BINETTER v DFC of T (No.3)

Judges:
Robertson J

Court:
Federal Court of Australia, Sydney

MEDIA NEUTRAL CITATION: [2012] FCA 704

Judgment date: 6 July 2012

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Robertson J::

Introduction

1. By her further amended originating application filed on 22 March 2012 the applicant applied for judicial review of the decision of the respondent Commissioner under s 264 of the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936) to issue a notice dated 24 February 2012 requiring the applicant to furnish information and to produce documents (the notice).

2. By her application, the applicant also sought review of the decision of the respondent on 14 March 2012 refusing an extension of time to comply with the notice. However that aspect of the application was overtaken by the interlocutory order made by Rares J on 20 March 2012 that the respondent extend the times for compliance with the notice, subject to further order, from 23 March 2012 up to and including the fourteenth day after the making of final orders in these proceedings: see
Binetter v Deputy Commissioner of Taxation [2012] FCA 377.

3. Section 264 of the ITAA 1936 was relevantly as follows:

• 264(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority:
  • (a) to furnish the Commissioner with such information as the Commissioner may require; and
  • (b) to attend and give evidence before the Commissioner or before any officer authorized by the Commissioner in that behalf concerning the person's or any other person's income or assessment, and may require the person to produce all books, documents and other papers whatever in the person's custody or under the person's control relating thereto.
• (2) The Commissioner may require the information or evidence to be given on oath or affirmation and either verbally or in writing, and for that purpose the Commissioner or the officers so authorized by the Commissioner may administer an oath or affirmation.
• …

4. By s 8C(1) of the Taxation Administration Act 1953 (Cth) (the TAA), a person who refuses or fails, when and as required under or pursuant to a taxation law to do so,to furnish any information to the Commissioner or another person; or to produce a book, paper, record or other document to the Commissioner or another person is guilty of an offence. An offence under s 8C(1) is an offence of absolute liability, as defined in s 6.2 of the Criminal Code Act 1995 (Cth) (the Criminal Code). By s 8C(1B), s 8C(1) does not apply to the extent that the person is not capable of complying with the relevant paragraph. A defendant bears an evidential burden in relation to the matters in s 8C(1B); see s 13.3(3) of the Criminal Code. By s 8E of the TAA, a first offence against s 8C is punishable on conviction by a fine not exceeding 20 penalty units.

Chronology of the facts

5. The relevant chronology, which I draw in part from the Commissioner's statement of reasons under s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) tendered by the applicant, began with an audit in 2010 which identified certain bank deposits made into a joint Commonwealth Bank of Australia account in the name of the applicant and her late husband during the 1 July 2001 to 30 June 2009 years of income. The relevant deposits during this period totalled $3,826,039. A majority of these deposits were made by entities of which the applicant and her late husband were directors.

6. A Position Paper issued to the applicant on 29 July 2010. The period under audit was the "years ending 30 June 2002 to 2009". The Position Paper said that the Commissioner intended to assess her on 50% of the relevant deposits on the basis that the deposits represented payments of director's fees, salary or wages or unexplained income in relation to the applicant's and her late husband's services as directors of Erma Nominees Pty Ltd (Erma Nominees) and Ligon 158 Pty Ltd (Ligon 158).

7. The applicant's response, dated 5 November 2010, to the Position Paper stated that these deposits were not assessable income. It said, relevantly:

• 1. It appears to us that the ATO has adopted the objectionable approach of simply adding all of the deposits made into a joint account held by the Taxpayer and her late husband, Mr Erwin Binetter and assumed the totality of the deposits to be assessable income. We are instructed that the deposits are not in the nature of assessable income and should not be treated as such.
• 2. The Income Tax Returns for the financial years ended 30 June 2001 to 2008 are correct and no income has been omitted from the Income Tax Returns as alleged in your Position Paper.
• 3. In relation to the financial year ended 30 June 2009, the Taxpayer strongly objects to the inclusion of your 2009 analysis in the Position Paper as, by your own admission, the Income Tax Return has not been lodged yet.…

8. However in the Commissioner's view there was no explanation or evidence provided to show what the deposits actually represented. By letter dated 16 November 2010, the Commissioner said that in the absence of any further documentation or evidence being provided his position remained unchanged. He said he would shortly be issuing amended assessments, and did so.

9. On 18 February 2011 and 20 October 2011 the applicant lodged objections to the amended assessments. She contended that the relevant deposit amounts represented loan repayments in respect of loans from the applicant to Erma Nominees and Ligon 158. On 1 December 2011 the taxpayer lodged an objection to the assessments for the 1 July 2008 - 30 June 2009 year of income on the same grounds.

10. On 18 July 2011 a letter was sent by the Commissioner to the applicant for the provision of additional information and evidence to support the contentions that the receipt of the relevant deposit amounts represented loan repayments in respect of loans from the applicant to Erma Nominees and Ligon 158. The letter stated that further information may include, but was not limited to: copies of any written loan agreements between the relevant parties; details of the terms and history of each loan, such as the purpose of the loan, the amounts of the loan, the repayment terms of the loan and the current balance of the loan.

11. After an extension of time was sought and granted, the applicant's solicitors supplied, under cover of a letter dated 17 October 2011, copies of six hand written extracts from the accounts of Erma Nominees and Ligon 158 concerning various periods throughout the 1993-94 to 2000-01 years of income. It was said in the letter that this documentation supported the applicant's contention that the receipt of relevant deposit amounts into the bank account represented loan repayments in respect of loans from the applicant to the relevant entities. The letter also said:

Erma Nominees as Trustee for the Erwin Binetter Family Trust ("Erma") and Ligon 158 Pty Ltd as Trustee for the Caringbah Investment Trust ("Ligon 158") have been the subject of an audit by the Australian Taxation Office ("ATO") since 2006. As previously indicated to the ATO on numerous occasions during the course of the audit, those entities have responded to the ATO's requests for documentation and information in the context of the following circumstances:

• (a) A former director of Erma and Ligon 158, Erwin Binetter was responsible for maintaining the financial and statutory records of the company;
• (b) Erwin Binetter passed away on 25 August 2009;
• (c) Prior to that date, Erwin Binetter had suffered from dementia for several years;
• (d) on 27 May 2004 the premises at Pagewood, NSW at which the majority of Erma's and Ligon 158's books and records were kept were destroyed by a fire.

12. On 13 January 2012 a notice under s 264 was issued (and later withdrawn).

13. On 30 January 2012 the applicant asked for a statement of reasons for the decision to issue the notice under s 264; withdrawal of the notice; and that information be requested by the Australian Taxation Office informally.

14. On 20 February 2012 the notice under s 264 dated 13 January 2012 was withdrawn and the applicant advised that a new but identical notice would issue in due course.

15. On 24 February 2012 the present notice was issued.

The Notice

16. The notice required the applicant to furnish the information in Schedule A not later than 23 March 2012 and further required the applicant to produce those documents described in Schedule B "which are in your custody or under your control" concerning the income or assessment of Margaret Binetter for the period 1 July 2001 to 30 June 2009 not later than 23 March 2012. Schedule A to the notice was in the following terms:

• 1. In your objection dated 18 February 2011, you contend that the relevant deposits made into joint Commonwealth Bank account number 28-011-521 represent loan repayments in respect of loans from you to Erma Nominees Pty Ltd as Trustee for the Erwin Binetter Family Trust ('Erma Nominees') and Ligon 158 Pty Ltd as Trustee for the Caringbah Investment Trust ('Ligon 158'). Provide full details concerning the terms and history of each purported loan, including:
  • a. the date the loan was made and to which entity
  • b. the account name(s) and number(s) which the loaned funds were made from
  • c. the account name(s) and number(s) which the loaned funds were made into
  • d. the principal amount of the loan
  • e. the purpose of the loan, i.e. why you personally loaned funds to the relevant entity and for what purpose the entity used the loaned funds for (sic)
  • f. the repayment conditions of the loan, including the frequency of the repayments, amount of the repayment (sic), interest payable on the loan, default interest payable
  • g. the security provided, and
  • h. the current balance of the loan.
• 2. On 17 October 2011 you provided copies of several hand written extracts from the financial accounts of the relevant entities to support your claim of a loan arrangement between the relevant parties and explained that:

  on 27 May 2004 the premises at Pagewood, NSW at which the majority of Erma's and Ligon 158's books and records were kept were destroyed by fire.

