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[1989] FCA 397
Federal Court of Australia
1989-09-27
Original judgment source is linked above.
And: THE DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH
Re: PERRON INVESTMENTS PTY LIMITED, CENTURY FINANCE PTY LIMITED and
Income Tax - Administrative Law - validity of notices issued pursuant to sub-s.264(1) Income Tax Assessment Act 1936 - whether notices on their true construction invalidly require recipients to bring copies of documents into existence - whether invalid portions of notices could be severed - legal professional privilege - whether notices in terms requiring the production of documents prima facie the subject of legal professional privilege are invalid - whether notices invalid by virtue of ambiguity in description of documents to be produced - whether s.264 notices requiring supply of information may be directed to persons other than natural persons - whether time for compliance reasonable - test to be applied and significance of absence of evidence from applicant of actual difficulties.
Income Tax Assessment Act 1936 sub-s.264(1)
Counsel and Solicitors D H Bloom QC and R F Edmonds
Counsel and Solicitors A R Emmett QC and M J Beazley
for Respondent: instructed by Australian
Government Solicitor
The orders made at first instance be set aside, and in lieu thereof order that:
(a) The notice issued under s.264 of the Income Tax
Assessment Act 1936 be set aside;
(b) The Deputy Commissioner of Taxation pay the
applicant's costs of the application.
The appellant pay the respondent's costs of the appeal.
The cross-appellant pay the cross-respondent's costs of the cross-appeal.
The orders made at first instance be set aside, and in lieu thereof order that:
(a) The notice issued under s.264 of the Income Tax
Assessment Act 1936 be set aside;
(b) The Deputy Commissioner of Taxation pay the
applicant's costs of the application.
The orders made at first instance be set aside, and in lieu thereof order that:
(a) The notice issued under s.264 of the Income Tax
Assessment Act 1936 be set aside;
(b) The Deputy Commissioner of Taxation pay the
applicant's costs of the application.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
These four appeals from a single Judge of this Court, being heard together by consent, concern the validity of four notices issued by a Deputy Commissioner of Taxation pursuant to sub-s. 264(1) of the Income Tax Assessment Act 1936 ("the Act"), one to each of the three corporate appellants and one to Mr. Fieldhouse. The appeals ultimately turn on three questions: first, whether the notices to the three companies, by requiring the production or provision of copies of documents to the Deputy Commissioner, require each recipient to create copies of documents described in the notices or otherwise obtain copies of them whether or not such copies are in the recipient's custody or under the recipient's control when it received the notice. This is a question of construction of the notices. If they require copies of documents to be produced other than those in the custody or under the control of the recipients at the time they received the notices it is common ground that they are bad, at least to that extent. The second question concerns legal professional privilege, in particular, whether notices are bad, either by requiring, expressly or by implication, the production to the Deputy Commissioner of documents which are prima facie privileged or by failing to make clear on the face of the notices themselves that the recipients are not required to produce privileged material. The third question is whether the notices are invalid for ambiguity or want of clarity in the description of the documents or classes of documents, production of which is required. Other questions were argued which I shall mention later.
2. A separate proceeding was brought in this Court's original jurisdiction by each appellant against the Deputy Commissioner of Taxation to review his decision to issue a notice to each appellant under sub-s. 264(1)(b). The proceedings were brought under the Administrative Decisions (Judicial Review) Act 1977 (the "Judicial Review Act"). The learned primary Judge dismissed each application for review with costs. The appellants appealed to the Full Court from his Honour's judgment. The Deputy Commissioner cross-appealed from the alleged failure of his Honour to declare the notice issued to Mr. Fieldhouse to be valid.
3. Section 264 of the Act is in the following terms:
"264(1) The Commissioner may by notice in writing
require any person, whether a taxpayer or not,
including any officer employed in or in connexion
with any department of a Government or by any
public authority -
(a) to furnish him with such information as
he may require; and
(b) to attend and give evidence before him or
before any officer authorized by him in
that behalf concerning his or any other
person's income or assessment, and may
require him to produce all books,
documents and other papers whatever in
his custody or under his control relating
thereto.
264(2) The Commissioner may require the
information or evidence to be given on oath and
either verbally or in writing, and for that
purpose he or the officers so authorized by him
may administer an oath.
264(3) The regulations may prescribe scales of
expenses to be allowed to persons required under
this section to attend."
4. Paragraph 264(1)(a) of the Act thus empowers the Commissioner to require any person to furnish him with such information as he may require. Paragraph 264(1)(b) has two limbs: the first empowering the Commissioner to require any person to attend and give evidence before him concerning his or any other person's income or assessment; and the second empowering the Commissioner to require any person to produce documents in his custody or under his control which relate to the income or assessment of any person. The words in para. (b) "relating thereto" refer back to the words "income or assessment" and not to the word "evidence", so that the power conferred by the second limb, namely, the power to require the production of documents is independent of that conferred by the first limb: Smorgon v Australia and New Zealand Banking Group Limited [1976] HCA 53; (1976) 134 CLR 475 per Stephen J. at 485-486; Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499 per Gibbs A.C.J. at 523-524, Mason J. at 535 and Murphy J. at 546.
5. For a notice under para. 264(1)(b) to be valid it "must of necessity identify with sufficient clarity the documents which are required to be produced": Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited per Gibbs A.C.J. at 525. The notice must also "show the person to whom it is addressed that any document which he is required to produce is one whose production the Commissioner is entitled to require". Where the notice is addressed to one person requiring him to produce the documents of another then the notice must show that those documents relate to the income or assessment of a particular person who must be identified. See Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (supra).
6. A notice which requires the production of documents and is not in terms related to the income or assessment of some person is invalid. A notice which is valid may, however, be of considerable breadth, for, as Mason J. said in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited at 537:
"What par. (1)(b) has in mind is that a notice may
be given requiring the recipient to produce 'all
books, documents and other papers' in his custody
or control 'relating thereto', that is, to the
income or assessment of the person whose name is
stated in the notice. It is then for the
recipient to decide for himself, difficult though
the task may be, which of the documents answer the
description. If his decision is wrong he exposes
himself to prosecution and penalty."
7. Although sub-s. 264(1) does not itself impose any express duty on the person to whom a notice is given, there is nevertheless a statutory duty to comply with such a notice by virtue of the provisions of ss. 8C, 8D, 8K, 8N and 8P of the Taxation Administration Act 1953.
8. I turn to the question whether, when properly construed, the notices require the three corporate recipients to bring documents or classes of documents into existence by copying or otherwise to obtain copies of them as distinct from merely requiring documents already in existence to be produced to the Deputy Commissioner.
9. Although there is a fair degree of overlap between the contents of these three notices, it is desirable to consider each notice separately.
10. This notice is dated 11 November 1985 and signed by the Deputy Commissioner. It is eight pages in length and contains four paragraphs with numerous sub-paragraphs. It requires Perron Investments to furnish the Deputy Commissioner with "the following information". The particular requirements then follow in the body of the notice so that everything that follows the opening paragraph falls within the overall description of "the following information". The notice seeks information relating to various matters and includes requirements that the recipient "provide copies of" various documents and classes of documents there described. There is no point in giving many examples of the documents so described; it is sufficient to say that they include copies of certain deeds, accounting journals, powers of attorney, agreements, minutes of meetings, correspondence and financial records including cheque butts, bank statements, cash books, journals, ledgers, brochures and invoices.
11. Does the notice, properly construed, require the recipient to provide either the originals of the documents described, or, if the recipient prefers it, copies of them?
12. I have the impression that the draftsman of the notice probably intended the requirement to provide copies as imposing a lesser burden upon the recipient than a demand to produce originals of documents. I suppose this is simply a recognition of the ease with which documents are produced by modern copying processes.
13. The notice in this respect is cast in plain language, it requires the provision of copies. The notice does not require the production of originals and does not, on its face, purport to give to the recipient an option as to whether to provide originals or copies. Such an option could have been clearly and simply given by requiring the provision of "originals or copies" of documents. The notice is limited, however, to copies. The analysis of what is meant by "copies" should not start from the premise that the provision of originals must satisfy the notice and therefore must be included in the requirement to provide copies. Rather the words of the notice must be read as deliberately chosen words in a document with serious legal consequences. When used precisely the word copy does not include the original, rather it is something derived from it. I therefore conclude that what these notices require is the provision of copies of specified documents, not the originals.
14. However, if the company decides to provide an original document rather than a copy, that could hardly be treated as non-compliance with the requirements of the notice, not because on its proper interpretation, the notice requires the provision of the original, but because the best evidence is always preferable and the Deputy Commissioner could not be heard to complain if he got that.
15. There is some force in the view that the notice requires the provision only of existing copies but it is, I think, unreal. A sensible recipient of the notice would consider that he is not obliged to provide the originals of documents, but is required to provide copies of the documents or classes of documents specified in the notice however he obtains them e.g. existing copies in his possession, copies from other persons or by thereafter copying documents so that he may produce a copy to the Deputy Commissioner. He would know that the notice must be complied with, otherwise he may be liable to prosecution for an offence against the Act. In my view the recipient would be likely to conclude that, however he obtains one, a copy must be produced. The notice could by appropriate language have made it clear that only copies in existence when the notice is served are to be provided; but the notice to Perron Investments does not do this. Indeed, the notice is not even confined to the production of copies of documents in the recipient's custody or under his control. This is the language of para. 264(1)(b) and it is not mentioned in the notice. Paragraph 264(1)(b) only extends to documents in the custody or under the control of the recipient when he receives the notice and does not support a construction that requires copies to be brought into existence. If it did, a serious question would arise as to whether the section was in that respect a valid exercise of the power of the Commonwealth Parliament under the Australian Constitution (see s. 51(xxxi)). It follows that the notice is bad at least in so far as it requires the recipient to provide copies.
16. An alternative view of the notice is that Perron Investments would be left in doubt as to its obligations, namely, whether to furnish only copies already in existence and in its custody or under its control at the time it receives the notice or to bring copies into existence, if none are currently in its custody or under its control, or to obtain copies from other persons. If that interpretation of the notice were correct the notice would be bad for uncertainty.
17. Section 264 uses the word "produce" with respect to documents. Argument was advanced before us about the verbs "provide" and "produce" and their respective dictionary meanings. I have not found much assistance from the dictionaries on this question, although they suggest that the verb "produce" is more readily susceptible of an interpretation of bringing something into existence than the verb "provide". Ultimately, the question is the meaning of the words of obligation contained in this notice when read in the context of the notice as a whole and in the framework of s. 264 itself. In the notice to Perron Investments the word used is "provide". In the notice to Century Finance and Prestige Motors both "produce" and "provide" appear. Nothing turns on the use of the particular word "produce" or "provide" in the notices in question.
18. Severance of the s. 264 notice addressed to Perron Investments is not possible in this case by excising so much of the notice as requires the provision of copies. The requirement to provide copies is central to the notice; and at least in one instance, if excised, leaves requirements remaining which are unintelligible without reference to the part excised: see paragraph 1.vi. The invalid components are so inextricably mixed with the valid that it would be unduly onerous to require the recipient to disentangle them by delicate papyrian exercises with scissors and paste. The notice is in reality a composite requirement and severance of the parts requiring the provision of copies is not practicable: see Royal Bank of Canada v Inland Revenue Commissioners (1972) 2 WLR 106 at 122; (1972) 1 All ER 225; and Parker v Churchill (1985) 9 FCR 316 per Burchett J. at 321-322 and, on appeal, (1985) 8 FCR 334 at 350.
