The Commissioner of Taxation of the Commonwealth of Australia v The Australia & New Zealand Banking Group Limited

Federal Court of Australia|1998-10-01|Before: Goldberg J

Introduction The applicants apply pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") for an order of review in respect of three decisions by the respondent to exercise power pursuant to s 264(1) of the Income Tax Assessment Act 1936 (Cth) ("the Act"). Section 264(1) of the Act provides: "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 paper whatever in his custody or under his control relating thereto." As a result of the decisions sought to be reviewed notices pursuant to s 264(1)(a) of the Act were served on the second and third applicants requiring them to provide certain information to the respondent.

Background The first applicant ("Deloitte") is a partnership carrying on business in Australia as chartered accountants and taxation advisors. The second and third applicants are the Managing Partners of the Sydney and Melbourne offices, respectively, of Deloitte. On or about 15 May 1997 a firm of solicitors Wantrup & Associates ("Wantrup") was requested by a client to provide detailed legal advice including the provision of advice relating to taxation matters. The advice was apparently provided although the evidence was not explicit on this point. In early November 1997 a partner of Wantrup was asked by the client to provide further advice covering matters set out in the firm's earlier advice and covering some additional matters. On 18 November 1997 Wantrup engaged Deloitte to provide advice to Wantrup on the interpretation and application of the income tax law and fringe benefits tax law in relation to non‑complying superannuation funds. Wantrup so engaged Deloitte solely for the purpose of enabling Wantrup to provide legal advice to its client, Mr Glenn Sargent of Sabre Financial Services Pty Ltd ("Sabre"). On 28 November 1997 Deloitte provided written advice to Wantrup in relation to the interpretation of various provisions of the Act and the Fringe Benefits Tax Assessment Act 1986 (Cth) ("the FBT Act") and their application to a non‑complying superannuation fund. The written advice did not give advice on how to structure or record a transaction or arrangement nor did it deal with the conception, implementation or formal recording of a particular transaction or arrangement or explain the setting, context or purpose of any particular transaction or arrangement. In early January 1998 Wantrup was requested by another client to provide legal advice which included the provision of advice relating to similar matters of the interpretation and application of the income tax law and the FBT Act in relation to non‑complying superannuation funds. On 19 January 1998 Wantrup requested Deloitte to provide part of the advice sought by that other client. That advice was provided by Deloitte to Wantrup by letter on 29 January 1998 and Wantrup provided advice to its other client which incorporated the advice received from Deloitte on 29 January 1998. On 9 June 1998 Deloitte was requested by another client to provide advice relevant to the information sought in the notices served on the second and third applicants. That advice was given by letter dated 25 June 1998. The advices of 29 January and 25 June 1998 also concerned the interpretation of various provisions of the Act and the FBT Act but they did not give advice on how to structure or record a transaction or arrangement nor did they deal with the conception, implementation or formal recording of a particular transaction or arrangement or explain the setting, context or purpose of any particular transaction or arrangement. The advice given by Deloitte on 28 November 1997, 29 January and 25 June 1998 canvassed issues the nature of which, according to Deloitte, required complete candour on the part of the clients and Deloitte as the clients' adviser in order that appropriate and comprehensive advice could be given. Deloitte says that in giving the taxation advice to the client it relied upon statements contained in the relevant sections of the Access and Information Gathering Manual issued by the Commissioner of Taxation in September 1996. These statements were to the effect that the Commissioner accepts that there is a class of documents and information which should in all but exceptional circumstances "remain within the confidence of taxpayers and their professional accounting advisers" and that "taxpayers should be able to consult with their professional taxation advisers on a confidential basis to enable full and frank discussions to take place and for advice to be communicated on that basis". Deloitte says it had the expectation that the taxation advice would remain confidential as between itself and its client. Wantrup says that to the extent that legal professional privilege applies to the two letters of advice from Deloitte and is the privilege of Wantrup, Wantrup does not waive the privilege. To the extent to which it is the privilege of clients of Wantrup, Wantrup has received instructions that the clients do not waive that privilege. In about May 1998 it was brought to the attention of Mr Petroulias, the Assistant Commissioner in charge of the Strategic Intelligence Analysis area ("the SIA"), Large Business and International Business Line of the Australian Taxation Office, that New Zealand non‑complying employer‑sponsored superannuation funds were being developed and promoted to employers in Australia. The primary function of the SIA is to detect, examine and develop responses to aggressive tax planning. Mr Petroulias' role includes initiating and directing enquiries by SIA and the oversight of any enquiries initiated by other SIA staff. Mr Petroulias is also authorised to issue notices under s 264(1) of the Act on behalf of the respondent. As a result of the information received, Mr Petroulias believed that such funds might have implications for the revenue and he decided that the SIA should commence examining the involvement of promoters, service providers and their clients in relation to the New Zealand funds. On 16 June 1998, in the course of general enquiries about the New Zealand funds Mr Petroulias, along with other taxation officers met with Mr Garry Brown and Mr Glenn Sargent of Sabre. Either Mr Brown or Mr Sargent told Mr Petroulias that the idea for the non‑complying fund, which was the subject of Deloitte's advice on 28 November 1997, had been stolen from them and that it was being marketed by Deloitte. For the purposes of this application it is unnecessary for me to make any finding as to whether or not there is any substance in this allegation. It is sufficient for present purposes that Mr Petroulias was told of this claim by Mr Brown or Mr Sargent. Mr Brown or Mr Sargent also gave Mr Petroulias other information naming other firms involved as promoters which information Mr Petroulias said proved to be accurate. Mr Sargent told Mr Petroulias he had an opinion from Deloitte in respect of the New Zealand funds and at his request Mr Sargent gave Mr Petroulias a copy of the opinion. This was the advice which had been given by Deloitte to Wantrup on 28 November 1997. Mr Petroulias also knew from Austrac (Australian Transaction Reports and Analysis Centre) that a significant volume of money was moving between Australia and New Zealand. Mr Petroulias formed the view that there was therefore some basis to suggest that there may be something in what he was told. Mr Petroulias said that the accuracy of the other information he had been given lent some credibility to what he was told although of itself it was not sufficient, but it was sufficiently weighty to justify seeking further information. He thought there may have been a risk that Deloitte may have been a promoter of the scheme or arrangement and he wanted to find out whether Deloitte was involved. He had not at this stage formed a view whether the advice given by Deloitte was correct. He was making a preliminary inquiry. Having regard to the opinion, what he knew and what he had been told, Mr Petroulias decided to seek further information and documents from Deloitte. On 2 July 1998 over the signature of the respondent, as the delegate of the Commissioner of Taxation, Mr Petroulias sent two letters to each of the second and third applicants. One of those letters sought the provision of certain documents in relation to the New Zealand funds but it is not relevant or in issue for present purposes as it is accepted that it was not sent as a notice for the purposes of s 264(1) of the Act. The other of those letters enclosed a notice of the same date over the signature of the respondent pursuant to s 264(1)(a) of the Act ("the 2 July notices"). Each letter stated: "Enclosed is a notice issued pursuant to section 264(1)(a) of the Income Tax Assessment Act 1936, as amended. … Please note that section 264 does not override legal professional privilege but does override the privilege against self‑incrimination. The information requested in the attached notice is requested for the purposes of the Income Tax Assessment Act 1936 and 1997, as amended. …" The notices required the applicants to provide the information described in the schedule to the notices in relation to any New Zealand employer‑sponsored non‑complying superannuation fund or trust substantially similar to the superannuation fund described in Annexure No 1 to the notices and in relation to any trustee of such a fund or trust. Annexure No 1 was a letter of advice on the letterhead of Deloitte headed "NON COMPLYING SUPERANNUATION FUND" and was Deloitte's advice of 28 November 1997 to Wantrup with the date, reference number, name and address of the addressee and a passage from the first paragraph relating to Mr Sargent and the name and telephone number of the Deloitte contact deleted. The second and third applicants were required to provide the information by 4.00pm on 31 July 1998. On 23 July 1998, Mr Conwell (a partner in Deloitte), on behalf of the second and third applicants, wrote to the respondent in relation to the 2 July letters and notices advising that the notices were not received by the second and third applicants until 13 July 1998 and requesting an extension of the time for compliance to 4.00pm on 31 August 1998. Mr Conwell said that the letters and notices appeared to be in breach of the guidelines in the respondent's Access and Information Gathering Manual ("the guidelines"). The letter also sought clarification of the issue of legal professional privilege and the extent, if any, the respondent, in the making of his decision to issue the 2 July letters and notices, considered the guidelines. Mr Conwell did not receive a reply to his letter and on 29 July 1998 he wrote again to the respondent and requested, pursuant to s 13(1) of the ADJR Act, that the respondent furnish a statement in writing in relation to the 2 July notices setting out the: "… findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for the decisions to issue the letters and notices to Messrs Brant and Martino, respectively." The letter also requested that the respondent, in framing (but without limiting) his response, address the following questions: "1. Whether you took into account the Commissioner's Access and Information Gathering Guidelines? If not, why not? 2. If those Guidelines were taken into account, which parts of those Guidelines were taken into account, the manner in which those parts were taken into account and the considerations relevant to, and the relative weight given to, those matters. 3. If those Guidelines were taken into account, but you formed the view that no part of the Guidelines precluded you from issuing the letters and notices, the basis upon which that view was formed. 4. If any discretions or choices contained in the Guidelines were exercised, which discretions or choices were exercised and the considerations taken into account in exercising those discretions and choices." The letter requested an extension of time for compliance with the 2 July letters and notices until the later of 4.00pm on 31 August 1998 or fourteen days after an adequate reply was received by the applicants to the 29 July 1998 letter. As a result of a conversation between Mr Isouard of the Australian Taxation Office and Mr Conwell on 31 July 1998 in which there had been a discussion about the time for compliance with the notices and the possibility of the withdrawal and reissue of the notices, Mr Petroulias decided to issue amended notices on 31 July 1998 ("the 31 July notices"). The 31 July notices required the applicants to provide the same information contained in the schedule to the 2 July notices but extended the time for compliance to 14 August 1998. On 5 August 1998 Mr Conwell wrote to the respondent requesting him to give reasons pursuant to s 13 of the ADJR Act for his decision to issue the 31 July notices and requesting a further extension of time to comply to 31 August 1998 or fourteen days after receipt of an adequate reply to the letter. The letter was in the same terms and asked the same questions as the letter of 29 July 1998. The applicants filed their application for an order of review with the Court on 11 August 1998. On 13 August 1998 orders were made by consent that the decisions made by the respondent be suspended pending the hearing and determination of the applicants' application.