  Given your statement of 17 October 2011 that a majority of the relevant documents were destroyed, you are required to explain for the period after 27 May 2004:

  • a. how the amounts of the purported loan repayments were calculated, and what documents were used to calculate them, and
  • b. how the outstanding balance of the purported loan was determined, and what documents were used to determine this.
• 3. An analysis of the relevant bank statements for Commonwealth Bank account number 28-011-521 shows that the amounts of the relevant deposits varied significantly. For example, on 25 February 2005 you received $999,992 from Ligon 158 and on 3 March 2005 you received $8 from Ligon 158. You are required to explain why there are significant variances in the amounts of the purported loan repayments.
• 4. Advise whether at anytime during the relevant period, Erma Nominees and/or Ligon 158 were unable to meet their obligations under the purported loan arrangement and failed to make repayments or were unable to make repayments to you in full. If so, provide full details of how the purported loan agreement dealt with such default payments and whether this clause was enforced. If this was not enforced, explain why not.
• 5. You declared $50,000 as 'other assessable income' in each of your tax returns for the 2000-01 to 2003-04 years of income. Provide details of:
  • a. the source of the funds
  • b. the account name(s) and number(s) which the relevant funds were paid into, and
  • c. the activities undertaken to earn the relevant income.
• 6. You did not report any amounts as 'other assessable income' in your tax returns for the 2004-05 and subsequent years of income. Confirm that you did not continue to receive the 'other assessable income' which you received in the 2000-01 to 2003-04 years of income and provide details of the change in circumstances which led to you ceasing to receive this particular income.

17. Schedule B to the notice was as follows:

Pursuant to questions 1 to 6 in Schedule A, please provide the following (note that copies of the documents will be sufficient):

• 1. Bank statements for the relevant bank accounts showing that you loaned the respective amounts to Erma Nominees and Ligon 158.
• 2. Bank statements for the relevant bank accounts showing that Erma Nominees and Ligon 158 received the respective amounts from you.
• 3. Loan agreements and any other documents evidencing loan agreements between you and Erma Nominees and you and Ligon 158, other than the hand written extracts provided on 17 October 2011.
• 4. Documents showing a full history and running balance of the purported loans between you and Erma Nominees and you and Ligon 158.
• 5. Documents used to calculate the amount of the purported loan repayments for the period after 27 May 2004.
• 6. Documents used to determine the balance of the purported loans for the period after 27 May 2004.
• 7. Bank statements and any other documents showing that you received $50,000 as 'other assessable income' in each of the 2000-01 to 2003-04 years of income.
• 8. Documents showing why you ceased receiving your 'other assessable income' in the 2004-05 and later years of income.

18. The applicant also directed attention in submissions to the terms of the covering letter dated 24 February 2012 from the Australian Taxation Office which so far as relevant is in the following terms:

You cannot refuse to comply with this notice on the basis of self-incrimination. However, section 264 of the ITAA 1936 does not override legal professional privilege. We may also allow some advice to remain in confidence between you and your professional accounting adviser. We have adopted a series of proformas that you are requested to complete in respect of every communication for which you make a claim. If you complete the proformas, this will enable us to make an informed decision about the claim. If you think any of the documents requested falls into either category, please contact Mr Stasinopoulos as soon as possible.

The information required in the attached notice is for the purposes of the ITAA 1936 and the Income Tax Assessment Act 1997.

Mr Stasinopoulos was described in the heading to the letter as the contact officer.

Consideration of the grounds of challenge

Ground 1

19. Ground 1 related to self-incrimination. Shortly stated, the applicant's point was that the respondent Commissioner wrongly asserted that the applicant could not refuse to comply with the notice on the basis of self-incrimination.

20. Although this matter was developed at great length in the applicant's outline of submissions the point is covered by authority.

21. In
Commissioner of Taxation v De Vonk (1995) 61 FCR 564 a Full Court held that the recipient of a notice under s 264 may not refuse to comply with the notice on the basis of self-incrimination. As Lander J said in
Australian and New Zealand Banking Group Ltd v Konza [2012] FCA 196; (2012) 126 ALD 255 at [69] a single judge of this Court is bound by that decision.

22. The applicant sought to argue that, as a single judge, I was not so bound because, accepting that the "central sentence in the reasoning" was "the context of the legislation combined with the terms of ss 8C and 8D lead to the conclusion that the privilege has been abrogated", that reasoning relied on a combination of matters and, so it was submitted, much of the reasoning had been undermined by the reasoning in
Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 (Daniels). On that basis it was submitted that the reasoning in Daniels must be followed by this Court in preference to the reasoning in De Vonk (above).

23. I do not accept this submission. De Vonk is a decision of a Full Court on the very provision I am required to construe. De Vonk has not been overruled either in Daniels or elsewhere.In Daniels, the High Court was not construing s 264 in relation to the privilege against self-incrimination but was construing s 155 of the Trade Practices Act 1974 (Cth) in relation to legal professional privilege. Indeed, one of the matters referred to by the High Court for its conclusion that s 155 did not displace legal professional privilege was the express exclusion of the privilege against self-incrimination in the same section. Another matter taken into account by the High Court was that construing s 155 so that it did not displace legal professional privilege would not stultify the operation of the legislation because legal professional privilege is not available for communications made in furtherance of an unlawful or other improper purpose. Quite different consideration would apply to a claim based on the privilege against self-incrimination, particularly in relation to tax legislation. It follows that the decision of the High Court in Daniels is not a sufficient basis upon which I may not follow De Vonk. In my opinion De Vonk remains binding on me.

24. I should also note that I do not accept the applicant's emphasis on the covering letter in this respect. If, as the applicant submitted, s 264 and a notice under it does not displace the privilege against self-incrimination then that is the position, irrespective of the covering letter.

25. Ground 1 therefore fails.

26. I note the additional submission by the respondent Commissioner that,like legal professional privilege, if the privilege against self-incrimination were available in relation to s 264, that would not go to the validity of the notice but would simply go to the duty of the recipient of the notice, in this case, to produce the information or the documents as required by the notice. In those circumstances, it would be up to the recipient of the notice, in answer to it, to make the claim that the information requested or the document would not be produced because of the claim of privilege against self-incrimination. If that was rejected by the Commissioner, it would be open to the recipient of the notice to seek declaratory relief in relation to whether she was, in fact, required to produce that information or the document in answer to the notice in light of the claim for privilege or, alternatively, it would be open to her to maintain her refusal to produce the document or information, and then raise the privilege as a defence to any prosecution for failing or refusing to comply with the terms of the notice. Reliance was placed on
Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187 (Fieldhouse) at 201 per Lockhart J and 217 per Hill J where their Honours reached the conclusion in relation to legal professional privilege that if a notice apparently covered such communications that did not lead to its invalidity. In my opinion that reasoning would also apply to the privilege against self-incrimination. De Vonk (above) proceeded on that basis, that is, whether there was an entitlement to refuse to answer questions pursuant to a s 264 notice.

Ground 2

27. Ground 2 related to the concession in respect of a professional accounting adviser and to legal professional privilege.

28. In respect of the concession, the error was said to be constituted by the respondent Commissioner setting up a procedure for a claim to be made for him to decide whether to permit this concession to be claimed, where non-compliance with the notice was an absolute liability offence to which it was not a defence that the Commissioner be satisfied with the extent of non-compliance. Thus the notice was legally flawed.

29. This ground appeared to be developed in two ways (leaving aside the question of self-incrimination which I have dealt with above).

30. First it was submitted that if the covering letter was able to amend the scope of the notice then the notice was nevertheless misleading to the extent that it required information or documents to be provided which the Commissioner wrongly determined were not subject to a valid claim for legal professional privilege.

