Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation

Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation - [1963] HCA 41 - HCA 1963 case summary — Zoe

[8]

In the present case the Board of Review, which had a heavy task, encountered difficulties under s. 16. That section is directed to preserving secrecy about a taxpayer's affairs when they are laid before the Commissioner and his officers. In the cases before the Board which are the subject of this reference it was thought desirable that some of the affairs of other taxpayers of which the Commissioner had learned from their returns and from his dealings with the taxpayers should be made known to the Board of Review as a means, so to speak, of sophisticating the judgment of members of the Board concerning some of the matters raised by the taxpayer who had objected and whose objections had been referred to the Board. Section 16 (2) provides that "Subject to this section, an officer shall not either directly or indirectly, except in the performance of any duty as an officer, and either while he is, or after he ceases to be an officer, make a record of, or divulge or communicate to any person any such information so acquired by him". Sub-section (3) provides that "An officer shall not be required to produce in Court any return, assessment or notice of assessment, or to divulge or communicate to any Court any matter or thing coming under his notice in the performance of his duties as an officer, except when it is necessary to do so for the purpose of carrying into effect the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax". Sub-section (1) defines "officer" to mean "a person who is or has been appointed or employed by the Commonwealth and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person, disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax". For reasons which it is not necessary to go into on this case stated, what is revealed by the returns or other income tax documents of other companies concerned in the importation and sale or disposal of oil may provide relevant information in the case of the appellant taxpayer.

[9]

The corresponding previous form of s. 16 (4) (b) recognized specifically the particular position of Boards of Review and referred to them as Boards of Review in terms. Section 16 (4) in its existing and relevant form provides that nothing in the section "shall be deemed to prohibit the Commissioner, Second Commissioner, or a Deputy Commissioner, or any person thereto authorized by him, from communicating any information to - (a) (b) any board exercising any function under any Act administered by the Commissioner of Taxation or any member of any such Board" and this expression appears to me clearly to include the Board of Review. The result, as it seems to me, is to enable any "officer" as defined, with the authority of the Commissioner, to act with complete freedom from the other provisions of s. 16 in communicating information to a Board of Review. This freedom extends to any information. To me it seems to follow from the nature of the functions of a Board of Review that it must have unfettered power to ascertain the facts which in the opinion of the Board or its Chairman are indispensable to the proper performance of its duties and powers. It appears to me that the exception created by sub-s. 4 (b) to the operation of the other provisions of the section extends to all things which are incidental to the purpose of the exception. Paragraph (b) of sub-s. (4) speaks only of "any board exercising any functions under any Act administered by the Commissioner " but the history shows that it clearly contemplated a Board of Review. What is incidental must be ascertained from considering the functions of the Board of Review but I think a wide view must be taken of the immunity from the operation of s. 16 which witnesses and others speaking with the authority of the Commissioner possess. As in many cases the presence of solicitors and accountants is necessary on the hearing before a Board of Review it appears to me that nothing which is incidentally or accidentally communicated to them in the course of laying information before the Board of Review is within the prohibition of s. 16. Of course persons must not be unnecessarily allowed to gain information but shorthand writers and others engaged in the task of recording the evidence are necessarily within the incidental immunity. At the hearing in this Court of the case stated by the Board of Review much difficulty was experienced because of the embarrassing nature of the questions and the difficulty of saying how many were confined to questions of law within the meaning of s. 196 (2). A direction was given that the questions should be reframed but this merely led to further questions being framed and in the result the Court had before it a large number of inquiries as to what ought to be done. This seemed to me to tend to replace the administrative procedure contemplated by the legislation in relation to reviews, as distinguished from appeals, by a very formal procedure and a strictness of legal rule which was not intended and would be unfortunate.

[18]

This view of s. 16 is in accordance with the Commissioner's contention but in relation to information of the character specified in s. 16 (1) obtained by him or his officers from other taxpayers it is further contended that the only form of excepted communication to the Board of Review is one which is made privately. Accordingly, he submits that it is permissible for him to make such a communication only in the absence of the objecting taxpayer and its representatives. But the character of the communication which is the subject of the exception must be the same whether the information communicated relates to the affairs of an objecting taxpayer or any other taxpayer and it would reduce the contemplated "sittings" of the Board to an absurdity if the excepting provision were to be taken to extend only to private communications of such information. When one comes to consider the character and functions of a Board of Review the fact that, although it is an administrative body, it is designed to proceed and, in fact, proceeds in a quasi-judicial manner it is, we think, obvious that the exclusion operates to protect all communications made to it in the normal course of its proceedings. That being so, there is nothing in s. 16 to require the Board to exclude the taxpayer's representatives if and when evidence of the character in question is submitted to it. On the other hand, there is no legal duty on the Board to receive such information. At the most, the communication of such information would constitute hearsay evidence and it would be open to the Board to take the view upon consideration that the communication of such information in the presence of the taxpayer's representatives would unduly prejudice the other companies concerned or, on the other hand, that the exclusion of the taxpayer's representatives whilst such hearsay evidence was being given would unduly prejudice the taxpayer in the proceedings before it. But whether it should receive the evidence in the presence of the objecting taxpayer's representatives, or, whether they should be excluded, or, whether the evidence should be received at all, are matters for the decision of the Board in the course of its proceedings and do not involve questions of law which it would be proper for us to consider.

