ONE.TEL LTD & ORS v DFC of T

Judges:
Burchett J

Court:
Federal Court

MEDIA NEUTRAL CITATION: [2000] FCA 270

Judgment date: 13 March 2000

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Burchett J

These matters, which were heard together, involve a number of separate issues arising out of the application of s 108 of the Sales Tax Assessment Act 1992 to the affairs of one or more of the applicants in the various proceedings. Sub-sections (1) and (2) of s 108 provide as follows:

``(1) The Commissioner may direct a person to do all or any of the following:

• (a) to provide the Commissioner with such information as the Commissioner requires;
• (b) to attend and give evidence before the Commissioner or an authorised officer;
• (c) to produce to the Commissioner any documents in the custody or under the control of the person;

for the purpose of enabling the Commissioner to apply the sales tax law in relation to the person, or in relation to any other person.

(2) The Commissioner may direct that:

• (a) the information or answers to questions be given either orally or in writing (as the Commissioner requires);
• (b) the information or answers to questions be verified or given on oath or affirmation (being an oath or affirmation that the information or answers the person will give will be true).''

The costs issue

2. This issue arises in Matter No 120 of 1998, in which the first, second and third applicants in that matter sought orders to set aside notices containing directions under s 108, each dated 28 April 1997, the validity of which the respondent was seeking to uphold. On 13 May 1998, the respondent, when answering a notice to produce, acknowledged that he had been unable to locate the instrument of authorisation pursuant to which he said the notices under s 108 had issued, or any copy of it. The only record he was able to produce was an electronic copy, unsigned, of the front sheet of what he asserted was an authorisation signed on 4 March 1997. The acknowledgment was made by a letter dated 13 May 1998, written on behalf of the respondent by a Principal Solicitor in the office of the Australian Government Solicitor. This letter explained that the Deputy Commissioner's officer responsible at the date 4 March 1997 alleged the authorisation was signed on that day, and also stated:

``It appears that with the closing of the Chatswood office of the Australian Taxation Office during October/November 1997 and with the restructuring of the title `Deputy Commissioner of Taxation', and along with it the accompanying delegations and authorisations, along business lines rather than according to geographical offices with effect from 1 July 1997, over time the authorisation no longer served any purpose and it seems that the authorisation has been at least lost and may have been destroyed.''

The letter went on to assure the solicitor for the applicants:

``There is no question but that the decision- maker, Frank Robinson, was at the time of issuing the notices a senior officer grade C

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and as such authorised by the authorisation to exercise the powers of the Deputy Commissioner under s 108 of the Sales Tax Assessment Act 1992. This is in accord with the general position with such instruments of authorisation in the ATO, as demonstrated by the authorisation which followed the one dated 4 March 1997. The inability to produce the instrument of authorisation is not to be taken as evidence of any absence of authorisation. This is particularly so in circumstances where your clients' delay in commencing the proceeding has contributed to the inability of the respondent to produce the authorisation.''

3. Subsequently, the respondent resisted a motion to amend the application so as to put the authorisation squarely in issue. The amendment was nevertheless made on 23 July 1998, whereupon the respondent effected service on the applicants of a notice to admit facts dated 5 August 1998, which was drafted with a view to eliciting an admission of the authorisation. Upon the applicants responding by serving a notice, dated 19 August 1998, disputing the relevant facts on the basis that they did not know them, and were unable to admit them, but stating they would reconsider upon being provided with documentation demonstrating the accuracy of the facts alleged, the respondent reconsidered his own position. On 28 August 1998, through his solicitor, he sent to the solicitor for the applicants the following advice:

``While the respondent believes that at the time that the notices were issued there was a proper authorisation in place, while he can explain why he cannot now produce that authorisation and while he may succeed in defending the notices on the basis of evidence available to him, he believes that, consistently with his obligation as an officer of the Commonwealth to act as a model litigant, he would prefer to be in a position to produce or otherwise positively prove that authorisation. Accordingly he prefers to consent to an order setting aside the notices.

He is willing to do so on the basis that each party bear their own costs. There is no certainty that either side would be successful in the litigation. Given that the issue on which the respondent is willing to concede was raised in the amended application filed on 23 July 1998 the costs in question would appear to be small in any event.''

By their reply dated 14 September 1998, the solicitors for the applicants refused to consent to the disposal of the proceeding on the basis suggested by the respondent, making it clear they would seek an order for costs.

4. The upshot of these events is that the sole issue left for determination in Matter No 120 of 1998 is the question whether an order for costs should be made in favour of the applicants.

5. It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial:
Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201;
Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624. But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or ``a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried'', as McHugh J put it in Ex parte Lai Qin at 625. His Honour added:

``If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.''

Although his Honour thought this would ``usually'' be so, he made it clear that he was not laying down an invariable rule. At the beginning of his discussion of the applicable principles (at 624), he referred to the discretionary nature of the power to order costs, and to the ``general rule [that] the successful party is entitled to his or her costs'', and he said:

``In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action.''

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As Sackville J pointed out in
Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334 at para 16, the remarks made by McHugh J evince ``a somewhat more flexible approach'' than that taken by the Court in
Gribbles Pathology Pty Ltd v Health Insurance Commission & Ors (1997) 80 FCR 284 at 287, when it suggested that ``there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party.'' What is well established is that frequently the determining factor will be the reasonableness of the conduct of the parties, a matter which was emphasized in each of the decisions I have cited, and also in
Reddy v Hughes (1996) 37 IPR 413;
Sun Zhan Qui v Minister for Immigration and Ethnic Affairs [1999] FCA 119; and
Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772. In the last case, Cooper J commented (at 774), concerning the principles laid down in Australian Securities Commission v Aust-Home Investments:

``These propositions are of assistance in focusing attention upon some of the relevant circumstances which should be considered in the exercise of the discretion to award costs where proceedings do not proceed to a final hearing. However they are not the only circumstances; nor are they intended to limit the discretion.''

