Kupang Resources Pty Ltd v Commonwealth of Australia

Relevant provisions of the TAA

1. Section 355-10 of Schedule 1 of the TAA provides: Objects of Division The objects of this Division are: (a) to protect the confidentiality of taxpayers' affairs by imposing strict obligations on *taxation officers (and others who acquire protected tax information), and so encourage taxpayers to provide correct information to the Commissioner; and (b) to facilitate efficient and effective government administration and law enforcement by allowing disclosures of protected tax information for specific, appropriate purposes.
2. Section 355-25(1) provides: (1) An entity commits an offence if: (a) the entity is or was a *taxation officer; and (b) the entity: (i) makes a record of information; or (ii) discloses information to another entity (other than the entity to whom the information relates or an entity covered by subsection (2)) or to a court or tribunal; and (c) the information is *protected information; and (d) the information was acquired by the first-mentioned entity as a taxation officer. …
3. Section 355-30 provides: Meaning of protected information and taxation officer (1) Protected information means information that: (a) was disclosed or obtained under or for the purposes of a law that was a *taxation law (other than the Tax Agent Services Act 2009) when the information was disclosed or obtained; and (b) relates to the affairs of an entity; and (c) identifies, or is reasonably capable of being used to identify, the entity. … (2) Taxation officer means: (a) the Commissioner or a *Second Commissioner; or (b) an individual appointed or engaged under the Public Service Act 1999 and performing duties in the Australian Taxation Office. …
4. There are two relevant exceptions to the prohibition contained in s 355-25. Section 355-50 states: (1) Section 355-25 does not apply if: (a) the entity is a *taxation officer; and (b) the record or disclosure is made in performing the entity's duties as a taxation officer. … (2) Without limiting subsection (1), records or disclosures made in performing duties as a *taxation officer include those mentioned in the following table: … Item 1 of the table permits records or disclosures to be made to "any entity, court or tribunal" where the record or disclosure "is for the purpose of administering any *taxation law".
5. Section 355-75 provides: Limits on disclosure to courts and tribunals An entity who is or was a *taxation officer is not to be required to disclose to a court or tribunal *protected information that was acquired by the entity as a taxation officer except where it is necessary to do so for the purpose of carrying into effect the provisions of: (a) a *taxation law; or (b) the Foreign Acquisitions and Takeovers Act 1975, if the entity acquired the information because of a request under subsection 138(4) of that Act. …

The issues

1. The Commonwealth submits that the information contained in the documents sought to be produced is information that: 1. Was disclosed or obtained for the purposes of a taxation law because it was information that was obtained for the purpose of investigating the tax affairs of Mr Grimaldi and his associated entities; 2. Relates to the affairs of such an entity because the information relates to Mr Grimaldi or entities associated with him; 3. By its nature identifies or is reasonably capable of being used to identify the entity to which the information relates. Accordingly, according to the Commonwealth the information is protected information within the meaning s 355-30(1).
2. The Commonwealth also submits that the information was obtained by the Commissioner or an employee of the Australian Taxation Office in that capacity and that consequently it would be an offence under s 355-25 for the information to be disclosed to Kupang or the Court.
3. Kupang submits that s 355-25 has no application in this case for the following reasons: 1. The documents are held by the Commonwealth which is not a "taxation officer"; 2. The Commonwealth has not established that the documents contain protected information; 3. The disclosure is for the purpose of administering taxation law and consequently falls within the exception created by s 355-50.

The Commonwealth is not a taxation officer

1. In my opinion, this submission rests on a misunderstanding. The fact that the Commonwealth is a separate legal entity that cannot itself be described as a "taxation officer" within the meaning of s 355-30 of Sch 1 to the TAA does not mean that the documents in question are no longer held by a taxation officer or that if the documents were produced production would not be made by such an officer.
2. It seems plain that the relevant provisions of Sch 1 are drafted on the understandable assumption that the administration of the taxing powers of the Commonwealth are vested in the Commissioner of Taxation and the individuals who perform duties in the Australian Taxation Office. The provisions recognise that any legal entity, including the Commonwealth, must act through individuals. In the case of Div 355 of Sch 1, the objects of the division are sought to be achieved by regulating the conduct of the individuals through whom the Commonwealth carries on administration of its taxing powers. Even assuming that the money collected as tax has been paid into consolidated revenue and loses its character as tax, the documents relating to its collection continue to be held by the Australian Taxation Office and are only capable of physically being produced by a person who meets the description of a taxation officer. The fact that such a person might do so on behalf of the Commonwealth does not alter the position.