31. In my opinion this contention is impermissibly theoretical. If there is a dispute, following a claim, as to whether a particular communication is subject to legal professional privilege then that dispute will have to be resolved by the exercise of judicial power: see Fieldhouse (above) at 200 per Lockhart J. At present, there is no evidence that any such communications would be covered by the notice; no communications have been produced; no claim to legal professional privilege has been made so it is not known whether there are any such communications; the Commissioner has not considered any such claim; and there is no impending dispute about any such claim. I reject this submission.

32. Second, if the covering letter were unable to amend the notice it was submitted that the covering letter was misleading in so far as it indicated that information in fact caught by the notice need not be provided because the Commissioner excused its production in relation to (1) information and documents which are not subject to legal professional privilege but in respect of which the Commissioner nonetheless made a decision to allow a claim based on legal professional privilege and (2) information and documents that the Commissioner accepted need not be provided on the basis that they comprised advice in confidence between the recipient of the notice, the applicant, and her professional accounting adviser.

33. As to this second limb of Ground 2, in relation to the legal professional privilege aspect again the submission is impermissibly theoretical for reasons similar to the reasons I have given in relation to the first limb of Ground 2. Further, in my view, an incorrect decision by the Commissioner to allow a claim that a communication is subject to legal professional privilege when in truth it is not does not affect the validity of the notice. In my view the validity of the notice is not affected by such a future event, if it were to occur.

34. So far as concerns any application of the concession in respect of the applicant's professional accounting advice, it is an unusual submission on behalf of an applicant that a proposed concession to exclude the production of certain information should be attacked. Nevertheless, the submission seems to involve a hypothetical future application by the recipient of the notice to the Commissioner for the concession which, if accepted by the Commissioner, would be unlawful. Again, for the same reasons as at [31] above in relation to legal professional privilege, the submission is impermissibly theoretical. The Commissioner has merely offered to consider allowing the recipient of the notice to have the status of such communications considered and, if certain conditions apply, not to read those communications.

35. As the respondent Commissioner submitted, the result of the consideration may be that the document has to be produced to the Commissioner but left in a sealed envelope or dealt with in another suitable way. All the Commissioner was doing in this letter was saying, "Provide us with the details and then we can decide how to deal with it, pursuant to our policy". In the case of information, it may have to be written down so that the Commissioner can deal with it in accordance with his policy.

36. A further answer, in my opinion, is that if such an application for the concession in respect of a particular communication were made by the recipient of a s 264 notice and accepted by the Commissioner then, even on the applicant's submission, the position could be regularised by the amendment of the notice or by its revocation and reissue.

37. I reject the aspect of the second limb of Ground 2 which concerns the professional accounting advice concession.

38. For these reasons I reject Ground 2.

Ground 3

39. Ground 3 was abandoned before the final hearing.

Ground 4

40. Ground 4 was that the notice was misleading, confusing and incomplete.

41. Justice Hill (with whom Burchett J agreed) summarised the legal position in Fieldhouse (above) at 208:

No doubt in part because of the severe sanctions that may become applicable in the case of a failure to comply with a notice under the section, but in part also because a request to supply information, attend and give evidence or produce books and documents etc is a considerable intrusion upon the privacy of the individual to whom a notice is addressed, there is a requirement that a notice identify with sufficient clarity any documents which are required to be produced:
Commissioner of Taxation (Cth) v ANZ Banking Group Ltd, (1979) 143 CLR 499 per Gibbs ACJ (at 525). Where information is required by the section to be furnished, the request for information should be so framed as to be sufficiently clear to convey to the addressee what information is sought and a notice which was unintelligible would obviously be bad. However, it does not follow from this that the question of the validity of a notice should be approached carpingly by engaging in a narrow analysis of each word in an attempt to find some latent ambiguity in it. Rather the approach to be adopted is to ask in respect of any particular request whether a reasonable man in the position of the addressee of the notice can fairly comply with it and not be thereby exposed to the possibility of penalty for non-compliance having regard to the manner in which the notice is formulated.

42. In
Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499 Mason J at 537 observed that the recipient of a notice is required to determine for himself or herself what must be done to comply with the notice. His Honour acknowledged that the task may be difficult and that a wrong decision may expose the recipient to prosecution or penalty. The fact that the task may be difficult does not render the notice invalid for lack of clarity.

43. A question arose before me as to whether it was or was not an answer to the notice for the applicant, an individual who was both the recipient of the notice and the taxpayer, to say, truthfully, "I don't know." Leaving aside the case where the recipient was not capable of complying with the notice, the applicant submitted a notice issued under s 264(1)(a) did not allow the recipient to respond by saying "I don't know." The applicant relied on
Smorgon v ANZ Banking Group Ltd (1976) 134 CLR 475 and on the principles summarised by Greenwood J in
Hart v Commissioner of Taxation (2005) 148 FCR 198 (Hart) at [100]:

• 100 The notice to Mr Hart is addressed to him in his capacity, properly construed, as a principal of the firm and sole trustee of the Cleary Hoare Practice Trust which is the proprietor of the business Cleary Hoare, Solicitors.… There is nothing in the authorities which limits the power conferred by s 264(1)(a) to information within the knowledge of the specific individual. Mr Hart is in a position to draw together, through the resources available to him, the information concerning implementation arrangements undertaken by the firm. The notice, on that ground, is not beyond power.

44. In the preceding paragraph in Hart, Greenwood J referred to the judgment of Stephen J in Smorgon (above) at 481-482 where Stephen J said:

When, as here, what is in question is not so much the seeking of admissions but rather a process of cross-examination, taking the form of responses to questions posed by the Commissioner or his representative, it seems an improbable legislative intent that some "proper officer", or even the corporation's "public officer" for tax purposes, should, on the corporation's behalf, respond to such questions. Not only might he know nothing at first hand about the matters inquired after but he would seem to be under no obligation to inform himself of them. Even were he to do so his evidence would, at best, be at second hand.

What s. 264 (1) (b) is designed to do is to permit the Commissioner to gain access to the knowledge residing in men's minds. A corporation can possess knowledge only because of its existence in the minds of those who direct its affairs and serve its interests. It is surely to them personally, and at first hand, that the Commissioner must direct his questions when it is about the affairs of a corporation that he wishes to elicit evidence. I would interpret the first part of par. (b) accordingly and confine its operation to natural persons, treating the context as revealing a sufficiently clear intention that "person" in s. 264 (1), when applied to the first part of par. (b), does not refer to other than natural persons.

Such an interpretation gives no unduly narrow operation to the first part of par. (b). The Commissioner remains free to serve notices upon natural persons in any way concerned with the affairs of the corporation. They must attend and may be questioned as to their own knowledge of the corporation's affairs; if it turns out that they do not possess the relevant knowledge they can no doubt be required to identify those who do have that knowledge and those others may then, in turn, be required to appear and give evidence.

45. Thus Stephen J treated the first part of s 264(1)(b) as having no application to corporations.

46. It was submitted that the applicant in this case was not in a position to answer the notice and that could be inferred simply from the ledgers that indicated the loans had been on foot for so many years.

47. The respondent submitted, on this point, that there was nothing in the text of s 264 or the statutory context that would support the submission that a recipient of such a notice could not say, "I don't know. I can't provide that information". Neither Smorgon (above) nor Hart (above) were authority for that proposition. In Smorgon Stephen J was addressing s 264(1)(b) not, as here, s 264(1)(a). More importantly, his Honour was addressing the question of construction whether a company could be required to attend and give evidence pursuant to s 264(1)(b). Here the notice was served on the applicant as an individual and she either knew or she did not know. She either had the documents or she did not have the documents. She could, if she wished, make inquiries and answer the questions, but if the inquiries she made turned to naught, then she should answer accordingly, and there was nothing to stop her from doing so. If she did answer "I don't know" and that was accepted as an honest answer, she could not be prosecuted under s 8C of the TAA because she had answered the notice to the extent that she was capable of doing so.

48. In reply the applicant submitted the reasoning of Greenwood J in Hart (above) was not so limited as to say that it was only necessary to make an inquiry if the s 264 notice was directed to you in a particular capacity. The only defence under a s 264 notice was that the person was not capable of complying with the notice. It would be unlikely that a person could say he or she was not capable of complying with the notice because they did not even make any inquiries.

49. I reject the submission that I should infer that the applicant in this case was not in a position to answer the notice. No evidence was adduced to that effect.

