• The impact of this case on ATO policy is discussed in Decision Impact Statement: Denlay v Commissioner of Taxation (QUD 14 and 15 of 2011).

DENLAY & ANOR v FC of T

Judges:
Keane CJ
Dowsett J
Reeves J

Court:
Full Federal Court, Brisbane

MEDIA NEUTRAL CITATION: [2011] FCAFC 63

Judgment date: 11 May 2011

---

Keane CJ, Dowsett and Reeves JJ

1. Mr Kevin Vincent Denlay and Mrs Mirja Helena Denlay (the taxpayers) brought applications under s 39B of the Judiciary Act 1903 (Cth) to challenge amended assessments of their liability to tax for the years of income ending 30 June 2002 to 30 June 2007.

2. The taxpayers' applications were based on the contention that, in making the amended assessments, the Commissioner of Taxation (the Commissioner) had used information obtained by officers of the Commissioner in contravention of s 400.9 of the Schedule to the Criminal Code Act 1995 (Cth) (the Criminal Code). On that basis, the making of the amended assessments was alleged to involve conscious maladministration of the assessment process. Accordingly, so it was said, the amended assessments should be quashed.

3. The learned primary judge held that the Commissioner's officers did not contravene s 400.9 of the Criminal Code because their conduct was justified by s 263 of the Income Tax Amendment Act 1936 (Cth) (the ITAA 1936). His Honour also held that the Commissioner's officers had acted in good faith in exercising their functions under the ITAA 1936. His Honour dismissed the taxpayers' applications:
Kevin Denlay v Commissioner of Taxation [2010] FCA 1434;
Mirja Denlay v Commissioner of Taxation [2010] FCA 1435 (Reasons).

4. The taxpayers dispute his Honour's conclusions in their appeal to this Court. In order to appreciate the taxpayers' arguments it is necessary first to set out the factual and legislative background to the proceedings before the primary judge and, his Honour's reasons for dismissing the taxpayers' application.

Factual background

5. On 3 November 2008 the Commissioner issued amended assessments for the 2002 to 2007 financial years. The amended assessments were said to be authorised by s 170 of the ITAA 1936 in that the Commissioner was "of the opinion that there has been fraud or evasion" in relation to the original assessments which were based on the taxpayers' tax returns for those years. The effect of the amended assessments was to increase substantially each taxpayer's indebtedness to the Commonwealth by way of income tax for the years in question.

6. On 4 November 2008 the Commissioner sent letters to the taxpayers stating that the information on which the amended assessments were based came from information obtained from companies associated with the Liechtenstein Group Trust (the LGT Group). Copies of documents containing this information had been obtained overseas by officers of the Commissioner from Mr Heinrich Kieber, a former employee of the LGT Group.

7. The information had been obtained by Mr Kieber in late 2002 from the LGT Group without its consent. Mr Kieber obtained a copy of the complete database of LGT's trust accounts in hard disk form (Reasons at [26]). The evidence as to how this occurred is not entirely clear, but it seems that Mr Kieber took a back up tape in hard disk from a shelf where it was kept by LGT. There is no evidence that Mr Kieber downloaded the information onto the disks from LGT's computer.

8. Between 23 and 25 October 2006, at an undisclosed location outside of Australia, Mr Kieber was interviewed by three senior officers of the Commissioner. Mr Kieber told the officers that he had worked in Liechtenstein for a bank which was part of the LGT Group, where he was responsible for LGT's electronic data. Mr Kieber had copied the information he had obtained onto disks which he handed over to the officers of the Commissioner, along with copies of the documents in paper format.

9. The information obtained from Mr Kieber suggested that Mr Denlay was a beneficial owner of assets in an entity, the Dorje Foundation, which had been established in November 1992. Mr Denlay's spouse also had a beneficial entitlement to the assets in the entity. The tax returns lodged by the taxpayers with the Commissioner indicated that they had not engaged in any transactions with overseas parties, nor did they have interests in overseas entities, but the information obtained from Mr Kieber suggested that the taxpayers had indeed engaged in a number of substantial transactions with overseas parties from which they had derived income which they had not disclosed to the Commissioner.

