires only the authorised officers to ask questions. What s 264(1)(b) does is to require that the authorised officers be in charge of the hearing and the giving of the evidence and in receipt of the evidence. 23 I accept the submission of the Deputy Commissioner that the function conferred on the authorised officers by s 264(1)(b) is the function of receiving the evidence. That is an important function because it is part of the Commissioner's function to investigate the income and assessment of persons. When evidence is given before the Commissioner or his authorised officers, that evidence is then available to them for the purpose of considering and enquiring into a person's income or assessment or the income and assessment of a number of persons. Although counsel may ask questions the evidence is given for the purpose of enabling the Commissioner and his authorised officers, not the counsel, to carry out a statutory purpose. Counsel cannot use the evidence as he or she might in a court of law. Rather counsel aids the investigative process being undertaken by the authorised officers. When that function is recognised, it is not inconsistent with the purpose to be achieved by s 264(1)(b) that counsel be allowed to ask questions to elicit the evidence to be given before the authorised officers. The terms and structure of s 264(1) are such that it is implicit in the section that counsel may ask questions to elicit the evidence to be given. 24 Section 264 is expressed in wide and general terms. As was observed by Mason J (with whom Jacobs J agreed) in Commissioner of Taxation of the Commonwealth of Australia v Australian and New Zealand Banking Group Limited (1979) 143 CLR 499 at 535: "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'". 25 In Smorgon v Australia and New Zealand Banking Group Limited (1976) 134 CLR 475, Stephen J said at 481: "What s. 264(1)(b) is designed to do is to permit the Commissioner to gain access to the knowledge residing in men's minds." As explained subsequently by Mason J in Commissioner of Taxation of the Commonwealth of Australia v Australia and New Zealand Banking Group Limited (supra) at 536, s 264 entitles the Commissioner to undertake a wide ranging inquiry or a fishing expedition: Industrial Equity Ltd v Deputy Commission of Taxation (1990) 170 CLR 649 at 662; May v Commissioner of Taxation (1999) 92 FCR 152 at 159. The conclusion that s 264(1)(b) allows for questions to be asked by counsel, albeit in a hearing before authorised officers, is consistent with this interpretation of s 264. There is no limitation contained in s 264 that precludes counsel retained by the Deputy Commissioner asking questions so as to enable the answers to be given "before" authorised officers which will enable them to use the evidence for the purpose of enquiring into the income and assessment of other persons. 26 In Smorgon v Australia and New Zealand Banking Group Limited (supra) Stephen J considered whether the first part of s 264(1)(b) applied only to natural persons capable of physical attendance and of actually giving evidence. In the course of this consideration his Honour said at 481: "When, as here, what is in question is not so much the seeking of admissions but rather a process of cross‑examination, taking the form of responses to questions posed by the Commissioner or his representative, it seems an improbable legislative intent that some 'proper officer', or even the corporation's 'public officer' for tax purposes, should, on the corporation's behalf, respond to such questions." Although his Honour referred to "questions posed by the Commissioner or his representative", his Honour was not addressing whether it was only the Commissioner or his authorised officers who could pose the questions. I do not consider that his Honour was there deciding the question presently before me. 27 I accept the submission of the respondent that the function provided in s 264(1)(b) is a function of receiving evidence and not a function of simply asking questions. I do not consider that the asking of questions by counsel intrudes into the process of the receipt of evidence by a person authorised to receive that evidence. 28 The construction which I have placed on s 264(1)(b) which allows counsel to ask questions is consistent with the observations of Sheppard J in Dunkel (supra) at 529 to which I have referred in par 15 above. It is desirable that the Commission's authorised officers be able to obtain evidence from the persons required to attend before them in an expeditious and economical way. The use of counsel to ask questions aids the investigatory process and cannot be said to be unreasonable in the circumstances. The use of counsel is reasonably adapted to the primary purpose sought to be achieved by s 264. 29 The giving of evidence pursuant to s 264(1)(b) is given in private: s 16(2) of the Act, but the involvement of counsel does not change that character of the process. Counsel retained to ask questions is bound not to divulge any information acquired in the course of the hearing: s 16(1)(A) and s 16(2); Consolidated Press Holdings Limited v Commissioner of Taxation (1995) 95 ATC 4231 at 4236‑4237. 