50. Thus the somewhat abstract issue is what is the obligation, if any, on an individual recipient of a notice to gather any information sought or find the documents within her custody or control.

51. In Hart (above), Greenwood J construed the notice as not seeking out information within the knowledge only of the recipient of the notice as an individual but calling upon him to provide information of the firm about those clients of the firm for whom the arrangements in question had been implemented. As I have set out, Greenwood J then asked the question whether, so construed, the notice was within the power granted by s 264(1)(a) and concluded at [100] that it was. Thus the decision in Hart (above) is distinguishable on the basis that the notice in that case was addressed to the recipient in his capacity, properly construed, as a principal of the firm and called on him to provide information of the firm.

52. I would not construe the notice in the present case as requiring the individual recipient to make exhaustive enquiries. In my opinion the better interpretation is that the individual recipient is not required to make those inquiries. The correct construction is to focus on what information an individual recipient can furnish or what documents are in the recipient's custody or control.

53. It is therefore not necessary to decide on the scope of s 264(1)(a) in that respect. I observe however that there is nothing expressly stated in the section to the effect that the individual recipient is required to make enquiries. And I would not readily construe s 264(1)(a) as imposing that requirement by implication, particularly where the obligation is not limited to the recipient's own tax affairs.

54. To the same effect seems to be the statement by Stephen J in Smorgon (above) at 481-482 in relation to s 264(1)(b) that, in relation to a company's affairs, a notice under that section may be given to a natural person and they must attend and may be questioned as to their own knowledge of the corporation's affairs. If it turns out that they do not possess the relevant knowledge they can no doubt be required to identify those who do have that knowledge and those others may then, in turn, be required to appear and give evidence. See also the report at 485 and the reference there to the knowledge of officers of the company. (emphases added)

55. I am not presently persuaded that the difference between giving evidence under s 264(1)(b) and furnishing information under s 264(1)(a) has the consequence that, in contrast to s 264(1)(b), an individual recipient of a notice under s 264(1)(a) may be required to make inquiries to gather any information sought which was not within his or her knowledge. I note that by s 264(2), either the information or the evidence may be required to be given verbally.

56. In
Clinch v Inland Revenue Commissioners [1974] QB 76, the statutory provision was s 481 of the Income and Corporation Taxes Act 1970 (UK). It provided, in part:

481(1) The board or, for the purpose of charging tax at the standard rate, an inspector may by notice in writing require any person to furnish them within such time as they may direct (not being less than 28 days) with such particulars as they think necessary for the purposes of this chapter.

Under the heading "Has the plaintiff established that the notice is inordinately burdensome or oppressive?" Ackner J said at 92:

I think an unnecessarily pessimistic view has been taken by the plaintiff of the time it would take to comply with the notice. In making this calculation he has taken into account two matters. (1) That in regard to matters in which he has given advice, but where he is doubtful whether any specified transaction or operation has been carried out as a result of the advice, he would have to make inquiries as to what the position was. In my judgment the notice imposes no such obligation. The notice does not require him to carry out any researches in order to obtain knowledge which he never had. He must examine the records maintained by him or maintained by the London bank and he must seek to refresh his knowledge from any sources which he considers are capable of providing such refreshment. He is not obliged to acquire new knowledge which he has never possessed. (2) He feels that the London bank is under a duty to its customers to inform them of the information that it gives to the commissioners. This may well be a matter of ordinary banking courtesy - I know not - but it is not strictly part of the compliance with the notice.

(original emphasis)

57. For present purposes the most authoritative consideration of the issue is
Dunlop Olympic Ltd v Trade Practices Commission (1982) 62 FLR 145 (Dunlop Olympic). The Full Court there considered a submission that a requirement in a notice under s 155 of the Trade Practices Act 1974 (Cth) was objectionable because it extended to require information about meetings which officers, employees or agents of the company might have attended other than in their capacity as such. Such information would not, it was argued, be in the knowledge of the company since it would be in the knowledge of the particular representative other than in his capacity as an officer, employee or agent of the company. To require the company to furnish such information would be to require it to act in the role of "detective" and to ascertain information which it did not possess. That, so it was said, was not a permissible use of s 155 of the Act. The Full Court said at 149-150:

We also find difficulty with the unqualified proposition that a s. 155 notice cannot legitimately require the recipient to act as a "detective". It is true that the recipient of a notice can only be required to furnish information which is in his knowledge or control and cannot be required to undertake a general investigation of matters beyond his control. That is not, however, to say that compliance with the requirements of a s. 155 notice may not well involve a degree of investigation to determine matters which are properly to be seen as being within the information (sic) or control of the recipient of a notice . This is particularly the case where the recipient is a company. Apart from documentary and computerized material which it owns, the knowledge and information of a company will ordinarily be the knowledge and information of its officers. The officer of a company responsible for formulating its response to a s. 155 notice will commonly find it necessary to make inquiries of responsible officers, employees and agents as to relevant information in the same way as is necessary when a company is required to provide particulars, answer interrogatories or discover and produce documents in compliance with court orders in litigation or to provide information in compliance with the requirements of innumerable statutory provisions.

The real answer to the appellants' argument is, however, to be found in the nature of the requirement which the notice imposes. The basis of the notice is, as the notice expressly recites, that Mr. Gilbert has reason to believe that Dunlop "is capable of furnishing information and of producing documents". In using that formulation, the notice follows the express words of s. 155 of the Act. Those words do not mean that the recipient of a notice is able, by acting as a "detective", to ascertain information or obtain possession of documents which are not within its knowledge, possession or control. They mean that the recipient of the notice is capable of furnishing information or producing documents which lie, in the case of information, within its knowledge or control or, in the case of documents, within its possession or control . In other words, Dunlop is required by the notice only to furnish information which is in its knowledge or control including information, however obtained, which is held on its behalf by its officers, employees or agents who are concerned, on its behalf, with the relevant subject matter.

(added emphasis)

The appeal, reported as
Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328, did not deal with this issue.

58. In
D'Anastasi v Environment, Climate Change and Water NSW (2011) 185 LGERA 358; [2011] NSWCA 374 the New South Wales Court of Appeal recently considered the issue of a notice under s 193 of the Protection of the Environment Operations Act 1997 (NSW) (the POEO Act). It provided, in part:

193(1) An authorised officer may, by notice in writing given to a person, require the person to furnish to the officer such information or records (or both) as the officer requires by the notice in connection with any matter within the responsibilities and functions of the regulatory authority that appointed the officer.

The Court held that the notice was invalid as it failed to indicate to the addressee the matter with which it was concerned. Young JA went on to consider the question whether the notice required the addressee to make enquiries or merely to answer from his, her or its own knowledge. After reviewing the cases, including Clinch (above) and Dunlop Olympic (above) Young JA said:

• 76 Thus, in my view the notice must be construed as only requiring the addressee to react to it in the manner noted in the Dunlop case and the previous paragraphs. If the notice were otherwise valid, so construed it would not be invalidated because it requires some search for information, but does not require the addressee to make extensive enquiries of others.
• 77 Insofar as it is objected that the addressee is required to state the purpose of each visitor when attending the premises, if the visitor has told the addressee that purpose or if the addressee has a belief as to the purpose (at least a belief founded on fact) there is no difficulty in complying with the notice. Otherwise the answer that the addressee has no information about the purpose would suffice.

Sackville AJA, with whom Campbell JA agreed, said at [109] that as the notice was invalid, he do not think it necessary to consider the precise extent to which the appellant would have been obliged to make enquiries had the notice been validly issued. It was enough to say that he doubted that s 193 of the POEO Act, on its proper construction, authorised notices that could require the recipient to make enquiries of third parties with whom that recipient had no relevant association, such as an employer-employee relationship.