The s 264(1)(a) notices The 31 July notices required the second and third applicants to furnish the information described in the schedule for the period from 1 July 1994 to 30 June 1998 to the respondent in writing at the Australian Taxation Office no later than 4.00 pm on 14 August 1998. The schedule to the notices was in the following form: "The questions and other instructions contained in this schedule are solely in relation to any New Zealand employer‑sponsored non‑complying superannuation fund or trust substantially similar to the superannuation fund described in Annexure No 1 or any trustee of such a fund or trust.

Did Deloitte Touche Tohmatsu provide a service to any of its clients? 2. If the answer to the question in (1) is yes then provide the following information: (a) Which services did Deloitte Touche Tohmatsu provide? Answer yes or no to each of the points (i) to (viii) in the definition of service. It is optional to provide further information: (b) The full names and addresses of all clients. (c) The full names and addresses of all New Zealand superannuation funds or trusts. (d) The full names and addresses of all trustees of funds or trusts in (c). Provide the information so that it is clear which trustees are acting in that capacity for which superannuation funds or trusts. (e) The basis upon which fees and disbursements are charged to clients. (f) The total amount of contributions made by clients directly or indirectly to funds or trusts in (c) and trustees in (d) for the years ended 30 June 1994, 30 June 1995, 30 June 1996, 30 June 1997 and 30 June 1998. (g) Did Deloitte Touche Tohmatsu have clients referred or redirected by it to other persons or entities (other persons or entities are referred to hereafter as 'incoming referral parties') irrespective of whether or not the origin of the referral or redirection is in or out of Australia. (h) If the answer to the question in (g) is yes then provide the full names and addresses of all such clients and the full names and addresses of all 'incoming referral parties'. Provide the information so that it is clear which clients relate to which 'incoming referral parties'. (i) Did Deloitte Touche Tohmatsu have clients referred or redirected by it to other persons or entities (other persons or entities are referred to hereafter as 'outgoing referral parties') irrespective of whether or not the destination of the referral or redirection is in or out of Australia. (j) If the answer to the question in (i) is yes then provide the full names and addresses of all such clients and the full names and addresses of all 'outgoing referral parties'. Provide the information so that it is clear which clients relate to which "outgoing referral parties." The notice contained definitions of a number of terms used in it. In particular, "client" was defined as meaning: "either a person or entity that has been provided a service." An "information provider" was defined as meaning: "the person or entity required to provide information in writing in this section 264 notice". A "service" was defined as meaning: "(i) The provision of information of an explanatory nature; (ii) The provision of advice other than any advice provided in (i); (iii) The referral or redirection of a person or entity by the information provider irrespective of whether or not the destination of the referral or redirection is in or out of Australia; (iv) The referral or redirection of a person or entity to the information provider irrespective of whether or not the origin of the referral or redirection is in or out of Australia; (v) The preparation or retention of a trust deed or the preparation or retention of a document that legally alters such a trust deed; (vi) Where the trustee is a company, the preparation or retention of a document that legally creates the trustee or the preparation or retention of a document that legally alters any aspect of the trustee; (vii) The preparation or retention of an accounting record; or (viii) The preparation or retention of a taxation record." A "non‑complying superannuation fund" was defined as having "the same meaning as Part IX of the Income Tax Assessment Act 1936".

The respondent's reasons Mr Petroulias, in deciding to issue the 2 July notices and the 31 July notices says he considered and applied the guidelines contained in the Access and Information Gathering Manual. He says that in doing so he considered whether legal professional privilege was likely to apply to any of the information requested in the notices and concluded that it did not. Mr Petroulias says he considered all relevant parts of the guidelines and that the parts that were given the most weight were: · Why a formal notice was used rather than an informal approach; · Why Deloitte was the correct party to bear the cost of compliance; · Why a notice to furnish information was used rather than other notices; · Whether legal professional privilege and other quasi‑administrative privilege relating to professional accounting advisors' restricted source documents and non‑source documents cited apply to the information sought. Mr Petroulias' consideration of these matters is set out in the respondent's statement of reasons given to Deloitte on 13 August 1998 pursuant to s 13 of the ADJR Act. The statement is quite extensive but in the circumstances, particularly having regard to the applicants' grounds for review, it is necessary to set it out in full: "(I) FINDINGS ON MATERIAL QUESTIONS OF FACT 1. In May 1998 the Australian Taxation Office (ATO) commenced examining the involvement of promoters, service providers and their clients in relation to New Zealand non‑complying employer‑sponsored superannuation funds. 2. In June 1998 Assistant Commissioner Mr Nick Petroulias, representing the ATO obtained information from an external source that Deloitte Touche Tohmatsu (DTT) was involved in promoting and/or providing services in relation to New Zealand non‑complying employer‑sponsored superannuation funds. 3. From the same source and time as (2), Mr Petroulias obtained a copy of a letter dated 28 November 1997 which was prepared by DTT. In the letter DTT provided advice to a solicitor in relation to, among other things, the Australian tax consequences of New Zealand non‑complying employer‑sponsored superannuation funds. 4. On 2 July 1998 notices were issued under section 264(1)(a) of the Income Tax Assessment Act 1936 (the Act) and sent by pre‑paid mail to Mr Chris Brant of DTT in Melbourne ad Mr Dominic Martino of DTT in Sydney, they being partners thereof. The decision to issue the notices was made by Mr Petroulias, a duly authorised officer of Mr James Michael Killaly, Deputy Commissioner of Taxation, Large Business and International. 5. Subsequently, a letter from DTT addressed to Mr Killaly dated 23 July 1998 was received, requesting an extension of time for both notices until 4.00 pm on 31 August 1998. The grounds for extension of time were as follows: (i) It was claimed that both notices were received on 13 July 1998, 11 days after the issue date of 2 July 1998; (ii) The need to clarify the position in relation to a possible claim for legal professional privilege; and (iii) Time required to formulate a response after DTT receives the ATO's advice as to whether the ATO considered the Commissioner's 'Access and Information Gathering Manual' September 1996. 6. On 31 July 1998 Mr Ray Conwell telephoned Mr Joe Isouard of this office. Mr Conwell asked Mr Isouard whether a decision had been made in relation to the section 264 notices as the final date for delivery for both notices was this day. Mr Isouard stated that no decision had yet been made and stated that if an extension of time was granted then it may be necessary to withdraw the notices and to immediately reissue new notices on this day. Mr Isouard told him that the matter would definitely be resolved on this day. 7. On 31 July 1998 amended section 264(1)(a) notices were issued and faxed to Mr Ray Conwell representing DTT. The original amended notices were to be delivered by hand to Mr Chris Brant of DTT in Melbourne and Mr Dominic Martino of DTT in Sydney. The effect of the amended notice was to grant an extension of time until 4pm 14 August 1998. The decision to issue the notices was made by Assistant Commissioner Mr Nick Petroulias. (II) EVIDENCE OR OTHER MATERIAL ON WHICH FINDINGS OF FACT ARE BASED.