6. In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. In Ex parte Lai Qin, McHugh J was careful to state (at 624) that the principles with which he was concerned were those that ``govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means''. As his Honour recounted the facts, the instant case was one where the applicant had challenged a decision of the Refugee Review Tribunal denying her status as a refugee but, during the pendency of her action in the High Court, the Minister had exercised his special discretion in her favour under s 417 of the Migration Act 1958. The question whether the Tribunal had or had not erred in law thus became moot. Sun Zhan Qui v Minister for Immigration and Ethnic Affairs was a similar case. Following the decision of the Full Court in
Sun v Minister for Immigration and Ethnic Affairs (1997) 81 FCR 71, the Minister exercised his discretion under s 417, with the result that an outstanding proceeding in respect of one of several decisions of the Refugee Review Tribunal lost any significance for either party. Beaumont J followed Ex parte Lai Qin. Gribbles v Health Insurance Commission was a variation on the theme. There, the Health Insurance Commission was sued by a pathologist because it declined to recognize particular services as eligible for the payment of Medicare benefits; but during the pendency of the proceeding, certain arrangements affecting the performance of the services were changed, with the result that the Commission reversed its decision. The original dispute thus ceased to have any significance, and the argument about the appropriate costs order had to take place in the absence of any determination of the merits. Again, in Australian Securities Commission v Aust-Home Investments Limited and in Australian Securities Commission v Berona Investments Pty Ltd, as Cooper J put it in the latter case (at 777), ``events had overtaken the proceedings''. The relief originally sought was no longer required, and the proceedings were terminated without any decision on the merits. Neither side had won or lost (see the former case at 202, and the latter at 777). Reddy v Hughes and Rizal v Minister for Immigration and Multicultural Affairs perhaps each turned even more clearly on an assessment of the reasonableness of a party's behaviour. In Reddy v Hughes, the respondent had offered the applicant a substantially complete remedy before the institution of proceedings, and Branson J held (at 415) that her Honour was ``not able to be satisfied that the applicant acted reasonably in commencing the proceeding''. In Rizal, although the applicant achieved the result he sought by his proceeding in the Court, there

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was an ``at least arguable'' objection to the Court's jurisdiction to entertain the application, and a proposed amendment to overcome the jurisdictional problem would have required leave to file an application long out of time. That leave had not been granted when the proceeding became moot because of the Minister's plainly reasonable decision to reconsider the request the previous rejection of which was the subject and casus belli of the litigation.

7. By contrast with the decisions I have been discussing, the present matter involves a clear winner. The applicants, by their proceeding, sought to challenge the validity of certain notices, and to have them set aside. The respondent, after initially defending those notices, encountered at least an evidentiary difficulty, and acknowledged that they were to be set aside. That means that the applicants have succeeded, just as the respondent succeeded in
Ahmetaj v Minister for Immigration and Multicultural Affairs [1999] FCA 332, where a proceeding failed by reason of the occurrence of an event that was always liable to occur and to defeat the proceeding; in those circumstances, Sackville J, when the hearing did not proceed, distinguished Ex parte Lai Qin and made a costs order. As in that case, so here, the result one party sought was achieved without a hearing, but not by a ``settlement'' in the ordinary sense, or as McHugh J used the word, and certainly not by what his Honour called ``extra-curial means''.

8. In any event, if, as the respondent contends, I should determine the question of costs by assessing whether, to borrow the language of McHugh J in Ex parte Lai Qin (at 625), ``both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation [came to an end by the respondent's decision not to seek to uphold his notices]'', I would arrive at the same result. The respondent asserts that his decision to desist from defending the proceeding was reached ``consistently with his obligation as an officer of the Commonwealth to act as a model litigant''. Since reliance upon clear proof, by secondary evidence, that an authorisation actually existed would be in no way inconsistent with the attitude of a model litigant, this can only mean that there was some degree of dubiety about the secondary evidence. Moreover, if a model litigant would not have maintained the validity of these notices as respondent to proceedings to set them aside, a fortiori a fair-minded officer of the Commonwealth would not have sought to enforce the same notices by criminal sanctions against an unsuspecting citizen or corporation - or even against a protesting one. On the Deputy Commissioner's own stance now, his stance earlier must have been unreasonable, at least once he had ascertained the true position. Yet that stance was maintained by opposition to the applicant's motion to amend, and by service of the notice to admit facts. It was only abandoned after the applicants defeated the attempt to obtain admissions.

9. I have therefore concluded that the respondent should be ordered to pay the costs of the applicants in Matter No 120 of 1998.

The notices issue

10. This issue concerns two notices under s 108 addressed to ONE.TEL Limited. The notices were formulated rather differently, and much of the argument turned on the difference. It is therefore necessary to set out significant portions of each of them.

11. By one notice, Mr Chapman, a Deputy Commissioner of Taxation, being a delegate of the Commissioner to exercise powers under s 108(1)(a), addressed ONE.TEL Limited in the following terms:

``I... DIRECT YOU to provide information in writing specified in the ATTACHMENT:

• ...
• 3. not later than 10am on Thursday, 2 April 1998

for the purpose of enabling the Commissioner to apply the sales tax law in relation to either or both ONE TEL Limited - `ONE TEL' and [sic] One Tel Digital Pty Limited - `OTD'.

Dated this nineteenth day of February 1998.''

There were actually two attachments to this letter, a notice of the severe penalties for refusal or failure to furnish information required pursuant to s 108, and a document described on its face as an ``[a]ttachment forming part of'' the notice. The latter, so far as is relevant, read as follows:

``1. The promotional bonus of [a confidential amount was stated] or such

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other amount that is paid by OPTUS from time to time, is paid as an estimation of anticipated connections made to the OPTUS GSM network. In the months following payment further adjustment [referred to as `the clawed back amount(s)'] are [sic] made to account for, amongst other things, customers who have not remained connected for the 12 month contract term, or have failed to meet the [a further confidential amount was stated] average monthly airtime spend. ONE.TEL calculates the `net cost' of handsets by offsetting in its accounts, the anticipated promotional bonus against the cost of handsets purchased from suppliers. In addition, ONE.TEL has chosen not to increase the handset `net cost' to reflect the clawed back amount of this bonus.

