Petroulias v Commissioner of Taxation

Federal Court of Australia|2010-12-23|Before: Mr J, Greenwood J

The application 1 On 17 November 2010 the applicant, Nikytas Nicholas Petroulias, commenced proceedings in this Court in which he seeks the following final relief against the Commissioner of Taxation ("the Commissioner"): 1. a declaration that the provisions of sections 16, 167, 168, 175, 177, 263 of the Income Tax Assessment Act 1936 and sections 3, 16, 14ZZK(a), 14ZZO(a) and 2605 of Schedule 1 of the Tax Administration Act 1953; 167 and 168; section 263 and all notices and actions in reliance on these provisions offend chapter III of the Constitution; 2. a declaration that the decision to conduct the raid and the decision to conduct the raid jointly with the New Zealand Inland Revenue Commissioner was invalid and beyond the power of the Defendant; 3. a declaration that any information provided or received between the Defendant and the New Zealand Inland Revenue Commissioner for the purposes of the joint operation or as a result of [it] was unlawful and that such information is to be returned to the Applicant; 4. a declaration … [that] failing to provide the Applicant and relevant parties an opportunity to claim legal professional privilege makes the receipt, retention and use of information received from New Zealand unlawful and that such information is to be returned to the Applicant; 5. a declaration … that, failing to provide the Applicant and the relevant parties an opportunity to claim legal professional privilege makes the receipt, retention and use of information received from New Zealand no longer a "lawful violation of privilege" by a "cursory examination" and renders the same unlawful and that such information is to be returned to the Applicant; 6. a declaration … that there has been a change of intervening purpose since the raid such that the receipt of information where such information includes the use of that information for the purposes of a criminal investigation in Operation Winkenby, unlawful and that such information is to be returned to the Applicant; 7. a declaration that the stolen documents obtained by the Defendant from Scott Fitzgerald Allen was unlawful and such information obtained [be] destroyed; 8. an order by way of prohibition preventing the Defendant receiving further material from the New Zealand Inland Revenue Commissioner or his agents; 9. a declaration that telephone recordings obtained and transcripts made of these recordings of the Applicant whilst in custody is unlawful and in the alternative, are unlawful to the extent that no opportunity was provided to the Applicant to claim legal professional privilege in relation to communications made with his solicitors on the record is unlawful and such material obtained and records made [be] destroyed; 10. a declaration that information and documents received by the Defendant from the Australian Customs Service in relation to the Applicant [is] unlawful and such information obtained [be] destroyed; 11. a declaration that the penalty assessments issued on 14 September 2010 are invalid, void and/or [of] no effect; 12. a declaration that the assessments to taxation under the default assessments issued on 14 September 2010 are invalid, void and/or [of] no effect; 13. damages as identified in the Statement of Claim; 14. such further orders as the Court sees fit. 2 By his application, the applicant also claimed the following interlocutory relief: 1. an order restraining defendant from using information obtained from: (i) the New Zealand Inland Revenue Department, (ii) Customs, (iii) the Australian Crime Commission, (iv) Scott Allen, (v) the New South Wales Department of Corrective Services and/or AttorneyGeneral's Department of New South Wales. 2. An order by way of injunction restraining the Defendant from enforcing the deemed assessments and penalty assessments against the Applicant until the trial of the issues. 3. An advance ruling under section 192A of the Evidence Act regarding the issue of section 128 Evidence Act certificates to witnesses who would otherwise be unable to give certain evidence by virtue of section 29A of the Australian Crime Commission Act. 4. Case management pursuant to section 37M of the Federal Court Act such that in the interests of justice the disparate and discrete proceedings are consolidated and parties joined and case managed in a way that properly reflects that course of conduct as set out in the Statement of Claim. 3 On 8 December 2010, the applicant gave notice under s 78B of the Judiciary Act 1903 (Cth) to the AttorneysGeneral for the States, Territories and the Commonwealth of a contended matter arising under the Constitution by reason of the declaration sought at para 1 of the claims for final relief. 4 The applicant has also filed a statement of claim in support of the relief he seeks. The statement of claim is a lengthy document of 94 pages which is in substance an argumentative document consisting of facts, evidence, assertions, argument and statements of contended legal position. On 16 December 2010, the Commissioner filed a notice of motion returnable on 2 February 2011 by which the following orders are sought: 1. Under s 31A of the Federal Court [of Australia] Act 1976, the defendant be given judgment against the applicant in relation to the whole or part of the proceeding on the basis that the applicant has no reasonable prospect of successfully prosecuting the proceeding. 2. Under O 11 r 16 of the Federal Court Rules the whole of the pleading be struck out on the basis that: 2.1 the pleading does not disclose a course of action; 2.2 the pleading has a tendency to cause embarrassment, and 2.3 the pleading is otherwise an abuse of the process of the Court. 3. The applicant to pay the defendant's costs of this motion. 5 At the first directions hearing, the applicant did not press any interlocutory relief as he had not filed any affidavit material in support of any of the interlocutory orders sought in the application.

The notice of motion brought on urgently 6 On 8 December 2010, the applicant urgently brought on a notice of motion at 4.00pm by which he sought an order that the Commissioner be restrained from "accessing documents received from the New Zealand Inland Revenue Commissioner until further order of the court". That application was supported by an affidavit filed on 8 December 2010. The urgency of the application was said to arise out of the Commissioner's stated position contained in a letter from the Australian Government Solicitor to the applicant's solicitors dated 26 November 2010 that the Australian Tax Office ("ATO") proposed to "use the open documents it has received from the IRD [New Zealand Inland Revenue Department] and intends to do so at 10.00a.m. on 9 December 2010". 7 The reference to "the open documents" received by the ATO from the IRD is a reference to 30,000 documents contained on a computer disk given to the ATO consisting of documents obtained by the IRD as a result of officers of the IRD either exercising statutory powers under the Tax Administration Act 1994 (NZ) (the "TAA (NZ)") to access premises in New Zealand and obtain information, or execute warrants issued under the TAA (NZ) to enter premises to obtain information. The documents are described as "open" documents because they represent documents which have been subjected to a process in New Zealand established by orders of the New Zealand Courts to isolate documents seized by the IRD which are the subject of a claim (or may have been the subject of a claim) by Mr Petroulias (and others including companies he claims he has standing to represent) of legal professional privilege. 8 Mr Petroulias has not made a claim of legal professional privilege under that process in New Zealand over any of the 30,000 documents. Those open documents have been delivered in electronic format on disk to the ATO in conformity with the process and thus the ATO proposes to "use" them in the discharge, it says, of functions under the taxation legislation of the Commonwealth. The Commissioner says that the ATO, consistent with the process established for doing so, has already looked at the open documents in New Zealand and proposes to continue to review them in Australia for the purposes of an investigation of the affairs of the relevant taxpayers. 9 Mr Petroulias is selfrepresented.