59. In my view, there are or may be questions of degree involved which it is unsuitable to attempt to answer in the abstract. At the level of compliance, ultimately it would be for the tribunal of fact in an appropriate forum to decide whether the recipient of the notice did or did not furnish the information: the more readily available to the recipient the information was the less likely it may be that the recipient would be believed if he or she said they could not comply. In my opinion this is a preferable approach to that adopted by Ackner J in Clinch (above).While I agree that a notice does not require the recipient to carry out any researches in order to obtain knowledge which he or she never had and the recipient is not obliged to acquire new knowledge which he or she has never possessed,the balance of the observations by Ackner J contains, in my opinion, a philosophical element of unknown knowns. The touchstones of knowledge or control, referred to by the Full Court in Dunlop Olympic (above) in relation to information seems to me, with respect, to provide a more practical approach to the questions of fact and degree to which I have referred. For these reasons I do not accept the submissions, which I have set out above, of either of the parties on this point.

60. I turn now to the particular complaints about the terms of the notice.

61. Although not developed in the applicant's written submissions, the first complaint related to paragraph 1 of Schedule A. The submission was that the Commissioner was now asking for full details concerning the terms and history of each purported loan, including but not limited to the matters that were articulated in subparagraphs a. to h. It was submitted that it was not known what other matters the Commissioner might be seeking. The applicant complained that "full details" was not a term that the applicant would be in a position to understand, in the context that there were subparagraphs a.to h., yet they did not constitute the limit of the details. Given how broad the requests were in subparagraphs a. to h., it was difficult for the applicant to know what else might be required, yet plainly, the notice was asking for more than that, because it was requesting full details.

62. In my opinion this complaint is not made out. It was the applicant, the recipient of the notice, who was contending that the relevant deposits represented loan repayments and I see no vice in the Commissioner requiring full details of the terms and history of each purported loan. In my opinion these subparagraphs indicate the nature of the information the Commissioner required. The word "including" indicates no more than that if there were other details concerning the terms and history of each purported loan then they were to be included. I refer to the observation of Mason J in
Commissioner of Taxation v Australia and New Zealand Banking Group Ltd set out above.

63. A further complaint in relation to paragraph 1 related to subparagraph e. It was submitted that "what purpose the entity used the loaned funds for" was not within the applicant's knowledge, which was a matter that ought to have been known to the Commissioner. In my opinion the factual basis for the submission on this application for judicial review has not been established. It was further submitted that in any event this question was not relevant: the purpose for which the loaned funds were used was not something that arose in the applicant's assessment. The business purpose was not part of the investigation of the Commissioner in relation to her assessment. I return to the submission about purpose below in relation to Ground 6A.

64. The third complaint was the use in the notice of the words "explain" and "explain why". I see no force in this proposition. In context, in my opinion, the meaning of these words is clear. Again, it was the applicant, the recipient of the notice, who had asserted that the amounts in the bank account represented loan repayments in respect of loans from the applicant to Erma Nominees and Ligon 158. I reject the submission that, in the present context of the calculation of the amounts of the repayments and the determination of the outstanding balance, to ask for an explanation as to how something is done is not a certain exercise.

65. The fourth complaint centred on the use of the word "analysis". There is no force in this contention. The word "analysis" is merely introductory: the meaning of the paragraph would not be different if the opening three words were omitted. The applicant is not asked any questions about the analysis. It seems to me to be immaterial that the analysis was "insufficiently described" as contended for on behalf of the applicant.

66. The fifth complaint was the use of the expression "significant variances". In context however the subject matter is, on the one hand, the repayment of alleged loans which one might expect to be of more or less constant amounts as against payments from time to time of fees or dividends and the like to a director/shareholder. It is in this context that the applicant is asked to explain at a general level (not by reference to each variation) why there are significant variances in the amounts. The language of paragraph 3 is "explain why there are significant variances in the amounts" of the loan repayments.

67. Further, depending on the facts, it would be open to the applicant to respond by denying the assumption: see Fieldhouse (above) at 212 where Hill J said in relation to an assumption that the addressee of the notice was at liberty when providing information to indicate, if it be the case, that the assumption was false with the consequence that the question was not relevant to any inquiry.

68. A further complaint was the use of the word "why". Again I think the meaning is clear. In context the expression means "what is the reason for significant variances in the amounts".

69. Another complaint related to the use of the words (underlined below) in paragraph 4 of Schedule A: If at any time during the relevant period , Erma Nominees and/or Ligon 158 were unable to meet their obligations under the purported loan arrangement and failed to make repayments or were unable to make repayments to you in full "provide full details of how the purported loan agreement dealt with such default payments ".

70. In my view the ambiguities contended for are not made out. The relevant period is the years in issue during which the payments were made and which were the subject of the correspondence between the applicant and the Commissioner. As I have said, this was the bank deposits made into the joint Commonwealth Bank of Australia account in the name of the applicant and her late husband from 1 July 2001 to 30 June 2009, identified in the Commissioner's position paper. The question is then asked, on the assumption that there were such loan arrangements, whether during that period either of the borrowers was in default of their obligations in failing to make repayments at all or in full. If that occurred then the applicant is asked to provide full details of how the purported agreement, to which she said she was a party, provided for such events, whether that provision was enforced and if not why not.

71. I reject the submission that the request for information was ambiguous because the agreement might be oral or evidenced other than in writing. It is the applicant who was propounding the agreement and may be presumed to know its terms. As Greenwood J said in Hart (above) at [91], the clarity of the notice must be considered against the background of the knowledge and circumstances of the respondent to the notice and the contextual facts.

72. I also reject the contention that to answer the question might require communications with all counterparties and their agents and an accurate reporting of the agreements and any variations thereto over a lengthy period. This seems to me to be an attempt to create ambiguity where there is none.

73. In my view, contrary to the contention on behalf the applicant, the request for information was not as to the state of solvency of the two alleged debtors either at all or over a long period or at any particular point or points in time. In this respect I construe the word "unable" not as being directed to the issues familiar to insolvency practitioners but to a much simpler question which is whether the debtors did not meet their obligations under the purported loan agreement or arrangement.

74. I also reject the submission that "To the extent that an agreement is oral or evidenced other than in writing, the question of how an agreement "dealt with" something was a complex question". This proposition is speculative. It was the applicant who was asserting the existence of a loan agreement. In my opinion it does not establish ambiguity for the applicant to say, in effect, the notice is ambiguous or uncertain by reference to facts that may not exist but which, if they did exist it would be her responsibility to put before the Court.

75. The next complaint related to paragraphs 5 to 6 and 8 of Schedule B. It was submitted that the applicant may not be the person who used the documents to calculate the amounts of the purported loan repayments or the balance of the purported loans. It was therefore impossible to comply. It is to be recalled that the documents described are those in the applicant's custody or under her control. In my opinion the factual basis for the submission on a judicial review application has not been established. To say that the applicant may not be the person who used the documents does not establish that she was not that person on the material before the Commissioner or at all. It is also to be recalled that it was the applicant who continued to receive the alleged repayments after the fire to which she had referred in communications with the Commissioner. In my opinion the factual basis for the complaint, that is that these paragraphs were asking for documents used by somebody else which were not within the knowledge of the applicant, has not been established.

76. In respect of each of these complaints it is in my view relevant that there is no evidence from the applicant that she had any difficulty understanding the terms of the notice. This is relevant because the test of ambiguity is by reference to the position of the addressee of the notice, shorn of personal idiosyncrasies: see Fieldhouse (above) at 208 where Hill J referred to "a reasonable man in the position of the addressee of the notice".

77. Although a notice may be severable, depending on its terms, in the view I take it is not necessary to resort to the principles of severance.

Ground 5

78. Ground 5 was that the time limited for compliance was on its face so manifestly unreasonable that no reasonable person in the position of the recipient could possibly comply with it and the period of time for compliance was unreasonable. It was argued that the Commissioner failed to take into account the relevant consideration that the applicant had review rights and it could be reasonably expected she intended to pursue those rights. Further, there was a statutory right to reasons which it could reasonably be expected she would pursue and a statutory time limit for providing the reasons which was 28 days.

79. This ground was not pressed in the applicant's lengthy written submissions. However, in oral submissions two things were put in relation to time for compliance.

80. First, it was submitted, time ought not to run for the applicant to comply with the notice until the Court determined whether the notice was valid. In my view this is dealt with by the interlocutory order made by Rares J and, if the matter is to be revisited, may be revisited once I have made orders disposing of the substantive application. The applicant accepted that position.