• (a) Why has ONE.TEL or OTD made no adjustment to 'net cost' of handsets to reflect the amounts clawed back by OPTUS?
• (b) Why has ONE.TEL or OTD chosen not to add back a corresponding amount for sales tax to their general ledger?
• (c) Why has ONE.TEL or OTD chosen not to adjust the taxable value of handsets in view of the promotional bonus clawback made by OPTUS from time to time?
• (d)...
• (e)...
• (f)...
• (g)...

2. The unactivated promotional rebate is an accrual for the promotional bonus that ONE.TEL takes up in its accounts for handsets sold but not yet `activated'. It is only taken up in the case of dealer agency sales (for handsets expected to be connected to the OPTUS network.) [sic]

• (a)...
• (b) If the accrual referred to in (a) above [ which contains a reference to `this accrual'] is used to reduce the cost of handsets how does ONE.TEL justify using the expected promotional bonus in circumstances where the handset was sold to the Dealer but had not been connected to the OPTUS GSM network?

3. Explain the basis for the exclusion of the promotional bonus from the handset cost given that ONE.TEL, and subsequently OTD, is not precluded from the supply of digital handsets and services as individual products for customers who wish to acquire these products separately? [Refer to letter from the ACCC, specifically Attachment A, in your response of 23 October 1996].''

12. The second notice, bearing the same date, commences in the same way. However, both the direction itself and the documents attached to that direction diverge from the previous model. The direction is expressed as follows:

``I... DIRECT YOU to provide information in writing by completing SCHEDULES `A' & `B' attached by stating in the shaded boxes appearing on each, the amount(s) that correspond [sic] to the description given, and in addition, provide separate explanations where you believe the amounts stated in the schedules are incorrect or where there are amounts omitted...''

(the balance of the form is in substantially the same terms as the other).

Schedules A and B are similar to each other and, in argument, counsel concentrated for the most part on Schedule A. Both raise the same issue, so it is sufficient to set out Schedule A, which I do, substituting the letters ``A'' to ``K'' for certain figures (which are confidential) appearing in this document, and the designation ``Item X'' for one confidential description of an item [Schedule A reproduced at pp 4236-4237].

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13. The argument put by Mr A Robertson SC (with whom Mr S Gageler appeared) on behalf of the applicants depended on the form taken by each notice with its attachment or schedules. In the case of the notice directing ONE.TEL Limited ``to provide information in writing specified in the ATTACHMENT'', the argument was that question 1 required inaccurate assumptions to be accepted, and that all questions in dispute (those that I have set out) sought, not information, but argumentative expositions of the company's stance. As regards the suggestion that there were inaccurate assumptions in question 1, Mr Robertson referred, in particular, to the statement that the promotional bonus ``is paid as an estimation of anticipated connections'', which he said was contrary to information already supplied by ONE.TEL Limited to the Commissioner; and Mr Robertson also referred to the expression ``the 12 month contract term'' as being contrary to repeated indications that the contract term was in fact fifteen months. As regards the second notice, it was pointed out that this did not merely, or perhaps even primarily, seek information, but sought to have a task carried out (the filling in of the form) which assumed the accuracy of information provided by the Commissioner himself. Much of the assumed information was said to be wrong, or at the least confusing.

14. To evaluate these arguments involves an analysis of s 108(1). Under this provision, a person may be required to do one or more of three things: to provide information, to attend and give evidence and to produce documents. It

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is the first only which is in question in this case. An obligation ``to provide the Commissioner with such information as the Commissioner requires'' is an obligation of considerable width. In
In re Stuart and Olivant and Seadon's Contract [1896] 2 Ch 328, Kay LJ said (at 334), speaking of a statutory provision concerning the cost of procuring ``information not in the vendor's possession'' in relation to the verification of an abstract of title to land:

``The word `information' is as large as can be.''

Cf
Insurance and Superannuation Commissioner v Robertson 95 ATC 4225 at 4226; (1995) 30 ATR 239 at 240. In a context closely analogous to the present, Hill J (with whom in this respect I expressed agreement) said in
Fieldhouse v DFC of T (sub nom Perron Investments Pty Ltd & Ors v DFC of T) 89 ATC 5038 at 5052; (1989) 25 FCR 187 at 207:

``Section 264 [of the Income Tax Assessment Act 1936] empowers the Commissioner to do three things. First, he may under s 264(1)(a) require the addressee to furnish him with `information' in the sense of `knowledge'.''

Of course, the authorities are replete with warnings that the language of a judicial exposition of the terms of a statute should never be substituted for the very words of the statute itself. (See
Commonwealth v Human Rights and Equal Opportunity Commission (1998) 76 FCR 513 at 521.) The statute does not use the word ``knowledge'', but the word ``information''. However, a glance at The New Shorter Oxford English Dictionary (1993) will confirm that there is a substantial area of meaning common to both words, and I understand Hill J to have referred to the meaning they both convey. The meanings of ``knowledge'' given in the dictionary include:

``The fact or condition of being instructed, or of having information acquired by study or research. Also, a person's range of information...''

The relevant meaning of ``information'' given in the dictionary appears to me to fall within the following:

``Communication of the knowledge of some fact or occurrence.... Knowledge or facts communicated about a particular subject, event, etc...''

So s 108 is concerned with the communication to the Commissioner of knowledge about facts or a particular subject which a person is able to provide and the Commissioner requires for the purpose of enabling him to apply the sales tax law in relation to the person or some other person.

