Petroulias v Commissioner of Taxation

REASONS FOR JUDGMENT 1 In early November of this year officers of the Commissioner of Taxation visited certain premises at which records were stored, exercising the power conferred by s 263 of the Income Tax Assessment Act 1936 (Cth) (the "ITAA"). Such visitation was pursuant to authority conferred upon those officers by an authorization issued pursuant to subs 263(2) of that Act. The authorization was limited to accessing buildings, places, books, documents and other papers related either directly or indirectly to a number of named entities or persons, including Nikytas Nicholas Petroulias, the present applicant. Mr Petroulias asserts that all, or virtually all, of the other persons or entities named as being of interest were people with whom he had had dealings over the preceding ten years. At or about the same time, the New Zealand Tax Office also visited certain premises in New Zealand, as it says, at the request of the Australian Tax Office. In Australia and New Zealand various documents were seized. In these proceedings the applicant seeks a declaration that the seizing, copying and use in Australia of the documents seized in Australia was and is unlawful, and a further declaration that any request and underlying decision made by the Australian Tax Office and directed to the Commissioner of Inland Revenue, New Zealand, for the seizure and copying of documents was unlawful. 2 It is also said that certain documents which were seized may be subject to legal professional privilege. The applicant seeks to protect such privilege. In addition to claims for declaratory and injunctive relief and prerogative writs, the applicant also seeks judicial review pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth). 3 The present application and supporting affidavit material were served on the Commissioner yesterday. In those circumstances there has been no question of a final hearing today or of interlocutory relief being granted pending trial. The proceedings have, as I understand them, been limited to determination of the entitlement of the applicant to interim relief pending a further hearing at which entitlement to interlocutory relief, that is, relief pending trial, can be considered. To that end, much of the hearing has been devoted to trying to identify the substantive issues which the applicant wishes to ventilate in these proceedings, the outcome of which he seeks to protect by interlocutory or interim relief. 4 It is asserted that the conduct of the Commissioner pursuant to s 263 was in some way unreasonable, unreasonableness, as it is said, being the "touchstone" of the power conferred by s 263. Whether or not that is so, there can be no doubt that reasonableness has a role to play in connection with the construction of the section. The only purpose for which the power may be invoked is for the purposes of the ITAA. The test of reasonableness may be applied in connection with the relationship between the conduct of the Commissioner and his officers and that purpose. 5 To some extent the applicant's submissions have been coloured by a misconception as to the section. Subsection 263(2) requires that any officer be authorised by the Commissioner in writing in order to exercise powers under the section. The section does not, as I read it, contemplate a direction by the Commissioner as to the particular circumstances in which the powers are to be exercised. However the Commissioner may limit the circumstances in which the power is to be exercised by an authorized officer. To my mind he purported to do so in the authorization document in this case. Nonetheless, each officer of the Commissioner, in exercising such powers, is subject to the limitation contained in subs 263(1), namely that the power be exercised only for the purposes of the ITAA, and must do so reasonably. 6 The applicant submits that the procedure which was adopted was unreasonable for a number of reasons. Firstly, it is said that it caused, or was likely to cause, substantial disruption to the applicant's conduct of his own affairs, particularly in connection with the criminal trial in which he is engaged. There has previously been a mis-trial. There is to be a re-trial. In the course of argument it was suggested that in the case of the re-trial, the applicant will need access to certain of the documents which have been seized. This is not particularly persuasive, given that there has already been a trial. One would have thought that the Crown case would have been sufficiently well identified by that stage, and the applicant would have sufficiently identified the relevant documents and supplied them to his lawyers. It is said that the Crown case has been changing in its emphasis. I accept the possibility that there may be some reason for reference to other documents. However the relief claimed in these proceedings is not tailored to meet that need. I do not understand that any attempt by the applicant to obtain access to documents seized by the Commissioner has been refused. The purpose of these proceedings seems to be to limit the Commissioner's access to documents, not to facilitate access by the applicant. I suspect that purported reliance upon this aspect has more to do with advocacy than with reasonable needs. 7 It is also said that to proceed pursuant to s 263 whilst the applicant is involved in preparation for his trial was to put undue pressure upon him. There is no evidence to suggest that the Commissioner was motivated by that objective. Nothing in the Act suggests that the Commissioner was obliged to delay any action until such time as the criminal proceedings were completed. I see nothing in this point. It is also said that the visits could have been conducted on notice. That is very much a matter of judgment. It is said that the documents might have been acquired in a different way. That may be so, but again, it is a matter of judgment. I see nothing in those matters which should lead to the conclusion that what was done was in any sense unreasonable. 