19. This notice requires Century Finance "to furnish me with and produce" ... "the following information relating to the income or assessment of Century Finance Pty. Limited" for certain specified years of income. The notice has some nine pages and four paragraphs with numerous sub-paragraphs. The notice, so far as the present point is concerned, is in substantially the same terms as the one directed to Perron Investments, so what I have said about the latter governs the former. The only material difference that I can discern, with respect to the present question is in the introductory paragraph of the notice which requires the recipient not only to furnish the Deputy Commissioner with "the following information" but to furnish him with "and produce" that information. I do not regard that difference as being of any significance on the present question. Strictly speaking it means the notice requires the recipient to furnish the Deputy Commissioner with and produce to him at a certain place and time "the following information" consisting, so far as relevant, of the provision of copies of certain documents; but that adds nothing to the form of notice in the case of Perron Investments. This notice is also bad.
20. The notice to Prestige Motors contains eight pages and it too has paragraphs and many sub-paragraphs. It requires the company "to furnish me with and produce" on or before a named date at a named place "the following information relating to the income or assessment of Prestige Motors Pty. Limited as trustee for the Prestige Toyota Unit Trust" for certain years of income. The notice then proceeds in similar terms to the notice in the case of Perron Investments in so far as it requires the provision of copies of documents. What I said about the Perron Investments notice applies to this notice also. It too is bad.
21. The notice to Mr. Fieldhouse is two pages in length and requires him to attend and give evidence at a named date before named officers of the Australian Taxation Office. It proceeds, so far as relevant, to say in its opening paragraph:
"AND IN CONNECTION THEREWITH I DO FURTHER REQUIRE
YOU to produce ... all books, documents and other
papers whatever in your custody or under your
control relating to the income or assessment of
... for the period ... and, in particular, all
deeds, correspondence, memoranda, minutes of
director's meetings, file notes and other
documents relating to ...:"
There then follow some fourteen numbered paragraphs which record the names of companies, transactions of alleged loans or assignments of interest in property, issue of shares or units, the issue of units in trusts, release of obligations and other matters.
22. The point relating to copying which applies to the three notices to corporations was not taken with respect to this notice; but it is useful to note that this notice casts the obligation to produce documents in terms of the language of para. 264(1)(b) of the Act. In so far as the description of documents in the opening paragraph of the notice is apt to encompass copies it does not require that they be brought into existence; it requires that, if they do exist, they be produced.
23. It was submitted on behalf on the appellants that the notices were all defective in form as each of them was expressed too widely or ambiguously, and, therefore on their face exceeded the powers conferred upon the Deputy Commissioner by s. 264. Again it is convenient to consider this question with reference to each notice.
24. The notice to Perron Investments seeks information (I leave aside the requirement that copies of documents be provided as I have already dealt with this) relating to a large number of transactions, and it requests information in considerable detail about each of them. A few examples will suffice. The information which is required includes the following:-
. in relation to the acquisition by Perron Investments of certain units in a unit trust, a detailed account of the circumstances which led to the acquisition of the units, including the names of persons involved in the negotiations which led to the arrangements being made, a detailed description of the negotiations and the reasons for Perron Investments agreeing to enter into them;
. full details of all improvements to certain real estate;
. the terms of loan agreements including rates of interest, periods of the loans and terms for repayment of principal and interest;
. the nature of any relationship between Perron Investments and certain persons and companies.
25. The notice is far reaching in its pursuit of information and requires careful and detailed attention before providing the information sought. The draftsman has gone to considerable lengths to be precise about the information which is sought. Although considerable effort is involved in supplying the information I do not find any of the requirements for information to be uncertain, ambiguous, oppressive or too general.
26. Exception was taken by counsel for the appellants to the use of the word "explain" where used as a requirement to "explain" certain events, incidents or circumstances or the nature of certain relationships on the ground of undue width. I suppose it is always possible for a draftsman to use a different word to "explain", but I see no vice in its use in this context.
27. Complaint was made that one of the requirements of the notice, repeated more than once, is to provide copies of documents which "evidence" certain matters. It was said that the use of the word "evidence" in this context is inherently ambiguous. I fail to see the ambiguity. The word "evidence" may be used in a variety of senses, that much is true. But the word is used in the context of this notice in the sense that copies of documents are to be provided which bear witness to or demonstrate the matters referred to in the notice.
28. The position is substantially the same with respect to the notice to Century Finance.
29. The position is also substantially the same with respect to this notice; but one further matter was relied on by counsel for the appellants to support the argument that this notice was defective in form, namely, that in paragraph 3 the recipient of the notice is asked to:
"advise whether ... any of the income distributed
from the Prestige Toyota Unit Trust to RLAV during
the period 1 March 1979 to 30 June 1983 has been
applied for the benefit of, recouped, reimbursed,
or paid, either in Australia or overseas, to
Prestige Motors or the Perron group of companies
or a person or company related to or associated
with Prestige Motors or the Perron Group of companies".
30. It was argued that this passage in essence restated the language of ss. 99B and 99C of the Act so that it was akin to asking someone whether certain facts fell within a statutory provision, and that was really a question of law. This argument is fallacious. The notice does not ask the recipient to decide whether certain matters fall within the terms of a section. It would be different if the question was to ask the recipient to construe the relevant provisions of a section of the Act. Indeed, ss. 99B or 99C are not even mentioned in the notice. The recipient is asked to look at the paragraph and answer it according to ordinary English usage. There is nothing wrong with this.
31. There is nothing in this notice which renders it bad on the ground presently under consideration.
32. None of the four notices is expressed too widely, generally, obscurely or ambiguously or is otherwise defective in form.
33. Although three of the four notices were addressed to the Public Officer of each company, it was conceded by the Deputy Commissioner that they were to be read as directed to the companies themselves. It was submitted, however, on behalf of the appellants that those three notices were bad because s. 264 permits notices thereunder to be directed only to natural persons. It is true that only a natural person can attend and give evidence, so that a company cannot be the recipient of a notice under the first limb of para. 264(1)(b) (see Smorgon v Federal Commissioner of Taxation [1976] HCA 53; (1976) 134 CLR 475 per Stephen J. at 481-5). There is no difficulty, however, in law with the notion of a company furnishing the Commissioner with information (para. 264(1)(a)) or producing documents to him (second limb of para. 264(1)(b)) (see Smorgon v Federal Commissioner of Taxation per Stephen J. at 485-6). The submission is fallacious.
34. Counsel for Mr. Fieldhouse argued that, as the notice directed to him under s. 264 allowed him only fourteen days from the date of service to comply with its requirements, it demanded compliance within an unreasonable time and hence was not a valid notice.
35. The test of the reasonableness of a period of notice is an objective one to be determined in the light of the surrounding circumstances: Commissioner of Taxation v Ganke (1975) 1 NSWLR 252 per Nagle J. at 258; McVey v Commissioner of Pay-Roll Tax (Vic) (1985) 85 ATC 4131 per Kaye J. at 4,137. It is for the Court to determine whether the time allowed is reasonable when the matter is tested before it.
36. At first sight fourteen days appears to be a very short period of time to gather together all the information sought in the notice. However, when the circumstances are examined the position becomes clearer. The notice is dated 19 May 1986. From as early as 26 November 1985 Mr. Fieldhouse was aware that the Deputy Commissioner was seeking information from him concerning the income or assessment of certain companies. Correspondence was exchanged between the Deputy Commissioner and Mr. Fieldhouse. Mr. Fieldhouse sought and obtained an extension of time to respond to an earlier request for information. He sought reasons under s. 13 of the Administrative Decisions (Judicial Review) Act 1977 out of time and reasons were furnished to him before the notice the subject of this proceeding was issued.
37. Mr. Fieldhouse called no evidence on the question of reasonableness at the hearing before the learned trial Judge. Plainly Mr. Fieldhouse had considerable notice of many of the matters which the s. 264 notice formally brought to his attention. I am not persuaded that the time allowed for compliance with the notice was unreasonable.
38. Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 is authority for the proposition that legal professional privilege is not confined to judicial and quasi-judicial proceedings and that, in the absence of some legislative provision restricting its application, the doctrine applies to all forms of compulsory disclosure of evidence. Section 264 requires the compulsory disclosure of information, documents or evidence and there is no basis for interpreting the section as negating the application of legal professional privilege. Indeed, it was not contended by the Commissioner in this case that s. 264 overrode legal professional privilege.
39. The reasoning of the majority of the High Court in Baker v Campbell leads to the conclusion that s. 264, upon its proper interpretation, does not abrogate legal professional privilege. A similar conclusion was reached by this Court both at first instance and on appeal to a Full Court of this Court with respect to s. 263 in Citibank Limited v Federal Commissioner of Taxation (1988) 88 ATC 4714 per Lockhart J. at 4732-3; on appeal to the Full Court in Federal Commissioner of Taxation v Citibank Limited (1989) 89 ATC 4268 per Bowen C.J. and Fisher J. at 4274-7, per French J. at 4291-3. The real difficulty arises with respect to the working out in practice of Baker v Campbell beyond judicial and quasi-judicial proceedings. As I pointed out in Arno v Forsyth (1986) 9 FCR 576 at 587:
"Once the law recognises that the doctrine of legal
professional privilege extends to extra judicial
search and seizure the question immediately arises
as to when and how questions of privilege are to
be raised. Sometimes the privilege question will
be raised at the stage of execution of a search
warrant rather than at the time of its issue."
40. Arno v Forsyth concerned search warrants under s. 10 of the Crimes Act (1914) (Cth); but similar questions arise with respect to notices under s. 263 of the Act which authorises the Commissioner or officers authorised by him to enter buildings and make extracts from or copies of books, documents or papers. Notices under s. 264 are, however, one step removed from search warrants and s. 263 notices because, once the notices are issued by the Commissioner and served upon the recipient, the requirement is that the recipient furnish the Commissioner with such information as he may require or attend and give evidence before him or produce books, documents and other papers in his custody or under his control relating to a particular person's income or assessment. Obviously a reasonable time, to be determined in the light of the circumstances of each case, must be afforded the recipient to comply with the notice. Generally the recipient will have time to consider the matter and consult with his legal advisers, but there will be cases when the recipient will be either ignorant of the law or not have sufficient foresight or means to obtain legal advice and ascertain his rights and duties. I do not propose to develop in any detail the problems that confront citizens when served with notices under s. 264. The problems were discussed in some detail by me in Arno v Forsyth, supra, though in the context of search warrants, but there are elements in common with notices under s. 264. The citizen is plainly at risk, whether through ignorance or otherwise, of being denied a fundamental right to assert a claim for legal professional privilege. There is I think much to commend the view that when issuing notices under s. 264 it would be appropriate for the Commissioner to insert a paragraph or two in the notice drawing the attention of the recipient to his rights with respect to legal professional privilege so that at least he is alerted to them and can take whatever steps he wishes to obtain legal advice.