10. By April 2007 the Commissioner's officers had instituted an investigation under the name of "Project Jade" using the information obtained from Mr Kieber to identify Australian tax evaders. On 7 September 2007 the Deputy Commissioner wrote to the legal representatives of the taxpayers informing them that the Commissioner was conducting an audit into the taxpayers' taxation affairs. By the end of February 2008 the Project Jade staff were preparing to interview Mr Denlay, pursuant to s 264 of the ITAA 1936. He was subsequently interviewed.

11. On 15 February 2008 the LGT Group issued to the world at large, a media communiqué entitled, "LGT illegally disclosed data material limited to the client data stolen from LGT Treuhand in 2002" (the LGT Communiqué). The LGT Communiqué included a statement that Mr Kieber, shortly after obtaining the stolen data, wrote to Prince Hans-Adam, the ruler of the principality of Liechtenstein, threatening to disclose the stolen data, and seeking the Prince's assistance (including the issue of two new passports) in relation to problems that he was experiencing in Liechtenstein with its criminal justice system. The primary judge set out a version of the LGT Communiqué with the portions which he ruled inadmissible marked in red ink. Because the taxpayers rely upon the LGT Communiqué to establish the knowledge of the Commissioner's officers of Mr Kieber's misconduct, it is necessary to set out that version below; the portions ruled inadmissible are shown in italics:

"LGT: Illegally disclosed data material limited to the client data stolen from LGT Treuhand in 2002

Further information about the offender and the circumstances of the data theft

Vaduz, 24 February 2008 - As already assumed in the first media communiqué issued by LGT Group on 15 February 2008, in as far as LGT is concerned, the data material illegally disclosed to the German authorities is limited, with almost complete certainty, to the client data stolen from LGT Treuhand in 2002. On the basis of the indications and circumstantial evidence, LGT is assuming that the data was stolen and illegally disclosed by the same offender. Accordingly, the criminal offence previously registered against a person unknown is to be re-registered directly against the convicted data thief. Now that the facts of the case have become clearer, and on account of the great media interests, LGT is publishing further details about the offender and the circumstances surrounding the theft of the data.

For LGT Group, all the facts now point - despite contradictory statements from sources said to be close to the German intelligence service - to the fact that the data material illegally disclosed to the German authorities is limited, in as far as LGT is concerned, to the client data stolen from LGT Treuhand in 2002. LGT issued a statement on 15 February 2008 about the data theft and the presumed connection with the events in Germany. Even though other rumors have been circulated about these occurrences, LGT Group is assuming on the basis of numerous indications that the person, who illegally passed the data on to the German intelligence service, is the same former employee of LGT Treuhand who stole the data in 2002. Apparently, there is a possibility that law firms were interposed as intermediaries. LGT will now re-register its report of a criminal offence committed by a person unknown directly against the convicted data thief.

Apparently, the stolen data material has also been illegally disclosed, directly or indirectly, to other authorities. According to reports in the media, the previously convicted offender was paid a sum of several millions for the information and was provided with a new identity. LGT regards such methods as being extremely offensive, particularly as it is apparently accepted that the person concerned could also misuse the confidential client data for other criminal purposes.

The data stolen in 2002 comprises various different types of records. They concern approximately 1'400 client relationships of LGT Treuhand, which were established before the end of 2002. The largest proportion, about 600 clients, are resident in Germany. The figure circulated in the media of 4'527 sets of data represents the number of beneficiaries of all the foundations contained in the data material stolen from LGT Treuhand in 2002. The figure should not be confused with the number of clients, who have deposited assets in one or more foundations which in turn have one or more beneficiaries. Furthermore, the generalization put forward in some cases that all the clients affected are tax offenders is to be utterly refuted.