30 A situation similar to that presently before the Court arose, albeit in the context of the Bankruptcy Act 1966 (Cth), in Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156. The applicants applied for orders to review decisions made by the Official Receiver to issue notices pursuant to s 77C(1)(b) of the Bankruptcy Act requiring the secretary of the corporate applicants and the personal applicant to attend before the Official Receiver or an officer authorised in writing by him to give evidence in relation to the bankrupt's affairs. The Official Receiver proposed to allow the trustee and his staff and legal advisers to take part in the examination. Spender J took the view that s 77C allowed counsel to ask questions at such a hearing. His Honour reasoned at 168: "The procedure adopted in such an inquiry or examination is a matter for the Official Receiver or authorised officer conducting the examination. There is no limitation contained in the section or otherwise in the Act which limits or specifically regulates the conduct of the examination other than it must be for the purpose specified. It seems to me to be incidental to the exercise of the statutory power that in the conduct of the examination, the Official Receiver or the authorised officer be entitled to admit any person into the examination the presence of whom is reasonably necessary to enable the Official Receiver or authorised officer to carry out the duty imposed under the Act. Particularly, it seems to me, the present of counsel or a legal representative will ordinarily facilitate the proper conduct of the examination." The conclusion I have reached is consistent with the reasoning of Spender J. Although s 77C is found in a different statutory context, its language "closely parallels that of s 264": Bond v Tuohy (1995) 56 FCR 92 at 97. 31 I am satisfied that there is no serious question to be tried that s 264(1)(b) of the Act does not allow for counsel retained by the Deputy Commissioner to ask questions, the answers to which are to be given before authorised officers. In reaching this conclusion I have been mindful of the proposition that it is no part of my function to decide a novel or difficult question of law at an interlocutory stage: American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 407‑408; Cohen v Peko‑Wallsend Ltd (1986) 68 ALR 394 at 397; CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 at 283. A different view has been taken by Powell J in Karaguleski v Vasil Bros & Co Pty Ltd [1981] 1 NSWLR 267 at 269; Kurt Keller Pty Ltd v BMW Australia Ltd [1984] 1 NSWLR 353 at 369 and MCP Muswellbrook Pty Ltd v Deutsche Bank (Asia) AG [1988] 12 NSWLR 16 at 30. 32 In OD Transport Pty Ltd v Western Australian Government Railways Commission (1986) 13 FCR 270, French J said at 274: "It can be accepted that where a straightforward question of law arises at an interlocutory stage, it will in most cases, be proper to decide it then and there. In fact it has been said to be a general rule that such questions should be so decided: Karaguleski v Vasil Bros & Co Pty Ltd [1981] 1 NSWLR 267. Where, however, time does not permit a proper consideration of questions of law at the interlocutory stage, then the Court should not decide them: Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545." The observation of Pincus J in Talk of the Town Pty Ltd v Hagstrom (1990) 99 ALR 130 at 133 is apposite in the present case: "Where the point is really a short question of construction, I see no reason [why] the court should not decide it, although the proceedings be but interlocutory." 33 I have been able to give proper consideration to the issue and in the circumstances and although the point is novel, I have not found it difficult to decide. I have reached the conclusion that the proper construction of s 264(1)(b) of the Act allows for counsel retained by the Deputy Commissioner to ask questions of persons required to attend and give evidence before authorised officers. 34 If I am wrong in that respect I do not consider that it has been demonstrated by the applicants that the balance of convenience is in favour of the grant of the interlocutory relief sought. It was not put that some irreparable harm or event would befall the applicants if the injunction was not granted or that the applicants will be exposed to some harm to which they would not otherwise be exposed if the questions were asked by the authorised officers. Rather it was put that what would occur would be an unauthorised asking of questions which could not be reversed. However, it is not disputed that questions can be asked of the applicants by the authorised officers themselves. 35 The application for interlocutory relief will be dismissed with costs. I certify that the preceding thirty‑five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.