41. I adverted to this question with respect to search warrants in Horowitz v Condie, unreported, judgment 5 May 1989, and referred there to a section of the search warrant in evidence in that case titled "The Procedure" which extended for some pages and defined the procedure to be followed by officers executing the search warrant representing "The Agreed Guidelines Between the Commissioner of the Australian Federal Police and the Law Council of Australia" which were designed to aid Australian Federal Police officers in the execution of search warrants at the offices of lawyers and were intended to give the lawyers the opportunity to claim legal professional privilege on behalf of their clients. This appears to have been the result of discussions between the Law Council of Australia and the Australian Federal Police following the judgment of the Full Court of this Court in Arno v Forsyth. I doubt if such a full description of a person's rights with respect to legal professional privilege is necessary in the case of a para. 264(1)(b) notice which by its very nature affords a reasonable time for a person to consider his position before complying with its requirements. Nevertheless, some pithy statement of the right to claim legal professional privilege in the body of the s. 264 notice would be useful and timely.
42. The question whether legal professional privilege applies to documents in the case of a search warrant will generally be determined when it is sought to execute the warrant; but it may be appropriate in some cases to determine this question when the warrant is issued: see Arno v Forsyth. In the case of a notice under s. 264 this question will be considered generally, when the obligation of the recipient arises to either furnish the information required or to attend and give evidence before the Commissioner or his officers or to produce the books, documents and other papers. The claim can then be asserted and tested in the courts, if necessary, or the recipient may move the courts earlier, as happened in this case.
43. If it were not for the express reference in certain of the notices under challenge in this case to documents to which on their face legal professional privilege would prima facie attach there could, I think, on the facts of this case be only limited room for argument that any of the notices were bad on their face albeit that it might emerge in due course that some of the documents of which production was required attracted the protection of legal professional privilege. The notice to Perron Investments does not in terms require the production of documents which on their face would be the subject of a claim for legal professional privilege, although I notice that on p 6 the particulars which are required to be provided include the names and addresses of the solicitors of a company "Cholomondely Equitable Estates (Singapore) Pty. Limited" ("Cholomondely") (para. 2.vii.d). Also, there is a reference in para. 2.x. to the requirement to "advise" in relation to certain dealings if the directors and representatives of Cholomondely were acting either directly or indirectly upon the instructions of the legal advisers for Perron Investments or certain other persons. Those particular matters do not seem to me to require the disclosure of material to which legal professional privilege would normally attach.
44. The notice to Century Finance requires, however, that there be provided copies of "all documentation, including notes of meetings and telephone conversations between Century Finance, RLAV and the representatives of the two companies (including accountants and solicitors), that evidence the negotiations for the loan". Paragraph 3.i.f.fe (p 76) requires that there be provided full details of a particular settlement that took place including copies of "all correspondence in relation to this matter between Century Finance, person(s)/company(s) related to or associated with Century Finance and solicitor Carnegie Fieldhouse".
45. Paragraph 3.iii.b requires that there be provided information as to
"whether legal or other professional opinion has
been sought as to the income tax consequences of
these arrangements between RLAV, PTT, Century
Finance, Keyser & Chumley, and, if so: (ba)
advise the name(s) of the person(s) from whom a
legal opinion was obtained; and (bb) provide
copies of that/those opinion(s);" (78)
46. This notice thus requires information and material which would prima facie be subject to a claim for legal professional privilege.
47. The notice to Prestige Motors requires in para. 5:
"Advise whether any professional, legal or
financial advice was obtained by the
representatives of PTT in relation to the
amendments to the trust deed as outlined in 1, 2
and 4 above and, if so, provide:
i. the name(s) of the person(s) from whom advice
was sought;
ii. the nature of the advice or opinion;
iii. a copy of all correspondence or other
documentation in which that advice or opinion is
expressed." (92)
48. This notice also requires information and documents which would prima facie be subject to a claim for legal professional privilege.
49. Mr. Fieldhouse is the solicitor for certain of the interested parties in the matters in dispute. The notice to him (53) does not in terms require the production of any material or information which on its face would prima facie be subject to a claim for legal professional privilege.
50. Claims of legal professional privilege may, of course, be made by any of the three companies or other persons or companies entitled to make such claims with respect to documents within the scope of the s. 264 notices. The claims may be made either before or at the time the information is required by the Commissioner or his duly authorised officers.
51. It is a difficult question when legal professional privilege should be determined with respect to documents the subject of search warrants. I considered this in Arno v Forsyth and there expressed the view that these questions may be determined in some cases when the warrant is executed or when it is issued, depending on the circumstances of case (588-590). So far as s. 264 notices are concerned, although, as I mentioned earlier, it would be desirable that the Commissioner include a statement of the recipient's rights with respect to claiming professional privilege, the time for determination of such a claim will generally be when the time arrives to answer the notice or earlier if proceedings are instituted for that purpose. This question is bound up with the further question whether legal professional privilege goes to the validity of a s. 264 notice itself or to the duty of its recipient to produce particular documents to the Commissioner. As at present advised I am of the opinion that the latter view is correct. I took a different view in Arno v Forsyth with respect to search warrants under s. 10 of the Crimes Act, but my view was based on the language of s. 10 of the Crimes Act 1914 (Cth), the application thereto of Baker v Campbell and the nature of the process of search and seizure. A s. 264 notice is more akin to a subpoena duces tecum than to a search warrant.
52. These proceedings challenge the validity of the decisions of the Deputy Commissioners to issue the various notices. The challenge is made under the Judicial Review Act. If a claim for legal professional privilege is made an appropriate Court will decide whether or not the claim is sustainable. That Court will then have before it the documents, the fact of the making of the claim for privilege and the necessary evidence.
53. In my opinion the notices are not bad in so far as they require the production of documents that may be the subject of a claim for legal professional privilege.
54. The appeals by the three companies should be allowed and the notices issued under s. 264 set aside. The Deputy Commissioner must pay the costs of the companies of their appeals. The appeal of Mr. Fieldhouse should be dismissed.
55. The Deputy Commissioner's cross-appeal in the Fieldhouse matter seeks a declaration that the s. 264 notice issued to Mr. Fieldhouse is valid. The ground of the cross-appeal is that the primary Judge "erred in failing to grant appropriate relief which had been sought by the cross-appellant". The application and pleadings do not disclose any such relief as having been sought by the Deputy Commissioner, so the cross-appeal appears to be based on a misconception. I must say, however, that the original file in the Fieldhouse matter is incomplete, though not, it seems, in any relevant respect. The primary Judge did not fail to declare the notice to Mr. Fieldhouse to be valid. Although that notice is valid there is no foundation for the cross-appeal which should therefore be dismissed. Mr. Fieldhouse must pay the costs of the Deputy Commissioner of his appeal and the Deputy Commissioner must pay the costs, if any, of the cross-appeal.
The completeness of the statements of the facts and the contentions of the parties contained in each of the other judgments enables me to come directly to the matters on which I wish to say something for myself.
2. I agree that, in the circumstances of these appeals, the notices are not invalidated by their failure to make express the fact that the obligations imposed by them did not extend to documents the subject of a proper claim of legal professional privilege. I wish only to add to the reasons given by my brethren for this conclusion the following commments.
3. The consideration of the question should commence with the scope of the power in s.264. The power is conferred to provide the Commissioner of Taxation with a means of gaining access to the wide range of information and documents referred to in the section. It is not conferred as a means of extracting from the unwary and the ignorant information or documents not within the proper scope of the section, which the Commissioner of Taxation has no lawful right to obtain or to see. Where a notice, having regard to all the circumstances, is likely to be understood as demanding under threat of statutory penalty more than the Commissioner's entitlement, it may, in my opinion, be excessive, and therefore beyond the power conferred by the section as the High Court has interpreted it: O'Reilly v. The Commissioners of the State Bank of Victoria [1983] HCA 47; (1983) 153 CLR 1 at 48; and see also The Commissioner of Taxation of the Commonwealth of Australia v. The Australia and New Zealand Banking Group Limited (1979) 143 CLR 499 at 537-538. An example might be a notice in terms comparable to those employed in the present case, directed to a recipient without legal qualifications and not shown to have ready access to appropriate legal advice. In such a case, a court should not shrink from insisting that so intrusive a power must not be exercised excessively. Perhaps a similar principle underlies the proposition that the Commissioner has a duty to exercise his wide discretions fairly: see Edelsten v. Wilcox (1988) 83 ALR 99 at 112-113, and the cases there cited. At any rate, it would not sit well with the insistence of the Full Court, in Federal Commissioner of Taxation v. Citibank Limited (1989) 89 ATC 4268, on the Commissioner's obligation to afford a recipient an adequate opportunity of making a claim of privilege, to accept as valid a purported notice of that kind under the circumstances I have suggested.
4. In the Citibank case, after referring to what Deane J. said in Baker v. Campbell [1983] HCA 39; (1983) 153 CLR 52 at 118-120, Bowen C.J. and Fisher J. at 4277 said of the officer of the Commissioner whose actions were in question:
"It was not sufficient for him to give
consideration only to the question whether a
claim made for privilege was justified. He
was obliged to ensure that Citibank and in
particular its staff had in the circumstances
an adequate opportunity to make claims of
privilege."
At 4278 their Honours referred to the incapacity of a particular employee to assert the there respondent's rights to claim privilege. At 4293, French J. said:
"The rights or powers conferred by sec.
263 are therefore limited to the extent that
they will not authorise access to or copying
of books, documents or papers which attract
the common law privilege. Where no practical
or realistic opportunity is provided for the
assertion and testing of claims of legal
professional privilege, then the purported
exercise of the right of access travels
beyond that limit and is beyond power. What
arrangements will answer the minimum
requirement for a practical and realistic
opportunity to assert claims of privilege
will depend upon the circumstances of the
particular case."
I think it would be inconsistent to fail to apply, in a case under s.264 of the kind outlined, the considerations expressed in these passages, which are dealing with a precipitate claim of access under s.263 to documents on the premises of a bank. Granted the factual differences, the likelihood that a proper claim could not in practice be asserted is quite similar. And the limitation which French J. stated, upon the power conferred by s.263, a section - as it is now settled (see Citibank at 4272) - that must be construed in the same light, should equally apply to the power conferred by s.264.
5. But in none of these appeals is there any reason to doubt the awareness, on the part of each of the appellants, of the right to claim any applicable legal professional privilege, or to doubt each appellant's ability to obtain any necessary professional advice. Therefore, I agree the appellants fail so far as that question is concerned.
6. I agree, for the reasons given by Hill J., that the submission challenging the validity of a notice addressed to a company requiring the supply of information must be rejected. I also agree with the reasons of Hill J. for rejecting those submissions of the appellants which attack the wording of the various notices on grounds other than the requirement of the production or furnishing of copies of documents. So far as the notice to the appellant Fieldhouse is concerned, in the very special circumstances of the case, and particularly having regard to his failure to give evidence that the time for compliance presented him in fact with any difficulties, I agree that the court ought not to find in the extremely short time limited for compliance a fatal defect in the notice itself. Finally, as regards the appeal of Mr Fieldhouse, I agree with the reasons of Hill J. for rejecting the contention that the notice addressed to that appellant was too vague.
7. The remaining questions relate to the requirement in each notice to the public officer of a corporate appellant that copies of documents be provided. I agree with the reasoning and conclusions of Lockhart J. on this aspect of the appeals. So far as concerns the respondents' contention that the invalid requirement can be severed, leaving effective notices, I desire to make some additional comments.