81. The second element was that on the material that the Commissioner had, the time allowed for compliance with the notice was unreasonable and now, taking into account the steps that the applicant must take in order to comply with the notice, it was submitted it was clear that months would be required not weeks.

82. The status of the objective test of reasonableness, on the basis of the decision in
Deputy Commissioner of Taxation (Cth) v Ganke [1975] 1 NSWLR 252, was referred to by Jagot J in
Krok v Commissioner of Taxation (Cth) (2009) 77 ATR 897; [2009] FCA 1497 at [46]. Her Honour noted a potential inconsistency between the approach in Fieldhouse (above) and the approach in
Holmes v Deputy Federal Commissioner of Taxation (1988) 88 ATC 4328 and in the Full Court in
Wouters, Wright and Holmes v Deputy Commissioner of Taxation (1988) 20 FCR 342.

83. In my opinion, whatever may be the status of Ganke (above) and Fieldhouse (above) in this respect, on the facts of the present case, once the notice is properly construed, there is no basis for a contention that the time for compliance was unreasonable whether considered objectively or by reference to the material before the Commissioner or with reference to Associated Provincial Picture
Houses v Wednesbury Corporation [1948] 1 KB 223.

84. It follows that I do not regard as relevant the two death certificates, which I admitted into evidence provisionally and subject to relevance. I reject their tender.

85. I reject Ground 5.

Ground 6

86. Ground 6 related to the extension decision which, as I have said, was overtaken by the interlocutory order made by Rares J.

Ground 6A

87. Ground 6A was that the notice was issued for the improper purposes of obtaining admissions or pre-trial discovery or obtaining an advantage or otherwise affecting future litigation and to avoid prejudice to the Commissioner in future litigation, which are properly matters for the Court or Tribunal adjudicating the litigation.

88. The applicant submitted that a purpose and arguably the dominant or sole purpose of issuing the notice was to advance the Commissioner's interests in future litigation he perceived to be imminent. Further, it was submitted, there was evidence to sustain an inference that the objection decision had in fact been made, or could be made without the information and documents sought under the notice but it had been held up in order to allow the Commissioner time to issue the notice and receive the information to further his purpose of advancing his interests in future litigation. It was submitted that the evidence suggested that the objections could have been determined at any time after 18 September 2011. It was only after receipt of the advice from the Legal Services Branch of the Australian Taxation Office to the effect that the objection process "could and should be used to collateral advantage" that the decision was made to issue the s 264 notice. The tone of the communications was to the effect that the objections would be disallowed and therefore the Commissioner must prepare for litigation.

89. The applicant submitted that the purpose was to affect Part IVC proceedings, to give the Commissioner an advantage before the Tribunal or the Court whereas advantages the Commissioner has in those proceedings and the ability to ensure that there was procedural fairness was in the Tribunal's and the Court's realm and no part of the purpose of the s 264 notice.

90. A second element of this ground was that the notice required the recipient to provide information concerning the purpose for which the alleged borrowing entity actually used the funds. It was submitted that the information sought was so remote from the taxation implications that it was outside any lawful purpose for which the notice was served and the notice was therefore invalid. The ultimate use to which the loans were put by Erma and Ligon 158 was not relevant to determining the tax consequences to the applicant of the granting of the loans and there being repayment. To the extent that the notice called for information regarding Erma and Ligon 158 it called for information outside the scope of the s 264 notice.

91. In my opinion the first element of the submission pays insufficient regard to the function the Commissioner was in fact seeking to exercise; that is, to make a decision on the applicant's objections. This is not a case where the question can be approached by asking whether the decision maker had or had not decided to commence legal proceedings: compare
Korean Airlines Co Ltd v Australian Competition and Consumer Commission (No 3) [2008] FCA 701; (2008) 247 ALR 781 at [70]. This is because the administrative process of assessment, which includes making a decision on the objections, precedes the commencement of either tribunal proceedings or court proceedings by the taxpayer. Further, in the present case there are no proceedings in the Tribunal or in the Court. The Commissioner was not deciding whether proceedings should be instituted by him. Such proceedings were neither imminent nor pending although they were foreseeable if the objections were disallowed. But there was no intrusion on judicial power nor any exercise of power for an improper purpose. Thus at that level of abstraction the ground fails.

92. In my opinion this ground also fails on the facts.

93. The material referred to by the applicant included references and correspondence as early as 18 July 2011 to the effect "If the additional information is not received by… we may decide your client's objection on the facts available." Reference was also made to a document submitted on 20 September 2011 to the effect that the Commissioner had then formed the opinion in relation to tax in 2005-2007 that there had been an avoidance of tax due to fraud or evasion (this finding not having been thought necessary at the time the assessment was made). This finding would not have been necessary, it was submitted, unless the Commissioner had by that date resolved to disallow the objection. It was then said that on 27 September 2011 the ATO Legal Practice advised that the s 264 notice should be issued. This was by reference to an e-mail from Virginia Rands which, under "Other comments" contained the following:

However, I think that the perception that the matter will proceed to litigation is clearly correct.… With this in mind, we need to consider how best to utilise the objection stage to assist with the finalisation of the matter overall.

It has been a typical pattern for this group of cases to refuse to provide information, and then flood the Commissioner with material at the late stages of litigation. The late receipt of the material is the most disadvantageous to the Commissioner. I would therefore recommend that we use the objection stage fully to try to compel additional evidence from the taxpayer at this early stage.

Before we make this decision, we should issue formal notices to provide information, and utilise any other power to seek as much material as possible that is relevant to this case. Whilst it is likely that we will get no response (and possibly a notice to compel the issue of the objection decision), it is still desirable to get the most out of this early stage of the dispute. We should also seek material directly from the purported sources of the loan repayments (Erma Nominees and Ligon 158) The more information we can gather the better. This at least forces their hand in the early stages, prevents surprise later and also commits them to particular documents in their current form.

Any notice should be carefully worded to capture all the necessary details and leave no room for 'misinterpretation' or vague responses …

(Underlining in original).

94. Of greater relevance was the submission to issue the notice. This refers to the Position Paper issued to the taxpayer on 29 July 2010. Under the heading "Reasons for proposing issue of notice" the following was stated:

Associated entities and litigation

The taxpayer's associated entities have instigated legal proceedings against the Commissioner for amended assessments issued by the Commissioner as a result of audits.

The issues involving the associated entities involved purported loans, similar to the issue relating to the taxpayer's personal tax affairs.

It has been a typical pattern for the taxpayer's associated entities to not provide information at audit or objection, and then inundate the Commissioner with material at the late stages of litigation. The late receipt of the material is disadvantageous to the Commissioner.

It is recommended by Legal Services that the objection stage be used fully to try to compel additional evidence from the taxpayer at this early stage.

Therefore, the reasons for the proposed issuance of a section 264 notice are:

• • To obtain additional information about the relevant bank deposits.
• • To obtain additional information about the purported loans, including information which was previously asked for informally and was not provided.
• • To ensure that all available evidence is presented to Commissioner (sic) at the earlier stage of objection rather than at litigation.
• • To allow the Commissioner to make an informed objection decision based on all of the available evidence.
• • To protect the Commissioner in the event the objection is disallowed and the taxpayer subsequently litigates, by committing the taxpayer to particular documents in their current form.

The reply to the section 264 notice should provide information to assist in deciding whether the Commissioner was correct in assessing the taxpayer on 50% of the relevant deposits.

Further, in the event the objection is disallowed and the dispute enters litigation, it provides a level of protection for the Commissioner.