The principal affidavit sworn 8 November 2010 10 His affidavit of 8 November 2010 failed to deal with the facts leading to the letter from the AGS of 26 November 2010 or the central facts upon which he relies for the order sought by the motion. The Commissioner on the initial hearing of the motion on 8 December 2010 agreed not to examine (or further examine) the documents pending the hearing of the motion on Friday, 17 December 2010. Mr Petroulias was ordered to file any further affidavits by Wednesday, 15 December 2010. The application was listed to be heard at 2.15pm on 17 December 2010. 11 One of the questions raised by the Court on 8 December 2010 concerned the question of whether Mr Petroulias has standing to assert privilege on behalf of particular persons or entities. Mr Petroulias is the only applicant in the proceeding. He asserts privilege in some of the documents or at least a right to an opportunity to determine whether any of the 30,000 documents are susceptible of legal professional privilege as communications between him and his legal advisers. He also asserts such a right on behalf of Avowal as he is the 100% shareholder in that company, the assignee of all of its causes of action and holds a power of attorney to conduct proceedings on its behalf. He also asserts a right of privilege (or an opportunity to determine whether privilege subsists in respect of any documents) on behalf of Professional Administration Service Centres Pty Ltd ("PASC") on the same basis as Avowal. He also asserts a right to an opportunity to inspect documents on behalf of 19 other companies identified at para 2 of the statement of claim for the purpose of determining whether any of the documents are the subject of legal professional privilege as communications between any one of those companies and its legal advisers. He also says that he has standing to assert such a right as he, and at least some of those 19 companies (including Avowal and PASC), are custodians of documents for others. 12 As intermediary custodians, Mr Petroulias says he and the other custodians have standing to protect the legal professional privilege of clients of the custodian entities. 13 Two problems emerged on 8 December 2010. First, these contentions as to custodian status and the other matters just mentioned were not properly dealt with in Mr Petroulias's affidavit. Second, neither Avowal nor PASC nor any of the other 19 companies are applicants in the proceeding and relief is not asserted by them. 14 Mr Petroulias says that he stands in the shoes of Avowal, PASC and the 19 other companies to assert rights on their behalf. He also says that he asserts rights on his own behalf and in his capacity as assignee of causes of action.

Mr Petroulias's further affidavit 15 On 14 December 2010, Mr Petroulias filed a further affidavit which exhibits a "Deed of Confirmation and Ratification of Authority" executed by Mr Ian Daley on 13 December 2010. Mr Daley is a director of Avowal, PASC and another company, PrePaid Professional Administration Ltd ("PPPA"). The deed records that Mr Petroulias is the attorney (agent) of those three companies for all matters arising in litigation concerning the IRD and the ATO (including claims of legal professional privilege); all past actions of Mr Petroulias on their behalf are ratified; Mr Petroulias remains the custodian of documents on behalf of those companies seized by the IRD and the ATO; and Mr Petroulias has the authority to "bring proceedings in the name of the companies". The deed also recites that Mr Petroulias is the assignee of "a large number of causes of action which were [causes] of the clients of Avowal, PASC and PPPA and as part of such assignment [Mr Petroulias] has been vested rights to legal professional privilege of those entities or has otherwise common and joint privilege rights …". 16 Although Mr Petroulias does not bring these proceedings in the name of Avowal, PASC, PPPA or any other entity or person (whether the 19 companies referred to in para 2 of the statement of claim or otherwise) he asserts that nevertheless he speaks, acts and binds Avowal, PASC, PPPA and the 19 companies pleaded at para 2 of the statement of claim concerning all matters related to the seizure of documents by the IRD in New Zealand, the seizure of documents by the ATO in Australia and all issues of legal professional privilege concerning all of the seized documents (including the 30,000 documents now in issue).

The grounds advanced for interim relief 17 The applicant seeks to restrain use of the 30,000 documents pending the trial of the action on a number of grounds. 18 First, the applicant contends that the question of whether any one or more of the documents seized in New Zealand is subject to legal professional privilege is a peculiarly domestic question concerning the New Zealand law of legal professional privilege which might be asserted by a relevantly interested person, governed in the taxation field in New Zealand, by s 20 of the TAA (NZ). It follows, it is said, that whatever documents emerged from the process established in New Zealand as documents not subject to a claim of legal professional privilege (and thus described as "open" documents) ultimately has nothing to say about whether any one or more of the open documents might also be subject to a claim of legal professional privilege according to law of Australia, in Australia. 19 The Commissioner on the other hand contends that the process established under the Court orders in New Zealand to which Mr Petroulias and other parties were consensual engaged participants expressly contemplated from the outset that documents isolated as not subject to any claim of legal professional privilege by Mr Petroulias (and those parties) would be given by the IRD to the ATO. The Commissioner says that the forwarding of the disk with the open documents is the express outworking of the process established in New Zealand. Moreover, consistent with the process, the open documents were examined, to a degree, by officers of the ATO in New Zealand and that process will now continue in Australia by reference to the electronic disk. 20 The Commissioner contends that because the documents have emerged from that process and have already, to a degree, been examined by officers of the ATO in New Zealand, the documents are no longer confidential with the result that there can be no legal professional privilege attaching to the communications. 21 The applicant's second contention is that the documents were seized pursuant to a "joint enterprise" between the Commissioner (and officers of the ATO) and the New Zealand Inland Revenue Commissioner (and officers of the IRD) in the exercise by the New Zealand Inland Revenue Commissioner (and officers of the IRD) of powers of compulsion for a purpose "which included the purpose of a foreign revenue authority and is unlawful". 22 The third contention is that the documents given to the ATO have been supplied by the IRD in contravention of a prohibition upon doing so contained in Article 26(2)(b) of the Convention between Australia and New Zealand for the avoidance of double taxation with respect to taxes on income and fringe benefits and the prevention of fiscal evasion (the "Australia New Zealand Double Tax Agreement" or "Double Tax Agreement"): Schedule 4 International Tax Agreements Act 1953 (Cth). 23 The fourth contention is that irrespective of whether the search and seizure operation undertaken by the IRD was lawful and the supply of the "open" documents to the ATO was lawful, an "intervening change of purpose" has occurred such that one of the purposes of the Commissioner in securing access to the 30,000 documents (and thus one of the proposed uses) is use in a criminal investigation. The applicant says that furthering that purpose is an abuse of the Commissioner's powers in accepting and examining the documents on the disc. 24 The applicant contends that if an interlocutory injunction pending trial is not granted and the Commissioner examines the documents in circumstances where no opportunity has been provided to him to assert a common law claim of legal professional privilege over one or more of the documents (both on his own behalf and on behalf of the range of corporations and firms for which he says he has standing to assert privilege), according to the law of Australia, the final relief claimed in the proceeding will be lost to him. Similarly, he says that if no interlocutory relief is granted preventing examination of the documents pending trial any relief that might have been granted at trial (assuming the merits in the applicant's favour on the other contentions) will be lost to him.

The principles 25 An interlocutory injunction is, of course, granted in aid of final relief according to the organising principles discussed in ABC v O'Neill (2006) 227 CLR 57 by Gummow and Hayne JJ at [65] to [72] and Gleeson CJ and Crennan J at [19]. The question is whether Mr Petroulias has made out a prima facie case in the sense of demonstrating a sufficient likelihood of success (a "serious question") in the proceedings to justify the preservation of the status quo pending the trial. The sufficiency of the likelihood of success depends, in part, upon the nature of the rights asserted and the practical consequences likely to flow from the orders sought: ABC v O'Neill, Gummow and Hayne JJ [65] and [70]. The further question is where the balance of convenience lies.