The Commonwealth has not established that the documents contain protected information

1. In my opinion, the Commonwealth has established that the information was disclosed or obtained for the purposes of a taxation law. Mr James Middleton, who is an AGS lawyer with the day-to-day conduct of the matter on behalf of the Commonwealth, gives evidence in an affidavit affirmed on 12 October 2021, that the documents falling within paras 1 and 2 of the notice to produce "were obtained in the course of an investigation into the tax affairs of multiple entities …" Additional details of the circumstances in which the documents were obtained are set out in the second affidavit affirmed by Mr Middleton on 5 November 2021. There is no reason to doubt Mr Middleton's evidence. In relation to category 3, Mr Middleton says that based on his enquiries, the Commonwealth has some documents falling within that category and that most likely those documents were obtained by the ATO from the Australian Federal Police. It is reasonable to infer that the documents were obtained as part of the same investigations. Documents falling within category 4 plainly relate to the tax affairs of Mr Grimaldi.
2. Kupang submits that the evidence given by Mr Middleton does not establish that the documents relate to the affairs of an entity for two reasons.
3. First, Kupang submits that the entity referred to in s 355-30(1)(b) is the taxpayer who is disclosed or from whom the information was obtained. That is said to be consistent with the objects of the division which is to "protect the confidentiality of taxpayers' affairs …" (and inferentially not the affairs of others).
4. I do not accept that submission. It is plain that the reference to "an entity" in s 355-30(1)(b) is a reference to any entity. That is the ordinary and natural meaning of the words used. When s 355-10 states that the objects of the division are to protect the confidentiality of taxpayers it is using the word 'taxpayers' to describe all taxpayers and not specific taxpayers. The objects of the division would be seriously undermined if s 355-30(1)(b) was given the narrower interpretation for which Kupang contends.
5. Second, Kupang submits that the evidence given by Mr Middleton does not establish that all of the information contained in the documents referred to at least in paras 1 and 2 of the notice to produce identifies or is reasonably capable of being used to identify the entity to whom the documents relate. It submits that, in the absence of such evidence, the Court should refuse to set aside the notice to produce. I do not accept that submission. The information contained in the documents sought in the notice to produce could only be of assistance in the tracing exercise if they identified or were reasonably capable of being used to identify the entity to whom the documents related. Accordingly, no useful purpose would be served by attempting to distinguish between those documents that identified an entity and those that did not. If the documents identify an entity then they are caught by s 355-25. If they do not, there is no reason to order their production.