15. But s 108(1)(a) does not oblige a person to do things beyond the provision of information. It does not in terms refer to the performance of operations - and a strong power of this kind conferred on an official to make demands upon a citizen is not to be construed expansively, but simply in accordance with what its terms fairly comprehend. Paragraphs (b) and (c) and sub-s (2) provide the expansions the legislature contemplated, and in such a context, other and different expansions ought not to be written in by the Court. In particular, it seems to me the legislature has considered the question whether the Commissioner should be empowered to direct the manner in which information is to be supplied to him, and has added a particular and limited empowerment. By sub-s (2), the Commissioner may require the information to be ``given either orally or in writing''. But beyond that, he is not entitled to dictate the manner in which information shall be given. Nor, for example, could he insist that a very ill educated person, wholly ignorant of legal and accounting concepts, should characterize transactions in language he could not understand. That would not be to ``direct a person.... to provide the Commissioner with... information... for the purpose of enabling the Commissioner to apply the sales tax law''. The statutory purpose must limit the Commissioner to the kind of information which the person can supply and the Commissioner can utilise in the application of the sales tax law.

16. Some of these considerations are reflected in the following passage in the judgment of Hill J in Fieldhouse (at ATC 5053; FCR 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

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that a notice identify with sufficient clarity any documents which are required to be produced: FC of T v The Australian and New Zealand Banking Group Ltd, per Gibbs ACJ at ATC p 4047; CLR p 525. Where information is required by the section to be furnished, the request for information should be so framed as to be sufficiently clear to convey to the addressee what information is sought and a notice which was unintelligible would obviously be bad. However, it does not follow from this that the question of the validity of a notice should be approached carpingly by engaging in a narrow analysis of each word in an attempt to find some latent ambiguity in it. Rather the approach to be adopted is to ask in respect of any particular request whether a reasonable man in the position of the addressee of the notice can fairly comply with it and not be thereby exposed to the possibility of penalty for non- compliance having regard to the manner in which the notice is formulated.''

In the same judgment, Hill J said (at ATC 5056; FCR 211):

``It may be conceded that the Commissioner could not address a notice to a recipient seeking his view on an abstract question of law as such, although the reason for so saying is that such a request would be irrelevant for any purpose of the Act, rather than that the request would not be a request for information.''

Earlier in the report, Lockhart J is recorded as saying (at ATC 5045; FCR 198):

``... The notice does not ask the recipient to decide whether certain matters fall within the terms of a section. It would be different if the question was to ask the recipient to construe the relevant provisions of a section of the Act.''

17. Just as Hill J thought a person's view ``on an abstract question of law as such'' could not be sought because it ``would be irrelevant for any purpose of the Act'', so also, his Honour made it clear (at ATC 5056; FCR 212) that a question which required a person to make a false assumption could properly be answered by an indication ``that the assumption is false with the consequence that the question is not relevant to any inquiry''.

18. An instance of the last problem arose for decision in
FH Faulding & Co Ltd v FC of T 94 ATC 4867; (1994) 54 FCR 75, where Cooper J had to consider a request under an analogous provision, s 264A of the Income Tax Assessment Act 1936. There the first request for information (which is set out at ATC 4874; FCR 86) concluded with the statement ``you are asked to cover all transactions comprising the flow of these funds from the time they left Australia up until the point where they were received by the party with whom they were invested by Finance Acceptances Ltd....'' Cooper J, after referring (at ATC 4910-4911; FCR 132-133) to High Court authority on s 264, said (at ATC 4912; FCR 135):

``The concluding part of request 1 is objectionable for two reasons. The first is that it assumes that the funds were invested by Finance Acceptances Ltd with another entity and requires an answer on the basis that the assumption is correct. The question makes no attempt to establish that the assumption is in fact correct....''

19. A different objection, also discussed in Fieldhouse, is the objection of ambiguity. The point of this objection, as was there recognized (at ATC 5041, 5053 and 5054; FCR 193, 208 and 210), is that an obligation for the performance of which there are very serious sanctions cannot be supposed to have been intended by Parliament to be a matter of doubt. In
May v DFC of T 98 ATC 4960, Goldberg J considered a request for information made under s 264 of the Income Tax Assessment Act which required ``[e]xplanatory details of the manner in which an arrangement is intended to operate and the perceived benefits of entering into an arrangement'' (see the report at 4963). His Honour said (at 4972-4973):

``This item is ambiguous and it is not clear what is the information sought. Whose intention is contemplated by the item and, in respect of the `perceived benefits of entering into an arrangement', whose perception is sought? Although it might be said that it is the intention of the firm and the firm's perception, that position is not made clear nor is it made clear whether it is the applicant's intention and perception as distinct from the intentions and perceptions of members of the firm. In any event, in relation to arrangements actually established and implemented the position is more ambiguous because it is not clear whether in such circumstances the relevant intention

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and perception is that of the applicant, the firm or any person who was a client of the firm on whose behalf the arrangement was established and implemented. In my opinion the information required by this item is sufficiently ambiguous as not to come within the terms of s 264(1)(a) of the Act because the information sought is not clear.... The applicant should not be required to provide the information sought in this item.''

20. The problem of clarity has also arisen in other fields. For example, in
Amalgamated Television Services Pty Ltd v Australian Broadcasting Tribunal (1989) 91 ALR 363, a Full Court (Morling, Burchett and Hill JJ, who wrote a joint judgment) had to deal with s 123 of the Broadcasting Act 1942 under which the Tribunal was entitled to require a licensee to furnish it with ``any other information specified by the Tribunal, being information with respect to the activities or affairs of the licensee and relevant to the operation of this Act''. The Court stated (at 378):

``[G]iven the consequences, by way of penalty and otherwise, for failing to provide information required by the tribunal, we do not think the question can be answered by reference to what a reasonable licensee might or might not do. We think that the request for information was not framed with sufficient clarity to show the person to whom the notice was addressed what information he was required to supply. Rather, it was so framed as to introduce great confusion and uncertainty as to the requirement to supply information.''