The contextual background 26 The contextual background matters relevant to each of the applicant's contentions are these. 27 Mr Petroulias is a former First Assistant Commissioner of Taxation in Australia. His conduct has been the subject of particular criminal proceedings brought against him. He asserts a wide range of matters about the commencement and prosecution of those proceedings and the motivation of the prosecutorial authorities, the Commissioner and officers of the ATO in his statement of claim in these proceedings. 28 In 2004, the ATO sought assistance from the IRD under the Australia New Zealand Double Tax Agreement in connection with its investigation of Mr Petroulias. That investigation gave rise to an examination of the activities of Mr Petroulias, Ms Clark and others including a range of corporations associated with Mr Petroulias and his business activities concerning the possible involvement of those parties in what the New Zealand Court of Appeal described as the "promotion of tax schemes affecting the tax bases of both Australia and New Zealand": Avowal v District Court, North Shore [2010] NZCA 183; 3 NZLR 661 at [6] (the "Court of Appeal decision"). 29 On 8 November 2006, a series of simultaneous access operations and associated searches were carried out in New Zealand and Australia. Although those operations involved a number of properties in different cities and towns, searches conducted at office premises in a building in Queen Street, Auckland and at Motueka River Lodge where Mr Petroulias and Ms Clark were residing became particularly contentious. The IRD thought those premises were likely to contain books or documents relevant to its investigations arising out of the IRD's discussions with one Ms Chisnall concerning the activities of Avowal Administrative Attorneys Limited ("Avowal") and other companies. The residential premises were searched pursuant to an access warrant issued under s 16(4) of the TAA (NZ). Access was obtained to the business premises under s 16(1) of that Act. 30 For completeness, those sections are in these terms: 16. Commissioner may access premises to obtain information - (1) Notwithstanding anything in any other Act, the Commissioner or any officer of the Department authorised by the Commissioner in that behalf shall at all times have full and free access to all lands, buildings, and places, and to all books and documents, whether in the custody of under the control of a public officer or a body corporate or any other person whatever, for the purpose of inspecting any books and documents and any property, process, or matter which the Commissioner or officer considers necessary or relevant for the purpose of collecting any tax or duty under any of the Inland Revenue Acts or for the purpose of carrying out any other function lawfully conferred on the Commissioner, or considers likely to provide any information otherwise required for the purposes of any of those Acts or any of those functions, and may, without fee or reward, make extracts from or copies of any such books or documents … (4) A judicial officer who, on written application made on oath, is satisfied that the exercise by the Commissioner or an authorised officer of his or her functions under this section requires physical access to a private dwelling may issue to the Commissioner or an authorised officer a warrant to enter that private dwelling. 31 The material demonstrates that the IRD officers had intended that at each site accessed under s 16 a preliminary keyword search of electronic records would be undertaken to first isolate material that was likely to be of interest in relation to the IRD's inquiries and also to isolate information in respect of which privilege claims could or might be made. This preliminary screening process did not occur at the Auckland site because a "blanket privilege" claim was made over all the information contained on the relevant computer hard drives. Officers of the IRD removed computer hard drives (one or more) from the premises for the purpose of "cloning" them. At the Motueka River Lodge some hard drives were removed because it became apparent that encryption software had been used. Officers of the IRD contended that they were concerned that immediate examination might corrupt data or prejudice access to encrypted information on the hard drives. 32 The IRD anticipated that questions of legal professional privilege would be likely to arise in connection with some at least of the documents the subject of the seizure and commenced proceedings to establish a framework for a judicial determination of claims of privilege. That process was ultimately one established by the High Court (discussed later in these reasons). The relevant statutory provision governing legal professional privilege so far as it relates to documents seized by officers of the IRD is contained in s 20 of the TAA (NZ). The principal provision is s 20(1) which is in these terms: 20 Privilege for confidential communication between legal practitioners and their clients (1) Subject to subsections (2) and (3), any information or book or document shall, for the purposes of sections 16 … be privileged from disclosure, if - (a) it is a confidential communication, whether oral or written, passing between - (i) a legal practitioner in the practitioner's professional capacity and another legal practitioner in such capacity; or (ii) a legal practitioner in the practitioner's professional capacity and the practitioner's client - whether made directly or indirectly through an agent of either; and (b) it is made or brought into existence for the purpose of obtaining or giving legal advice or assistance; and (c) it is not made or brought into existence for the purpose of committing or furthering the commission of some illegal or wrongful act. 33 Section 20(4) provides that except as provided in s 20(1), no information or book or document shall for the purposes of s 16 be privileged from disclosure on the ground that it is a communication passing between one legal practitioner and another legal practitioner or between a legal practitioner and the practitioner's client. Section 20(1) is subject to subsections (2) and (3) of s 20 which for present purposes are not in issue. Section 20(5) is in these terms: (5) Where any person refuses to disclose any information or book or document on the ground that it is privileged under this section, the Commissioner or that person may apply to a District Court Judge for an order determining whether or not the claim of privilege is valid; and, for the purposes of determining any such application, the District Court Judge may require the information or book or document to be produced to the District Court Judge. … 34 For the purposes of s 20, a legal practitioner means a barrister or solicitor of the High Court, and references to a legal practitioner include a firm or an incorporated law firm (within the meaning of the Lawyers and Conveyancers Act 2006 (NZ) in which he or she is, or is held out to be, a partner, director or shareholder: s 20(7).

The New Zealand proceedings 35 Mr Petroulias, Avowal and others commenced judicial review proceedings in New Zealand challenging the lawfulness of the search and seizure actions and the removal of the hard drives before officers of the IRD had first conducted an initial search of material on the hard drives. The High Court in a preliminary decision (Avowal Administrative Attorneys Ltd v District Court at North Shore (2007) 23 NZTC 21, 610 (HC)) concluded in reliance, in part, on JMA Accounting Pty Ltd v Carmody [2004] FCAFC 274; (2004) 139 FCR 53 that although the level of inspection might not be detailed there must nevertheless be, at least, some highlevel examination before removal. The Court of Appeal (considering other aspects of an appeal from the dismissal of the judicial review proceedings) observed at [17] (of the Court of Appeal decision) that no consideration had been given by the High Court to the "blanket claim" to legal professional privilege asserted over documents on the hard drives at the Auckland premises nor the presence of encryption software on the hard drives at the residential premises. 36 The Court of Appeal also observed at [19] that the Full Court of the Federal Court of Australia construed s 263 of the Income Tax Assessment Act 1936 (Cth) as requiring ATO officers to "conduct the search in a reasonable fashion" (JMA at [27]) and that some screening at a generic level was required. The Court of Appeal noted at [21] that the obligation upon officers of the IRD to "act reasonably in the circumstances of the case" in exercising search powers in New Zealand under s 16 arises out of s 21 of the New Zealand Bill of Rights Act 1990. 37 As to the question of "preliminary screening" the Court of Appeal said this at [23]: 23. Given the overarching impact of s 21, the inquiry about the legality of the Commissioner's exercise of the s 16 powers needs to focus on reasonableness in the circumstances. Whilst a preliminary screening of the kind envisaged in JMA Accounting and in the preliminary decision [of the High Court] is undoubtedly good practice, we do not see it as necessarily a prerequisite to a reasonable search or to a reasonable access operation under s 16 of the TAA. For example, it may be that the investigation made by the Commissioner prior to the s 16 operation provides him with sufficient information to consider that it is "necessary" that a computer hard drive belonging to a particular person is inspected and/or copied, without a preliminary screening onsite. In the present case … the Commissioner had a basis for considering inspection to be necessary without a preliminary screening, at least in some instances. 38 A five day hearing occurred before the High Court in the judicial review proceedings. A final judgment was delivered addressing a range of matters that ultimately did not continue to be challenged on appeal before the Court of Appeal (Avowal Administrative Attorneys Ltd v District Court at North Shore [2010] 2 NZLR 794). A third judgment was given in the High Court by Venning J (Avowal Administrative Attorneys Ltd v District Court at North Shore (2009) 24 NZTC 23 252) and those matters were in contention before the Court of Appeal. 39 Before contextually identifying the matters which were alive before the Court of Appeal (and the question of the preliminary inspection of the hard drives has already been mentioned) it is important to identify the process put in place for dealing with documents seized by the IRD about which a claim for legal professional privilege might be made.