[22]

We have before us two sets of questions referred by a Board of Review constituted under Pt. V of the Income Tax and Social Services Contribution Assessment Act 1936 Cth as amended. One set was referred on 19th September 1962, but to some extent (it is not entirely clear to what extent) it was superseded by a new set on 12th November 1962. The result is that we are asked to answer at least nine questions, some being referred at the request of both the Commissioner and the taxpayer, some at the request of the taxpayer alone and some at the request of the Commissioner alone. The questions are divided into many sub-questions. They read somewhat less like an oppressive examination paper than did the original batch, but they are still objectionable as not conforming with the requirements of s. 196 (2), the provision of the Act upon which the authority of the Board to refer questions to the Court depends. The sub-section provides that upon the request of the Commissioner or the taxpayer the Board shall refer to the High Court "any question of law arising before the Board". A question of law arises before the Board when facts have been found "requiring only the certainty of some point of law applied to those facts to determine either the whole case or some particular stage of it - the stage at which the case is stated": Australian Commonwealth Shipping Board v. Federated Seamen's Union of Australasia [1] . In my opinion it arises also where, in the course of a reference, the Board finds itself unable to perform its function properly without deciding a question, adjective rather than substantive though it may be, which depends wholly upon the application of the law to a situation which has actually developed. Hypothetical questions are plainly not within s. 196 (2), and for that reason, if for no other, all the questions in the second batch fall outside that sub-section. Indeed they depend upon a double hypothesis, all being asked with the introduction: "In relation to (certain) categories of evidence if such evidence is tendered on behalf of the Commissioner and in so far as such evidence is material ". Again, questions which, far from asking the legal effect of ascertained facts, demand a disquisition on a general topic cannot be said in the relevant sense to be questions of law which have arisen before the Board. An example is a question that has been submitted in this form: "If the Board has (a particular) power, according to what criterion ought the Board to exercise such power?". The function of this Court is not to give the Board general or abstract advice as to the manner in which it ought to exercise the authority confided to it by the Act: per Starke J. [1] , but to give a judgment deciding a concrete question of law which must be decided in order that the Board may perform its function in the particular case in accordance with law.

[26]

In the hearing of the reference the Board has found, as one might expect, that it cannot deal with the matter satisfactorily without taking into consideration a good deal of information, oral and documentary, about businesses in Australia similar to the taxpayer's but carried on by other companies. The Commissioner in making the assessments apparently had regard to information of this character, and the Board obviously ought to have available to it any information the Commissioner can supply or the Board can obtain for itself which may help towards a proper and reasoned decision. But a great deal of information of the kind referred to is information which the companies to whom it directly relates have valid commercial reasons for wishing to keep from their competitors, and in particular from their rival the taxpayer in this case. It is information as to their financial affairs, the profits their accounts disclose, the prices they have paid for their petroleum products, the terms of agreements under which they have obtained supplies, their business methods and arrangements, and the composition and methods of preparation of the goods they sell. In the ordinary course of legal proceedings a Court often has occasion to devise its own methods for obviating unfair prejudice to persons who are required to disclose information about their private concerns. In so far as the Board is faced with a question not of law but of fairness it, like a court, must exercise its own discretion. It cannot submit its discretion on such a question to the High Court by means of a case stated. But the Act makes specific provisions as to secrecy, and both the Board itself and officers of the Taxation Department who have relevant information in their possession find themselves under the necessity of considering as a matter of law how those provisions affect them in relation to the proceedings under the reference. The necessity to do so is particularly pressing because the taxpayer not only desires but claims as of legal right that its representatives be allowed to know the whole of the information that comes before the Board, including any that relates to the affairs of other companies.