8. Of the three notices in question, one contains fifteen express requirements for the provision of copies of documents, a second contains nineteen such requirements, and the third contains twenty-two. Most of these requirements relate to multiple documents, and many to an indefinite, and possibly very large, number of documents. As Lockhart J. has pointed out there are instances (though they are few) where the deletion of one of these requirements would render another part of a notice unintelligible. Generally, the requirements for copies occur throughout the notices, forming an integral part of the information sought in respect of virtually every topic covered. The content of what would be sufficient answers in respect of these topics would of necessity be profoundly affected by whether or not the invalid demands were complied with.
9. I do not doubt that, in an appropriate case, the court can sever an invalid portion of a notice under s.264. But I do not think the analogy of a search warrant is precisely applicable here, just as it is not precisely applicable in respect of the issue of legal professional privilege. In Parker v. Churchill (1985) 9 FCR 316, at 321-322, I discussed the basis of the doctrine that a search warrant can be severed. On appeal (9 FCR at 350), this doctrine was accepted by the Full Court. The line of authorities dealing with the severance of search warrants starts with the proposition that an order of a justice (which a search warrant normally is - the power to issue it is not entrusted to the police) can be good in part, though defective in part. A notice under s.264 is not like a warrant. It is not an order of a justice and it does not authorize an official to do a number of things, but is a notice to a taxpayer or other person, issued by the Commissioner himself, to furnish information under what may be severe penalties in respect either of failure or of error. Compliance ought not to involve the recipient in abstruse questions of construction demanding the extraction (and performance) of some valid obligation from a matrix of invalidity. I do not think, according to its true meaning, s.264 authorizes the issue of a demand containing a complex interweaving of requirements very many of which are beyond power. Such a demand is not what the section contemplates. It is quite different from a valid notice with an added ineffective paragraph capable of simple deletion. That, if the search warrant analogy is to be pursued, is all that was involved, in substance, in Parker v. Churchill, as is made plain by Bowen C.J. and Lockhart J., on the appeal, in their joint judgment at 336.
10. I agree with the orders proposed by Lockhart J.
The appellants who were each the recipient of notices served upon them by (in the case of the corporate appellant) the Deputy Commissioner of Taxation, Perth and (in the case of the individual appellant) the Deputy Commissioner of Taxation, Sydney appeal from the judgment of a Judge of this Court upholding the validity of the decision to issue the notices and of the notices themselves.
2. The proceedings were instituted by the appellants under the Administrative Decisions (Judicial Review) Act 1977. The applications for orders of review, which claimed declarations that each notice was invalid and not authorised by s.264 or any other provision of the Income Tax Assessment Act 1936 ("the Act") were supported by points of claim filed in the proceedings although it would appear that not all of those points were ultimately pressed at the hearing.
3. Each of the notices was a lengthy document and sought details concerning, what the questioner apparently saw as, a tax avoidance scheme of some complexity. Although each of the corporate notices differed and submissions were made as to the language of each, it is, in my opinion, sufficient to set out by way of example one only of such notices and to discuss the submissions made by reference to that notice. Where specific submissions were made in respect of other notices I will indicate, so far as is relevant, the specific provisions of those notices. Accordingly, I set out as an appendix to this judgment the notice addressed to Prestige Motors Pty Limited.
4. Having regard to the limited matters argued in respect of the notice to Mr Fieldhouse it is unnecessary to refer in detail to the provisions of the notice served upon him.
5. In summary before his Honour and before us it was submitted in the case of each notice to the corporate appellant that each was bad because:
* Each notice was issued under s.264(1)(a) and went beyond
the power conferred by that section to require the
furnishing of information.
* To the extent that the respondents sought to support the
notices in part under s.264(1)(b), if properly construed
the notices required the recipient to bring into
existence copies of documents and supply these to the
Deputy Commissioner of Taxation and were beyond power
under s.264(1)(b).
* Each notice sought conclusions, opinions of law or
required assumptions of fact to be made or was ambiguous
and was for any of those reasons beyond power.
* Each notice sought the furnishing of information or
material which was "prima facie privileged" that is to
say in respect of which, prima facie, a claim for
privilege could be made and was accordingly beyond
power.
* Each notice should have been addressed to a named
individual rather than the proper officer of the
corporate recipient as only an individual, and not a
corporation, could supply information.
6. Before his Honour it was submitted in writing that the decision-maker failed to take into account a relevant matter or matters, or took into account an irrelevant matter or matters, or acted so unreasonably that no person properly instructed could have so exercised the power, but these matters were not pressed before us and indeed, from the written submissions which were made to his Honour it would not seem that these matters were seriously argued before him.
7. So far as the notice addressed to Mr Fieldhouse was concerned, it was submitted that:
* it was invalid because the time for compliance
stipulated in it was unreasonably short;
* it was invalid because it required production of
documents that were, prima facie, privileged; and
* it was so vague that a third party served with it would
be unable to comply with it.
9. By virtue of s.8 of the Act Parliament has entrusted to the Commissioner of Taxation the administration of the Act. Among the obligations imposed upon him as a result are the assessment of the taxable income of each "taxpayer" and the tax payable on such income as well as the collection of such tax. To enable the Commissioner to perform these obligations Parliament has in ss.263 and 264 of the Act conferred upon the Commissioner (and through him upon those to whom the powers are delegated or who are authorised by him to exercise them) very broad investigatory powers, powers which of their very nature must impinge upon the liberty of the subject.
10. By s.263 the Commissioner or person authorised by the Commissioner is to have full and free access, inter alia, both to all places and to all documents. He may, but only for a purpose contemplated by the Act, enter offices or houses or indeed, any building or place, and inspect books, documents and papers. The citizen is obliged to render reasonable assistance in the search which the section authorises. Should the Commissioner or officer authorised by him so desire, he may in the course of taking access to books, documents and papers, make copies of them. It is, however, to be doubted whether acting under s.263 the Commissioner could require a citizen to make copies of documents and supply them to him, particularly having regard to the specific authority given by the section to the Commissioner to take copies himself.
11. As Barwick CJ observed in Southwestern Indemnities Ltd v. Bank of New South Wales [1973] HCA 52; (1973) 129 CLR 512 after referring to the universal expressions such as "at all times" and "to all buildings" contained in s.263:
"the sole limitation or qualification is that the
access should be sought for "the purposes of the
Act.'" (p 520)
12. However, as Mason, Murphy, Brennan and Deane JJ said in O'Reilly v. Commissioners of the State Bank of Victoria (No.1) [1983] HCA 47; (1982-83) 153 CLR 1 at p 48:
"Like all statutory powers, that power must be used
bona fide for the purposes for which it was
conferred and that involves that its exercise be
not excessive in the circumstances of the case."
13. The decision of this Court in Federal Commissioner of Taxation v. Citibank Ltd (1989) 89 ATC 4268 provides an example of a case where it was held that the Commissioner had exceeded power in exercising the right of access under s.263 by denying to Citibank the capacity to make an adequate claim of privilege on behalf of its clients.
14. Section 264 authorises the Commissioner to require persons within the jurisdiction to furnish information, give evidence or produce books, documents or papers. Before the powers under the section may be exercised the Commissioner must serve a notice indicating to the addressee what is required of him. In this way the section differs from s.263 where the right of access may be initiated without a specific authority in writing: Federal Commission of Taxation v. Citibank Ltd post.
15. While both s.263 and s.264 must be read together, cf. O'Reilly per Gibbs CJ, Wilson and Dawson JJ at pp 42-3, and per Mason, Murphy, Brennan and Deane JJ at p 47 ff., it does not follow from this that the powers exercised under the one section must be exercised before the powers may be exercised under the other. So in Citibank an argument that the Commissioner should first ask questions under s.264 before exercising the powers of access under s.263 failed. An argument that the Commissioner should first exercise the right of access before exercising powers under s.264 would similarly be misconceived.
16. Section 264 empowers the Commissioner to do three things. First, he may under s.264(1)(a) require the addressee to furnish him with "information" in the sense of "knowledge". It would seem as a matter of language that if that is all the Commissioner desires to do he need not identify in the notice the person in connection with whose income or assessment the request for information is made: Federal Commissioner of Taxation v. Australia & New Zealand Banking Group Ltd (1974) 143 CLR 499 at p 535 per Mason J. The comment of Gibbs J in Geosam Investments Pty Ltd & Ors v. Australia & New Zealand Banking Group Ltd (1979) 25 ALR 445 at p 446 that the Commissioner would not be able to obtain under s.264(1)(a) full information as to the contents of a document which he could not have had produced under para.(b) was probably directed at an argument that both under s.264(1)(a) and s.264(1)(b) the information or document must be one required for the purposes of the Act rather than as suggesting a limitation upon s.264(1)(a) inconsistent with the view of Mason J.
17. Second, the Commissioner may under s.264(1)(b) require a person to attend and give evidence before him or an officer authorised by him. If the Commissioner desires to exercise this power he must specify in the notice the person whose income or assessment is being enquired into: Smorgon v. Australia & New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475 at p 486. A corporation cannot be required to attend and give evidence and a notice addressed to a corporation requiring its attendance for the purpose of giving evidence would be bad: Smorgon at pp 481-6 per Stephen J.
18. Third, the Commissioner may under s.264(1)(b) require a person to produce to him all books, documents and other papers in the custody or control of such person. This requirement is independent of the power of the Commissioner to require a person to attend and give evidence: Smorgon at pp 485-6 per Stephen J; Federal Commissioner of Taxation v. ANZ Banking Group Ltd at p 524 per Gibbs ACJ, at p 535 per Mason J and at p 546 per Murphy J. However the books, documents and papers must be such as relate to the income or assessment of a person named in the notice, assessment being the whole process of ascertainment of the taxable income and tax payable thereon: Federal Commissioner of Taxation v. ANZ Banking Group Ltd at pp 523-4 per Gibbs A.C.J.; at p 535 per Mason J; at p 541 per Jacobs J.
19. Each of the three powers while capable of exercise independently could, should the Commissioner so desire, be exercised together so that one notice would suffice. Should that happen, it would be unnecessary that the notice specify under which subsection the notice is given. The contents of the notice itself will indicate which one or more of the powers referred to in s.264 the Commissioner desires to exercise.
20. A notice properly given under s.264 operates to override any contractual obligation of the recipient to preserve confidentiality: Smorgon at p 487; Federal Commissioner of Taxation v. ANZ Banking Group Ltd per Gibbs A.C.J. at pp 521-2, but it does not, it would seem, abrogate a claim for legal professional privilege: cf. Baker v. Campbell [1983] HCA 39; (1983) 153 CLR 52.
21. Section 264(1) imposes no specific obligation upon a recipient of a notice given under the section to comply with it. However the sanctions for non-compliance with a notice are to be found in ss.8C, 8D, 8K, 8N and 8P of the Taxation Administration Act 1953 which impose penalties for: refusing or failing when required to furnish information, produce books, papers, records or documents or to attend, to the extent that the person is capable of doing so (s.8C); refusing or failing to answer questions or produce books (s.8D); making false or misleading statements (s.8K); recklessly making false or misleading statements (s.8N); and knowingly making statements that are false or misleading (s.8P). The penalties for breach of these provisions can be quite severe and include the possibility of imprisonment as well as substantial monetary fines. The penalties are tiered so that the penalty for a second offence is more severe than that for a first offence and the penalty for a third and subsequent offence is even more severe than that for a second offence.