Copy of DTT's letter to solicitor dated 28 November 1997 (re findings of fact No.4). [Later corrected to finding of fact No 3].
Copies of original section 264(1)(a) notices sent to Mr Chris Brant of DTT in Melbourne and Mr Dominic Martino of DTT in Sydney on 2 July 1998 (re findings of fact No.5). [Later corrected to finding of fact No 4].
Copy of letter from DTT to Mr Killaly dated 23 July 1998 (re findings of fact No.6). [Later corrected to finding of fact No 5].
Copy of record of telephone conversation between Mr Ray Conwell and Mr Joe Isouard on 31 July 1998 (re findings of fact No.7). [Later corrected to finding of fact No 6].
Copy of letter from ATO to DTT dated 31 July 1998 (re findings of fact No.8). [Later corrected to finding of fact No 7].
Copies of amended section 264(1)(a) notices sent to Mr Chris Brant of DTT in Melbourne and Mr Dominic Martino of DTT in Sydney on 31 July 1998 (re findings of fact No.9). [Later corrected to finding of fact No 7]. (III) REASONS FOR THE DECISIONS 1. The advice provided in the letter from DTT to the solicitor in relation to New Zealand non‑complying employer‑sponsored superannuation funds was examined by Mr Nick Petroulias. The same external source that provided the letter also provided information to Mr Nick Petroulias that DTT itself was promoting and/or providing services in relation to the same type of superannuation funds. The two matters raised the ATO's concerns that Part IVA or the transferor trust provisions of the Income Tax Assessment Act 1936 inter alia, might apply. Therefore Mr Petroulias decided that information would be sought from DTT to establish the extent of DTT's involvement and to identify the names and addresses of clients, New Zealand superannuation funds, trustees of such funds, and incoming and outgoing referral parties. 2. Mr Petroulias decided to use the formal powers of section 264(1)(a) notices after considering the Commissioner's 'Access and Information Gathering Manual' (the guidelines) September 1996. All relevant parts of the guidelines were considered. However, the parts that were given the most weight are as follows: (A) Why a formal notice was used rather than an informal approach The names and addresses of clients involved in such superannuation funds was part of the information being sought from DTT. DTT clearly has a duty of confidentiality to its clients. A formal notice would protect DTT from liability for breaching that duty as stated at … '2.2.25 [sic] You should consider issuing a notice if: … (viii) information is held by a party who is subject to contractual duty of confidentiality, such as a financial institution. The statutory requirement to provide the information or documents will protect the addressee against liability for a breach of that duty.' This consideration was given more weight than the other considerations. (B) Why DTT was the correct party to bear the cost of compliance The guidelines state at … '2.2.8 Compliance with a notice may involve cost to the addressee. If the requirements of the notice could be particularly expensive you should consider whether the information can be obtained from other sources. If notices are issued to a party other than the taxpayer, you should consider whether that party is the appropriate person to bear the expense and try to minimise this cost, in accordance with Access and Information Gathering Principle (vi) …' The names and addresses of clients involved in such superannuation funds can only be provided by DTT and the remainder of the information being sought is directly relevant to establishing the extent of DTT's involvement in New Zealand non‑complying employer‑sponsored superannuation funds. Therefore, it was considered that DTT was the appropriate party to bear the cost of compliance. (C) Why a notice to furnish information was used rather than other notices In deciding that a notice to furnish information would be used, the following considerations were relevant: '2.3.3 Each power has certain advantages and restrictions. Whether you require information or documents and evidence will depend on the circumstances. You should consider the relative costs to the addressee in deciding which power to use. However, your overriding consideration should be effectiveness. 2.3.4 … In most circumstances you should ask them (the record holders) what they prefer before you decide which form of notice you are going to use.' However, … 'When notice to furnish information is preferred 2.3.6 The circumstances where a notice to furnish information rather than an [sic] notice to produce documents should be issued would include: (i) the information is not contained in a document. For example, it may be details of a transaction in the knowledge of a person; … (iii) if the information sought does not relate to a particular taxpayer but relates to a category of persons or transactions.' The majority of the information sought falls within either (i) or (iii). Furthermore, the majority of the information sought (eg. the names and addresses of clients) cannot be obtained by a section 264(1)(b) notice to attend and produce because it does not relate to the income or assessment of a particular person. The issuing of notices to furnish information was the most effective method to obtain the information. (D) The considerations given to LLP and other privilege prior to the issue of the notice Prior to the issue of the notice it was considered whether legal professional privilege or quasi‑administrative privilege relating to professional accounting advisors' restricted source documents and non‑source documents could apply to the information sought under the notice. It was decided that legal professional privilege was unlikely to apply for the following reasons: (a) Information describing the particulars of documents in relation to a specific client was not sought; (b) Information describing the nature of any confidential communication/advice/opinion provided in relation to a specific client was not sought; and (c) The names and addresses of clients are not subject to privilege. Therefore it was not relevant to consider paragraph 8.3.5 of the guidelines, which provides, [s]imilarly, you should generally consult the recipient before using the notice powers. This may result in negotiation to resolve LPP issues before the notice is sent.' Furthermore, consideration was given to Chapter 8.7 of the guidelines titled, 'Access to Professional Accounting Advisors' Paper'. After considering the guidelines it was decided that the information sought originates from a class of documents known as 'source documents'. Paragraph 2.1 of Chapter 8.7 of the guidelines provides, … source documents include papers prepared in connection with the conception, implementation and formal recording of a transaction or arrangement and which explain the setting, context and purpose of the transaction or arrangement. These documents are source documents because, in effect, they explain the basis and form part of the fabric of the transaction or arrangement. Thus, as the information sought related to the conception and implementation of an arrangement (ie. New Zealand employer‑sponsored non complying superannuation fund or trust) including the identity of clients participating in such an arrangement, it fell within the foregoing definition of 'source documents'. Under the guidelines, the Commissioner has full and free access to 'source documents'. It was considered that the information sought would not originate from documents falling within a class of documents known as 'restricted source documents' or 'non source documents' for the following reasons: (a) Information describing the particulars of advice given in respect of structuring a transaction was not sought. (b) Information describing the nature of advice provided after a transaction was not sought. (c) Information relating to a professional accounting adviser's opinion on any other taxation matter was not sought. 3. The guidelines were taken into account and no part thereof precluded the ATO from issuing the letters and notices. In making the decision to issue the notices, only relevant considerations were taken into account and each such consideration was weighed relative to the others. The information required in the notice was sought in good faith and for the purposes of the Act. 4. An extension of 14 days to comply with the notices was granted as a result of the mail delaying by 11 days the receipt of the notices issued on 2 July 1998. 5. The reasons why each category of information was sought is as follows: (1) Whether or not DTT provided a service (as defined) to any of its clients was necessary in order to determine whether it had a requirement to provide the other information sought pursuant to the section 264 notices. (2) (a) The extent to which DTT provided the range of services detailed in points (i) to (viii) in the definition of a service was required to determine DTT's involvement in New Zealand superannuation funds. (b) The names and address of all clients were required in order that further enquiries could be made to establish the extent to which they have complied with the Income Tax Assessment Acts 1936 and 1997. (c) The names and addresses of all New Zealand superannuation funds or trusts were required to establish the funds to which employers were making contributions. (d) The names and addresses of all trustees of funds or trusts in (c) were required to determine the person who has legal control of the funds. (e) The basis upon which fees and disbursements were charged to clients was required to determine whether or not fees were liked to the amount of contributions made by employers. (f) The total amount of contributions made by clients directly or indirectly to the funds for the years ended 30 June 1994 to 1998 inclusive, was required to establish the quantum of amounts claimed as deductions. (g) The names and addresses of 'incoming referral parties' were required to establish whether others were involved in New Zealand superannuation funds. If so then further enquiries would be undertaken with the 'incoming referral parties'. (h) As above. (i) The names and addresses of 'outgoing referral parties' were required to establish whether others were involved in New Zealand superannuation funds. If so then further enquiries would be undertaken with the 'outcoming referral parties'. (j) As above. 6. Reference is made to point 2 in relation to any 'discretions' or 'choices' that may have been exercised."