[35]

The question of law has been debated, therefore, whether the Board is legally bound to conform to the principles of natural justice in dealing with a reference in a case under s. 136. A legal obligation so to act arises in respect of many statutory powers, as is shown by a long line of cases of which the most recent are Ridge v. Baldwin [1] in the House of Lords and Commissioner of Police v. Tanos [2] in this Court. It is beyond question that in the ordinary kind of case a Board of Review is not under such an obligation, for its function is merely to do over again (within the limits of the taxpayer's objection) what the Commissioner did in making the assessment - not to give a decision affecting the taxpayer's legal situation, but to work out, as a step in administration, what it considers that situation to be. The Board is "in the same position as the Commissioner himself", as the Privy Council said in Shell Co. of Australia Ltd. v. Federal Commissioner of Taxation [3] . It is "only another executive body in an administrative hierarchy": Jolly v. Federal Commissioner of Taxation [4] , per Rich and Dixon JJ. [5] . But the taxpayer in the present case contends that a review of an assessment made under s. 136 has special features which give it a quasi-judicial character. The function of the Board under that section, like the function of the Commissioner, is not to ascertain and give effect administratively to a liability existing under the Act, but, where the Board forms a certain opinion as to a matter affecting the taxpayer's liability under the ordinary provisions of the Act, to select an amount (of the total receipts of the business) which it considers normal or reasonable: cf. Minister of National Revenue v Wrights' Canadian Ropes, Ltd. [6] to become the taxpayer's taxable income for the purposes of assessment, and by so doing to cause a special tax liability to arise by force of the section. It must give a decision as to whether s. 136 shall operate to subject the taxpayer to the special tax liability for which it provides, and if so what the amount of the liability shall be. If the decision involves a question of law it will be subject to appeal to this Court; but even where an appeal lies to this Court - and it is then an appeal on fact as well as law - the Court will not substitute its own discretionary judgment for those of the Commissioner or of the Board: Robertson v. Federal Commissioner of Taxation [1] ; Denver Chemical Manufacturing Co. v. Commissioner of Taxation (N.S.W.) [2] ; McEvoy v. Federal Commissioner of Taxation [3] . The Board's function, therefore, is to decide whether to create a liability. To adapt some words of Lord Reid in Ridge v. Baldwin [4] , although the Board has not to decide, like a judge in a law suit, what is the liability of the taxpayer, it has to decide how the taxpayer shall be treated - "something analogous to a judge's duty in imposing a penalty". It is just such a duty, the taxpayer here contends, that entails an obligation to conform to the substantial requirements of justice, and in particular to give to each party who may be adversely affected an opportunity of adequately presenting its case. On the other side it is said, in effect, that although the Board's recognition of its obligation to act responsibly and not arbitrarily or capriciously (see the Texas Case [5] ) will cause it to feel a practical necessity of studying the affairs of other companies as well as of the taxpayer in order to qualify itself to reach an informed and reasoned conclusion, its duty is not inherently one of decision based upon investigation and ascertainment of objective matters and for that reason it is not quasi-judicial.

[37]

I do not think it is necessary to decide the point. Even if the Board is bound in law to act "in the spirit and with the sense of responsibility of a tribunal whose duty is to mete out justice" (to quote Lord Haldane's words in Local Government Board v. Arlidge [6] ) it does not follow (and his Lordship proceeded immediately to say so) that the procedure of each such tribunal must be the same: "what that procedure is to be in detail must depend on the nature of the tribunal" [7] . And notwithstanding what Lord Loreburn said in Board of Education v. Rice [8] about "always giving a fair opportunity to those who were parties in the controversy to correct or contradict any relevant statement prejudicial to their view" [9] , the books are full of cases which illustrate both the impossibility of laying down a universally valid test by which to ascertain what may constitute such an opportunity in the infinite variety of circumstances that may exist, and the necessity of allowing full effect in every case to the particular statutory framework within which the proceeding takes place. By the statutory framework I mean the express and implied provisions of the relevant Act and the inferences of legislative intention to be drawn from the circumstances to which the Act was directed and from its subject-matter: cf. Ridge v. Baldwin [1] . As Tucker L.J. said in Russell v. Duke of Norfolk [2] , in a passage approved by the Privy Council in University of Ceylon v. Fernando [3] , there are no words which are of universal application to every kind of inquiry and every kind of tribunal: "the requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth" [4] . What the law requires in the discharge of a quasi-judicial function is judicial fairness. That is not a label for any fixed body of rules. What is fair in a given situation depends upon the circumstances. And it is not a one-sided business. What is a fair opportunity to allow the taxpayer in a given case is a question which by its very nature forbids an answer in disregard of the interests of other people. This is particularly true where, as here, the statute giving rise to the duty of decision expressly recognizes and aims to protect the interests of others which may come into competition with those of the taxpayer. For this reason the proposition cannot be maintained that even assuming that the Board is legally bound to determine the reference in a case under s. 136 in accordance with the substantial requirements of justice it must disclose all that it has learned about the affairs of other companies. How much it should disclose is a question which this Court ought not to attempt to answer in the abstract. On the opposite hypothesis, that the Board is not bound legally to act in a quasi-judicial manner, all questions as to disclosing information to the taxpayer are questions of pure discretion; but the Board's sense of fairness and responsibility will no doubt make the decision as to how the discretion should be exercised practically indistinguishable from that which it would have to make if faced with a legal necessity to conform to natural justice.

At a glance

Court

Decision date

Before

Source

Judgment (41 paragraphs)

Parties