22. No doubt in part because of the severe sanctions that may become applicable in the case of a failure to comply with a notice under the section, but in part also because a request to supply information, attend and give evidence or produce books and documents etc. is a considerable intrusion upon the privacy of the individual to whom a notice is addressed, there is a requirement that a notice identify with sufficient clarity any documents which are required to be produced: Federal Commissioner of Taxation v. ANZ Banking Group Ltd per Gibbs ACJ at p 525. Where information is required by the section to be furnished, the request for information should be so framed as to be sufficiently clear to convey to the addressee what information is sought and a notice which was unintelligible would obviously be bad. However, it does not follow from this that the question of the validity of a notice should be approached carpingly by engaging in a narrow analysis of each word in an attempt to find some latent ambiguity in it. Rather the approach to be adopted is to ask in respect of any particular request whether a reasonable man in the position of the addressee of the notice can fairly comply with it and not be thereby exposed to the possibility of penalty for non compliance having regard to the manner in which the notice is formulated.
23. It will be seen from the notice annexed to this judgment that that notice did not on its face disclose whether the source of the power to give the notice lay in s.264(1)(a) or s.264(1)(b); rather the notice referred to s.264 as a whole. The same is true of all notices the subject of the present appeals. That is not a matter for criticism for there is no requirement that a notice refer to one or other of the two paragraphs of the subsection.
24. A perusal of the notice makes it clear that the notice seeks information (s.264(1)(a)); it also seeks "copies" of documents of various classes which are described. To the extent that the notice in so doing seeks production of existing documents or existing copies of documents the notice could be justified to that extent under s.264(1)(b). Whether the notice should be so construed is one of the more difficult aspects of the present appeal. However, the mere fact that the notice seeks to exercise powers under both s.264(1)(a) and s.264(1)(b) would not have the consequence of invalidating the notice.
25. Hence the fact that the notice went beyond the requirement of information and required production of documents did not operate to invalidate the notice in a case such as the present where the requirement for a valid notice requiring production of documents (particularly the stipulation in the notice of the person to whose income and affairs the document must relate) was complied with. Although the Commissioner did not in Walsh v. Commissioner of Taxation (1981) 81 ATC 4693 press the requirement to produce a document (in that case an opinion of counsel) where that request was contained in a notice that otherwise required the provision of information, the Commissioner's failure to press the production presumably arose because the notice did not stipulate the person to whose income and affairs the opinion related and so would not have been authorised by s.264(1)(b).
26. The more difficult question is whether the notices required the recipient to bring into existence copies of documents. I have already indicated that s.263 of the Act does not appear to authorise the Commissioner to require others to copy documents although it does authorise him to make copies of documents himself as part of and in exercise of his right of access. No reference at all is made in s.264 to copies and I think that it is clear that the legislature did not intend in s.264 to empower the Commissioner to require the making of copies. Had the legislature so intended, it presumably would have dealt at the very least with the payment of an appropriate fee or reimbursement of the costs of copying conformably with the general requirement of the Australian Constitution that Commonwealth legislation for the acquisition of property be on just terms (s.51(xxxi)).
27. The opening words of the notice refer to the furnishing and production of what is described as "information". Under the very first question in the notice which seeks an "explanation" of a particular matter, the recipient of the notice is requested to "provide copies of all minutes of directors meetings, correspondence and all other documentation that evidences" certain matters. A similar request to provide copies appears in para.(2). In clause 2(xi) of the notice the request is to "provide a copy of" various books including the trust's bank statements, cash books, cheque butts and journal entries" of a particular kind during a particular period. In clause 4 the word "provide" is used in the context of provide reasons as well as in the context of providing copies.
28. There is a latent ambiguity in most words and the words "provide" and "copy" are no exception. The word "provide" may, depending upon its context, mean no more than "furnish" or "supply" (see The Macquarie Dictionary (2nd revised edition) but it may connote "preparation" as well as "furnishing". The word "copy" will generally mean "reproduction" (see The Macquarie Dictionary) but in a particular context is often used to mean no more than "version" or "example" as in the question, "Do you have a copy of Shakespeare's plays?"
29. The author of the notice may well not have read the word "copy" in contradistinction to the word "the original". It can hardly be imagined that the Commissioner could properly regard the production of the original of any document as involving a failure to comply with the notice. Rather, it may well be that the notice intended to require the addressee to produce either the original or a copy of the specified document at the option of the addressee. However the notice is so unclear that a reasonable person in the position of the appellants receiving such a notice might well regard the notice as requiring him to copy the relevant document and thereafter to provide to the Commissioner that copy and so be misled as to what he was required to do.
30. Given the serious penalties which a failure to comply with a notice may ultimately trigger it seems to me that an ambiguity in a notice which an addressee is unable to resolve for himself must, where that ambiguity could mislead him, operate to invalidate, to that extent, the notice.
31. I say "to that extent" because there seems no reason why a provision in a notice which provision is invalid should necessarily operate to invalidate the notice as a whole. Indeed, the appellants did not submit otherwise. It is, of course, different where the part of the notice which is bad is inseverable from the rest of the notice (cf. Dyson v. AG (1912) 1 Ch 158 and Royal Bank of Canada v. IRC (1972) 1 All ER 225 at p 239). In the latter case Megarry J in referring to a request for particulars by the revenue said:
"If the Commissioners seek particulars of more than
they are entitled to, I do not in principle see why
their requirement should not be bad merely as to
the excess. It may well be that if the excess is
so entwined with the valid as to be separable from
it only with difficulty, then the whole of the
requirement will be bad: the subject ought not to
be required to perform delicate feats of surgery on
what is in substance a single requirement."
32. However it was clearly implicit in what was said by Farwell LJ in Dyson at p 172 that if the valid portion of a notice were severable from that which is invalid the whole notice was not bad and the possibility of severance was accepted by this Court in Pyneboard Pty Ltd v. Trade Practices Commission [1983] HCA 9; (1982) 57 FLR 368 at p 376.
33. There is an analogy in the law relating to search warrants in which context it has been held by the Full Court of this Court in Parker v. Churchill [1986] FCA 88; (1986) 65 ALR 107 that the invalid parts of a search warrant granted under s.10 of the Commonwealth Crimes Act could be severed from the remainder.
34. The question whether there can be severance of the notices in the present case is a difficult but important one. It is true that there are a large number of paragraphs in each notice requiring the addressee to provide copies and it is also true that if the consequence of invalidity of each of these paragraphs is to involve the excision of them from the notice the remainder of the notice would be unintelligible. However it does not seem to me that this is what severance really means. The consequence of treating each requirement to provide copies as invalid is merely that the addressee has no obligation to comply with that particular requirement. Otherwise it remains in the notice. There is no mechanical scissors and paste exercise to be performed.
35. In most instances the requirement to provide copies is, in any event, discrete. For example, in paragraph 2 of the notice attached to this judgment there is no cross reference to paragraphs 2(v) and 2(viii)(b) so if these particular paragraphs were merely excised there is no paragraph dependent upon them. Different considerations apply to paragraphs 1(iv) and 1(v) where after the demand that copies of certain documentation be provided the notice continues:
(v) "If no written documentation exists then
explain the reason it was not considered
necessary to evidence such decisions in
writing."
36. I doubt if there would be difficulty in answering 1(v) in the event that 1(iv) were totally excised from the notice but once it is realised that invalidity requires no more than treating the invalid requirement as ineffective, there remains no difficulty at all in understanding paragraph 1(v) because paragraph 1(iv) remains in the document. The same comment is equally applicable to clause 2(x)(ab).
37. The argument that each of the corporate notices is bad amounts to no more than saying that once there is an invalid requirement in the notice, invalid either because it requires the addressee to make copies or because it is capable of being so interpreted then the whole notice must as a matter of law be bad because the addressee must turn his mind to the question which part of the notice is invalid and which part of the notice is good. Such an argument pays mere lip service to the possibility of severance while denying it under the guise of some notion such as practicality.
38. It follows, there being, in my opinion, no difficulty in so doing, that the requirements in the notices for the supply of copies are invalid and should be severed from the remainder of the notices.
39. The next series of submissions seized upon the particular wording of the particular notices and sought to attack that wording on a number of bases.
40. First, it was submitted that certain questions sought conclusions of fact rather than primary facts, the proposition being advanced that the Commissioner under s.264(1)(a) can seek information only as to specific primary facts. Second, it was submitted that some questions sought information as to matters which involved either a question of law or the addressee of the notice making assumptions of law. By way of illustration reference was made to question 3 of the Prestige Motors notice with its reference to "recouped" and to "arrangement". It was said that the meaning of the word "arrangement" for example in a particular context in the Act, e.g. s.260, s.82KH, or the meaning of the word "recoupment" in the context of s.100A of the Act necessarily involved the drawing of conclusions, the acceptance of hypotheses and the request of information as to matters of law. These submissions cannot, in my opinion, be accepted.
41. It may be conceded that the Commissioner could not address a notice to a recipient seeking his view on an abstract question of law as such, although the reason for so saying is that such a request would be irrelevant for any purpose of the Act, rather than that the request would not be a request for information. However, I have carefully considered each notice and am of the view that where questions are asked using words that might appear in particular contexts in the Act (e.g. s.260) the questions merely use ordinary English words and would be so understood by the addressee.
42. Next it was submitted that certain questions were bad as requiring the addressee to assume a fact or proceed upon the basis of hypothesis. Examples given included questions 2ix and 2x(b) of the Prestige Holdings notice. It was said that to be forced to make assumptions was to be put into a position of potential embarrassment. An analogy was sought to be drawn from the rules of cross-examination. Again the submission is misguided as it misconceives the function of notices under s.264. The reason why a question which requires a witness to make an assumption, which assumption has not first been put to the witness, will usually be rejected in cross-examination is that to allow the question to be put in the heat of cross-examination would be unfair to the witness. A request for information under s.264(1)(a) does not require immediate answer and the addressee of the notice is at liberty when providing information to indicate, if it be the case, that the assumption is false with the consequence that the question is not relevant to any enquiry.
43. Next it was said that many of the questions in the notice were ambiguous and did not convey in clear and plain terms to the recipient what information was required. An example given was clause 2(v) of the Prestige Motors notice which referred to documentation etc. which evidence "the negotiations for and the issues of those units". It was said that the documents called for could either be such as themselves bore witness to the negotiations or which manifested the negotiations. Given the ambiguity it was said the recipients should not be required to choose between the alternatives, particularly having regard to the substantial penalties for non compliance with the section.
44. However the suggested ambiguity in this and other questions is in my opinion more apparent than real. Given the context of the question a reasonable person in the position of the addressee of the notice would in my view be left in no doubt as to the information or documentation which he is required to furnish. So far as the particular question 2(v) is concerned documentation which affords proof of the relevant negotiations is required.
