Sharp, J. R. & Anor v Taxation, Deputy Comm. & Ors [1988] FCA 66

interlocutory relief pending the final hearing of the

proceedings. Although the principal proceedings will, it appears, involve a consideration of the application of both

$83.263 and 264 of the Income Tax Assessment Act 1936 ("the Act"),

only s.263 is in question here. This is because the parties have agreed on a method of holding the status quo in respect of the Commissioner's purported exercise of his powers under s.264.

"263. - (1) The Commissioner, or any officer authorized by him in that behalf, shall at all

places, books, documents and other papers for any of the purposes of this Act, and for that purpose

may make extracts from or copies of any such books, documents or papers.

(2) An officer is not entitled to enter or remain on or in any building or place under this section if, on being requested by the occupier of

the building or place for proof of authority, the officer does not produce an authority in writing

signed by the Commissioner stating that the officer is authorised to exercise powers under this section.

(3) The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, umder subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section.

Penalty for a contravention of this subsection: $1,000." The present dispute arises in the following context. According to Mr. Sharp's evidence (which is substantially accepted by Mr. Fitton), on 10 February 1988, Mr. Fitton called

on Mr. Sharp and demanded, pursuant to 8.263, immediate access to the second applicant's "fax" books. These books record facsimile transmissions sent. Mr. Sharp asked for an opportunity to obtain legal advice. After further discussion, an arrangement was made to hold the position on a temporary basis: photocopies were made of the fax books and the photocopy was placed in a_ sealed

envelope; Mr. Fitton undertook not to open the envelope for a

The envelope has not been opened. It was called for and tendered in the present application (exhibit "A"). I have directed that the envelope be marked "confidential", that it remain in the Court's custody and not be opened without a Court

In the principal proceedings, the applicants seek judicial review of, inter alia, the decision of the respondents to have access to the fax books. The applicants claimed, by way of interim relief, an order, pending the final hearing, that the respondents deliver into the custody of the Court, to abide any further order, the envelope containing the fax material. Since the envelope is now in the Court's custody, the applicants seek

only an order that it remain in such custody until further order.

On behalf of the applicants, reliance is placed upon observations made by Mason, Murphy, Brennan and Deane JJ. upon the operation of s.263 in Q'Reilly v. State Bank of Victoria Commissioners (1982-3) 153 C.L.R. 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."

It is submitted on behalf of the applicants that the respondents' purpose in purporting to exercise the power of access granted by s.263 was not bona fide for the purposes of the Act and was excessive in the circumstances. It is said tht although the only relevant purpose here could be the assessment of taxable income, it should be inferred from the width and general nature of the respondents' request that they had in mind

Mr. Fitton gave evidence that he believed that a number of the clients of the second applicant had engaged in "profit shifting" and "transfer pricing" schemes using international tax havens; and that the fax books contained material which evidenced steps taken in the implementation of such schemes. Mr. Fitton believed that tax had been avoided or evaded by means of these schemes; and that obtaining the fax material would assist

On behalf of the respondents, reliance is placed upon observations made by Barwick C.J. in Southwestern Indemnities Limited v. Bank of New South Wales (1973) 129 C.L.R. 512 at p.519:

"It suffices that the exercise of the power given by the section is for the purposes of the Act, which of course include an investigation into whether or not a person is or has been in receipt of assessable income. Such an investigation cannot be limited to buildings, books, etc. of a person who is liable to taxation but must extend to any person."

Reliance is also placed by the respondents upon the

opinion expressed by Murphy J. in Federal Commissioner of

Taxation v. Australian and New Zealand Banking Group Ltd.

(1977-79) 143 C.L.R. 499 (at p.545) that 5.263 "enables the

In order to decide whether to grant interim relief, it is, of course, first necessary to consider whether there is a

serious question to be tried; if there is such a question, it

will be necessary to take into account the balance of

In my opinion, there is nothing in the evidence, as it presently stands, which suggests that, in acting under s.263, the respondents had in their contemplation any purpose other than an investigation into whether or not a person is or has been in receipt of assessable income. This is a legitimate purpose in terms of the operation of s.263 (see Clyne v. Deputy Federal Commissioner of Taxation 85 A.T.C. 4,597 per Morling J. at

p.4,600). In other words, there is no evidence of any ulterior purpose on the part of the respondents. There is a suggestion in the evidence that the respondents acted peremptorily in approaching the applicants. But this is not to say that they had

Commissioner's statutory right of access "is not confined to documentary records which relate to the income of the person in

whose possession they are ata given time" (per Mason J. in

Federal Commissioner of Taxation v. Australian and New Zealand Banking Group Ltd., supra, at p.534).

It 1s submitted on behalf of the applicants that the respondents are seeking access to the fax material for the purpose of gathering information rather than for the purpose of assessing a taxpayer's taxable income under the Act. But there is no suggestion in the evidence that the respondents are gathering information for its own sake. Rather the evidence, as it stands at this preliminary stage of the proceedings, is consistent only with the respondents having as their purpose the investigation of the question whether a person or persons have a

In the cross-examination of Mr. Fitton, it was suggested that his belief that clients of the applicants had engaged in tax avoidance was based on inadequate information and that his view was without foundation. But this is not the relevant question. What is in issue is the purpose for which access is sought. This is essentially a question of fact. Whatever might be the position at the final hearing (by which time the applicants will have had the advantages of discovery or interrogatories) the material available at the interlocutory stage indicates that no foreign or ulterior purpose was here involved. This is necessarily a preliminary view which is based on the evidence in

the present application. It is not, and could not involve, a

final or conclusive finding of that fact. That will be a matter

for the findings of the trial judge at the final hearing to be

For present purposes, it suffices to say that, in respect of the contention that the power available under 3.263 was abused, there is no basis in the evidence for any suggestion that the respondents had any purpose other than that of

investigating whether a person or persons may have been liable

This is not to say that the mere assertion by the respondents that they had a particular purpose in view is conclusive. The Court must inquire into their real purpose and

this is to be determined from the whole of the evidence.

It follows, in my view, that, in the absence at this stage, of a serious question to be tried, the present claim for

As to the future conduct of the matter, I propose to permit the applicants a short period of time in which to consider their position. This can be achieved by directing that exhibit "A" be handed to the solicitor for the respondents by 12 noon on

9 March 1988, provided that the applicants renew, up to that

time, their existing undertaking, given on 3 March, not to deal

The matter should proceed to a final hearing at an early date. As indicated to the parties during the present application, Burchett J. will be ready to take the final hearing later this month, if the matter is then ready.

The proceedings are stood over for further directions

I certify this and the seven) (7) preceding pages to be a true copy of the Reasons for Judgment of

Counsel for the Applicants: Sir Maurice Byers Q.C., Mr. R.J. Bainton Q.C. Mr. R.F. Edmonds

Solicitors for the Applicants: Freehill Hollingdale & Page

Counsel for the Respondents: Mr. D. Bennett Q.C. Mr. A. Robertson

Solicitors for the Respondents: Australian Government Solicitor