See also
MacDonald v Australian Securities Commission (No 2) (1994) 48 FCR 210 at 214.

21. The argument for ONE.TEL Limited in relation to questions 1(a), (b) and (c), 2(b) and 3, set out in the document called an ``attachment'', asserted that the language of what could be described almost as prefatory averments, in which the Commissioner's requirements were entangled, lacked clarity because of the intrusion of inaccuracies and, for the same reason, was unfair in that it required the company to accept assumptions with which it did not agree. To insist upon answers to questions of that sort was said to be an abuse of power. But this is an objection, as Hill J pointed out in Fieldhouse (at ATC 5056; FCR 212), that may evaporate where the assumption is plain, and the question may be answered by calling attention to it while denying its validity. Each of the questions in issue here asks, in substance, for the basis on which the company (and One.Tel Digital Pty Limited in the case of question 1) adopted an attitude towards an assumed state of affairs in its accounts. If either the attitude or the state of affairs is misrepresented in any of these questions, the company is at liberty to answer by saying so. But if the assumptions on which the questions depend are correct, I see nothing wrong in the company being required under s 108 to furnish information as to the basis on which it accounted in a particular way.

22. I turn to what I have earlier called the second notice. Whereas the notice I have just discussed is expressed precisely in accordance with the language of s 108, as a direction ``to provide information in writing specified in the ATTACHMENT'', the second notice departs at the outset from the terms of the statute. It is a direction ``to provide information in writing by completing SCHEDULES `A' & `B' attached by stating in the shaded boxes appearing on each, the amount(s) that correspond to the description given...''. The statute says nothing of an obligation to perform an exacting task of this kind, which calls, not for ``information... for the purpose of enabling the Commissioner to apply the sales tax law'', but for an exercise in possibly approximate judgment of imperfect correspondence of an actual item with a formulation fixed by the Commissioner. That it was indeed contemplated, when the terms of the direction were settled, that the Commissioner's formulation might be incorrect, yet have to be adhered to by the company, is implicit in the added words: ``and in addition, provide separate explanations where you believe the amounts stated in the schedules are incorrect or where there are amounts omitted''. Those added words do not alter at all the initial obligation to complete the rigid form, right or wrong, truly informative or not; they accept it may be wrong, and add a further obligation, of uncertain import, to ``provide separate explanations''.

23. Counsel for the applicants described the schedule as a bed of Procrustes, to which the Commissioner demanded that they conform. For the Commissioner, it was contended that, unlike Procrustes' victims, they were at liberty to remake their bed. But the words are ``in

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addition'', not ``alternatively''. Furthermore, there is no liberty to correct (or remodel) the form itself, but only any incorrect or incomplete ``amounts'' stated in it. If items are wrongly described, the recipient of the notice must still insert ``the amount(s) that correspond'', presumably inexactly and according to an estimation of the least degree of variance.

24. These problems arise from the form of the direction and the schedules. But the argument demonstrated that there are also significant difficulties with the particular figures in the schedules. On the evidence before me, the ``[h]andset sell price, specified as [ $]399.00'', appears to be just wrong; the contrasting periods of 12 months and 15 months in several entries are confusing and inconsistent; and in other respects the form is highly contentious.

25. The power of the Commissioner under s 108 has been described as intrusive. That is when it is exercised strictly within the terms of the Act, as it must be: cf
Edelsten v Wilcox & Anor 88 ATC 4484 at 4494-4496; (1988) 83 ALR 99 at 111-113. It should not be exercised in an even more intrusive manner. It does not entitle the Commissioner to insist upon a person carrying out an operation of the kind he required ONE.TEL Limited to perform with this schedule. Not only does a requirement to complete such a form go beyond the provision of information; it involves impermissible uncertainty with respect to what is sought upon pain of significant penalties, and it attempts to impose the Commissioner's assumptions upon the company. It leaves no room for the company to answer by denying the assumptions.

26. As the schedules to the second notice constitute integrated forms the parts of which are interdependent, there is no basis on which it would be appropriate to perform some sort of severance in order to preserve a part of the notice: it is wholly bad: Fieldhouse at ATC 5043, 5050; FCR 195, 204-205; Amalgamated Television Services Pty Ltd v Australian Broadcasting Tribunal at 378.

The extension of time issue

27. ONE.TEL Limited sought an extension of time to comply with the notices referred to in the previous section of these reasons until 28 days after the receipt from the Commissioner of a statement of his reasons for the decision to issue the notices, to be furnished pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977. The Commissioner declined, and declined at a time when he had not furnished reasons, though requested to do so. In these circumstances, the decision to refuse an extension of time, according to the contention of ONE.TEL Limited, was so unreasonable that no reasonable person could have made such a decision.

28. The point is a short one. In
ARM Constructions Pty Ltd v FC of T 86 ATC 4213 at 4219; (1986) 10 FCR 197 at 204, I adopted the remarks of Woodward J in
Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 at 507-508, where his Honour referred to ``the general policy of the Judicial Review Act, which clearly intends that persons aggrieved by administrative decisions which adversely affect them should have full opportunity to show, if they can, that such decisions have been improperly reached'', and pointed out that ``[t]hey can only do this if they know how the decisions were in fact reached''. It seems to me that what Woodward J said is of particular importance in a case, like the present, where a decision is made to enforce statutory notices that are framed in terms raising genuine questions as to their validity. I have held one of these notices was actually invalid. The questions in the other the subject of objection involved assumptions that I have held could be challenged by ONE.TEL Limited in its answers; however, a similar difficulty was held to cause invalidity in FH Faulding & Co v FC of T (ubi cit supra). In other words, the point was not without difficulty. In
FC of T & Ors v The Australia and New Zealand Banking Group Ltd; Smorgon & Ors v FC of T & Ors (Smorgon's case) 79 ATC 4039 at 4047; (1979) 143 CLR 499 at 525, Gibbs ACJ said that a valid notice under the corresponding provisions of s 264 of the Income Tax Assessment Act ``must show the person to whom it is addressed that any document which he is required to produce is one whose production the Commissioner is entitled to require.'' Where there is doubt whether the terms of a notice are within the limits of what the Commissioner is empowered to ask, his reasons for the decision to issue the notice may cast light on the problem. That may give the recipient of the notice a fair basis to require to consider the Commissioner's reasons for issuing the notice before being called upon to answer it.