45. I would, with respect, adopt in reply to the present group of submissions what was said by Northrop, Deane and Fisher JJ in this Court in Pyneboard Pty Ltd v. Trade Practices Commission [1983] HCA 9; (1982) 57 FLR 368 at p 375:
"The requirement that a notice under s.155(1)
convey, with reasonable clarity, to the recipient
what information he is required to furnish or what
documents he is required to produce is not to be
applied in a precious or hypercritical fashion (see
Melbourne Home of Ford Pty Ltd v. Trade Practices
Commission No.3) [1980] FCA 94; (1980) 47 FLR 163). Artificial
dissection, in the cause of determined obfuscation,
can introduce an argumentative element of
uncertainty into words which, when read reasonably
in context, are adequate to convey a plain and
clear meaning. Provided a notice makes it
reasonably clear, in the circumstances in which it
is given and on a fair reading of its terms, what
information or documents are required, the
requirements of s.155(1) as to clarity will be
satisfied. In this regard, the mere fact that
parsing and analysis in the artificial atmosphere
of the courtroom can lead to the identification of
a number of latent ambiguities will not invalidate
what, as a matter of common sense, is reasonably clear."
46. More substantial were the appellants' submissions that the notices were invalid to the extent that they sought production of documents which prima facie were the subject of a claim for legal professional privilege e.g. opinions of counsel on various matters. It was not sought to be argued that the Commissioner had no power to require production of such opinions on the ground that they could not be relevant to the income or assessment of the persons nominated in the notice although there could, at least in some circumstances, be scope for such an argument.
47. The Commissioner does not seek to argue that legal professional privilege is abrogated by s.264 and having regard to the decisions of the High Court in O'Reilly (supra) and Baker v. Campbell (supra) the Commissioner's concession in this regard was, in my opinion, rightly made.
48. The argument for the appellants can be put quite simply. It is said that a notice purporting to be given under s.264 of the Act which requires production of documents or the furnishing of information which the section does not authorise to be produced or furnished, is, to that extent, bad. Thus a notice under s.264(1)(b) would be valid only if "it clearly confines the documents to be produced to the class of documents of which the Commissioner is authorised to require production". Cf. per Mason J in Federal Commissioner of Taxation v. ANZ Banking Group Ltd supra at p 537. So much may be conceded. Next it is said that s.264(1) does not authorise the Commissioner to require production of documents which are prima facie the subject of privilege. The conclusion thus sought to be drawn is that, to the extent that the notices seek production of documents which are prima facie the subject of legal professional privilege, (or information about such documents), the notices are bad.
49. The critical question is whether the second premise in the argument is correct. That in turn depends, at least in part, upon the question whether a document is privileged from the outset, or whether a document will only be the subject of legal professional privilege if a claim for privilege is made and sustained.
50. The matter is not the subject of direct authority and this is perhaps not surprising since until the decision of the High Court in Baker v. Campbell there was great doubt as to whether the doctrine of legal professional privilege had any application at all to non judicial proceedings, it being thought by many that the privilege was a rule of evidence.
51. In New Zealand the Court of Appeal was required in Commissioner of Inland Revenue v. West-Walker (1954) NZLR 191 to consider whether a notice given to a solicitor under s.163 of the Land & Income Tax Act 1923 and Finance Tax Act (No. 2) 1948, (the former being in terms virtually identical to s.264 of the Act) to produce books and documents, compelled the solicitor to comply with its terms where he was unable to obtain instructions from his client. The notice contained no exclusion from the requirement to produce on the ground of privilege. It was held that the solicitor was entitled to decline to furnish the information and produce documents which would be protected in ordinary legal proceedings by privilege unless his client had previously assented to his so doing.
52. It was never suggested by the Court of Appeal that the notice to the solicitor, which sought inter alia all correspondence relating to certain transactions, was itself void whether or not, as was pointed out by Fair J at p 203, all the documents and information which the solicitor possessed were documents which he was bound to produce as not being entitled to legal professional privilege. Rather it was held that the solicitor was entitled to raise privilege as a defence in answer to proceedings for failure to comply with the notice.
53. However it is, of course, clear from the decision that the issue of the validity of the notice was not debated in West-Walker and indeed the question of law posed by the magistrate to whom the matter had apparently come on a prosecution was so framed as not to raise the present question. Viz. "Whether in the circumstances, and notwithstanding the provisions of the Land & Income Tax Act 1923 and its amendments, the defendant in his capacity as a solicitor is privileged and excused in law, and, if so, to what extent, from furnishing the information and producing the books and documents sought by the Commissioner in exercise of his authority under the Act until such time as he has his client's authority to do so?"
54. Nor did the issue arise in Baker v. Campbell (supra) where the question posed for consideration by the Court, the context being a search warrant under s.10 of the Crimes Act 1903 (Cth), was:
"In the event that legal professional privilege
attaches to and is maintained in respect of the
documents held by the firm, can those documents be
properly made the subject of a search warrant
issued under s.10 of the Crimes Act?"
55. When one speaks of a document being prima facie the subject of legal professional privilege all that is meant is that the document is one that records in some way or another legal advice. Where the issue arises in a court on an application for inspection of a document or where in the course of cross-examination objection is taken to the production of a document or to answering a question put on the ground that the document or the answer to the question is the subject of legal professional privilege, in allowing production and inspection of documents the court ruling upon the question exercises a judicial discretion and will scrutinize with care any claim of privilege made. As Stephen, Mason and Murphy JJ said in Grant v. Downs [1976] HCA 63; (1976) 135 CLR 674 at p 689:
"It is for the party claiming privilege to show
that the documents for which the claim is made are
privileged. He may succeed in achieving this
objective by pointing to the nature of the
documents or by evidence describing the
circumstances in which they were brought into
existence. But it should not be thought that the
privilege is necessarily or conclusively
established by resort to any verbal formula or
ritual. The court has power to examine the
documents for itself, a power which has perhaps
been exercised too sparingly in the past, springing
possibly from a misplaced reluctance to go behind
the formal claim of privilege. It should not be
forgotten that in many instances the character of
the documents the subject of the claim will
illuminate the purpose for which they were brought
into existence."
56. What the above comments omit (no doubt because it was irrelevant on the facts of the case) is that even where the claim to have a document exempted from inspection on the ground of privilege is made, that claim may nevertheless be rejected where the privilege is shown to have been waived or where the advice sought was for the purpose of committing or furthering a crime or fraud. See per Gibbs CJ in Baker v. Campbell (supra) at p 67, per Mason J at p 80, per Murphy J at p 86 and per Dawson J at p 129. A notice under s.264 may well seek production of a document which appears on its face to be privileged but where in fact that privilege has been waived. Is the notice then to be treated as void merely because on its face the document might be the subject of a valid claim for privilege? If the answer is yes, might a requirement for the production of all documents of a general description (not on their face necessarily capable of being the subject of a valid claim for privilege) be invalid because a document which falls within the description happens to be the subject of a valid claim for privilege? Logic, at least, suggests that these questions should be answered, no. That is to say that a requirement to produce a document is not bad merely because it is possible that the document may ultimately be the subject of a valid claim for privilege, even if on its face the possibility of that claim succeeding appears likely, having regard to the description of the document. Such authority as there is, is not to the contrary.
57. In re BX Development Inc & Ors v. The Queen (1976) 70 DLR (3rd) 366 a case referred to in Baker v. Campbell (supra), the British Columbia Court of Appeal refused to quash a search warrant merely because the documents sought to be seized were in a solicitor's office. As was said by Bull J.A. with whom in this respect the other members of the Court agreed (at p 369):
"In my view, it was never shown to the Judge below,
or to us, that any of the documents covered by the
warrant and seized were documents subject to such a
privilege, if any existed. The mere fact that the
person from whom documents are taken on a proper
search warrant is a solicitor raises no privilege
which would require or justify the quashing of that
search warrant."
58. In Solosky v. The Queen (1979) 105 DLR 745, a case directly relied upon by the majority of the High Court in Baker v. Campbell Dickson J with whom the other members of the Court agreed, noted that privilege could only be claimed by a prisoner seeking exemption from the opening of his mail document by document. His Honour added at p 758:
"To make the decision as to whether the privilege
attaches, the letters must be read by the Judge,
which requires, at a minimum, that the documents be
under the jurisdiction of a Court."
59. The very formulation of the issue in Baker v. Campbell assumes that the search warrant in that case was not on its face bad, but that privilege was not only required to be claimed but also had to be maintained. However, it is fair to say that no member of the High Court addressed the question whether the warrant in that case was bad on its face merely because documents subject to it could or would prima facie be the subject of a claim for privilege. The argument which Mason J, dissenting in Baker v. Campbell found compelling was the difficulty of determining, where the issue arose in an administrative context whether a document was privileged. This difficulty was doubted by Dawson J at p 132. His Honour said:
"In the first place, the doctrine of legal
professional privilege is not ordinarily difficult
to apply and there is no reason to suppose that its
application in a non-judicial context is any less
appropriate than the application of the many other
rules of law which must frequently be applied in
proceedings other than judicial proceedings.
Moreover, should any dispute arise, the means exist
whereby a judicial determination of the dispute may
be obtained as is indicated by this and the other
cases in which such a dispute has arisen. Such a
reason was not thought to justify the exclusion of
the privilege against self-incrimination from
extra-judicial proceedings (see Sorby v. The
Commonwealth [1983] HCA 10; (1983) 152 CLR 281), nor should it do
so in the case of legal professional privilege."
60. It may be thought that the decision of this Court in Federal Commissioner of Taxation v. Citibank Ltd (supra) stands in the way of accepting the Commissioner's submissions. In that case Citibank argued that a decision under s.263 to seek access was void because insufficient attention was given to the fact that there were documents on the premises of Citibank which were prima facie the subject of privilege and that the exercise of the power under s.263 was in the circumstances of that case unreasonable because insufficient time was given to permit Citibank adequately to deal with the issue of privilege. In fact no trial had ever taken place of the issue whether particular documents were privileged and counsel for Citibank argued the case, as here, on the basis that certain documents which had been tendered in evidence were "prima facie" privileged. The full Court appears either to have proceeded upon the assumption that the documents were such as to which legal professional privilege attached (cf. 89 ATC 4268 at p 4275) or that the relevant issue (the Court concluding that the decision-maker had paid attention to privilege in deciding to take access) was whether adequate opportunity was given to Citibank to make the claim for privilege. See at pp 4277-8. In either event, it seems to me that the issue in the present case was not really considered by the court in Citibank.
61. Some light is shed upon the issue by the judgment of the Full Court of this Court in Arno v. Forsyth (1986) 65 ALR 125. In that case the Court considered the validity of a search warrant issued in respect of the search of a barrister's chambers. The warrant was held to be void for uncertainty as being excessively wide so that such comments as were made with respect to legal professional privilege were dicta.
"It was argued that no assumption should be made
that any particular document covered by the warrant
was the subject of legal professional privilege,
and that it could not therefore be said to be
invalid. It was put that the issue was one to be
decided at the time of execution.
To a point I think this submission is sound. The
matters to be considered by the justice before he
issues a warrant pursuant to s.10 are those set out
in the section. He would not, of course, knowingly
issue a warrant if it were plain on the material
submitted to him that the things sought were the
subject of legal professional privilege. This
would however not necessarily be so even where the
warrant is sought against a legal practitioner in
respect of documents concerning a client, because
the question whether or not privilege attaches is
subject to a number of considerations, not least of
which is the attitude of the client of the legal
practitioner. It is the privilege of the client.