95. There was also material relevant to this issue in the s 13 statement of reasons dated 16 March 2012. The reasons for the decision were set out as follows:

• • It was determined that the taxpayer provided an inadequate response to the informal requests for further information made both at audit and objection. This was demonstrated by the taxpayer not responding and/or providing vague responses to certain questions. Therefore, the use of a formal request for further information and objection was considered warranted.
• • The taxpayer had not provided details about the terms and history of the loans in (sic) which a reasonable person in the taxpayer's position would be expected to know, for example, the purpose of the loan, the amount of the loan, the repayment terms of the loan and the current balance of the loan (if any).
• • To obtain additional information concerning the purported loans, including information which was previously asked for informally at objection which was not provided.
• • To obtain additional information about the relevant bank deposits which was previously requested informally and audit, however no response was received.
• • To ensure that all available and relevant evidence is supplied at objection to enable the Commissioner to make an informed and correct decision, in that the reply to the section 264 notice should provide information to assist the Commissioner in deciding whether he was correct in assessing the taxpayer on 50% of the relevant deposits.
• • To ensure that all available and relevant evidence is presented to Commissioner (sic) at the earlier stage of objection rather than at litigation, where late provision of information may prejudice the Commissioner's position. This is stated bearing in mind that entities associated with the taxpayer have instigated legal proceeding (sic) involving purported loans, similar to the issue relating to the taxpayer's personal taxation affairs. It has been a typical pattern for these associated entities to not provide information at either audit or objection. There have then been instances where the associated entities have produced large volumes of material at the late stages of litigation.
• • To protect the Commissioner in the event that the objection decision is disallowed and the taxpayer subsequently litigates, by committing the taxpayer to particular documents in their current form. This is particularly so given that entities associated with the taxpayer had instigated legal proceeding (sic) involving purported loans, similar to the issue relating to the taxpayer's personal taxation affairs. It has been a typical pattern for the taxpayer's associated entities to not provide information at either audit or objection. There have also been instances where the associated entities have then produced large volumes of material at the late stages of litigation. This late receipt of information is disadvantageous to the Commissioner.

96. The applicant referred to a number of authorities including De Vonk (above).

97. The facts in De Vonk were quite remote from the present case. In De Vonk, on 15 February 1994 Mr De Vonk was charged with three offences. The first of the three charges alleged a dishonest representation to the Australian Taxation Office that the income of a partnership was exempt income.Three days after the indictment, Mr De Vonk was served with a notice under s 264 requiring him to attend and give evidence concerning his income or assessment and that of the partnership for the period 1 July 1989 to30 June 1993. The evidence was that the applicant was required to attend and give evidence for the purpose of determining the assessable income of the applicant and a syndicate for the purpose of the ITAA 1936 and not for the purpose of gathering evidence for use in the criminal proceedings pending against the applicant. It was held that the notice issued under s 264 was not issued for an improper purpose.

98. In relation to contempt of court Hill and Lindgren JJ said it was conceded on behalf of the Deputy Commissioner in that case that the facts relevant to be inquired into in the s 264 interrogation were significantly the same as and overlapped the facts relevant to the offences charged. It was also conceded that there was a risk that the answers which Mr De Vonk would give would tend to incriminate him and in so doing could interfere with the course of justice. However, it was submitted for the Deputy Commissioner that to the extent that the question of contempt of court went beyond self-incrimination, ss 8C and 8D of the TAA operated to abrogate the common law rights, just as the privilege against self-incrimination was likewise abrogated by those sections.

99. It was in this context that at 585 Hill and Lindgren JJ said, in a passage relied on by the applicant:

Unless Parliament has acted to authorise an investigation in contempt of court (an authorisation not lightly to be inferred), it must be conceded that the coercive power of investigation conferred by s 264 could, in a particular case, be exercised in a way which would constitute a contempt. The question would, however, not ordinarily be likely to arise. If the power to interrogate under s 264 were exercised for a purpose of interfering with the administration of justice in a court, then no doubt the exercise of the power would be in contempt of that court. But so to use the power would be an abuse of the power which could be set aside. To conduct an investigation for a purpose of interfering with the administration of justice would not be a bona fide exercise of the power under s 264 at all.

Nevertheless, circumstances could arise where, the power not being intended to be exercised for the purpose of interfering with the administration of justice, the asking of questions might nevertheless bring about a substantial risk of serious injustice.

100. As I have said, the facts in this case are quite remote from the facts with which the Court was dealing in De Vonk. Here the Commissioner is embarked on the task of dealing with objections to assessments and there are no proceedings on foot.

101. The applicant also sought to rely on Re
Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582; (1970) 91 WN (NSW) 537. There, Street J (as his Honour then was) considered an application by two people against whom an order had been made that a summons for private examination be issued under s 249 of the Companies Act 1961 (NSW). Before the private examinations were held the liquidator caused a misfeasance summons to be taken out against the examinees. The s 249 order was challenged on the ground that the private examinations could only be regarded as having been undertaken for the purpose of obtaining admissions from the examinees to be used against them in evidence in the misfeasance proceedings. Justice Street said that if it should appear that the machinery of a private examination was being used for a vexatious or oppressive purpose then it would amount to an abuse of the process of the court, and the procedure would be withheld by the court from the party seeking to invoke it. However, the mere fact that in obtaining that information he also obtained admissions or material that was available for him to use in evidence in current proceedings fell short of rendering the process and abusive, vexatious or oppressive.

102. I am unable to see the relevance of this decision for present purposes. It is to be recalled that Street J dismissed the summons on the basis that although the liquidator was seeking information upon the transactions which would no doubt be relevant in the misfeasance proceedings he could not be regarded as abusing the process of the court by probing the knowledge of the applicants in relation to the transaction in issue through the means of a summons under s 249.

103. The applicant sought to distinguish
Saunders v Commissioner of Taxation (1988) 88 ATC 4349; (1988) 19 ATR 1289. In that case, apart from the criminal proceedings in respect of which the applicant had been ordered to stand trial in the Supreme Court of Victoria, the applicant had contested a number of assessments of income tax. On 22 December 1987 the applicant received from the Commissioner notices informing him that his objections to amended assessments of income tax for the years ended 1976 to 1979 inclusive had been disallowed. On 15 February 1988 the applicant formally requested the Commissioner in writing to refer those decisions to the Administrative Appeals Tribunal. On 22 December 1987 the applicant also received notices from the Commissioner informing him that his objections to assessments of income tax for the years ended 1980 to 1982 had been disallowed. On 15 February 1988 the applicant formally requested the Commissioner to refer those decisions to the Federal Court.

104. Between 21 January 1988 and 2 March 1988 various tax officers called on the applicant at his business premises seeking access under s 263 to the records of various companies in order to inspect and photocopy those records. The companies the subject of these requests fell into two categories: first, companies involved with the tax minimisation scheme which formed the basis of the criminal charges; secondly, the companies which were relevant to the applicant's private income tax concerns. One of the submissions was that the Commissioner's actions constituted a contempt of the objection proceedings before the Tribunal and the Federal Court in which the applicant and the Commissioner were parties. Counsel expressly conceded that no claim was made that the Commissioner had not exercised the power under s 263 bona fide for the purposes of the Act.

105. It was contended on behalf of the applicant in that case that once judicial or quasi-judicial proceedings involving the Commissioner had commenced, the Commissioner was precluded from issuing s 263 notices and acting pursuant thereto and must restrict himself to the avenues open to him through the procedures of the court or the tribunal, as the case may be. To do otherwise, it was argued, would give the Commissioner an unfair advantage over the applicant, particularly in the context of discovery, including interrogatories, which, when obtained through the normal processes of the court, is limited by factors such as relevance and legal professional privilege.

106. Justice Northrop at 1292-1293 said it was clear that s 263 did not empower the Commissioner to engage in conduct amounting to contempt of court in the sense of improperly interfering with judicial proceedings in a court. In order to come within those principles, Northrop J said, the applicant had to establish that the actions of the Commissioner and the tax officers constituted a contempt in that they were seeking material to use in pending proceedings by methods not available to them through the normal processes of the Tribunal or the Court. Justice Northrop held that it was not possible to be in contempt of the contemplated proceedings in the Federal Court. In relation to the Tribunal, Northrop J said it was inappropriate to regard the Commissioner as having gained an unfair advantage as a result of his use of the s 263 powers as the Tribunal was in the shoes of the Commissioner and may use any material put before it in reaching its decision and the applicant would be entitled to be informed of material so obtained. Therefore Northrop J said "it is quite permissible for the Commissioner to obtain material pursuant to s 263 powers for the purpose of placing such material before the tribunal, if indeed this was a purpose of obtaining the information. In so doing, he is not in contempt of the tribunal." See also
Watson v Commissioner of Taxation (1999) 96 FCR 48.