Data theft in 2002 - facts about the offender and the circumstances of the theft

On 15 February 2008, LGT Group announced in a media communiqué that a former employee of LGT Treuhand in Vaduz had stolen client data in 2002; that a criminal case had been registered against him and that he had been subsequently convicted. Furthermore, LGT stated that as a result of contacts between the parties the client data was supposedly returned, and that the data theft related solely to client relationships of LGT Treuhand which had been established up to the end of 2002. The State Court and the Office of the Liechtenstein Public Prosecutor supplemented LGT's communication on 19 February 2008 with information about the relevant legal aspects.

In the meantime, it has become increasingly clear that the so-called "informant" of the BND German intelligence service is indeed the same convicted data thief who illegally disclosed the client data stolen in 2002. Consequently, and on account of the great interest shown by the media, LGT is now in a position to publish further - from a client perspective partially non-relevant - details regarding the circumstances of the data theft. In order to provide a comprehensive overview, LGT is also publishing information, by way of exception and in consultation with the parties concerned, which does not relate to LGT Treuhand, but rather to other entities.

The former employee, who was convicted of the data theft is a Liechtenstein citizen named Heinrich Kieber (HK). He was active from October 1999 as an external employee of an IT-company, and from April 2001 to November 2002 as an employee of LGT Treuhand. He was tasked, within the scope of the transfer of data inventories to an electronic archive, with checking the scanned documents At the time of his recruitment and during his employment with LGT Treuhand, he had not been previously convicted of a crime. However, as would become known later, an arrest warrant had been issued against HK, which was not accessible for examination during the standard checks carried out on new employees.

This arrest warrant was linked to a real estate deal in Spain in 1996, which HK had allegedly financed with uncovered checks, and was issued by the Spanish criminal prosecution authorities in 1997, firstly at national and subsequently at international level. In October 2001, HK was sentenced by the Liechtenstein State Court to pay the injured party a sum of approximately CHF 600'000. HK lodged an appeal against this sentence, which was rejected by the Liechtenstein High Court in October 2002. In November 2002, the Liechtenstein public prosecutor brought a case of serious fraud against HK in connection with the real estate deal in Spain. In the same month, HK left LGT Treuhand and fled abroad. As it later emerged, prior to leaving he had illegally taken client data from his employer and copied them onto four DVDs.

In January 2003, HK sent a letter and a tape cassette to H.S.H. Prince Hans-Adam of Liechtenstein. HK stated that he felt he had been unfairly treated by the judicial authorities. He demanded assistance in solving his legal problems, including the issuing of two new passports, otherwise he would pass on the stolen client data to foreign media and authorities. The demands were rejected, the State Court issues an arrest warrant, and the public prosecutor lodged an indictment against HK. LGT Treuhand succeeded in making contact with HK In May 2003, it persuaded him to return to Liechtenstein and face the legal consequences. The Liechtenstein High Court assured him of safe conduct up to the date of the court proceedings. Within the scope of the court proceedings, the DVDs with the stolen client data were supposedly returned to LGT Treuhand, which later destroyed them. The costs of legal counsel for HK and of his apartment in Liechtenstein were borne by LGT Treuhand.

In October 2003, HK - who had confessed and shown remorse - was sentenced in the first instance by the Criminal Court to four year's imprisonment for serious fraud, dangerous threats, unlawful compulsion and suppression of documents. Subsequently, in a personal letter to H.S.H. Prince Hans-Adam, HK requested him - in view of his appeal against the conviction - to confirm that he had never felt threatened by HK, which H.S.H. Prince Hans-Adam verified. The final judgment of the High Court in January 2004 convicted HK of serious fraud, unlawful compulsion and suppression of documents, and sentenced him to a term of imprisonment of one year, which was made conditional for a probationary period of three years. The conviction for fraud was based on the previously mentioned real estate deal in Spain; the attempted unlawful compulsion referred to the demands in the letter to H.S.H. Prince Hans-Adam; and the suppression of documents related to the data theft at LGT Treuhand. HK was cleared of the criminal charges of spying in connection with professional or business secrets because the court assumed that at the time of the theft of the client data he did not intend to disclose their contents to foreign entities. The international arrest warrant issued by the Spanish criminal prosecution authorities was rescinded in October 2004 and the criminal proceedings in Spain were suspended in November 2005.