The application of the exceptions

1. It appears to be common ground that disclosure could be made of the information by a tax officer in the course of performing his or her duties as such - in particular, in defending proceedings to recover a sum of money to discharge a liability to pay tax. It must plainly be part of a tax officer's duties to resist paying an amount collected by way of tax when there is no obligation to do so.
2. The question in this case is whether the relevant tax officer is relieved of any obligation to disclose information by s 355-75. That question itself raises two questions. The first is whether the notice to produce requires disclosure to the Court of the protected information. The second is whether, if it does, the exception contained in s 335-75 (that disclosure is necessary to carry into effect the provisions of a taxation law) applies.
3. Those questions were considered by White J in relation to s 16(3) of the Income Tax Assessment Act 1936 (Cth) (the predecessor to s 355-75) in the context of a discovery application in proceedings in which a liquidator was seeking to recover tax paid to the Commissioner as a preference: see Javorsky v Federal Commissioner of Taxation [2005] NSWSC 167; (2005) 216 ALR 619. White J answered the first question in the affirmative and the second in the negative.
4. It is convenient to deal with the two questions in reverse order (as White J did). In relation to the second question, White J said (at [31]): In defending these proceedings, the Commissioner is not seeking to carry into effect a provision of a taxation law. He is seeking to resist a claim made by the liquidator under the Corporations Act to avoid a payment made to him. This view of the exception to s 16(3) of the Income Tax Assessment Act is consistent with the decisions of Powell J in Purnell Bros Pty Ltd v Transport Engineers Pty Ltd (1984) 73 FLR 160 and of Cohen J in Deputy Commissioner of Taxation v Nika Management Service Pty Ltd (SC(NSW), Cohen J, 6 December 1995, unreported). In Donnelly v Davison (2000) 105 FCR 1; [2000] FCA 1396, Branson J, after referring to these decisions, said (at 7-8): The terms of s 16(3) of the ITA Act themselves suggest that information and documents can come to the notice of an officer "in the performance of his duties as an officer" which it will not be necessary for him or her to disclose for the purposes of carrying into effect the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax. In my view the language of s 16(3), seen in the context of Pt II of the ITA Act, discloses an intention that the circumstances in which an officer may be compelled in Court to disclose information or to produce documents should be limited to purposes directly arising out of the provisions of the ITA Act or earlier income tax legislation. This seems to me to be the approach to the subsection which the Full Court adopted in Commissioner of Taxation (Cth) v Nestle Australia Ltd. It is also the approach to the subsection adopted by Powell J in Purnell Bros Pty Ltd v Transport Engineers Pty Ltd.
5. That approach was followed by the Full Federal Court in Federal Commissioner of Taxation v Tamarama Fresh Juices Australia Pty Ltd (2017) 252 FCR 471; [2017] FCAFC 154. In that case, the Court said (at [20]): As the Commissioner submitted, there are some obvious differences between s 355-75 (dealing with disclosure under compulsion) and s 355-50 (dealing with voluntary disclosure). On the one hand, a taxation officer may disclose protected information "for the purpose of administering any taxation law" or "for the purpose of criminal, civil or administrative proceedings (including merits review or judicial review) that are related to a *taxation law". On the other hand, a taxation officer may not be required to disclose protected information unless the disclosure is "necessary for the purpose of carrying into effect the provisions of a taxation law". The provisions do not mirror each other. Nor is there any sensible reason why they should do so when one provision concerns permissible voluntary disclosures and the other concerns disclosures under compulsion to a court or tribunal. Section 355-75 involves a relatively confined subset of s 355-50. This is because a disclosure may be for the purpose of administering a taxation law or for the purpose of proceedings that are related to a taxation law (s 355-50) without the disclosure being necessary to carry into effect the provision of a taxation law (s 355-75). However, a disclosure necessary to carry into effect the provision of a taxation law (s 355-75) must be a disclosure for the purpose of administering a taxation law (s 355-50).
6. Accordingly, the exception to the operation of s 355-75 does not apply in this case. The disclosure of documents (information) in connection with proceedings in which the Commonwealth is seeking to resist the recovery of an amount originally paid by way of tax, much less action taken to resist the payment of compensation in respect of the payment of tax, is not disclosure that is necessary for the purposes of carrying into effect the provisions of a taxation law.
7. That leaves the question whether the notice to produce requires disclosure to the Court of the relevant documents. In relation to that question, White J said (at [38]): In my view, if an order for discovery were made under Pt 23 r 3 of the Supreme Court Rules, the Commissioner would be subjected to an obligation to produce documents to the court and to divulge and communicate the information in them to the court. Part 18 r 4(3) provides that where a list of documents is served, the opposite party on whom the list is served is deemed to have given a notice to produce, requiring production at the trial of such of the documents specified in the list as are in the custody, possession or control of the party serving the list. Thus the party serving the list of documents is required to produce the documents in its custody, possession or control at the trial. Although the production of documents in the court, and the divulgence or communication of the documents to the court, will be delayed until the trial, such an obligation would still be imposed by the making of an order for discovery. I therefore reject the first ground upon which the plaintiffs contended that ss 16(3) and 3C(3) were inapplicable.