The orders of Venning J 40 On 22 December 2008, a dispositive judgment of the High Court was published dismissing the application for judicial review. The applicants were Mr Petroulias, Avowal, Ms Clark, Ms Chisnall, seven other individuals and one other company. Mr Petroulias, Avowal and Ms Clark appealed that decision to the Court of Appeal. On 8 May 2009, the High Court dismissed an application by the appellants for a stay pending the appeal of the orders made on 22 December 2008. Venning J observes at [2] of his judgment of 21 December 2009 (Avowal v The District Court at North Shore (HC AK CIV 2006404007264) that: The effect [of refusing the stay] was to permit the Commissioner to begin a review of the electronic documents seized by the Commissioner's officers. The application for stay was dismissed on certain terms including a requirement that an affidavit be filed on behalf of the Australian Tax Office before the Commissioner was to make the electronic information available to officers of the [ATO]. 41 The ATO filed the affidavit required by the High Court to enable it to access the documentation held by the New Zealand Inland Revenue Commissioner. As Venning J observed at [3] of the 21 December 2009 judgment the remaining issue however was how privilege in relation to the documents would be dealt with. That question was addressed by the appellant parties at a telephone conference hearing which they and the New Zealand Commissioner treated as an application for directions: Venning J, [6]. That application resulted in a minute of orders of 8 October 2009 which "are properly characterised as interlocutory orders": Venning J, [6]. Paragraph 7 of the minute of orders recorded: [7] I confirm the following directions: [a] The Commissioner is permitted to commence review of the electronic information removed from the Avowal and Motueka River Lodge sites in accordance with the following procedure: [i] The Commissioner will cause the Computer Tax Audit Unit of the Department to carry out a key word search on the hard drives, using the terms that were used for the s 16 operation. All documents that produce hits will be provided electronically to the investigations team in Takapuna. [ii] The investigations team will review those documents in a cursory manner. Any documents that appear as though they may be subject to privilege or tax advice nondisclosure (potentially privileged documents) will be set aside and will not be read or looked at further. [iii] Copies of the potentially privileged documents will be provided to the respondents to enable them to pursue claims of privilege and tax advice nondisclosure or set aside pending resolution of the privilege proceedings. Potentially privileged documents will not be made available to the ATO. [iv] The Commissioner may review all remaining open documents as part of his investigation and will allow the ATO to view any relevant open documents. [v] The Commissioner is to provide the applicants on an ongoing basis, a schedule(s) of the open documents so that the applicants can identify the documents that the Commissioner and the ATO have access to. [b] The Commissioner is permitted to allow officers of the ATO to review the electronic information in accordance with the above procedure. [c] The ATO is permitted to copy and remove information that it is entitled to under the AustraliaNew Zealand Double Tax Agreement and previous decisions of this Court. [emphasis added but for the references to prima facie] 42 By the application made before Venning J on 17 December 2009 (resulting in the 21 December 2009 decision), the applicants sought further directions recalling, in part, the orders of 8 October 2009 and clarifying their entitlement to claim privilege in relation to documents which, following the New Zealand Commissioner's cursory examination contemplated by para [7][ii] of the orders, would be prima facie open documents and not subject to privilege: Venning J, [4]. Mr Clews of counsel appeared on behalf of Avowal, Ms Clark and Mr Petroulias. They were the parties agitating the substantive appeal. By the application, the three applicants sought to amend the process to enable them to raise claims for privilege in relation to open documents. The applicants contended before Venning J that despite the cursory review by the Commissioner there may be documents which the Commissioner considers to be open but which the applicants "may still wish and be entitled to claim privilege for": Venning J, [10]. 43 In dealing with the application, Venning J said this: [12] As a consequence of the blanket claim to privilege [by the applicants and their former legal advisers] the Commissioner's officers did not feel able to carry out even a relevant search when the initial search was carried out. Given that blanket claim to privilege was made on legal advice, for the reasons set out in the substantive judgment, it can hardly be said to have been unreasonable on the IRD officers' part to have accepted the claim to privilege and not have insisted on a keyword search at that time. But as a consequence, there is an enormous amount of material to be reviewed. [13] The process set out in the minute of 8 October [2009] represented an attempt to address that by a process consistent with the lawful violation of privilege concept as discussed in Alitt v Sullivan [1988] VR 621 and JMA Accounting Pty Limited v Michael Carmody, Commissioner of Taxation [2004] FCAFC 274. [16] Having heard argument I accept that the possibility exists the applicants may need to make further claims to privilege in relation to the documents otherwise identified as open by the Commissioner. The Commissioner (and no doubt the ATO) have two principal concerns. First that unjustified claims to privilege will be advanced, and second, the applicants will use such claims to delay the review. [emphasis added but for references to the cases] 44 Venning J observed that concerns that unjustified claims to privilege might be made could be resolved, by the Court, by the Commissioner seeking interim rulings on documents if a claim of privilege was made. Venning J observed that the Court would make time available to deal with those matters as a priority. In such an application full details of the basis for the claim of privilege would need to be demonstrated: Venning J, [17]. As to the second concern about delays in the review of the documents, the applicants themselves suggested a process by which that might be addressed. Venning J at [18] said this: The Commissioner's other valid concern that the process [for reviewing claims of privilege] will further delay the review process can be met by strict implementation of the timetables suggested by the applicants themselves. Mr Clews has suggested a process in the application which provides a time for the applicants to make any claim for privilege on receipt of the schedules of "open" documents and the process that follow[s] thereafter. In the event a claim for privilege is not made within the time suggested then the documents will retain the status as open and may be reviewed by the Commissioner and made available to the ATO. [emphasis added] 45 In the result, Venning J varied the orders of 8 October 2009 by adding a further sentence at the end of [7][a][ii] in these terms: "The remaining documents [those not set aside as subject to a possible claim of privilege] are classed as prima facie open documents". Orders 7[a][iii], [iv] and [v] were replaced and further orders 7[a], [vi], [vii] and [viii] were inserted with the result that the varied order made on 21 December 2009 is in these terms (Venning J, [24]): 7[a][iii] The Commissioner is to provide the applicants on an ongoing basis, a schedule[s] of the prima facie open documents so that the applicants can identify the documents the Commissioner contends are prima facie open documents and that he intends to review and provide to the ATO for inspection. [iv] The applicants will have five working days (subject to any other extension of time agreed in writing on behalf of the Commissioner) from receipt of the schedule of prima facie open documents to raise any claim to privilege and/or tax advice nondisclosure in respect of any of the documents listed on the schedule of prima facie open documents, provided that any such claim to privilege must be sufficiently particularised to enable the Commissioner to consider the basis of the claim to privilege and the entity on whose behalf the privilege is claimed. [v] The Commissioner will not review and will not make available to the ATO any prima facie open documents until the expiry of the five working day period. Any documents that the applicants do not claim privilege for within the five working days will be confirmed as open documents. The Commissioner may then review all of those confirmed open documents as part of his investigation and may allow the ATO to view any confirmed open documents. [vi] The potentially privileged documents and any other documents for which privilege [is] claimed by the applicants will then be the subject of review by this Court. Pending resolution of the claims to privilege those documents will not be released to the Commissioner's investigators for review or to the ATO. [vii] The Commissioner is permitted to allow officers of the ATO to review the electronic information confirmed as open and the ATO is permitted to copy and remove such documents confirmed as open under the Australian New Zealand Double Tax Agreement and previous decision of this Court. [viii] In the event the Commissioner wishes to test the applicant's challenge to privilege in relation to the documents on the prima facie open list, I reserve leave for such an application to be made in advance of the review of the documents identified by the Commissioner's officers as potentially privileged documents. [emphasis added but for the references to prima facie] 46 Venning J gave leave to the parties to seek any further directions that might be necessary in order to implement orders establishing the above process. 47 It follows that Mr Petroulias (both, it seems, in his own capacity and in the representative capacity he asserts as described at [11][16] of these reasons, engaged in proceedings before Venning J to establish a process (by the orders of 8 October 2009 and 21 December 2009) by which the New Zealand Commissioner was to provide them with a schedule of prima facie open documents; they had five working days from receipt of the schedule to claim privilege (and particularise the basis of the claim); and, the New Zealand Commissioner would not review the prima facie open documents until the expiration of the five working day claim period. As Venning J noted, the consequence of the loss of the stay application was that by reason of the dismissal of the judicial review challenge, the New Zealand Commissioner could begin a review of the electronic documents and "make the information available to officers of the [ATO]". 48 From the outset of the challenge to the seizure, it was common ground that the IRD proposed to make the documents available to the ATO. As Venning J noted, the privilege question however had to be resolved before the New Zealand Commissioner could look at the documents or give the relevant documents to the ATO. The process orders contemplated that not only would the Commissioner not look at the documents until the expiration of the claim period but that no prima facie open documents would be given to the ATO until the expiration of the claim period. Moreover, pending the resolution of a privilege claim, the relevant documents the subject of that claim would not be given to the ATO. 49 The amended orders established by Venning J on the recall application made by the applicant appellants expressly provided that the New Zealand Commissioner was permitted to allow officers of the ATO to review the electronic information confirmed as open. By order 7[a][vii] of the orders of Venning J, the ATO was permitted to copy and remove such documents confirmed as open, under the provisions of the Australia New Zealand Double Tax Agreement. 50 By that process, the parties determined at the first level whether one or more of the documents seized in New Zealand might be subject to a claim of privilege, expressly for the purposes of enabling a review of the nonprivileged documents by both the New Zealand Commissioner and the ATO (by release of the documents not subject to any claim to the ATO), and at the second level, whether documents prima facie not subject to a claim might nevertheless be susceptible of a claim if properly made within the time limited by the orders. 51 Because no claim was made by Mr Petroulias, each of the 30,000 documents (whatever their content, circumstances of authorship or otherwise) was treated as "open", that is, no longer confidential communications of the relevant kind. In other words, Mr Petroulias is taken, it is said, by his conduct, in accepting and entering into these arrangements, to have waived (by not asserting any ground of privilege) any claim of legal professional privilege on the footing that he engaged in the arrangements well understanding that documents emerging from the process would be inspected by the ATO and made available to the ATO.