In April 2005, HK addressed another letter to H.S.H. Prince Hans-Adam, in which he petitioned the Prince for a pardon. This request for a pardon was turned down by H.S.H Crown Prince Alois in agreement with the competent authorities. However, in May 2005, the right to information about the criminal records of HK was restricted to criminal prosecution authorities, which would have occurred ipso jure from January 2006. LGT Group is not aware of HK's present whereabouts. According to reports in the media, he is living under a new identity in Australia."

12. In October 2003 Mr Kieber was convicted in the Liechtenstein Criminal Court of the following offences against the Liechtenstein Criminal Code (the LCC):

• • serious fraud, contrary to § 146 and 147(2) of the LCC;
• • violence and dangerous threats against the Prince of Liechtenstein, contrary to § 249 of the LCC;
• • attempted duress contrary to § 15 and 105(1) of the LCC; and
• • suppression of documents contrary to § 229(1) of the LCC.

13. In January 2004, the above convictions were upheld on appeal, except for those relating to violence and dangerous threats again the Prince of Liechtenstein. The convictions are, however, of only peripheral relevance to the proceedings in this Court.

14. Relevantly for present purposes, an expert on the law of Liechtenstein, Dr Helmet Schwarzler, gave evidence that under § 131a of the LCC it is an offence punishable by imprisonment for up to three years, with or without a fine, for a person to procure automated processed data which he may or may not alone dispose of with the intent to unjustly enrich himself or a third party (Reasons [52]).

15. On 27 February 2008, the Liechtenstein Office of the Public Prosecutor issued a press release detailing the action which it was taking in respect of Mr Kieber. This press release included a suggestion that, in addition to the proceedings which had already been taken in Liechtenstein against Mr Kieber, the Office of the Public Prosecutor had it in mind to seek to charge Mr Kieber with a contravention of § 131a of the LCC.

16. There was no evidence to suggest that the ATO knew about the content of the LGT Communiqué or the Public Prosecutor's press release prior to their publication. However, the primary judge was satisfied that, by the end of February 2008, the contents of these documents would have been known to the Commissioner's officers (Reasons [83]).

The proceedings at first instance

17. The taxpayers objected to the amended assessments which were issued in November 2008 and, being dissatisfied with the Commissioner's refusal of their objections, instituted appeals in the Federal Court of Australia pursuant to Part IVC of the Taxation Administration Act 1953 (Cth). Those appeals are still pending. The taxpayers also commenced these proceedings which the parties agreed should be heard and determined before the hearing of the appeals pending under Part IVC of the Taxation Administration Act.

18. The taxpayers argued before the primary judge that the receipt and bringing into Australia of documents containing the LGT Group information, obtained by officers of the Commissioner in October 2006, contravened s 400.9 of the Criminal Code as it stood at that time (it may be noted that amendments commencing on 13 December 2006 were made within Div 400 of the Criminal Code by the Anti-Money Laundering and Counter-Terrorism Financing (Transitional Provisions and Consequential Amendments) Act 2006 (Cth).

19. The taxpayers' argument was that, as a matter of objective fact, it was reasonable for the Commissioner's officers to suspect that the disks obtained by the officers of the Commissioner from Mr Kieber were property which was the proceeds of crime in relation to a foreign indictable offence within the meaning of s 400.9 of the Criminal Code. That suspicion would have been heightened when the LGT Communiqué and Public Prosecutor's press release were published prior to the making of the amended assessments. The taxpayers sought to rely upon the terms of the LGT Communiqué as proof of all the facts asserted in it. The taxpayers argued that the use of the disks, being proceeds of crime, in the process of assessment was "conscious maladministration" under the ITAA 1936. In support of this argument, the taxpayers relied upon statements in the majority judgment in
Commissioner of Taxation v Futuris Corporation Ltd 2008 ATC ¶20-039; (2008) 237 CLR 146.