The Access and Information Gathering Manual In September 1996, as part of the Commissioner of Taxation's response to the Joint Committee of Public Accounts' Report 326 "An Assessment of Tax", the Commissioner published an Access and Information Gathering Manual which, inter alia, set out guidelines to be followed for the exercise of statutory powers for the gathering of information. In the Commissioner's introduction to the Manual he states: "This manual sets out guidelines which you should follow when you are using the powers of investigation contained in the various Acts I administer as the Commissioner of Taxation … The powers of investigation can be divided into two categories: (i) the power to gain access to premises and documents … (ii) the power to require the furnishing of information, attendance and the giving of evidence and the production of documents. This power can only operate through the service of a notice ... "

A number of the provisions of the Manual are relevant to the issues before the Court and it is desirable to set them out. Chapter 2 of the manual relates to notices requiring information and notices requiring attendance, giving evidence and/or production of documents. Section 2.1.1 is in the following terms: "This chapter has two purposes: (i) to provide you with guidelines for preparing and issuing notices; and, (ii) to inform you about the extent and limitations of the Commissioner's powers under the notice provisions of the Acts he administers. The guidelines are set out first. The rest of the chapter contains a discussion of the relevant case law …" Section 2.2.1 is headed "Alternatives to Issuing a Notice" and is in the following terms: "The Commissioner is committed to lowering the cost to the public of compliance with the laws he administers. See Access and Information Gathering Principle (vi) of this manual. Consequently if you are gathering information, you should first consider whether it is necessary to exercise the notice powers or whether it is possible and practical to gather the information using a less formal approach. Many taxpayers and custodians of information are willing to respond to a request for information without receiving a formal notice. If a person is likely to respond to a less formal request for information, you should use this approach." Section 2.2.5 is headed "Reasons to Issue a Notice" and it provides that: "You should consider using a notice if: (i) … … (viii) information is held by a party who is subject to a contractual duty of confidentiality, such as a financial institution. The statutory requirement to provide the information or documents will protect the addressee against liability for a breach of that duty. This is also the case for the access powers discussed in Chapter 1; … (xii) you have genuine concerns that documents could be lost or destroyed, or that an informal request would get a selective response; … (xiv) any other circumstance in which it is necessary to obtain information for the purposes of an Act and you consider the use of the notice provision expedient or effective, such as if the taxpayer's office or records are interstate. In this situation it may be better for an officer in another branch to use the access powers to obtain the information." Chapter 8 is headed "LEGAL PROFESSIONAL PRIVILEGE" but it covers more than that subject‑matter. As is stated in section 8.1.1: "There are separate published guidelines regarding 'Access to Lawyers' Premises' and 'Access to Professional Accounting Advisers' Papers". These are set out in Chapters 8.6 and 8.7. Chapter 8.7 is headed "ACCESS TO PROFESSIONAL ACCOUNTING ADVISORS' PAPERS". Section 1, headed "Introduction" provides, inter alia: "While recognising that the Commissioner has the legislative power to request access to most documents, it is accepted that there is a class of documents which should, in all but exceptional circumstances, remain within the confidence of taxpayers and their professional accounting advisors. In respect of such documents the ATO acknowledges that taxpayers should be able to consult with their professional accounting advisors on a confidential basis to enable full and frank discussion to take place and for advice to be communicated on that basis. … In addition the guidelines are to be used as a guide in determining the appropriate circumstances for requesting external professional accounting advisors to furnish information or produce their papers etc. in accordance with section 264 of the ITAA or its equivalents. The guidelines have been compiled in consultation with members of the Commissioner's Taxation Liaison Group which includes, inter alia, the Australian Society of Certified Practising Accountants, the Institute of Chartered Accountants in Australia, the National Institute of Accountants and the Taxation Institute of Australia. ATO officers will follow these guidelines in dealing with access to papers prepared by professional accounting advisors. For their part, the professional bodies will encourage their members and clients to positively assist in meeting requests, made in accordance with these guidelines, from ATO officers. All of the professional bodies involved in the compilation of these guidelines have indicated their willingness to discuss with their respective members, on an individual basis, any specific points of disagreement that they may have with the ATO in the interpretation of these guidelines. In circumstances where there is disagreement, the ATO encourages taxpayers and their professional advisors to approach the relevant professional body (of which the advisor is a member) to seek clarification on interpretation of the guidelines."