The initial examination by officers of the ATO 52 In November 2009, officers of the IRD made documents characterised as open documents in accordance with the interlocutory orders of 8 October 2009 available for the inspection in New Zealand of officers of the ATO. The documents were inspected in accordance with order 7[a][iv] of the orders of Venning J on the footing that they constituted "all remaining open documents" and thus not subject to any claim of privilege. The hearing of the recall application by the applicant appellants occurred on 17 December 2009 and judgment was delivered on 21 December 2009. That judgment was given after the ATO officers had examined the nonprivileged documents in accordance with the orders of 8 October 2009. 53 The Commissioner contends that counsel for the IRD, Mr Pike, made Venning J aware in the course of the applicant's recall application that officers of the ATO were in New Zealand and were in the course of reviewing the documents. The Commissioner says that no documents had been physically exchanged with the ATO before the judgment of 21 December 2009. Although documents were being prepared for exchange, the documents were held by the IRD in order to ensure that the applicants had an opportunity to assert privilege within the five working day period provided for by the orders of 21 December 2009. 54 On 20 January 2010, officers of the IRD provided a detailed report to the applicants identifying the documents considered to be open and not subject to any question of privilege. The applicants did not make any claim in relation to the documents set out in the detailed report. The documents in the report were then characterised as open documents for the purposes of the orders of 21 December 2009. The documents were provided by officers of the IRD to the ATO in electronic form on a computer disk on 22 February 2010 under the provisions of the Australia New Zealand Double Tax Agreement and in accordance with the orders of 21 December 2009.

Asymmetrical principles concerning legal professional privilege as between New Zealand and Australia 55 The central point advanced by Mr Petroulias is that there is a potential asymmetry between the basis upon which he (and those for whom he speaks and acts) is entitled to assert a claim of privilege in respect of any one of the documents seized by the New Zealand Commissioner, in New Zealand, under s 20 of the TAA (NZ) and the basis upon which he is entitled to assert privilege from disclosure on the basis of legal professional privilege according to law in Australia. The illustration of that asymmetry is that Mr Petroulias might assert privilege in respect of a confidential communication between him (and for present purposes those for whom he speaks and acts) as client (and on Mr Petroulias's contentions, as custodian for clients) and a New Zealand legal practitioner. Since a legal practitioner is defined by s 20(7) of the TAA (NZ) in the way set out at [34] of these reasons it may be that within the documents there lies an advice from an Australian legal practitioner which represents a privileged communication for the purposes of Daniels Corp v Australian Competition and Consumer Commission [2002] 213 CLR 543 per Gleeson CJ, Gaudron, Gummow and Hayne JJ at 552 [9] - [11] but not attracting privilege under s 20(1) of the TAA (NZ). Mr Petroulias contends that his election not to make any claims of privilege in respect of the prima facie open documents simply represented an election to abandon any claim of privilege so far as it subsisted according to the laws of New Zealand. 56 I accept that there is a genuine legal question and thus a serious question of whether there is an asymmetrical position in the principles which apply in New Zealand in determining, in the revenue context, whether legal professional privilege subsists in relation to a communication represented by one or more of the 30,000 documents in issue and the principles which apply in Australia in determining the entitlement of a person to assert legal professional privilege in respect of a particular communication. That question may simply be a function of the construction of the statutory constraints upon the right to assert legal professional privilege in New Zealand (having regard to relevant authorities) as compared with the common law substantive right subsisting in Australia. 57 The law in each jurisdiction may or may not be different. 58 However, the question to be determined is whether there is a serious question to be tried of whether Mr Petroulias waived the privilege he might otherwise be entitled to assert according to the law of Australia by engaging in the process established in New Zealand, in part upon his own application to the Courts of New Zealand represented by counsel, on the footing that at all relevant times he knew that the documents would be provided to the ATO should he not assert a right of privilege. The question is not so much one of simply a strict interpretation of the orders of Venning J but rather whether the orders properly construed established a process by which Mr Petroulias by his conduct was provided with an opportunity to assert privilege in the knowledge that a failure to do so would result in documents being inspected and ultimately given to (electronically or otherwise) the ATO for further examination and consideration. 59 The question is one of whether having regard to the orders of 8 May 2009, 22 May 2009, 8 October 2009 and 21 December 2009 and Mr Petroulias's engagement in those processes, Mr Petroulias elected to embark upon a course of conduct which resulted in no claim of privilege of any kind being made in respect of the documents. 60 Had the proceedings in New Zealand and the orders made in those proceedings not contemplated any possibility of the documents being provided to the ATO, the question of asymmetrical legal principles concerning legal professional privilege in the revenue environment and whether documents not subject to privilege in New Zealand might be subject to privilege in Australia on a different footing would give rise, in my view, to a triable question should the IRD seek to give the documents to the ATO, warranting an interlocutory injunction restraining use of the documents pending the determination of that question. 61 In the present case however, Mr Petroulias (and all those for whom he speaks and acts as he asserts), Avowal and Ms Clark knew from the outset of the proceedings that the ultimate result of the process established to determine whether documents seized by officers of the IRD were susceptible of a claim of privilege would be that documents not subject to any such claim would be inspected not only by officers of the IRD but by officers of the ATO and copies of relevant documents would be provided to the ATO. In those circumstances Mr Petroulias as a former First Assistant Commissioner of Taxation, conscious of the importance of asserting claims of privilege and conscious that officers of the ATO would look at documents not subject to any privilege claim, elected to stand back (no doubt for reasons associated with the pressure of other legal proceedings) and take no step to assert privilege on any ground.