20. In Futuris the High Court held that s 175 of the ITAA 1936 does not immunise a tax assessment against challenge where there has been a deliberate failure by the Commissioner or his officers to administer the Act according to its terms (at [55]). In Futuris the Commissioner had double counted an amount of income in making the assessment in question. It was argued that this double counting was deliberate and therefore that the assessment was vitiated by bad faith on the part of the Commissioner. The High Court rejected the contention that the double counting had been deliberate, but the majority of the judges accepted that if the double counting had been deliberate, the assessment would not be an assessment for the purposes of s 175 of the ITAA 1936 (at [59], [105]).

21. The expression, "conscious maladministration", which looms large in the taxpayers' argument, derives from the statement by Gummow, Hayne, Heydon and Crennan JJ in Futuris that s 175 of the ITAA 1936 "operates only where there has been what answers the statutory description of an 'assessment'" (at [[25]). Their Honours said (Reasons [23] - p 25]):

"The significance of s 175 for the operation of the Act and for the scope of judicial review outside Pt IVC is to be assessed in the manner indicated in
Project Blue Sky Inc v Australian Broadcasting Authority . That case decided that the description of provisions as either mandatory or directory provides no test by which the consequences of non-compliance with a statutory criterion can be determined. Rather, consistently with the reasons in Project Blue Sky of McHugh, Gummow, Kirby and Hayne JJ, the question for the present case is whether it is a purpose of the Act that a failure by the Commissioner in the process of assessment to comply with provisions of the Act renders the assessment invalid; in determining that question of legislative purpose regard must be had to the language of the relevant provisions and the scope and purpose of the statute.

Section 175 must be read with s 175A and 177(1). If that be done, the result is that the validity of an assessment is not affected by failure to comply with any provision of the Act, but a dissatisfied taxpayer may object to the assessment in the manner set out in Pt IVC of the Administration Act; in review or appeal proceedings under Pt IVC the amount and all the particulars of the assessment may be challenged by the taxpayer but with the burden of proof provided in s 14ZZK and 14ZZO of the Administration Act. Where s 175 applies, errors in the process of assessment do not go to jurisdiction and so do not attract the remedy of a constitutional writ under s 75(v) of the Constitution or under s 39B of the Judiciary Act.

But what are the limits beyond which s 175 does not reach? The section operates only where there has been what answers the statutory description of an "assessment". Reference is made later in these reasons to so-called tentative or provisional assessments which for that reason do not answer the statutory description in s 175 and which may attract a remedy for jurisdictional error. Further, conscious maladministration of the assessment process may be said also not to produce an "assessment" to which s 175 applies. Whether this be so is an important issue for the present appeal.

[Footnotes omitted]."

22. Their Honours went on to say (Reasons at [55] - [57]):

" The issue here is whether, upon its proper construction, s 175 of the Act brings within the jurisdiction of the Commissioner when making assessments a deliberate failure to comply with the provisions of the Act. A public officer who knowingly acts in excess of that officer's power may commit the tort of misfeasance in public office in accordance with the principles outlined earlier in these reasons. Members of the Australian Public Service are enjoined by the Public Service Act (s 13) to act with care and diligence and to behave with honesty and integrity. This is indicative of what throughout the whole period of the public administration of the laws of the Commonwealth has been the ethos of an apolitical public service which is skilled and efficient in serving the national interest. These considerations point decisively against a construction of s 175 which would encompass deliberate failures to administer the law according to its terms.

Such failures manifest jurisdictional error and attract the jurisdiction to issue the constitutional writs. To the extent that there is any indication to the contrary in what was said by Mason and Wilson JJ in F J Bloemen Pty Ltd v Federal Commissioner of Taxation that should not be followed.

It should be added that, with respect to the remedy of injunction, what was said in the joint reasons in Plaintiff S157/2002 v The Commonwealth indicates that injunctive relief clearly is "available for fraud, bribery, dishonesty or other improper purpose".

[Footnotes omitted]."