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29. In the present case, the Commissioner's argument does not suggest any urgency. Rather, he takes his stand on the proposition that the mere fact reasons have been requested is not a ground for extension. So much may be conceded, but the contention does not meet the special circumstances of the case. Given that the notices were not straightforward requests for information, but involved arguable issues of some complexity; that such notices should show on their face the Commissioner's right to insist upon answers under pain of statutory penalties; and that the policy of the judicial review legislation is to give persons affected by administrative decisions ``full opportunity to show, if they can, that such decisions have been improperly reached'', it seems to me that in this case, where no significant countervailing reason has been presented, it was in the relevant sense unreasonable to refuse ONE.TEL Limited any extension of either notice for some period beyond the receipt of the Commissioner's reasons.

30. ONE.TEL Limited also relied on the proposition that the Commissioner failed to take into account a relevant consideration, namely, that the applicant was entitled to consider the Commissioner's statement of reasons before determining whether it was required to comply with the notices. The Commissioner contends that the recipient of notices under s 108 has no such entitlement. I agree that this is so, as a general proposition. However, it follows from what I have already said that, in my opinion, the recipient of a notice, depending on its terms and the circumstances, may be justified in insisting upon an opportunity to consider the basis on which the direction to furnish information has been given to him, and in such a case, or in a case where this might be so, the Commissioner's failure to take into account that consideration is a matter capable of providing a ground of review. In the present case, the request for an extension of time was made by a letter, dated 19 March 1998, which expressly referred to the ground ``that our client may consider [the Commissioner's statement of reasons] and seek legal advice as to the validity of the notices, including the question of whether to seek judicial review of the decision to issue the notices''. The Commissioner's response was a bare statement of the decision ``not to grant the extensions of time sought'', communicated by the Australian Government Solicitor's letter of 26 March 1998.

31. In my opinion, ONE.TEL Limited is entitled to succeed on this issue, although, of course, its success is academic as regards the notice which I have held to be invalid.

The guidelines issue

32. Section 108 does not abrogate the principle of legal professional privilege: Fieldhouse at ATC 5046, 5049, 5057-5060; FCR 199, 202-203, 213-218;
Carmody v MacKellar (1997) 76 FCR 115 at 137-138. But no corresponding privilege has ever been held to attach to the advice of accountants. Concerns have been expressed that the same type of advice in relation to the tax affairs of individuals and companies may be given by accountants as may be given by lawyers. It has been suggested that the same considerations which underpin the doctrine of legal professional privilege apply, at least to some extent, to justify, in the public interest, the according to advice furnished by professional accountants of a degree of protection from disclosure. The Commissioner of Taxation has acknowledged that this proposition has validity, and has issued a document entitled Guidelines for the Exercise of Access Powers in relation to External Accountants' Papers. The final question with which I must deal concerns the effect of the issue of these guidelines (which I shall call simply ``the Guidelines'').

33. The Guidelines commence with a reference to the Commissioner's powers ``to review documents and other information to ascertain a taxpayer's compliance with the tax laws''. They continue:

``2. At the same time, 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 advisers. In respect of such documents the Australian Taxation Office (ATO) acknowledges that taxpayers should be able to consult with their external accountants on a confidential basis to enable full and frank discussion to take place and for advice to be communicated on that basis.

3. It is against that background and in association with representatives of the

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Australian Society of Accountants, the Institute of Chartered Accountants in Australia and the Taxation Institute of Australia that these Guidelines have been prepared. ATO auditors will follow the Guidelines in dealing with access to papers prepared by external accountants. For their part, the professional bodies will encourage their members and taxpayers to positively assist in meeting requests, made in accordance with these Guidelines, from ATO auditors.

4. Subject to legal professional privilege, which is dealt with in other guidelines, the right of access to books, documents and other papers is limited only by the requirement that the power must be exercised in good faith and for the purposes of the taxation laws. Also, where the taxpayer and ATO are engaged in litigation, limits applicable to discovery of documents and any restrictions arising from the conduct of the litigation apply.''

34. The Guidelines proceed to identify what are described as ``source documents'', which ``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''. Traditional accounting records thus fall within the description of source documents. The Guidelines contrast them with ``restricted source documents'' and ``non-source documents''. Restricted source documents include advices prepared by an external accountant for a taxpayer to show how to structure or record a transaction or arrangement. Of these, the Guidelines state:

``11. 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 what 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 appellation ``non-source documents'' is applied by the Guidelines to advisings provided after a transaction has been completed, which did not affect its recording, and advisings regarding transactions which were not and are not intended to be put into effect.

35. The Guidelines make it clear that the Commissioner claims ``full and free access to source documents'', but as regards restricted source and non-source documents they provide:

``15. Access to restricted source and non- source documents prepared by external accountants, whether in the possession of taxpayers or their accountants, will not be sought except in accordance with the following paragraphs. The opinions expressed by accountants in such documents are considered to be within the class of documents [which should in all but exceptional circumstances remain within the confidence of taxpayers and their professional accounting advisers].''

36. A number of specific situations, such as fraud or evasion, or loss or unavailability of records, are dealt with in the Guidelines. Where source documents do not provide sufficient information, the Guidelines indicate that restricted source and even non-source documents may be sought ``in accordance with these Guidelines''. But the Guidelines contain an overall safeguard expressed in the following terms:

``26. In the exceptional circumstances outlined above, access to restricted source and non-source documents may only be sought with the written approval of the Deputy Commissioner of the Office in which the relevant ATO audit manager is located. In these circumstances, ATO auditors will specify, to the extent practicable, the relevant documents applicable to the issue under review....''