8 It is then said that questions of legal professional privilege arise, and that they pose either a separate basis for setting aside any decision to conduct the visitation and the visitation itself, or alternatively, that there are separate claims to such privilege which must be determined. As I understand it, the applicant retained a solicitor, Mr Andrews, to attend during the visitations, consider claims to legal professional privilege and to make appropriate claims. He had no previous association with the applicant, and the circumstances in which he came to represent his interests at these visitations are a little obscure. However I have been invited to decide the case upon the basis that he represented the applicant's interests. 9 It is now said that Mr Andrews did not have sufficient opportunity to consider documents and did not have sufficient background to enable him to make decisions as to whether or not to claim legal professional privilege, as he was invited to do by the Commissioner's officers. He claimed privilege with respect to some 15 volumes of documents at the two premises at which the visitations occurred. This does not suggest that he was in any way reticent about making such claims. It is now asserted that there may be other documents in respect of which the claim for privilege should have been, but was not, taken. The applicant has not sworn to the fact that there are any such documents. 10 It is also said that Mr Andrews had no instructions to waive (as opposed to claim) privilege. To my mind, the better view of Mr Andrews' instructions, as they appear from the material, is that he attended for the purpose of protecting the applicant's interests in the sense of ensuring that appropriate claims to legal professional privilege were taken. To my mind, that necessarily involved authority to waive any claim for privilege. There would otherwise be no point in having him there. I am inclined to the view, therefore, although I do not decide, that such claims to legal professional privilege as against the Commissioner of Taxation as were not taken, have been waived. Whether I am correct in that view or not, the real point is that no attempt has been made to demonstrate in any convincing way that there is any likelihood of documents being held by the Commissioner in respect of which legal professional privilege is available and has not been claimed. 11 A further problem arises with respect to a claim for legal professional privilege. The documents were seized from the custody of a company called "Prescience" which provides office administration including document storage. In entrusting documents to Prescience it is possible that the applicant waived any claim to privilege. It is also possible that he did not. They may have been entrusted to Prescience upon conditions which maintained privilege. No evidence has been supplied as to this aspect of the matter. 12 One other matter requires comment. It is said that the Commissioner has demonstrated unreasonableness in the width of the authorisation and the searches conducted pursuant to it. The applicant says, as I have already mentioned, that most, if not all, of the people listed in the authorisation are people with whom he has had a professional association over the last ten years. It is said that this suggests that the Commissioner is actually, in some way, seeking to persecute the applicant rather than seeking to enforce the Act. I do not accept that proposition. It has been conceded in the course of argument, if not in the material, that the applicant is involved in giving advice in connection with tax matters. Whether or not that concession related to all of these people I do not know, but I cannot see why it should be unreasonable for the Commissioner to infer that there might be matters of interest to him, in the administration of the Act, in documentation evidencing the relationship between the applicant and these various people. In any event, no attempt has been made to identify particular documents which have been seized, which, in the applicant's view, are not documents relevant to the administration of the ITAA. 13 A further problem may arise in connection with the claim for judicial review of the decision. It is not immediately clear to me that there is a decision to which the Act applies. I do not understand the Commissioner to take that point at this stage. It is not necessary for me to address it further. 14 As to the New Zealand documents, the matter is not so clear. Again, subject to one exception, the applicant does not assert that any of the documents is necessarily privileged. Further, the basis for the attack upon the seizure in New Zealand seems to be limited to preventing the Australian Commissioner from having access to the products of such seizure. No attempt has been made to rely upon privilege under New Zealand law. It is said that the Commissioner must have requested the New Zealand authorities to act and that such request may itself be a reviewable decision. No attempt has been made to persuade me to the view that there is a decision under an enactment which may be reviewed. 15 The Commissioner has offered an undertaking not to communicate information derived from these visitations to anybody associated with the criminal prosecution. It is therefore not necessary, in order to protect the applicant's interests in that regard, that any relief be granted on an interim basis. 16 I do not mean to be taken as determining any of these questions. I am rather highlighting the weaknesses which I perceive to lie in the case which the applicant has put before me today. At a later stage, when the Commissioner has responded to this material, and assuming that the applicant wishes to apply for interlocutory relief, and after any cross-examination as may be allowed, the applicant's claim may appear to have more merit than it presently does. 17 For the moment I am not satisfied that there is a serious question to be tried, or a prima facie case demonstrated, in order to justify the grant of interim relief. In those circumstances, it is not necessary to address the question of balance of convenience. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.