23. The reference in the passage cited in the preceding paragraph to "the tort of misfeasance in public office in accordance with the principles outlined earlier in these reasons" is a reference to the statement by their Honours (at [11]):

" What is conveyed by the holding by the Full Court that the Second Amended Assessment did not represent an exercise by the Commissioner of the power to assess which was bona fide? That phrase is used in several senses in public law. With cognate expressions, it also appears in formulations of the tort of misfeasance in public office. This Court has accepted that in that context it is sufficient that the public officer concerned acted knowingly in excess of his or her power. The House of Lords has since indicated that in English law recklessness may be a sufficient state of mind to found the tort. The affinity between tort law and public law has been remarked upon in this Court; that affinity reflects the precept that in a legal system such as that maintained by the Constitution executive or administrative power is not to be exercised for ulterior or improper purposes."

24. Before the primary judge in the current case, the Commissioner argued the evidence in support of the taxpayers' allegation of a contravention of s 400.9 of the Criminal Code did not meet the standard of proof required by s 140(2) of the Evidence Act 1995 (Cth) (Evidence Act) in relation to the proof of conduct of such alleged gravity. Next, the Commissioner argued that the allegation of a breach of s 400.9 of the Criminal Code ignored the operation of s 10.5 of the Criminal Code in respect of actions authorized by law; their conduct was authorised by ss 166, 263 and 264 of the ITAA 1936. These provisions should, it was said, be given effect according to their terms.

25. In any event, it was argued, the Commissioner's officers acted in good faith throughout; to the extent that Mr Kieber engaged in illegal conduct in taking information from LGT four years or more before handing the disks over to the Commissioner's officers, that did not affect them in the conscientious performance of their duties. The Commissioner argued that there was no evidence that his officers knew or believed they were committing an offence at any time. All of the officers of the ATO who interviewed Mr Kieber, who were involved in Project Jade, or who amended the assessments were engaged only in seeking, in good faith, to give effect to the ITAA 1936.

26. We will set out the detail of his Honour's reasons directly. Before doing so, it is necessary to set out the legislative provisions which are involved in this case.

Relevant legislation

27. Liability to income tax is governed by both the ITAA 1936 and the Income Tax Assessment Act 1997 (Cth) (the ITAA 1997). The provisions relevant to the making and amending of assessments are to be found in the ITAA 1936.

28. Assessment is defined in s 6 of the ITAA 1936 to include "the ascertainment of the amount of taxable income (or that there is no taxable income) and of the tax payable on that taxable income (or that no tax is payable)".

29. The relevant provisions of the ITAA 1936 relating to the making of an assessment and the Commissioner's power to obtain information for that purpose are as follows:

• " 166 Assessment

  From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income (or that there is no taxable income) of any taxpayer, and of the tax payable thereon (or that no tax is payable).

• 173 Amended assessment to be an assessment

  Except as otherwise provided every amended assessment shall be an assessment for all the purposes of this Act.

• 175 Validity of assessment

  The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.

• 177 Evidence
  • (1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.
  • (2) The production of a Gazette containing a notice purporting to be issued by the Commissioner shall be conclusive evidence that the notice was so issued.
  • (3) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued.
  • (4) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced.
  • (5) To avoid doubt, subsection (4) applies to a copy or an extract of a document that was given to the Commissioner on a data processing device or by way of electronic transmission unless the taxpayer can show that the taxpayer did not authorise the document.
• 263 Access to books etc.
  • (1) The Commissioner, or any officer authorized by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers.
  • (2) An officer is not entitled to enter or remain on or in any building or place under this section if, on being requested by the occupier of the building or place for proof of authority, the officer does not produce an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under this section.
  • (3) The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, under subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section.

    Penalty: 30 penalty units.

    Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit."

30. It is common ground that, by virtue of s 4A of the Taxation Administration Act 1953 (Cth) the Commissioner's officers who were involved in Project Jade and the making of the amended assessments were employees of the Australian Public Service (APS) and therefore, APS employees within the meaning of the Public Service Act 1999 (Cth) (Public Service Act). Section 13(4) of the Public Service Act provides:

• " (4) An APS employee, when acting in the course of APS employment, must comply with all applicable Australian laws. For this purpose, Australian law means:

  • (a) any Act (including this Act), or any instrument made under an Act;

    or

  • (b) any law of a State or Territory, including any instrument made under such a law."