8. White J, of course, was dealing with a discovery application, whereas the present case is concerned with a notice to produce. However, it is difficult to see how different principles could apply to the two cases. Both require production of documents in the first instance to the other party in the proceedings, but with the possibility or likelihood that the documents will ultimately be tendered as evidence.
9. Nonetheless, I have reluctantly concluded that I should not follow the decision of White J.
10. First, it is significant that the notice to produce sought to be set aside by the defendant was served by the plaintiff to the defendant pursuant to r 21.10 of the Uniform Civil Procedure Rules 2005 (UCPR). Rule 21.10 concerns notices to produce for inspection between parties and is in Pt 21 of the UCPR, which concerns discovery, inspection and notice to produce documents. Rule 21.10 relevantly provides: (1) Party A may, by notice served on party B, require party B to produce for inspection by party A - (a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and (b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue. …
11. Notices to produce served pursuant to r 21.10 of the UCPR must be distinguished from those served pursuant to r 34.1 of the UCPR, which concerns specifically notices to produce to court and falls within Pt 34 of the UCPR. Rule 34.1 relevantly provides: (1) A party may, by notice served on another party, require the other party to produce to the court, or to any examiner: (a) at any hearing in the proceedings or before any such examiner, or (a1) at any time fixed by the court for the return of subpoenas, or (b) by leave of the court, at some other specific time, any specified document or thing. …
12. The differences between rr 21.10 and 34.1 of the UCPR were addressed in Norris v Kandiah [2007] NSWSC 1296. In that case, Brereton J observed "[t]here are important and fundamental distinctions between a notice to produce under r 21.10 and a notice to produce under r 34.1. Rule 21.10, appearing as it does in Pt 21 of the Rules, is a process of discovery. A notice under r 34.1, appearing in Pt 34 … is a process akin to a subpoena for production" (at [3]). See also Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at [8]-[10], discussing Norris. It would therefore not normally be a contempt of court for one party to refuse to produce documents to the other. Rather, the party, if a plaintiff, is liable to have its claim struck out and, if a defendant, is liable to have its defence struck out, if documents are not produced in accordance with the rules of court.
13. Those distinctions between rr 21.10 and 34.1 of the UCPR are significant to a determination of the question whether the notice to produce requires production to the Court of protected information. It means that because the plaintiff's notice to produce was served pursuant to r 21.10, should the defendant be unsuccessful in its application to set it aside, the defendant would be required to disclose the documents sought in the notice to the plaintiff, not to the Court.
14. Second, and putting to one side the form of the plaintiff's application, in my opinion, it is not correct to say that a taxation officer is being required to produce documents to the Court. Rather, the Commonwealth has chosen to defend the proceedings in a way that makes the documents sought relevant to those proceedings. In those circumstances, the rules of court require production of the documents to the other party in response to a notice to produce. The documents produced to the plaintiff may never be produced to the Court, and, even if they are, that would not be the result of any requirement on the plaintiff to produce them to the Court.
15. Production in accordance with the rules is not inconsistent with the obligations placed on taxation officers. The relevant taxation officers are permitted to produce the documents under s 355-50, since, applying the reasoning of the Full Court Federal Commissioner of Taxation v Tamarama Fresh Juices Australia Pty Ltd (2017) 252 FCR 471; [2017] FCAFC 154, production would be for the purpose of performing the taxation officer's duties as such. Consequently, the relevant officers are in a position consistently with their legal obligations to take the steps that are part of the process that enables a fair trial of the issues in the case. In those circumstances, in my opinion, s 355-75 should not be read as in effect giving taxation officers a discretion whether to produce relevant documents or not.
16. The conclusion of the previous paragraph is not a surprising one. It is one thing for litigants to seek access to documents within the control of a taxation officer where the proceedings are not concerned with the collection of tax. Section 355-75 relieves a taxation officer of having to produce documents in those circumstances. As I say, it is quite another to interpret s 355-75 in combination with s 355-50 as giving a taxation officer a discretion whether to produce documents or not in proceedings concerned with the administration of a taxation law, as these proceedings are.

Orders

1. It follows that the orders of the Court are: 1. the notice of motion filed by the defendant on 13 October 2021 be dismissed with costs. 2. the matter be listed for directions on 10 December 2021.

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