37. The decision the subject of the application for judicial review, so far as it relates to the Guidelines, is the decision of a Deputy Commissioner of Taxation, made on 15 December 1998, giving approval to the seeking of access to documents including advices emanating from the external accountant of ONE.TEL Limited and One.Tel Digital Pty Limited. The companies and their accountant contend that the issue by the Commissioner of the Guidelines gave rise to a legitimate expectation that the Guidelines would be observed, and that they themselves would be advised of any matter put forward as an

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exceptional circumstance before the making of a decision, so that they would have an opportunity of arguing that access to the relevant documents would not be justified. They submit that there are no exceptional circumstances in the present case. The Deputy Commissioner, on the other hand, gave approval for officers to have access in this matter to restricted source and non-source documents, falling within certain categories, on the basis that there was an exceptional circumstance. The exceptional circumstance identified by him was ``the possible application of the anti-avoidance provisions'', on which it was indicated advice had been obtained from senior counsel. Before the step was taken of authorising access to these documents, the Deputy Commissioner wrote to the companies' accountant a letter in the following terms:

``AUDIT OF ONE.TEL LIMITED AND ONE.TEL DIGITAL PTY LIMITED

My approval has been sought under section 5 of the Commissioner's Guidelines `Access to Professional Accounting Advisors' Papers: Guidelines for the Exercise of Access Powers' [sic - this is either a mistaken reference, or the title and paragraph numbering of the Guidelines have undergone some changes] for officers to have access pursuant to s. 109 of the Sales Tax Assessment Act 1992 to restricted source and non-source documents of One.Tel Ltd (`One.Tel') and One.Tel Digital Pty Ltd (`OTD') (`the taxpayers') and the firm known as Firmstone & Feil, including Mr Adrian Firmstone.

The documents which it is proposed that officers will access are:

• • documents which relate to the introduction of One.Tel Digital into the business structure of the taxpayers, including documents relating to the trade practices issues as they arose before the introduction of One.Tel Digital; and
• • documents contained in the list provided to the ATO by Mr Firmstone on or about 10 July 1998.

Given the past dealings in this matter this proposal will not come as a surprise to you. As a courtesy I wish to give you an opportunity to comment on the proposal set out above.

I would be grateful if you could address any comments you wish to make to me within 14 days of the date of this letter. I will take such comments into account in deciding whether to give the approval sought.''

38. The applicants argue that this letter was insufficient to satisfy their legitimate expectations, and to accord them procedural fairness or natural justice, because it did not specify the nature of the exceptional circumstance upon which the Deputy Commissioner proposed to rely.

39. In
Haoucher v Minister of State for Immigration and Ethnic Affairs (1990) 169 CLR 648 at 651, Deane J stated the general proposition:

``The notion of a `legitimate expectation' which gives rise to a prima facie entitlement to procedural fairness or natural justice in the exercise of statutory power or authority is well established in the law of this country.''

His Honour held (at 654), in the context of criminal deportation, that there was ``much to be said for the view that where a person has made the effort and incurred the expense involved in persuading the [Administrative Appeals] Tribunal to make findings and recommendations in his or her favour, after a full hearing on the merits in proceedings in which the Minister has been fully heard as an active opposing party, there will arise a new and distinct legitimate or reasonable expectation that the Minister will accept the findings and abide by the recommendation of that Tribunal.'' But the decision did not have to depend on so broad a principle as this. The appellant was able to call to his aid the effect of a published ministerial policy with regard to the exercise of the discretion to set aside a determination of the Tribunal in such a case. The policy provided that this would only be done in ``exceptional circumstances and only when strong evidence can be produced to justify [the] decision''. In consequence, a further legitimate expectation was engendered. Deane J held (at 655):

``In those circumstances, the justice of the common law demanded that the appellant be accorded an opportunity of being heard on the questions whether the `recommendations of the... Tribunal should be overturned' by reason of `exceptional circumstances' and whether `strong evidence can be produced to

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justify' such an overturning of the Tribunal's recommendation. The failure to accord to the appellant such an opportunity vitiated the Minister's decision that the deportation order should stand.''

Similarly, McHugh J said (at 684) that ``the doctrine of legitimate expectations'' entitled the appellant ``to know what were the matters which constituted `exceptional circumstances' and `strong evidence''', and to an opportunity to attempt to persuade the Minister that the recommendation of the Tribunal should be followed.

40. However, it is necessary to appreciate that Haoucher involved a legitimate expectation founded, in part, on the result of a fully contested hearing in the Administrative Appeals Tribunal. That is a strong source for a legitimate expectation. Other circumstances may not rise so high. In Haoucher itself, Deane J stated (at 652):

``[I]t is important to bear in mind that the recognition of an obligation to observe procedural fairness does not call into play a body of rigid procedural rules which must be observed regardless of circumstances. Where the obligation exists, its precise content varies to reflect the common law's perception of what is necessary for procedural fairness in the circumstances of the particular case. In some cases where the requirements of procedural fairness are applicable, nothing less than a full and unbiased hearing of each affected individual's case will satisfy them. In other circumstances, something less may suffice.''

In
Minister of State for Immigration and Ethnic Affairs v Ah Hin Teoh (1995) 183 CLR 273, McHugh J said (at 305):

``There is a want of procedural fairness if there is no opportunity to be heard on matters in issue. And there is no opportunity to be heard if the person concerned neither knows nor is in a position to anticipate what the issues are. That is also the case if it is assumed that a particular matter is not in issue and the assumption is reasonable in the circumstances.''

In that case, there was a reasonable expectation that an international convention ratified by the Australian Government would be observed. See also
Vaitaiki v Minister for Immigration and Ethnic Affairs (1998) 150 ALR 608.