31. Section 400.9 of the Criminal Code, as scheduled to the Criminal Code, as in force prior to 13 December 2006, provided relevantly:

• " 400.9 Possession etc. of property reasonably suspected of being proceeds of crime etc.
  • (1) A person is guilty of an offence if :
    • (a) the person :

      • (i) receives, possesses , conceals or disposes of money or other property ; or
      • (ii) imports money or other property into , or exports money or other property from, Australia ; and

    • (b) it is reasonable to suspect either or both of the following:

      • (i) the money or property is proceeds of crime in relation to a Commonwealth indictable offence or a foreign indictable offence;
      • (ii) the money or property is proceeds of crime, and the person's conduct referred to in paragraph (a) takes place in circumstances referred to in subsection (3).

        Penalty: Imprisonment for 2 years, or 50 penalty units, or both.

    …

  • (4) Absolute liability applies to paragraph (1)(b) .
  • (5) This section does not apply if the defendant proves that he or she had no reasonable grounds for suspecting that the money or property was derived or realised, directly or indirectly, from some form of unlawful activity.

    Note: A defendant bears a legal burden in relation to the matter in subsection (5) (see section 13.4)."

    [Emphasis added].

32. At the relevant time the expression "proceeds of crime" was defined in s 400.1 of the Criminal Code to mean:

" …any money or other property that is derived or realised , directly or indirectly, by any person from the commission of an offence that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence).

[Emphasis added]."

33. Section 400.2(3) defined the phrase "foreign indictable offence" to mean:

"[A]n offence against a law of a foreign country constituted by conduct that, if it had occurred in Australia, would have constituted an offence against:

• (a) a law of the Commonwealth; or
• (b) a law of a State or Territory connected with an offence;

  that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence."

34. Section 400.2(4) of the Criminal Code provided:

"For the purposes of the definition of foreign indictable offence in subsection (3), a State or Territory is connected with the offence if:

• (a) a dealing in money or property [which is defined in s 400.2(1) to include importing money or other property] takes place in the State or Territory; and
• (b) the money or property would be proceeds of crime, or could become an instrument of crime, in relation to the offence if the offence were a foreign indictable offence."

35. In order to establish a reasonable suspicion that the LGT documents were the proceeds of crime in relation to a foreign indictable offence by Kieber, the taxpayers sought to demonstrate the criminality of Kieber's conduct under Liechenstein law and also its criminality, assuming that it had occurred in Australia, under Australian domestic law.

36. As to the criminality of Kieber's conduct under Australian domestic law, the taxpayers relied upon s 477.1 of the Criminal Code and s 308C of the Crimes Act 1900 (NSW) (the NSW Crimes Act) (New South Wales being where the documents obtained by the Commissioner's officers were brought into Australia). Further, the taxpayers argued that New South Wales was the State with which Kieber's offence was connected within the meaning of s 400.2(4) of the Criminal Code.

37. At the time of Mr Kieber's taking of the information from LGT, s 477.1 of the Criminal Code provided, relevantly:

"Intention to commit a serious Commonwealth, State or Territory offence

• (1) person is guilty of an offence if:

  • (a) the person causes:

    • (i) any unauthorised access to data held in a computer;

      …

  • (b) the unauthorised access… is caused by means of a telecommunications service; and
  • (c) the person knows the access…is unauthorised; and
  • (d) the person intends to commit, or facilitate the commission of a serious offence against a law of the Commonwealth, a State or a Territory (whether by that person or another person) by the access…

• (2) Absolute liability applies to paragraph 1(b).
• (3) In a prosecution for an offence against subsection (1), it is not necessary to prove that the defendant knew that the offence was:

  • (a) an offence against a law of the Commonwealth, State or a Territory;

    or

  • (b) a serious offence."

38. It may be noted here that s 477.1 speaks of an intent "to commit, or facilitate the commission of a serious offence against a law of the Commonwealth, State or Territory": conduct informed by an intent to commit an offence against the law of another country is not within s 477.1 of the Criminal Code.