The Federal Court proceedings commenced on 18 December 2008 and the application before Dowsett J 62 A further matter relevant to the exercise of the discretion is this. 63 Mr Petroulias commenced proceedings in the Federal Court on 18 December 2006 (QUD505/06) by which he challenged the conduct of the Commissioner in exercising the search and seizure power under s 263 of the Income Tax Assessment Act 1936 (Cth) and steps taken by the Commissioner under the Double Tax Agreement. In those proceedings he claimed at paras 1 to 6 final relief consisting of a declaration that the seizure and copying and use in Australia in November 2006 (the Australian part of the joint search and seizure operation) of documents of the applicant pursuant to s 263 was unlawful; a declaration that any request by the Commissioner of Inland Revenue of New Zealand under the International Tax Agreements Act 1953 (Cth) for the seizure and copying in New Zealand of documents in the possession or control of Mr Petroulias in November 2006 was unlawful; an order setting aside those decisions; an order for the return of the documents seized in Australia and New Zealand to Mr Petroulias; an injunction restraining the ATO from examining, copying or otherwise using or disseminating, or further doing so, any of the seized Australian and New Zealand documents; and, an injunction restraining the ATO from receiving, or further receiving from … the IRD any of the seized New Zealand documents. 64 At paras 9 to 12, Mr Petroulias also claimed this final relief: Protection of legal professional privilege 9. Further or alternatively to the foregoing and to the extent necessary, declarations of right in relation to such of the seized Australian documents as may hereinafter be found by this Honourable Court to be protected by legal professional privilege (referred to herein as "the privileged Australian documents"). 10. An injunction restraining the ATO from examining, copying, disseminating or otherwise using for any purpose whatsoever the privileged Australian documents. 11. An order in the nature of mandamus requiring the ATO to return the privileged Australian documents, including any copies made or record of information obtained from them, to the applicant. 12. Alternatively to paragraph 2 to 6 above [being the relief sought relating to the New Zealand documents] and to the extent that it might hereafter become necessary: (a) a declaration of right in relation to any of the seized New Zealand documents that might hereafter be adjudged by this Honourable Court to be subject, in Australia, to legal professional privilege (referred to hereinafter as "the privileged New Zealand documents"); (b) an injunction restraining the ATO from receiving from or on behalf of the IRD any of the privileged New Zealand documents. 65 By paras 1 and 2 of the claims for interlocutory relief in those proceedings, Mr Petroulias sought this relief: 1. An interlocutory injunction restraining the ATO from examining, copying or otherwise using or disseminating, or further doing so as the case may be, any of the seized Australian and New Zealand documents. 2. An interlocutory injunction restraining the ATO from receiving, or further receiving, from or on behalf of the IRD any of the seized New Zealand documents. 66 On 19 December 2006, Mr Petroulias represented by Mr O'Bryan SC applied for the interlocutory orders before Dowsett J. The matters then in issue expressly concerned (among other grounds) the lawfulness of the seizure of the documents in New Zealand and Australia. In particular, the applicant sought "interim and interlocutory relief to stop the Australian ATO from ever accessing any of the New Zealand material": (Transcript, p 13; ln 42). Dowsett J delivered an ex tempore judgment: Petroulias v Federal Commissioner of Taxation [2006] FCA 1821; (2006) 65 ATR 76. At [8][11] Dowsett J dealt with issues in relation to questions of legal professional privilege in relation to the Australian documents. At [14], Dowsett J dealt with issues in relation to the New Zealand documents. No interim relief was granted having regard to a without prejudice undertaking offered by the Commissioner. His Honour observed at [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 crossexamination as may be allowed, the applicant's claim may appear to have more merit than it presently does. 67 At [17], Dowsett J observed: "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". 68 The question of whether the applicant was to pursue the application for interim relief is dealt with at p 68 of the Transcript in this exchange after delivery of the judgment: HIS HONOUR: Now, Mr O'Bryan, do you want me to adjourn this application - your application so that you can renew it at a later stage on notice? MR O'BRYAN: Our instructions, your Honour, are to seek to have it adjourned. At the moment - would it be satisfactory at the moment to adjourn it to a date to be fixed? HIS HONOUR: Yes. MR O'BRYAN: … on the understanding that we won't leave it for a ridiculously long time. We'll prejudice ourselves if we do, but with the festive season and holidays coming up, and the need to obviously do more work, intensive work, we just don't want to be bound to a date just yet, if we can avoid it. HIS HONOUR: … You'll have to bring it on before whoever is on duty over the vacation. … You'll have to ring them and get a date. 69 The point of these references is that Mr Petroulias on 18 and 19 December 2006 sought relief directed to all of the conduct which is now the subject of the present proceedings by the principal application in 2010, 4 years later. The interlocutory application was not pursued. The proceedings were not pursued. That, no doubt, occurred because Mr Petroulias became committed to dealing with the judicial review challenges in New Zealand, the trial in New Zealand and preparation of his defence to the criminal proceedings. 70 Nevertheless, all of the matters which agitated the mind of Mr Petroulias concerning the same conduct were the subject of the proceedings in December 2006 which were then abandoned. A strong inference is open that Mr Petroulias elected to address the privilege issues generally in New Zealand in the context of the framework ultimately established for doing so. 71 The present proceedings seek to reagitate all of those matters and reagitate the matters dealt with by the Court of Appeal. Mr Petroulias, Avowal and Ms Clark sought leave to appeal from the Court of Appeal decision to the Supreme Court of New Zealand. Leave was refused. The Court of Appeal decision does not deal with any question of the process orders concerning documents becoming open or any particular claim of privilege.

Conclusion as to a serious question concerning the legal professional privilege point 72 It follows that I am not satisfied that Mr Petroulias has demonstrated a sufficient likelihood of success in establishing a right to final relief (claims 4 and 5) as his conduct is entirely consistent with a waiver of a right to assert privilege which might have subsisted in respect of any document (communication) not the subject of privilege under s 20(1) of the TAA (NZ) (which, on Mr Petroulias's case, was abandoned in any event). Further, the matters which are now agitated were matters abandoned in December 2006. Moreover, the evidence in relation to the standing of Mr Petroulias to assert questions of privilege on behalf of the parties (who are not parties to the proceeding) for whom he asserts a right to act is not properly demonstrated in his affidavit material. Nor are the proceedings commenced in the name of any relevant party (apart from Mr Petroulias personally) that (or who) asserts a right of privilege by way of final relief. However, for present purposes, I proceed on the assumption that Mr Petroulias has standing to assert the rights he contends for on behalf of the full field of claimants for whom he has acted over time, as he asserts. 73 It remains necessary to consider whether any of the other grounds advanced for an interlocutory injunction demonstrate a serious question to be tried warranting interlocutory relief having regard to ABC v O'Neill (supra) and the practical consequences of either making or not making an interlocutory order and where the balance of convenience lies.