The Justice of the Peace may in a particular case
be able to take the matter further; the affidavit
in support of the issue of the warrant should
inform him on as much as is known relevant to the
topic. In the present case, there were apparently
a large number of clients. Mr Forsyth was probably
under a duty to claim privilege in the first
instance, but the attitude of his clients is the
primary determinant."
63. Having discussed the decision of the High Court in Baker v. Campbell his Honour then expressed the view that the issue of privilege was one that fell to be decided at the time of execution of the warrant. From a practical standpoint there is much to be said for his Honour's view, because it would be impossible to determine issues of privilege at an earlier time. His Honour in a passage, so far ignored by those responsible to change the law, suggested that the practical procedure to be adopted might have to be the subject of legislation. I can but echo that suggestion both in the context of s.10 of the Crimes Act and in the context of s.264 and similar sections.
64. Lockhart J addressed at p 136 the point of time at which the question of privilege should be raised. His Honour was of the view that the question of privilege should in appropriate cases be dealt with at the time of issue of the warrants and that sometimes it will be necessary to consider privilege at the time of execution of the warrant. His Honour pointed out the desirability of the warrant itself addressing the issue. Jackson J expressed the view (at p 145) that the High Court in Baker v. Campbell was not seeking to resolve the issue of the point of time at which privilege was to be considered. However his Honour at p 145 said:
"Assuming, however, that the existence of legal
professional privilege in respect of a document
should be treated as meaning that a search warrant
may not lawfully be granted in respect of such a
document, I do not think that the issue whether a
warrant has lawfully been granted in respect of
such a document is to be determined simply by the
fact that the description of the document in the
search warrant is such that it would normally
indicate a document to which legal professional
privilege would attach.
It seems to me that in such circumstances the
question whether privilege attaches is one to be
determined by matters dehors the warrant itself and
I note that in Brewer v. Castles (No.3) (1984) 52
ALR 581 when Beaumont J struck out of a search
warrant a reference to "opinions of counsel" as
being beyond power, he did so only after referring
(at p 583) to the fact that there was no suggestion
in the evidence that the documents had lost the
status of being the subject of legal professional
privilege."
65. The comments of Fox and Jackson JJ above do, if anything, support the submission of the Commissioner that ultimately the question is one that goes not to the validity of the notice under s.264 itself but to the question whether a particular document can validly be required to be produced by the Commissioner. In my view the mere description of a document as being an opinion of counsel, or the fact that a request for information seeks the substance of legal advice will not permit the court to conclude that the notice has required production of a document or the furnishing of information which is the subject of legal professional privilege. Rather at the appropriate time, which would generally be at the latest at the time for compliance with the notice, it will be incumbent upon the recipient of the notice to make a claim for privilege and if that claim be rejected to maintain the claim if need be by an application made then to a court or as a defence to proceedings for prosecution. Alternatively, it would be open to the recipient of a notice to seek a declaration from a court having jurisdiction that it was entitled not to produce the document or furnish the information upon the ground of legal professional privilege.
66. Accordingly, I am of the view that the notices are not, to the extent that they may seek material the subject of legal professional privilege, bad.
67. The final submission advanced in favour of the invalidity of the notices was that the notices were addressed to a company and that a notice addressed to a company to supply information was bad.
68. This submission sought to found upon what was said by Stephen J in Smorgon v. Federal Commissioner of Taxation [1976] HCA 53; (1976) 134 CLR 475 at pp 481-5 in the context of the impossibility of a company attending and giving evidence and the consequent invalidity of a notice under s.264(1)(b) requiring it to do so. For the purposes of his submission the Commissioner accepted that the notices were in fact addressed to the relevant company although the form of each notice made that an arguable issue.
69. In my view the submission is misconceived. There is no impediment to a company supplying information. Of course, a company can only act through its agents but it does not follow from that truism that the company cannot supply information any more than that it cannot be required to furnish documents. The reason why a company cannot be required to attend and give evidence is that a company being an abstract legal entity cannot attend anywhere - neither can it take an oath or give evidence. Only an individual may attend, take an oath and give evidence. Nothing in what his Honour said in Smorgon or the cases cited in the very careful analysis undertaken by his Honour supports the submission sought to be advanced.
70. The notice addressed to Mr Fieldhouse was a notice which required him to produce at the Australian Taxation Office in Sydney 14 days from the date of the notice:
"all books, documents and other papers in your
custody or under your control relating to the
income or assessment of ... (4 named companies) for
the period 1 July 1977 to 30 June 1985 and, in
particular, all deeds, correspondence, memoranda,
minutes of Directors' meetings, file notes and
other documents relating to ..." (there followed a
reference to an offshore company and a description
of 13 transactions).
71. Mr Fieldhouse was the solicitor of the four named companies which included the three corporate appellants.
72. Evidence led before Einfeld J indicated that general practice in the Sydney Office of the Australian Taxation Office was to allow 28 days, that the officer in the Commissioner's office in Perth Mr Shawcross who had the conduct of the investigation and who had a detailed knowledge of the matter had suggested 28 days but that Mr Shawcross' superior had been responsible for the time being shortened from 28 days to 14.
73. As was pointed out by Einfeld J the notice under s.264 was not an isolated event which stood alone. The chronology as found by his Honour was as follows:
"1. A letter dated 26 November 1985 was sent to Mr
Fieldhouse. This was six pages in length and
requested information and documents relating
to the income or assessment of RLAV, Century
Finance, PTT and Perron Investments. A reply
was requested by 31 December 1985.
2. On 20 December 1985 Mr Fieldhouse wrote to the
Taxation Department and requested that the
time for compliance be extended to 28 February
1986. This was granted.
3. On 28 February 1986, Mr Fieldhouse requested a
statement of reasons pursuant to section 13(1)
of the Judicial Review Act.
4. On 24 April 1986, Mr Fieldhouse was informed
that the respondent did not intend to take
action on the letter of 26 November 1985 as if
it were a section 264 notice.
5. On 19 May 1986, a section 264 notice was
issued to him."
74. His Honour held, and with respect I agree, that the events preceding the issue of the notice could be taken into account when determining if the time allowed for compliance was reasonable: Ganke v. Deputy Federal Commissioner of Taxation No.2) (1982) 82 ATC 4474 at p 4477 and Waterhouse & Ors v. Federal Commissioner of Taxation (1988) 88 ATC 4088. This was not, as such, disputed by counsel for Mr Fieldhouse but rather it was said that the documents requested in the letter dated 26 November 1985 differed from those in the notice ultimately issued under s.264 so that the letter of 26 November 1985 was in truth irrelevant to the issue whether the time limited for compliance was reasonable. Further, it was said that, as a solicitor, Mr Fieldhouse required adequate time to consult with his clients, that the clients were in Perth and that objectively seen the time for production was unreasonable.
75. It is to be noted that no evidence was led from Mr Fieldhouse that the time for compliance presented him with any difficulties.
76. Section 264 does not refer at all to a time in which the addressee of the notice is to produce documents but it can no doubt be inferred from the terms of the section that a reasonable time for compliance must be given: cf. West-Walker supra at p 203; Commissioner of Taxation v. Ganke (1975) 1 NSWLR 252 at pp 255-6.
77. The appellant relied particularly on the decision of the New South Wales Court of Criminal Appeal in Commissioner of Taxation v. Ganke (1975) 1 NSWLR 252.
78. In that case Mr Ganke appealed to the New South Wales District Court against a conviction under the then s.223(1) of the Act for failing to duly furnish information as required by a s.264 notice and a case was stated for the opinion of the Court of Criminal Appeal. The questions asked in that Stated Case include the following:
"1. Does the Commissioner of Taxation or his
delegate have power to specify in a notice in
writing for the purposes of section 264(1)(a)
of the Income Tax Assessment Act 1936 as
amended a date on or before which the
information so required is to be furnished to
him.
2. If the answer to question 1 is "Yes", is it
necessary, if all other elements of the
offence are made out, in order that the
defendant be
(a) found guilty of an offence under section
223 of the Act that it be proved by the
informant that:
(i) a reasonable time; or
(ii) a time which, in the opinion of the
Commissioner his delegate, was
reasonable
for the furnishing of the information was
allowed by the notice, Exhibit C? or
(b) found not guilty of such an offence that
it be proved by the defendant that
(i) a reasonable time; or
(ii) a time which in the opinion of the
Commissioner his delegate was
reasonable
for the furnishing of the information was
not allowed by the notice, Exhibit C?
3. If the answer to Question 1 is "No", was the
notice, Exhibit C, void because it specified a
date on or before which information was to be
furnished?"
"1. Yes; 2.(a)(i) Yes; 2.(a)(ii) Does not arise;
2. (b)(i) and (ii) No; 3. Does not arise"
80. The Court held that to determine the question whether there had been a failure on the part of the recipient of the s.264 notice to furnish the requested information it was necessary to consider whether the time for compliance was reasonable.
81. Nagle J, with whom the rest of the Court agreed, said of the determination of a reasonable time at p 258 "... the question for consideration by the Court is an objective one and does not depend on the subjective views of the Commissioner."
82. However, it is clear in my view that their Honours did not intend to say that no regard could be had to the circumstances of the particular recipient of the notice, for the judgment then continued to consider the question upon whom the onus rested to prove the issue of reasonable time. In my view the question of whether the time limited in a notice is reasonable is a matter of fact in each case. In the present proceedings the onus lay upon the appellants to show that the time limited for compliance was in the circumstances of the case unreasonable.
83. No doubt if the time limited for compliance was on its face so manifestly unreasonable that no reasonable person in the position of the recipient could possibly comply with it, it would be unnecessary for a person challenging the validity of a notice to adduce evidence of the impossibility of complying with it. That, however, is not this case. Where, as here, the time limited for compliance, while short, cannot be said to be so short as to render compliance impossible it will be incumbent upon the person seeking to attack the notice as limiting too short a time to adduce evidence why it is unreasonable that he be required to comply with the notice within the time stipulated. Failure to adduce any evidence, as in the present case, leaves the Court unable to say whether in all the circumstances the time limited in the notice was unreasonable.
84. It will have been noted that while Mr Fieldhouse was the solicitor for the companies referred to in the notice it would not follow that the documents the subject of the notice were such that without more it could be assumed that they would be the subject of a claim for legal professional privilege. To this extent Mr Fieldhouse's case is, if anything, weaker than that advanced for the corporate appellants. However, for the reasons I have already given in connection with the appeals of the corporate appellants the notices were not void, even if it were possible to say that some of the documents sought, prima facie, were privileged. Nor was it, as submitted by counsel for Mr Fieldhouse, necessary for the validity of the notice to make it clear, by endorsement, accompanying communication or otherwise that Mr Fieldhouse was not required to produce privileged documents, no matter how desirable such a course might have been.
85. It was submitted for Mr Fieldhouse that a notice requiring production of all books, documents and papers whatsoever relating to the income or assessment of named third persons, even if limited in time would be void. The fact that the notice then proceeded to particularize certain documents for production did not save the notice since those documents had first to fall within the wide class.
86. Although Einfeld J addressed this argument below, his Honour did not find it necessary to address it. After referring to Smorgon's case and to what was said by Mason J in Federal Commissioner of Taxation v. ANZ Banking Group Ltd to which reference will shortly be made his Honour said:
"These judicial pronouncements seem to me to have
some conflicting elements. I think that what was
here validly required were all the documents held
relating to the income and assessment of the named
taxpayers, including those specifically listed.