Section 2 of Chapter 8.7 identifies and describes three types of documents namely: (a) Source documents (b) Restricted source documents and (c) Non-Source documents, which might be the subject of requests for access. Section 2.1 of Chapter 8.7 is headed "Source Documents" and provides, inter alia: "In order for the Commissioner to carry out his responsibilities under the tax laws it is essential for ATO officers to have full and free access to all documents which record a transaction or arrangement entered into by a taxpayer. These documents which are referred to in these guidelines as source documents include papers prepared in connection with the conception, implementation and formal recording of a transaction or arrangement and which explain the setting, context and purpose of the transaction or arrangement. These documents are source documents because, in effect, they explain the basis and form part of the fabric of the transaction or arrangement. Documents and papers of this nature can be an integral part of the process leading up to a transaction or an arrangement or to the recording of a transaction or an arrangement in the formal books of account or the tax return. Traditional accounting records such as ledgers, journals, working papers for financial statements (including consolidated financial statements), profit and loss accounts, balance sheets are obvious source documents. … Documents comprising the permanent audit file held by an [sic] professional accounting advisor performing a statutory audit are source documents …" Section 2.2 is headed "Restricted Source Documents" and provides, inter alia: "Advisings and advice papers prepared by an external professional accounting advisor solely for the purpose of advising a client on matters associated with taxation would fall within the key concept contained in 11.3.1 [sic] above where they are prepared in connection with the conception, implementation and completion of the transaction or arrangement. For example, advice given to a taxpayer on how to structure or record a transaction or arrangement, and which is acted upon, forms an integral part of what has actually occurred. Thus, advice papers created prior to or contemporaneously with a relevant transaction or arrangement, because they shed light on the transaction or arrangement, may themselves represent a record of hat has actually occurred. However, such advisings are likely to canvass the issues in circumstances in which a need for candour is a necessary element. Access to such documents will only be sought in exceptional circumstances. These documents are referred to in these guidelines as restricted source documents." The access to restricted source documents, which will only be sought in exceptional circumstances, is to be sought in accordance with a procedure set out in section 3.2 of Chapter 8.7 (referred to on page 20 of these reasons). Section 2.3 is headed "Non‑Source Documents" and provides, inter alia: "Other advice and advice papers are referred to in these guidelines as non‑source documents. For example, these may include advisings provided after a transaction has been completed where the advisings did not affect the recording of the transaction or arrangement in the books of account or tax return. Advice papers (that would otherwise be restricted source documents) which relate solely to transaction or arrangements which the taxpayer has not, and does not intend to, put into effect are non‑source documents. Provided they do not materially contribute to an understanding of the tax strategy or the specific courses of action actually implemented by the taxpayer. Non‑source documents also include papers contained in the current audit file prepared or obtained by an external professional accounting advisor in the course of an audit (under any statutory code or stock exchange listing requirement), in the course of a prudential tax audit, or in the course of a due diligence report. Papers contained in the current audit file are those documents, etc. not properly forming part of the permanent audit file. Typical of these papers are the engagement letter, the audit plan, letters of confirmation, test details, analyses, working schedules and commentaries. These working papers are an important part of the professional accounting advisor's evidence of compliance with the audit standards (or the external reporting requirements) and of the decisions made throughout the audit. Similarly, tax working papers which in substance merely state a professional accounting advisor's opinion on the matters presented in a tax return are non‑source documents." Section 3 sets out the manner in which access will be sought to documents. Section 3.1 headed "Source Documents" provides: "ATO officers will seek full and free access to source documents, other than those referred to in these guidelines as restricted source documents, during the course of an audit of a taxpayer's taxation affairs." Section 3.2 headed "Restricted Source and Non‑Source Documents" provides: Access to restricted source and non‑source documents prepared by external professional accounting advisors, whether in the possession of taxpayers or their professional accounting advisors, will not be sought except in accordance with the following paragraphs. The opinions expressed by professional accounting advisors in such documents are considered to be within the class of documents referred to in 11.2 [sic] above. Where access to documents is sought, a mutually agreed time will be allowed to enable the taxpayer and professional accounting advisor to consult and ascertain whether the taxpayer wishes to claim client confidentiality in relation to those documents. The professional accounting advisor and\or client will be allowed a mutually agreed time to obtain legal advice in relation to those documents. In the circumstances where the ATO officer has attended upon the professional accounting advisor or taxpayer in person, the ATO officer may wish to remain on the premises while the consultation takes place, at the same time respecting the privacy of the consultations. Where a request for files or groups of documents is made by ATO officers and the taxpayer and/or the advisor consider that the documents, or some of the documents, are properly categorised as restricted source and\or non‑source documents, the taxpayer or the advisor shall provide a list of the documents in question. The list will contain [certain] details. … However, the details provided pursuant to paragraph (i) to (vii) above should not result in the disclosure of restricted source and\or non‑source information."

The decisions under review In the initiating application the applicants sought review of the decisions: · to issue the 2 July notices; · to issue letters on 2 July 1998 requesting provision of documents; · to refuse the applicants' request on 23 July 1998 to extend the time for compliance with the 2 July notices and letters to 4.00pm on 31 August 1998; and · to issue the amended 31 July notices. The relief sought in the application in relation to the letters which sought the provision of documents was not proceeded with as it was accepted by the respondent that those letters did not constitute notices for the purposes of s 264(1) of the Act. It was accepted by the applicants, having regard to the time that had elapsed since the application was filed, that it was not necessary to seek relief in relation to extending the time for compliance with the notices. The hearing proceeded on the basis of challenging only the decision to issue the amended 31 July notices although the facts and circumstances leading up to the earlier decision to issue the 2 July notices are relevant to that challenge.

Grounds for review The grounds for review on which the applicants relied at the hearing can be summarised generally as follows: · Failure to take into account adequately or at all the guidelines in the manual and in particular Chapter 8.7 "Access to Professional Accounting Advisors' Papers". · The decision was not authorised by the Act as it was made for a purpose which went beyond that of enabling the Commissioner of Taxation to perform his functions under the Act.

Relevant legal principles There was no issue between the parties as to the relevant legal principles and the scope of the power granted to the respondent under s 264 of the Act. It is a very extensive and wide ranging power. In The Commissioner of Taxation of the Commonwealth of Australia v The Australia & New Zealand Banking Group Limited (Smorgon's case) (1979) 143 CLR 499 Mason J said at 535‑536: "Except in one respect the powers given by s. 264 should be circumscribed only by reference to the limitations which are expressed in that section. Thus, in s. 264(1)(b) the power to compel evidence is restricted to evidence 'concerning his or any other person's income or assessment' and the power to require production is confined to documentary records 'relating thereto', that is, to 'his or any other person's income or assessment'. However, the power to require information contained in par. (1)(a) is not similarly limited. As it is a power given to the Commissioner for the purpose of enabling him to perform his functions under the Act it must be circumscribed by reference to this purpose. … And, for a similar reason there is nothing in the suggestion that an issue or dispute of fact must first arise between a taxpayer and the Commissioner before the Commissioner can invoke s. 264. There is simply no basis for the implication of such a limitation. The strong reasons which inhibit the use of curial processes for the purposes of a 'fishing expedition' have no application to the administrative process of assessing a taxpayer to income tax. It is the function of the Commissioner to ascertain the taxpayer's taxable income. To ascertain this he may need to make wide‑ranging inquiries, and to make them long before any issue of fact arises between him and the taxpayer. Such an issue will in general, if not always, only arise after the process of assessment has been completed. It is to the process of investigation before assessment that s. 264 is principally, if not exclusively, directed." This passage demonstrates, relevantly for present purposes, that the Commissioner is entitled under the umbrella of s 264(1)(a) to make wide‑ranging inquiries which do not have to relate to a particular taxpayer. The only constraint upon the power is that it must be exercised for the purpose of enabling the Commissioner to perform his functions under the Act. It enables him to undertake a roving inquiry and a fishing expedition into the income or assessment of taxpayers: Smorgon's case (supra) at 524, 535‑536; Eighth Oupan Pty Ltd v Deputy Commissioner of Taxation (1986) 10 FCR 559, 565; Industrial Equity Limited v Deputy Commissioner of Taxation (1990) 170 CLR 649 at 662; May v Deputy Commissioner of Taxation for the Commonwealth of Australia (unreported, Goldberg J, 1 October 1998), 12. The fact that he may be concerned about the existence or prevalence of a particular arrangement or proposal which may have implications in relation to provisions of the Act rather than whether a particular taxpayer has entered into such a arrangement or adopted such a proposal does not put an investigation into the arrangement or proposal outside the scope of s 264(1)(a). A key issue in the proceeding is the relevance of the guidelines in the manual and whether they were complied with by the respondent. It is important to understand the significance of the guidelines for they do not have the status of a legislative enactment but are rather the creation of the Commissioner and the Australian Taxation Office. It is submitted by the respondent that they do not constitute a source of rights. In my opinion, the manner in which they have been promulgated and their contents make it clear that they are, at the least, a relevant consideration to which the respondent and officers of the Australian Taxation Office must have regard and at the most (without deciding the issue) they are matter which create a legitimate expectation in taxpayers and their professional accounting advisors that they will be complied with according to their terms: see generally Minister for Immigration & Ethnic Affairs v Conyngham (1986) 11 FCR 528 at 540‑541; Broadbridge v Stammers (1987) 16 FCR 296, 300‑301; Apthorpe v Repatriation Commission (1987) 77 ALR 42, 51‑52; Gerah Imports Pty Ltd v Minister for Industry, Technology and Commerce (1987) 17 FCR 1, 10‑13. The respondent submitted that the guidelines were simply guidelines and are not to be construed and applied "over critically" relying upon May (supra) at 13‑14. However, the statement relied upon and the authorities referred to in May (supra) were more concerned with the construction of an administrative instrument rather than the circumstances in which regard should be had to it by an administrative decision‑maker. For present purposes, it is not necessary to consider in any depth whether the guidelines in the manual are a source of rights because the respondent did not dispute that a delegate should have regard to the guidelines when deciding to issue a notice under s 264 of the Act. The applicability of the guidelines is not in issue. What is in issue is whether the respondent had proper regard to the relevant guidelines in deciding to issue the 31 July notices.