The joint enterprise contention 74 By the second ground, the applicant contends that the documents were seized by officers of the IRD pursuant to a "joint enterprise" between the New Zealand Commissioner and the Australian Commissioner of Taxation in the exercise of powers of compulsion by officers of the IRD for a purpose which included "the purpose of a foreign revenue authority". The applicant contends that the exercise of powers of compulsion by officers of the IRD so as to serve the interests of the Australian Commissioner is unlawful. Mr Petroulias also puts a submission that "the ATO cannot get the New Zealand Commissioner to do in New Zealand what he can't do here and secure, in effect, an expansion of his limited statutory powers". The authority relied upon by the applicant for these propositions is Currie v Deputy Commissioner of Taxation [2000] FCA 1964. 75 In his supplementary submissions dated 22 December 2010, Mr Petroulias emphasises the focus of the challenge as a challenge in relation to the gathering of information by officers of the IRD to assist a foreign revenue authority and acting in aid of a criminal investigation. Mr Petroulias elaborates the focus of that submission at paras 4 to 7 of his supplementary submissions and attacks the references to the use (or preliminary use) of the documents by the ATO and the process of initially flagging them. 76 In Currie v Deputy Commissioner of Taxation, Finkelstein J was concerned with an application for an interlocutory injunction so as to restrain the conduct of an examination of Mr Currie on the contended footing that the Deputy Commissioner was seeking to exercise powers under s 264 of the Income Tax Assessment Act 1936 (Cth) for the purpose or the principal purpose of gathering information on behalf of the New Zealand Inland Revenue Authorities rather than any purpose of inquiring into whether tax was due under the Australian taxation legislation. The procedural circumstances were that a notice issued to Mr Currie on 16 August 2000 for his examination. The terms of the notice enabled the examination to be conducted (that is, the exercise of the powers would be undertaken) by particular New Zealand IRD officials, to the exclusion of any officer of the ATO, and the principal focus of the examination was, his Honour concluded (for the purposes of the interlocutory application), the interest of the IRD officials in contraventions or possible contraventions of the revenue law and criminal law of New Zealand. 77 The notice of 16 August 2000 was withdrawn. 78 A second notice dated 23 August 2000 issued to Mr Currie. It was also withdrawn. A third notice issued to Mr Currie dated 30 August 2000. That notice was the subject of the application for an interlocutory injunction before Finkelstein J. Even though the examination under the notice issued on 30 August 2000 was to be conducted by officers of the ATO rather than officers of the IRD, his Honour concluded that, having regard to the history of the notices, the principal purpose of the examination (and thus the exercise of the powers under s 264) was not inquiring into whether any tax was due under Australian taxation law but for the principal purpose of simply passing information on to New Zealand officials. His Honour concluded that the changes to the three notices appeared to his Honour to have been made to make the notice of 30 August 2000 "seem on its face as if it were being given for a proper purpose". Moreover, the Deputy Commissioner proffered no evidence to support a reason falling within the scope of s 264. 79 The circumstances of Currie v Deputy Commissioner of Taxation are entirely different to the present circumstances. 80 The Court of Appeal decision makes plain that the New Zealand Inland Revenue Commissioner in exercising powers of compulsion under s 16 was, in part at least, acting so as to investigate concerns about the promotion of tax schemes affecting the tax base in New Zealand: Court of Appeal decision [6], [55] and [56]. At [55], the Court of Appeal concluded that the s 16 power was used by the New Zealand Commissioner to obtain information which was necessary or relevant for the investigation of activities in New Zealand affecting tax liabilities in New Zealand. 81 The notion that information properly obtained in the course of exercising powers of compulsion could not be shared with New Zealand authorities was expressly rejected by Finkelstein J. At [20], his Honour said this: Nothing that I have said should be taken to mean that the Commissioner is not permitted to share information with his New Zealand counterpart. Indeed the exchange of information between the Commissioner of Taxation and the New Zealand Commissioner of Inland Revenue, is contemplated by Article 26 of the double tax agreement between Australia and New Zealand, which is found in Schedule 4 to the International Tax Agreements Act 1953 (Cth). This case is not concerned with the lawfulness of the provision of information to the New Zealand Commissioner, but rather with the question whether an examination under s 264 can be conducted for the purpose of providing information to him. 82 As indicated earlier, the Court of Appeal expressly determined by affirming the judgment of the primary judge (and in terms of the Court of Appeal decision itself) that the New Zealand Commissioner had exercised the powers of compulsion in New Zealand for a purpose which served the promotion and protection of the tax base in New Zealand. Information obtained, in part, for that purpose was intended to be provided to the New Zealand Commissioner's counterpart, the Australian Commissioner of Taxation. 83 In this case, information obtained by the New Zealand Commissioner and officers of the IRD was provided to officers of the ATO for the purposes of the Double Tax Agreement. 84 On 27 January 1995, the Australian and New Zealand Executive Governments entered into a treaty described as an Agreement Between the Government of Australia and the Government of New Zealand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes of Income. That Agreement was given statutory force by s 6B(1A) of the International Tax Agreements Act 1953 (Cth) which was inserted into the Act by the Income Tax (International Agreements) Amendment Act 1995 (Act No. 22 of 1995). 85 The Agreement was amended by a Protocol entered into by both countries in Melbourne on 15 November 2005. The Protocol is called: Protocol Amending the Agreement between the Government of Australia and the Government of New Zealand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The International Tax Agreements Act 1953 (Cth) was amended by the International Tax Agreements Amendment Act (No. 1) 2006 (Cth) (Act No. 100 of 2006) so as to introduce into the International Tax Agreements Act 1953 (Cth) s 6C giving the New Zealand Protocol the force of law in Australia. Section 6C provides: "Subject to this Act, on and after the date of entry into force of a provision of the New Zealand Protocol, the provision has the force of law according to its tenor". The amending Act (No. 100 of 2006) was expressed by s 2 of that Act to commence on the day on which the amending Act received Royal Assent. That occurred on 14 September 2006. 86 As the terms of s 6C recite, the Protocol was to have the force of law on and after the date of entry into force of a provision of the Protocol. The provisions of the Protocol entered into force on 22 January 2007: Commonwealth of Australia Gazette No. GN12, 28 March 2007. 87 The Protocol which is Schedule 4A to the International Tax Agreements Act 1953 (Cth) amended the Agreement of 27 January 1995 so as to omit Article 26 of the Double Tax Agreement and substitute a new Article 26 which like the old Article 26 is headed "Exchange of Information". 88 Article 26(1) provides that the competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of the Agreement or of the domestic law of the contracting States concerning the taxes to which the agreement applies. Article 26(3) provides that Article 26(1) is not to be construed so as to impose on the competent authority of a contracting State an obligation to carry out administrative measures at variance with the law or administrative practice of that or the other contracting State, or to supply information which is "not obtainable under the law or in the normal course of the administration of that or of the other Contracting State". Article 26(3) is in essentially the same terms as Article 26(2) of the Agreement as it stood prior to amendment by the Protocol. Accordingly, competent authorities shall exchange information but that provision does not impose on the New Zealand Commissioner an obligation to supply information to the Australian Commissioner of Taxation which is not obtainable under the law or in the normal course of the administration of the contracting State or of Australia. 89 The Double Tax Agreement as it stood prior to amendment by the Protocol and as it operates in its amended form expressly contemplates that the New Zealand Commissioner may supply information to competent authorities of the contracting State which includes the Commissioner of Taxation. The information to be exchanged was obtained by the exercise of powers of compulsion by the New Zealand Commissioner not the Commissioner of Taxation and, as the Court of Appeal determined, the New Zealand Commissioner exercised powers of compulsion for a purpose which included the protection and preservation of the New Zealand tax base among other purposes. The New Zealand Commissioner and his officers did not purport to exercise powers of compulsion for the Commissioner of Taxation and nor did officers of the ATO simply stand in the shoes of the New Zealand Commissioner or officers of the IRD in the exercise of powers for a purpose which served only the interests of the Commissioner of Taxation. In short, Currie v Deputy Commissioner of Taxation has no relevant application, having regard to the facts of this case. 90 Article 26(4) of the Double Tax Agreement is in these terms: If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations in paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 91 When officers of the IRD exercised the powers of compulsion, those powers were exercised for a purpose which included the promotion and protection of the tax base of New Zealand. Even if that purpose was exhausted upon its exercise, it remained open to the New Zealand Commissioner to provide information obtained in that way to the ATO. The orders made in the course of litigation, as already discussed, expressly contemplated the disclosure of the information to the ATO subject to the protocols governing the determination of whether particular documents or communications might be protected by legal professional privilege. Article 26(4) makes it clear that Article 26(3)(b) does not permit officers of the IRD to decline to supply information solely because the New Zealand Tax Commissioner no longer has any domestic interest in the information. 92 Officers of the ATO inspected the documents in November 2009 in New Zealand. That examination was consistent with either supply or partial supply of the information to the ATO as contemplated by the process arrangements struck with the applicant appellants in New Zealand. The supply of the 30,000 documents on disk to the ATO is consistent with the supply of information under Article 26(4). In any event, the ATO need not rely upon Article 26(4). The Court of Appeal decision (with leave to appeal having been refused by the New Zealand Supreme Court) makes plain that information obtained by the New Zealand Commissioner in the proper exercise of powers of compulsion (having regard to the conclusion that the powers were exercised for a proper purpose) could properly be supplied under the Double Tax Agreement to the ATO. Notwithstanding the reliance by Mr Petroulias on Currie v Deputy Commissioner of Taxation, Finkelstein J when speaking about matters of principle in 2000, made it plain at [20] that nothing he said in Currie should be taken to mean that exchanges of information between agencies of the Contracting States could not occur. 93 As already observed, the Court of Appeal determined that the challenge to the exercise of the New Zealand Commissioner's compulsory powers was misplaced. In asserting that the exercise of the powers had miscarried, Mr Petroulias also relied upon the propositions he advances now about the application of Currie v Deputy Commissioner of Taxation. Those submissions were rejected by the primary judge in New Zealand on the footing that, unlike Currie, the evidence did not suggest (or demonstrate in a final sense at trial) that the New Zealand Commissioner had exercised the powers for an improper purpose: Avowal Administrative Attorneys Limited & Ors v The District Court at North Shore & Anor [2000] NZHC 817. 94 I am not satisfied that any serious question arises on the footing advanced by Mr Petroulias that the documents were obtained as a product of a joint enterprise by which the New Zealand Tax Commissioner exercised powers of compulsion for an improper purpose.