41. The proposition that the issue of the Guidelines similarly gave rise to a legitimate expectation that they would be observed was stated, without any final view being reached as to whether it was correct, in
Deloitte Touche Tohmatsu v DFC of T 98 ATC 5192, a decision of Goldberg J. His Honour found it unnecessary to decide the point, but he did decide (at 5207) that the Guidelines constituted ``at the least, a relevant consideration to which... officers of the Australian Taxation Office must have regard''.

42. It seems to me that the formality and detail with which the Guidelines are framed and the nature of their subject matter point strongly in favour of the view that they give rise to a legitimate expectation that the Commissioner will conduct himself in the manner he has so carefully set out. I do not think he could depart from the Guidelines, except in such an urgent case as might arise if there were grounds for fearing the destruction of the documents in question, without giving the person concerned an opportunity to make out a case why he should not do so. Of course, provided he does allow the requisite opportunity, it is in the nature of guidelines that they may be departed from in an individual case for sufficient reason:
Minister for Immigration and Ethnic Affairs v Conyngham (1986) 11 FCR 528 at 540-541, 542;
Gerah Imports Pty Ltd v Minister for Industry, Technology and Commerce (1987) 17 FCR 1 at 10 et seq;
Australian Broadcasting Tribunal v Bond Corporation Holdings Ltd (1989) 86 ALR 424 at 432;
Smoker v Pharmacy Restructuring Authority (1994) 53 FCR 287;
Sacharowitz v Minister for Immigration, Local Government and Ethnic Affairs (1992) 33 FCR 480 at 485 et seq. The more difficult question is whether there is a legitimate expectation, of the kind held to arise in Haoucher, binding the Commissioner, even when he proposes to act in accordance with the Guidelines in the making of a decision to authorize access to certain documents on the footing of an exceptional circumstance, to give a person affected a prior opportunity of arguing that there is no such exceptional circumstance. But here, too, I think the formality and particularity of the Guidelines, together with the Commissioner's own care to set out in them the justification supporting each aspect of them, require the

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conclusion that they do give rise to such a legitimate expectation, just as the nature of the proceeding involved in Haoucher gave rise to a similar expectation. However, a decision under the Guidelines does not have the solemn consequence that may follow a decision of the Minister in a case like Haoucher. Although the Guidelines give rise to a legitimate expectation, I do not think that natural justice makes the same demand here as it did in Haoucher, in a situation where the substance of that expectation is liable to be thwarted. As the passages I have quoted from judgments of Deane J in Haoucher (at 652) and McHugh J in Ah Hin Teoh (at 305) make clear, a person may be entitled to less than full particulars of the facts and views which may be considered sufficient to deny his expectation. To borrow the words of McHugh J, it will at any rate be sufficient, in such a case as the present, if the person affected knows or ``is in a position to anticipate what the issues are''.

43. In my opinion, the evidence establishes that the applicants were in that position. They fully understood the proposition they had to combat, that the circumstances raised a possible application of the anti-avoidance provisions of the Act. In their letter of reply to the Deputy Commissioner's invitation to make submissions, they expressly recognized the issue of ``the possible application of the anti- avoidance provisions of the law'', addressing to it a careful argument. They did not ask for further particulars.

44. At the hearing before me, counsel for the applicants contended it was not open to the Deputy Commissioner to regard the possible application of anti-avoidance provisions as an exceptional circumstance within the Guidelines. Apart from the difficulty of reconciling with Conyngham an approach that would seek to answer the question facing the Deputy Commissioner by construing an expression in the Guidelines as if it were contained in the Act, I cannot in any case accede to the argument. In my opinion, a situation calling for the application of the general anti-avoidance provisions could have been seen as exceptional. Whether it should was a matter for the Deputy Commissioner, as was the issue whether, in truth, the situation was possibly of that complexion. Reference was made at the hearing to the statement in the joint judgment in
FC of T v Spotless Services Limited & Anor 96 ATC 5201 at 5205; (1996) 186 CLR 404 at 414 that ``Part IVA is as much a part of the statute under which liability to income tax is assessed as any other provision thereof'', but it does not follow from this that the application of the Part, or of the corresponding provisions of the Sales Tax Assessment Act, may not constitute an exceptional circumstance.

45. For the applicants, a separate contention was raised, that the decision with respect to access to documents that were not source documents was so unreasonable that no reasonable person could have made it. It will be apparent from what I have already written that, on the contrary, I think the decision was open to the Deputy Commissioner. In particular, I could not, on the evidence, conclude that the finding of a possible application of the anti-avoidance provisions of the Act was unreasonable. I simply do not know. The onus being on the applicants to persuade me on the issue of unreasonableness, it does not assist them merely to point out that the relevant facts are peculiarly within the knowledge of the Commissioner. Nor do I place any significant weight on the circumstance that, well over a year and a half earlier, officers of the Commissioner noted concerning an argument in favour of the application of general anti- avoidance provisions: ``At this point we have no evidence to support a current argument on this ground.'' Lack of evidence does not deny a possibility, as Lord Devlin once famously made clear:
Hussien v Chong Fook Kam [1970] AC 942 at 948-949. (His Lordship said, ``I suspect but I cannot prove'', and he demonstrated that ``reasonable grounds for suspicion'' do not require ``anything like a prima facie case''.) Moreover, much may have been revealed since the officers made their comment.

46. Accordingly, I shall dismiss the application to review the decision to seek access to documents that are not source documents.

Orders

47. I direct the applicants to bring in, on a date to be fixed, short minutes of orders appropriate to reflect these reasons. When that is done, I shall hear argument as to the orders to

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be made in respect of costs, having regard to the mixed success of the parties, in matters other than Matter No 120 of 1998.

THE COURT ORDERS THAT:

The applicants bring in, on a date to be fixed, short minutes of orders appropriate to reflect the reasons of the Court.