Exercise of power not authorised by the Act The applicants submitted that the decisions to issue the notices were not authorised by the Act in that they were made for a purpose that went beyond that of enabling the Commissioner to perform his functions under the Act or, alternatively, that they purported to require the disclosure of information which went beyond that required to enable the Commissioner to perform his functions under the Act. The applicants did not identify or propound the purpose which they said was the purpose for which the decisions were made. Rather the argument was that the decisions did not relate to a matter relevant to enabling the Commissioner to perform his functions under the Act. Mr Petroulias was cross‑examined as to the reasons why he decided to issue the notices and whether he had had regard to the guidelines before making those decisions. The genesis of the issue was the information received by him in May 1998 that New Zealand non‑complying employer‑sponsored superannuation funds were being developed and promoted to employers in Australia. He believed those funds might have implications for the revenue so he decided that his unit should commence examining the involvement of promoters, service providers and their clients in relation to the funds. He also had the benefit of his meeting on 16 June 1998 with Messrs Brown and Sargent and what they told him and gave him. This brought Deloitte into the picture for the reasons he gave, in particular that Deloitte may have been a promoter of the arrangement and he wanted to find out whether Deloitte was involved. As set out in the statement of reasons there were concerns in the Tax Office that Pt IVA or the transferor trust provisions of the Act might apply. Accordingly Mr Petroulias decided to seek information from Deloitte to establish whether it was involved, the extent of its involvement and to identify the names and addresses of clients, New Zealand superannuation funds, trustees of such funds and incoming and outgoing referral parties. All this evidence leads me to being satisfied that the decisions taken to issue the 2 July notices and the 31 July notices were decisions taken for the purposes of the Act and to enable the Commissioner to perform his functions under the Act. Mr Petroulias had become aware of information which he thought may have an impact on the revenue in relation to New Zealand employer‑sponsored non‑complying superannuation funds or trusts. At the time the notices were issued Mr Petroulias had not formed a view as to the efficacy of these arrangements but that is not the point. He formed the view on the plane flight to Sydney after meeting Messrs Brown and Sargent that: "It is an aggressive tax scheme with alarming potential tax Consequences. Accordingly, it is imperative that we immediately get an idea of the scope of the scheme and number of taxpayers involved to consider future action." The fact that Mr Petroulias had not formed a view about the proper taxation consequences of the arrangement in respect of which Deloitte's advice had been given or whether Deloitte's advice was correct is not to the point. He was in investigative mode and, as he said, the purpose of the notice was a preliminary inquiry which would have facilitated further information if he thought it was necessary. As the cases to which I have referred make clear, a formal issue or dispute of fact between the taxpayer and the Commissioner does not have to exist before the Commissioner is entitled to exercise power under s 264(1)(a). I am satisfied that the information which was available to Mr Petroulias and the reasons why he decided to issue the 2 July and 31 July notices were such as entitled him to exercise the power given by s 264(1)(a). His purpose in so doing was for the purposes of the Act and to enable the Commissioner to perform his functions under the Act. The fact that Mr Petroulias was making what the applicants called a very general inquiry does not mean he was not making it for the purposes of the Act or to enable the Commissioner to perform his functions under the Act. Mr Petroulias was concerned about the income tax consequences of the funds. The applicants submitted that until Mr Petroulias had formed a view about the effectiveness of the arrangement it was difficult to see why or how the information sought in the notices was particularly useful or necessary. They submitted that he should first pursue questions relating to the correct tax view of the arrangement before going to the next step. The applicants' criticism was that Mr Petroulias' purpose was to gather information at large. Different people will no doubt have different views as to how to go about a tax investigation. Mr Petroulias may have been able to go about his task differently but I am not sitting in judgment on his performance or efficiency. The short question is - was what he was doing for the purposes of the Act and to enable the Commissioner to perform his functions under the Act? It is to ignore the evidence to say that his purpose in issuing the notices was the gathering of information at large. He was gathering information, in substance, because he was concerned about the income tax implications of the non‑complying employer‑sponsored superannuation funds and the contributions made to them. He had not formed a conclusive view on any matter because it was too early in the inquiry but that does not mean that he decided to issue the notices for a purpose which was beyond the scope allowed by s 264(1)(a) of the Act. The applicants made a further criticism of the scope of the notices by reference to the statement of reasons where it is said that the information sought fell within the definition of "source documents" in section 2.1 of Chapter 8.7 of the manual because it related to "the conception and implementation of an arrangement …". It was said that the information sought in the notices goes beyond information relating to the conception and implementation of the specified arrangement. That may be so in that the advice enquired after in question 1 in each notice is not limited to the conception, implementation and formal recording of the arrangement but is simply advice at large in relation to the arrangement. Nevertheless, even if it be said that the scope of the notice went beyond the reason for seeking it given by the respondent in the statement of reasons, it is still necessary to determine whether in fact the information sought is sought for the purposes of the Act and to enable the Commissioner to perform his functions under the Act. For the reasons to which I have referred I am satisfied that the information sought in the notices is sought for those purposes of s 264(1)(a) of the Act. Were the guidelines and in particular Chapter 8.7 taken into account? The main thrust of applicant's submissions was that the guidelines had not been complied with and that the respondent failed or failed adequately to take them into account when deciding to issue the 2 July notices and the 31 July notices. It was submitted by the applicants that the guidelines had been published by the respondent with a great "fanfare" and that there was a legitimate expectation in the community and in particular the accounting profession that the guidelines would be followed. It is apparent from the provisions of the guidelines, and in particular, the provisions to which I have earlier referred that the respondent intends the guidelines to be observed and complied with by officers of the Australian Taxation Office. Mr Petroulias did not give evidence to the contrary. Indeed, he said the guidelines were to be complied with in the circumstances for which they provided and he contended that they had been complied with in relation to the issue of the 2 July notices and the 31 July notices. The applicants' principal submission was that the respondent, through Mr Petroulias, had not taken the guidelines and in particular Chapter 8.7 into account in deciding to issue the 2 July and 31 July notices. Alternatively the applicants submitted that if he did take the guidelines into account he did not do so properly or in accordance with their terms and misunderstood them. I am satisfied from the material contained in the statement of reasons, which Mr Petroulias adopted in his affidavit and from Mr Petroulias' viva voce evidence that he did take the guidelines properly into account and in accordance with their terms in deciding to issue the 2 July and 31 July notices. Mr Petroulias set out in some detail in the statement of reasons the manner in which, and the extent to which, the guidelines were considered. He said that all relevant parts were considered and he identified the parts that were given most weight. The applicants submitted that Mr Petroulias misunderstood or did not have proper regard to the guidelines because he held the view that Chapter 8.7 did not apply to the provision of information. I do not accept that submission. In my opinion it is clear from Mr Petroulias' evidence that he did hold the view that chapter 8.7 applied to the provision of information and that he gave it proper consideration. The statement of reasons said that: "Consideration was given to Chapter 8.7 of the guidelines … After considering the guidelines it was decided that the information sought originates from a class of documents known as 'source documents'. Mr Petroulias decided that the information fell within the definition of "source documents" (I will consider that issue separately). Mr Petroulias was criticised for agreeing with or approving of the following passage in the respondent's outline of submissions: "However, those guidelines are expressly concerned with access to documents, not the provision of information pursuant to a notice. At best, section 8.7 can only be referred to by analogy when issuing a notice for the provision of information. In the circumstances of this case, the guidelines in section 8.7 can only be used as 'a guide': see 8.7.1". I do not consider that this passage contains, or expresses, the vice relied upon by the applicants, that is to say that Chapter 8.7 does not apply to a notice seeking information pursuant to s 264(1)(a) of the Act. This passage does no more than express, and reiterate, the terms of Chapter 8.7. Although Chapter 8.7, in its terms, contains provisions in relation to access to professional accounting advisors' papers and documents it is clear from the guidelines that those provisions are also intended to apply in relation to the seeking of information pursuant to s 264(1)(a) of the Act. This is made clear by the provision in section 1 of Chapter 8.7 that: "In addition, the guidelines are to be used as a guide in determining the appropriate circumstances for requesting external professional accounting advisors to furnish information or produce their papers etc. in accordance with section 264 of the ITAA or its equivalents." (emphasis added) I consider it a correct proposition to say that Chapter 8.7 can only be referred to by analogy in relation to issuing a notice for the provision of information. This is not to say that Chapter 8.7 does not apply to the issuing of a notice for the provision of information; it does and Mr Petroulias agreed that it does and said he considered it at the time. But one has to use an analogy in seeking to fit the concept of requesting information into the categories of source documents, restricted source documents and non‑source documents. It is in that sense that I consider Mr Petroulias was correct in saying that Chapter 8.7 did not deal in terms with information directly but rather did so indirectly because it did not refer to "source documents or information", "restricted source documents or information", or "non‑source documents or information". The applicants submitted that the notices did not distinguish at all between source, restricted source and non‑source information. It was necessary for the applicants' submissions that they categorise the information sought in the notices as either source information, or restricted source information or non‑source information. The categorisation in section 2 of Chapter 8.7 is specific in relation to documents and does not, in its terms, categorise information by reference to the source, restricted source or non‑source classifications. The applicants submitted that the information sought was "restricted source information". As access to restricted source documents is only to be sought in exceptional circumstances (section 2.2 of Chapter 8.7) the applicants submitted that no consideration was given to whether or not exceptional circumstances existed. As consultation was required with the professional advisors in accordance with section 3.2 of Chapter 8.7 where exceptional circumstances existed it was said that an erroneous view was taken of what was being sought. It is therefore necessary to determine how one categorises the information sought in the notices. The provisions of Chapter 8.7 are designed to ensure that classified confidential or restricted documents and their contents are not seen by the respondent and the Australian Taxation Office unless exceptional circumstances exist. By analogy it is necessary to ask and answer the question whether similar information is sought in the notices and will be disclosed if the notices are answered properly. The key question in the notices is the first question which requires the second applicant and the third applicant to answer the question whether Deloitte provided a "service" to any of its clients. The questions and answers are limited, having regard to the first paragraph in the schedule to the notices, to any New Zealand employer‑sponsored non‑complying superannuation fund or trust substantially similar to the superannuation fund described in the Deloitte letter of advice of 28 November 1997. The expression "service" is defined in the notice as having eight meanings. The meaning which is the closest to the meaning which has the result that an answer may need to bring forth the equivalent of the contents of advice given by Deloitte or the equivalent of the contents of documents which are the subject of restriction from disclosure or production to the Australian Taxation Office in sections 2.2 and 2.3 of Chapter 8.7 of the guidelines is that contained in sub‑paragraph (ii) of the definition of "service". This refers to "the provision of advice other than any other advice provided in (i)". Sub‑paragraph (i) refers to "the provision of information of an explanatory nature". When one approaches the first question asked in the notices on the basis that there is an inquiry as to the provision of advice other than the provision of information of an explanatory nature one sees that the question is to be asked and answered as follows: Question 1 "Did Deloitte Touche Tohmatsu provide a service to any of its clients?" Answer Yes. Question 2 "If the answer to the question in (1) is yes then provide the following information (a) Which services did Deloitte Touche Tohmatsu provide? Answer yes or no to each of the points (i) to (viii) in the definition of service. It is optional to provide further information:" Answer Sub‑paragraph (ii) - yes. As it is optional to provide further information the second applicant and third applicant can simply answer yes to sub‑paragraph (ii), that is to say they simply say Deloitte provided advice other than information of an explanatory nature to clients but they are not obliged to provide the contents of that advice or the substance of it. The remaining questions in the schedule seek the provision of names and addresses of clients New Zealand superannuation funds or trusts and trustees and other factual information. Those matters and the following questions in the schedule do not seek the contents or substance of any advice given by Deloitte or any information which, by analogy, is similar to the documents referred to and protected from disclosure, in sections 2.2 and 2.3 of Chapter 8.7 of the guidelines relating to restricted source documents and non‑source documents. Put shortly, the questions asked in the schedule from question 2(b) to question 2(j) do not fall within the category of restricted source information or non‑source information if one applies by analogy the descriptions of restricted source documents and non‑source documents in sections 2.2 and 2.3 of Chapter 8.7. The evident purpose of Chapter 8.7 is to provide by analogy with legal professional privilege a measure of protection, except in exceptional circumstances, to clients of professional accounting advisors in respect of disclosure of confidential taxation advice given to them by their professional accounting advisors. In other words, the provision of accounting advice given in connection with the conception, implementation and completion of transactions or arrangements and advice given after a transaction has been completed are to be protected from production except in exceptional circumstances. I do not consider that the information sought in the 2 July notices and 31 July notices falls into the categories of restricted source documents or non‑source documents. The most that one can say is that the notices ask whether advice was given in relation to New Zealand employer‑sponsored non‑complying superannuation funds or trusts substantially similar to the fund described in the Deloitte advice of 16 November 1997 but the content or substance of that advice is not sought. I have considerable difficulty, in any event, in fitting the information sought into any of the categories of source, restricted source and non‑source which apply to documents. I doubt that the information can be so classified by reference to any of the descriptions given to those categories in sections 2.1, 2.2 or 2.3 of Chapter 8.7. Mr Petroulias took the view that as the information sought related to the conception and implementation of the arrangements it fell by analogy within the definition applicable to source documents. If one has to place the information sought into one of the these categories it seems to me that Mr Petroulias is correct because the descriptions in the sections for restricted source and non‑source documents do not apply and the most that can be said is that the information sought relates to the identification of the persons who went into, set‑up or participated in, the arrangement, the fees charged and the contributions made. Such matters may be said to be part of the conception and implementation of the arrangements in that they are relevant to or part of that conception and implementation. This information comes closest, by analogy, to the notion of "recording a transaction or arrangement entered into by a taxpayer" and "the conception, implementation and formal recording of a transaction or arrangement", in that it requires information, not of an advice nature, but rather of an objective factual nature.