The prohibition point 95 Mr Petroulias further contends that the Double Tax Agreement contains a prohibition upon the New Zealand Commissioner supplying information obtained in the course of exercising powers of compulsion to the ATO. That argument was also advanced before the Court of Appeal. The Court of Appeal noted that such an argument depended upon an acceptance of the proposition that the IRD has no obligation to supply information to the ATO unless the information in the hands of the New Zealand Commissioner could have been obtained by the Australian Commissioner of Taxation by adopting precisely the same measures and taking precisely the same action as the New Zealand Commissioner took in New Zealand. Mr Petroulias's present argument also involves the notion that the Double Tax Agreement involves such a prohibition and an argument that the Commissioner cannot obtain access to information obtained by the IRD unless the New Zealand Commissioner is exercising precisely the same measures and powers and taking the same action as would be available to the Australian Commissioner. The conjunction of these two notions results in Mr Petroulias's proposition that the Commissioner "cannot get the New Zealand Commissioner to do what the Commissioner can't do here". 96 The Court of Appeal observed at [56] and [58] that: 56. We see no reason to strain the interpretation of the provision in that way. It is clear that the provision simply provides that the Commissioner [New Zealand] has no obligation to pass information to Australia that would not be accessible under Australia's tax laws or administrative practices by a broadly analogous process. In the present case, the Commissioner obtained the information in the exercise of his s 16 powers for his own purpose as well as for the purpose of providing it to the ATO. 58. We conclude that, for the purposes of art 26(2)(b) the information derived from the s 16 operations is information that is obtainable under the law of Australia so that the Commissioner is obliged by art 26(1) to supply the information to the ATO. 97 At [60], the Court of Appeal said this: 60. We record that the Commissioner also supported his position by arguing that Art 26(2)(b) provided only that there was not an obligation to supply information coming within that provision, but did not prevent the Commission[er] from doing so voluntarily. We accept that this is so. 98 The Court of Appeal, of course, was making reference to Article 26(2)(b) which later became Article 26(3)(b) by reason of the amendment effected by the Protocol. The Double Tax Agreement at the moment in time when the powers of compulsion were exercised recited that Article 26(1) did not impose an obligation upon the New Zealand Commissioner to supply information not obtainable under the laws or in the normal course of the administration of that State to another Contracting State. 99 The Court of Appeal considered the relationship between Article 26(2)(b) and ss 81 and 88 of the TAA (NZ) concerning the secrecy of tax information and the exceptions contained in s 88 to that obligation. The distinction between an obligation to supply information and an election to supply voluntarily was not decisive of the issue before the Court of Appeal having regard to the conclusions the Court had reached at [56] and [58]. For present purposes, it is clear that Article 26(2)(b) did not and Article 26(3)(b) does not operate to impose on the New Zealand Commissioner an obligation to supply information which is not obtainable under the law or in the normal course of the administration of the tax laws of New Zealand or of Australia. The Commissioner may elect to voluntarily provide information subject to any statutory constraints upon that election. However, neither Articles 26(2)(b) or 26(3)(b) contains a prohibition as the applicant contends and in any event Article 26(4) now needs to be taken into account.

The intervening or supervening unlawful purpose 100 The further argument of the applicant is that irrespective of whether the search and seizure operations undertaken in New Zealand were lawful and the supply of the open documents to the ATO was lawful, an intervening change of purpose has occurred as the Commissioner seeks access to the documents on the disk for use in a criminal investigation and that purpose is not a proper purpose. As already mentioned, Article 26(2) has now become Article 26(3). A new Article 26(2) has been inserted into the Double Tax Agreement. Article 26(2) provides that any information foreseeably relevant to carrying out the provisions of the Convention or the administration of the domestic taxation laws of the Contracting States "shall be disclosed only to persons or authorities concerned with the assessment or collection of, the enforcement or prosecution in respect of … taxes or the oversight of [such matters]". Such persons or authorities shall use the information only for such purposes. Article 26(2) further provides that: Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use. 101 Mr Petroulias contends that the Commissioner cannot use statutory and administrative powers in a way which either constitutes a contempt or as an aid to criminal prosecution or a criminal investigation. Mr Petroulias says that there is now an intervening or supervening change of purpose that operates to prevent the Commissioner from using any of the documents on the disk in or for a criminal investigation or criminal prosecution. 102 The difficulty with this contention is that there is simply no evidence in the affidavits of Mr Petroulias to support the factual contention that an intervening or supervening purpose of aiding a criminal investigation has emerged. The evidence demonstrates that the ATO has received the information from the IRD in accordance with the processes already discussed and the use proposed by the Commissioner is the review and examination of the documents. 103 Accordingly, I am not satisfied that Mr Petroulias has demonstrated a serious question to be tried in relation to any of the grounds he advances for an interlocutory order. 104 The application will be dismissed with costs. I certify that the preceding one hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (5)

Cited By (1)