When and if any prosecution flowed from the non
supply of certain documents said to have been
required, that would be the time, in my opinion,
for an argument as to what the notices could or did
require. For the present, I can discern no "in
principle" invalidity."
87. With respect to his Honour, that view is not an adequate answer to the submission. If the notices are so wide that a reasonable person in the position of the recipient of the notice could not comply with them or if they were so wide and oppressive in their terms that no reasonable decision maker would have issued them the notices or the decision to issue them, as the case may be, would be struck down at the outset. If the notices are valid, but there is some difficulty of compliance then no doubt that difficulty could be dealt with on a prosecution as a defence. However, if his Honour meant to imply that the issue of invalidity should await prosecution, that is not, in my opinion, correct.
88. Accordingly I turn to consider the question of the validity of the notice, noting that it is of significance that the notice is addressed not to the person whose income and assessment is under consideration but to a third party, albeit the solicitor of the companies whose income and assessments were the subject of investigation.
89. In Smorgon, Stephen J was required to consider the validity of a s.264 notice which relevantly required the production of seven categories of documents specified, the eighth being:
"all other books, papers, writings and other
documents concerning the said matters which are in
your custody."
90. The matters referred to were the income and assessment of each of the hundreds of persons both natural and artificial whose names were scheduled to the notice. In holding the notice invalid Stephen J said at p 491
"The vice lies not, however, in the sheer number of
such persons but rather in the uncertainty involved
in describing documents by reference to these two
"matters". A particular taxpayer may not himself
be aware of the particular basis upon which he has
been assessed to tax; he certainly may well be
ignorant of the basis upon which the Commissioner
may be proposing to assess him in the future. To a
third party such as the Bank it must often be quite
impossible to determine what documents in its
possession will answer the description of documents
"concerning" the process of assessment which the
Commissioner has adopted or may be proposing to
adopt in relation to a particular taxpayer. The
consequence is that, in my view, par.(viii) of the
notice is a nullity since it does not constitute a
requirement such as is contemplated by s.264 having
any certain content. Its presence in the notice
has, I think, no generally invalidating effect but
is mere surplusage.
It follows that I would not regard a notice which
did no more by way of requiring production of
documents, than to repeat the words of the latter
part of s.264(1)(b) as an effective exercise of the
Commissioner's power. These words describe the
ambit of that power but do not provide a suitable
formula for insertion in a notice. Such notice,
given in exercise of the power, must instead
specify with some degree of particularity, as do
pars.(i) to (vii) of the notice to the Bank, what
documents are being sought. Failing this there
will be no valid requirement."
91. If this case is binding upon us, then I think it must follow that Mr Fieldhouse is entitled to succeed in respect of the operative part of the notice. Although there are minor differences in wording (the word "relating to" is used in the present case in place of the word "concerning" and "assessment" is used alone rather than the words "process of assessment"), these differences do not enable me to distinguish the present case from Smorgon.
92. A similar argument for the invalidity of a s.264 notice was advanced in the ANZ Banking Group case. It appears that following the first Smorgon case the Commissioner served fresh notices upon the Bank and members of the Smorgon family (among others). Attack was made on the validity of these notices, two of which were held invalid as not indicating the person whose income and assessment the instruments related to and the remainder of which were held not invalid. The Court refused to grant a declaration that certain of the notices were valid because as Gibbs ACJ observed "that question depends on whether in fact the lockers did contain documents all of which relate to the income or assessment of the named persons", that being a question of fact.
93. At first instance Stephen J held that the notices addressed to the Bank were inoperative because the Bank did not have custody and control of the locker, the control being divided among members of the Smorgon family. That finding was reversed on appeal. His Honour otherwise held all notices valid except the two notices to which I have referred above. In discussing the notices Mason J said at p 537:
"What par.(1)(b) has in mind is that a notice may
be given requiring the recipient to produce "all
books, documents and other papers" in his custody
or control "relating thereto", that is, to the
income or assessment of the person whose name is
stated in the notice. It is then for the recipient
to decide for himself, difficult though the task
may be, which of the documents answer the
description. If his decision is wrong he exposes
himself to prosecution and penalty.
The existence of this hazard is not a sufficient
basis for the conclusion that the section requires
the Commissioner to give a notice in such terms as
would enable the recipient on reading it and on
examining the documents in his custody or control
to determine whether they fall within the ambit of
the Commissioner's powers. To so hold would be to
impose an impossible burden on the Commissioner.
In many, if not most, cases he will be unaware of
the contents of the documents of which he seeks
production. And there will be cases in which a
recipient who is not the taxpayer will lack the
degree of knowledge of the taxpayer's affairs and
of the Commissioner's approach to his assessment
that is necessary to determine whether the
documents relate to the taxpayer's income or
assessment. Not only would the suggested
requirement frustrate the object of conferring the
power, it would be inconsistent with the section as
I have explained it.
It is not in dispute that a notice given under
par.(1)(b) may validly require the production of
something less than all the books, documents and
other papers in the custody or control of the
recipient relating to the income or assessment of
the named person. If may, for example, specify
particular documents. Such a notice, if correctly
drawn, will make it clear that the requirement
extends to the particular documents because they
are included in the class of documents of which the
Commissioner is authorized to require production."
94. The precise terms of the notices do not appear from the report. However, they apparently included a notice addressed to the Bank, inter alia, to produce books, documents and papers in connection with the income of and/or the ascertainment of the amount of taxable income and the tax payable thereon by certain named persons being all books, documents and other papers located in certain deposit boxes. All of the Court was of the view that this notice was valid in form. Mason J was of the view that some of the notices addressed to the Smorgon family were void and to this extent, his Honour was in dissent.
95. It can hardly be thought that Stephen J whose judgment in the ANZ Banking Group case was ultimately upheld (but for the issue of control) was unaware of his Honour's previous judgment. Indeed, he referred to it. It must therefore be concluded that his Honour saw the notices in the later case as not falling within what his Honour had decided in the former case presumably because they were distinguishable.
96. The comments of Mason J in the later case do not sit well with the reasons for decision of Stephen J in the former. If the comments of Mason J were taken literally, a notice requiring a third person to produce all documents relating to a named person's income and assessment would be clearly valid, whereas the view of Stephen J seems to have been that it was not.
97. A decision of a single justice of the High Court is of course deserving of great respect and I would give the matter earnest consideration indeed before failing to follow it. Nevertheless, the "modern" rule of precedent is, as Gibbs J said in Viro v. The Queen [1978] HCA 9; (1976-8) 141 CLR 88 at p 120 usually expressed as being: "every court is bound to follow any case decided by a court above it in the hierarchy." The theoretical justification of the rule is the very existence of the hierarchy of courts within Australia at the present time, the High Court being at the apex: cf. per Jacobs J in Viro at p 151. Thus the removal of the right to appeal to the Privy Council left the High Court itself free to follow its own decisions in preference to those of the Privy Council and left intermediate courts bound to follow any High Court decision in preference to a conflicting decision of the Privy Council.
98. Given this theoretical justification it must follow, in logic, that when the rule is stated that the Federal Court is bound to follow decisions of the High Court the rule refers to judgments of the High Court on appeal rather than judgments of a single Justice of that Court, since while a judgment of a single Justice is a judgment of the High Court it is not a judgment of a court that could sit on appeal from the Federal Court, there being a requirement that an appeal from this Court be heard by a full Court.
99. This presumably was the view of Jacobs P, sitting as a Judge of the New South Wales Court of Appeal in Bone v. Commissioner of Stamp Duties (1972) 2 NSWLR 651 at pp 654-5 when his Honour referred to a decision of a single Justice of the High Court as being not a decision of that Justice "when sitting as a member of a court in the framework of the appellate structure of which this Court is part" and therefore "not a precedent which is binding" upon the Court of Appeal. See too the discussion of the position of a single Judge of this Court by Gummow J in Businessworld Computers v. Telecom (1988) 82 ALR 499 at p 504.
100. Thus it seems to me that the full Court of this Court is free to determine for itself whether to follow the decision of Stephen J in Smorgon.
101. Section 264 on its face contemplates that the Commissioner may give a notice for the production of all books etc. in the custody or control of a recipient which relate to a nominated person's income or assessment. Thus on its face a notice requiring production of all such books would seem to have been authorised by Parliament. The suggestion that a notice in that form is bad appears to be based upon the oppressive burden placed upon the recipient, at least if a third party, to have to decide from among the documents which are in his hands, those which do and those which do not relate to the relevant person's "income or assessment", particularly as failure to comply with the section gives rise to penal consequences. Cf. Commissioner for Railways v. Small (1938) 38 SR 564.
102. While this argument is attractive and while it will often be difficult to determine whether a particular document falls within the category of a document which relates to some other person's "income or assessment" it will in principle be not more difficult than the question which arises where documents of a particular class are called for (e.g. "all those documents in a strong box" or "all minutes or correspondence") and the recipient is required by the notice to determine not merely whether the document is in the strong box but whether the document is one falling within a particular class (e.g. within the class of "minutes" or "correspondence"). The difficulty in each case lies in the very peculiar obligation of the addressee to have to determine for himself whether particular documents fall within the precise description contained in the notice.
103. Of course if a notice calls for all documents having the necessary relationship to be produced the class of potential documents to be examined may on the particular facts of a case be large indeed but in such a case, if there were ultimately shown to be a failure to produce a particular document it would seem unlikely that a prosecution for failure to comply "to the extent that the person is capable of doing so" would succeed, notwithstanding the advantage which the system of averment gives to the Commissioner. Averment, after all, does no more than displace the onus of proof in a prosecution.
104. What I have said accords largely with the view which Mason J expressed in ANZ Banking Group Ltd which I have set out above and I am fortified by what his Honour there said although it seems clear that these remarks were not directed to the argument presently before the Court.
105. It follows that I am of the view that the notice addressed to Mr Fieldhouse was good and that I would dismiss the appeal brought by him with costs.
106. The orders which I would therefore propose are as follows:
1. As to appeals Nos. G161, G162 and G163 -
(a) Appeals allowed in part.
(b) In place of the orders made by Einfeld J there be
substituted:-
(i) declaration that each of the notices the
subject of the appeals is invalid to the
extent that it requires production of copies;
(ii) an order that the respondent pay to the
appellant one quarter of the costs of the
appellant in the application before Einfeld J
and of the appeal.
2. As to appeal No. G89 -
(a) Appeal dismissed.
(b) Appellant to pay the respondent's costs of the
application.
(1976) 134 CLR 475
(1979) 143 CLR 499
(1985) 9 FCR 316
(1985) 8 FCR 334
(1975) 1 NSWLR 252
(1983) 153 CLR 52
(1986) 9 FCR 576
(1983) 153 CLR 1
(1988) 83 ALR 99
(1973) 129 CLR 512
(1974) 143 CLR 499
(1979) 25 ALR 445
(1982) 57 FLR 368
(1986) 65 ALR 107
(1980) 47 FLR 163
(1976) 135 CLR 674
(1983) 152 CLR 281
(1986) 65 ALR 125
(1972) 2 NSWLR 651
(1988) 82 ALR 499