107. While I accept that there was no issue before the Court in that case of improper purpose as such, nevertheless the discussion by Northrop J of the position of the Tribunal is relevant for present purposes, as is his Honour's discussion of the position of the Federal Court in relation to proceedings which had not commenced.

108. I also reject the submission that in the matter before me I should draw the inference that the objection decisions had in fact been made or had been held up in order to allow the Commissioner to issue the notice and receive the information to further his purpose of advancing his interests in future litigation in any impermissible way. In my opinion it is clear that the objection decisions had not been made and indeed there is no evidence that they have yet been made. To contend that the decisions could have been made without the material sought or had been held up to obtain that material is to invert the inquiry. I reject the related submission that the objection process was being used to collateral advantage. These contentions do not recognise that the better the information before the Commissioner at the objection stage the better the decision on the objection. Further, to investigate the question of fraud and evasion does not show that a decision has been made: depending on the circumstances, such an investigation is appropriate to enable a decision to be made.

109. The applicant also relied on the difference between s 264 and s 264A(10). The latter provision deals with offshore information notices. According to the terms of s 264A(10), if the taxpayer does not comply with the request set out in the offshore information notice then, except with the consent of the Commissioner, the information or document, or any secondary evidence of a document, is not admissible in proceedings disputing the taxpayer's assessment. In
FH Faulding & Co Ltd v Commissioner of Taxation (1994) 54 FCR 75 Cooper J, at 131-132, rejected on the facts a submission that the Commissioner had issued the notice for an improper purpose "namely to render a re-assessment adverse to the applicant, harder to contest by denying to the applicant an ability to tender relevant evidence in proceedings disputing an assessment of the sum of $1,164,324.90 to tax."

110. I accept that such a purpose would be an improper purpose, although it might be the effect of such a notice, but the absence of a provision equivalent to s 264A(10) in s 264 makes this submission weaker, rather than stronger as contended on behalf of the applicant. This is because there is no equivalent statutory advantage given to the Commissioner by use of the power in s 264 and the use of that power would not affect the applicant's ability to tender relevant evidence in a Part IVC review or appeal.

111. In my opinion, the purpose of the respondent in issuing the notice was better to make the objection decision. The Commissioner was also aware that a consequence of the production of the material was that if and when litigation commenced, either in the Tribunal or in the Court, and if the notice was complied with, he might or would be better placed in that litigation by virtue of having the applicant's relevant material at the objection stage. However, this is a consequence of the statutory scheme and of the Commissioner making a better decision, in the sense of a decision based on fuller factual material. On the present facts I conclude that there was no improper purpose or other legal defect flowing from the Commissioner's consciousness of the consequences of any production of material by the applicant pursuant to the notice.

112. The Commissioner referred to
Thompson v Randwick Municipal Council (1950) 81 CLR 87 at 106. As explained by the High Court more recently in
R & R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603 at [33], in Thompson the High Court held that powers of compulsory acquisition conferred by the Local Government Act 1919 (NSW) could only be exercised with respect to land purchased or resumed for a purpose authorised elsewhere in that Act. Where a council attempted to resume more land than required to construct a proposed road, it was held not to be acting in good faith but actuated substantially by the purpose of profit-making by sale of the land not so required. The proposed resumption was therefore not for the purpose of the undertaking by the council of the statutory function of "improvement and embellishment of the area" within the meaning of s 321(d).

113. In Thompson (above) at 105-106 the Court (Williams, Webb and Kitto JJ) said:

… we are of the opinion that the Council, in attempting to resume more land than is required to construct the road, is not acting in good faith. By that we do not mean that the Council is acting dishonestly. All that we mean is that the Council is not exercising its powers for the purposes for which they were granted but for what is in law an ulterior purpose. It is not necessary that this ulterior purpose should be the sole purpose … But the evidence establishes that one purpose at least of the Council in attempting to acquire the land not required to construct the new road is to appropriate the betterments arising from its construction … it is still an abuse of the Council's powers if such a purpose is a substantial purpose in the sense that no attempt would have been made to resume this land if it had not been desired to reduce the costs of the new road by the profit arising from its re-sale."

(Emphasis added)

114. See also
Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467 at 468-469 per Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ and
Knuckey v Commissioner of Taxation (1998) 87 FCR 187 at 195-197 where a Full Court considered Thompson and referred also to
Industrial Equity Ltd v Deputy Commissioner of Taxation (1990) 170 CLR 649 at 660 where the High Court considered that the Commissioner would be acting for the purposes of the Act so long as he was endeavouring to fulfil the function of ascertaining the taxable income of the taxpayers.

115. Here, the evidence does not meet the test of substantiality necessary to establish improper purpose: see Thompson (above) at 106. Even assuming that I am incorrect in my analysis of the facts above and it was a purpose of the exercise of the power to issue the notice to advance the Commissioner's interests in future litigation in my opinion that purpose was not the substantial or true and dominant purpose. I reject the first element of this ground. It should be noted that I am not considering here any question of contempt of court since, unlike De Vonk (above), there are no court proceedings and no proceedings are pending.

116. As to the second element, it is addressed to part of paragraph 1.e. of Schedule A being the request for information as to the purpose for which the entity used the loaned funds.

117. The applicant relied on
May v Deputy Commissioner of Taxation (1998) 40 ATR 131 per Goldberg J in relation to the irrelevance to or remoteness from the identified purpose of a particular category of information. The applicant also relied on
Australia & New Zealand Banking Group Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia 2001 ATC 4140; (2001) 46 ATR 451; [2001] FCA 314 per Sundberg J as follows:

• [12] In relation to the second basis of the application, it was submitted that in order to determine whether a notice purporting to be issued under s 264 is valid, it is necessary to identify the function that is being exercised by the Commissioner. If the notice has nothing to do with that function, or is more extensive than the function, the power in s 264 is not being exercised to enable the respondent to perform his functions under the Act. In my view there is a serious question to be tried on this issue. … Since I will in all probability have to determine the substantive application, I will say no more than that the approach to the application of s 264 propounded by the applicants as outlined in this paragraph is supported by
  May v Deputy Commissioner of Taxation (1998) 98 ATC 4960 at 4975.

118. Assuming that such a ground is available, its resolution depends on the facts.

119. In my opinion it was not irrelevant in the present circumstances for the Commissioner to seek information as to what use a borrower made of the funds allegedly lent. The Commissioner was entitled to test whether or not a loan had been made and there was, and is, a logical connection between this information and the existence and terms of the disputed loans:
May v Deputy Commissioner of Taxation (1999) 92 FCR 152; [1999] FCA 287 at [47]; and see also
Melbourne Home of Ford Pty Ltd v Trade Practices Commission and Bannerman (No 3) (1980) 47 FLR 163 at 174 and
Lloyd v Costigan (No 2) (1983) 76 FLR 279. This is particularly the case as the recipient of the notice was a shareholder and director of each of the borrowing companies.

120. I do not therefore need to consider further the issue in
McLaren v Deputy Commissioner of Taxation 2001 ATC 4136; (2001) 46 ATR 421; [2001] FCA 311 at [7]-[8] and
Australia & New Zealand Banking Group Ltd v Deputy Commissioner of Taxation of the Commonwealth of Australia (above) at [12] although I note the observation of the Full Court in May (above) at [48] in relation to a submission that to issue a notice wider in terms than the purpose for which the power was proposed to be exercised was an error of law:

Fourthly, if the purpose as stated did not justify the information sought, it again would not follow as of course that the power was exercised for an improper purpose in the sense of a "purpose other than a purpose for which the power is conferred:" ADJR Act, s 5(2)(c). The power was exercised for no demonstrated reason other than for reasons related to "the proper administration" of the ITA Act: see para(c) of the statement of reasons. These being proper reasons for its exercise: see
Industrial Equity Ltd v Deputy Commission of Taxation at 661, 671-672; it is difficult to see how, to use an old description, a "fraud on the power" has nonetheless been perpetrated: cf
Vatcher v Paull [1915] AC 372 at 378.

121. I reject this element of Ground 6A.

Conclusion and orders

122. The grounds relied on by the applicant have not been made out. I therefore order that the further amended originating application be dismissed, with costs.