Legal professional privilege Mr Petroulias gave relevant consideration to the guidelines in relation to legal professional privilege when he formed the view that it was unlikely legal professional privilege would be relevant. In my opinion he was correct in reaching this conclusion although for present purposes I only have to be satisfied that he gave adequate consideration to the issue of legal professional privilege as raised by the guidelines. Legal professional privilege is not raised or brought into consideration by the notices as no contents of privileged communications are sought. The applicants submitted that Chapter 8.7 is concerned with assimilating the position of non‑lawyers to lawyers so as to give external accountants a measure of symmetrical treatment. Assuming for present purposes (but without deciding) that this submission is correct, the notices do not intrude into such a privileged area. Legal professional privilege does not entitle a lawyer to refuse to provide the name of a client except perhaps where the disclosure of the name will result in the disclosure of legal advice or an otherwise privileged communication (which is not this case): Bursill v Tanner (1885) 16 QBD 1, 4‑5; Cook v Leonard [1954] VLR 591, 592; Southern Cross Commodities Pty Ltd (In Liquidation) v Crinis [1984] VR 697, 700‑703. Cf National Crime Authority v S (1991) 29 FCR 203, 218. The privilege also does not entitle a lawyer to refuse to disclose the address of a client except in particular circumstances not presently relevant: The Queen v Bell; Ex parte Lees (1980) 146 CLR 141, 155‑156. On their face I do not consider that the notices raise questions of legal professional privilege in such a way as to invalidate the notices. The covering letters make it clear that s 264 does not override legal professional privilege. In any event, even if it could be said that the questions asked in the notices transgressed into privileged areas, that is not a matter which invalidates the notices but rather arises for consideration and response at the time the notice is to be answered: Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187, 201‑202, 217; May v Commissioner of Taxation (supra), 25. The fact that advice may have been given by Deloitte which is subject to the protection of legal professional privilege because it was given to solicitors, in this case Wantrup, for the purposes of enabling them to provide legal advice to their client only means that Deloitte can refuse to produce that advice if asked. The notices do not seek the production of such advice. Accordingly the evidence relating to the advice sought from Deloitte and provided by it on 28 November 1997, 2 January and 25 June 1998 does not provide a basis for concluding that the notices are invalid or that Mr Petroulias misunderstood or mis‑applied the relevant guidelines. I accept that the seeking and giving of that advice required complete candour on the part of the clients and Deloitte and that such advice was sought and given in reliance upon the statements and guidelines in the manual. A proper response to the notices does not undermine that candour or reliance as the contents of the advice is not sought in the notices. No privilege whether legal professional privilege or privilege by way of analogy in relation to accounting or tax advice is impinged upon or intruded into by the notices or a proper response to them. It was submitted by the applicants that the capacity of the notices to travel beyond source material is "self evident", particularly having regard to the definition of "service" in the notices. However, as I have analysed earlier, an affirmative response to the obligatory parts of the notices, that is to say the parts where an answer is not optional, will not result in any information being supplied which, by way of analogy, is similar to, or is in the category of, restricted source documentation. The applicants rely upon the evidence of the partners of Deloitte who were the authors of the advices in November 1997, January and June 1998 which it is said: "contain or concern information responsive to the notices". It is said that when one looks at this evidence it is apparent that Deloitte did not give advice to its clients on how to structure or record a transaction or arrangement, nor did its advice deal with the conception, implementation or formal recording of a particular transaction or arrangement, nor explain the setting, context or purpose of any particular transaction or arrangement. However that evidence does not touch upon the validity of the notices. The notices do not enquire as to the contents or substance of the advice given. Even if Deloitte has not given advice in relation to the conception, implementation or formal recording of a particular transaction or arrangement the notices are not limited or restricted to advice in relation to those criteria. The notices ask a more general question, so far as advice is concerned, whether, in the terms of sub‑paragraph (ii) of the definition of "service" Deloitte provided advice other than the provision of information of an explanatory nature in relation to any New Zealand employer‑sponsored non‑complying superannuation fund or trust substantially similar to the superannuation fund described in the 28 November 1997 advice. For the reasons to which I have referred I consider this to be a question which, in the circumstances, the respondent is entitled to ask in the notices and which is within the scope of s 264(1)(a) of the Act. As the notices do not enquire as to the contents or substance of information which falls into the category of restricted source documents there is no reason for the respondent to consider whether "exceptional circumstances" existed as required by section 2.2 of Chapter 8.7 of the guidelines in relation to restricted source information.

Basis for charging fees It was submitted that question 2(f) in the notices, which sought information as to the basis upon which fees and disbursements are charged to clients, could not conceivably be useful to the respondent and that it was not shown how the answer to this question could further the respondent's purposes under the Act. In the statement of reasons it was said that this information was sought to determine whether or not fees were linked to the amount of contributions made by employers. Reliance was placed upon May v Deputy Commissioner of Taxation (supra) for the proposition that asking this question was not for a proper purpose. However, the circumstances in May were different as the question there asked also related to fees payable by prospective clients. The expression "client" in the notices is defined as meaning either a person or entity "that has been provided with a service". Accordingly, question 2(e) enquires as to the basis upon which fees and disbursements have been charged to date. The respondent is concerned to ascertain whether there is any link between the fees charged and the amount of contributions made by employers. Mr Petroulias expressed the view that the fee structure might be related to the question of contributions to a fund which in turn may have a bearing on the genuineness of the fund. I do not have to make a finding in relation to that claim other than to be satisfied that the question is being asked for the purposes of the Act and to enable the Commissioner to perform his functions under the Act. I am so satisfied on the basis of the evidence to which I have referred.

Should a formal notice have been issued? Consistently with the guidelines Mr Petroulias turned his mind to whether there should be an informal or formal approach made to the applicants. He recognised that if an informal approach was made confidentiality considerations would require the applicants to write to their clients for release of the information and that clients might not be contactable. He considered that unnecessary delay in taking action might give rise to criticism of the Australian Taxation Office. The manual sets out in section 2.2.5 of Chapter 2 the circumstances in which an officer should consider issuing a notice pursuant to s 264(1). Mr Petroulias recognised that Deloitte had a duty of confidentiality to its clients and thought that a formal notice would protect it from liability for breaching that duty. He turned his mind to the considerations in section 2.2.5 of Chapter 2 and gave more weight to the consideration in sub‑paragraph (viii) than the other considerations. That consideration related to the situation where information is held by a party subject to a contractual duty of confidentiality. The applicants submitted that it was not enough for Mr Petroulias to turn his attention to and rely upon sub‑paragraph (viii). Rather he was obliged to explain why he regarded that consideration as overriding what they said was the public policy expressed in section 1 of Chapter 8.7 that in respect of restricted source documents: "the ATO acknowledges that taxpayers should be able to consult with their professional accounting advisors on a confidential basis to enable full and frank discussion to take place and for advice to be communicated on that basis." Mr Petroulias was required to take the relevant guidelines into consideration and if he failed to do so, review might follow. But the appropriate weight to be given to the guidelines is a matter for him not a matter for the Court to determine: Minister for Aboriginal Affairs v Peko‑Wallsend Ltd (1986) 162 CLR 24, 41. It is not for the Court to substitute its own decision on this matter. I am satisfied he gave adequate consideration to this matter and this is highlighted by his conclusion that the information sought originated from what he described as "source documents". As the information sought does not fall into the "restricted source" category provided for in Chapter 8.7 the public policy is not impinged upon. Although the application raised the ground that the respondent had no power to issue an amended notice under s 264(1) of the Act thereby calling in question the 31 July notices that ground was not proceeded with at the hearing and no submissions were made in relation to it. I am satisfied that the respondent through Mr Petroulias gave consideration to the relevant guidelines dealing with whether a formal or informal notice should be given and I am satisfied that he gave adequate weight to those guidelines. Having regard to sub‑paragraph (viii) of section 2.2.5 of Chapter 2, Mr Petroulias turned his mind to the contractual duty of confidentiality. In cross‑examination he said that sub‑paragraphs (xii) and (xiv) were indirectly relevant as he was not sure how Deloitte was structured and he thought that an informal approach may not help. I do not consider that sub‑paragraphs (xii) and (xiv) were of any relevance to the matter under consideration but sub‑paragraph (viii) certainly was.

Conclusion I am satisfied that Mr Petroulias gave relevant and proper consideration to those matters set out in the guidelines which the guidelines required him to consider before deciding to issue the notices. I have earlier concluded that the decisions to issue the notices were authorised by the Act and were made for the purposes of the Act and to enable the Commissioner to perform his functions under the Act. It follows that the 2 July notices and the 31 July notices were valid, not vitiated by any error on the part of the decision‑maker and the decision to issue the notices was within the power conferred by s 264(1)(a) of the Act. The application will be dismissed with costs including reserved costs. I certify that this and the preceding thirty-five (35) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg

Counsel for the Applicant: Mr G T Pagone & Ms W Harris

Counsel for the Respondent: Mr B J Shaw QC and Mr G J Davies

Solicitor for the Respondent: Australian Government Solicitor

At a glance

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