39. Section 308C of the NSW Crimes Act provided, relevantly:

• " (1) A person who causes any unauthorised computer function:
  • (a) knowing it is unauthorised; and
  • (b) with the intention of committing a serious indictable offence, or facilitating the commission of a serious indictable offence (whether by the person or by another person), is guilty of an offence.

    Maximum penalty: The maximum penalty applicable if the person had committed or facilitated the commission of, the serious indictable offence in this jurisdiction."

40. It may be noted that s 308C(2)(a) defines the term "unauthorised computer function" to include any unauthorised access to data held in any computer, which, the appellant's argue, in turn includes the copying or moving of the data to another place in the computer or to a data storage device.

41. Section 10.5 of the Criminal Code provides that "a person is not criminally responsible for an offence if the conduct constituting the offence is justified or excused by or under a law". The Commissioner argues that s 263(1) of the ITAA 1936 justified or excused the receipt, possession and importing into Australia of the documents obtained from Mr Kieber.

The reasons of the primary judge

42. The primary judge admitted the LGT Communiqué into evidence but not as proof of the truth of facts asserted in it. As the primary judge said (Reasons at [40]), "[t]here was some controversy at the hearing as to the extent to which the contents of the various factual representations made in the LGT Group media communiqué were admissible under the Evidence Act 1995 (Cth) as proof of those facts". His Honour explained (Reasons at [40]) that:

"This controversy occurred prior to the narrowing of Mr Denlay's case so as to focus, so far as Australian illegality by or on behalf of the Commissioner is concerned, on "reasonable to suspect". In that context, the whole of the contents of the media communiqué have a relevance in their own right, just as information bearing upon the formation of a suspicion as to the provenance of the LGT documents, irrespective of the extent to which any representation in the document might be admissible to prove the actual occurrence of a fact."

43. The primary judge accepted that, having regard to the contents of the record of the interview with Mr Kieber in October 2006, a reasonable suspicion should be attributed to the Commissioner's officers that Mr Kieber had obtained the information in breach of the law of Liechtenstein. His Honour considered that it was likely that, by the time the amended assessments were made in November 2008, the LGT Communiqué and the Public Prosecutor's Press Release (which were by that time available to the public) had confirmed these suspicions.

44. His Honour made the following findings (Reasons at [82] - [83]):

"… [By] 23 October 2006, … it was reasonable then to suspect (suspect in the sense described in Queensland Bacon Pty Ltd v Rees) that the LGT documents had been taken by him from the LGT Group not only in breach of a duty of confidence owed by him to his employer but also in breach of the criminal law of Liechtenstein. It was then not possible, just on the basis of the disclosures proved to have been made by Mr Kieber at this interview, to give greater precision to this suspicion."

By the time when the assessment was made in November 2008, greater precision could reasonably be given to this suspicion. Copies of the media communiqué and the Public Prosecutor's Press Release were then in the Commissioner's possession. Reading then in conjunction with the October 2006 record of interview and the affidavit which Mr Kieber gave in May 2007, it was by November 2008, reasonable to suspect that the LGT documents were, at least, the product of the following offences against the LCC: spying out business secrets for the benefit of a foreign party pursuant to para 1 and para 2 of § 124 and data theft pursuant to § 131a. Further, given the co-ordination within the ATO in Project Jade, evident from February 2008, it seems inherently more likely than not and I infer that each of these documents was known to the officer(s) within the ATO who made the amended assessments.

[Footnotes omitted]."

45. It should be noted here that it is apparent that when the primary judge referred to the "LGT documents" in this passage that he was not seeking to suggest that Mr Kieber handed over to the Commissioner's officers the disks that he had physically taken from LGT. His Honour was not attentive to a distinction between the information in LGT's database and the physical form in which that information was stored or to which it was transferred.

46. His Honour went on to say (Reasons at [84]):

"It does not follow from this that there was any breach of s 400.9 of the Criminal Code, much less that there was conscious maladministration."

47. The primary judge said (Reasons at [87]) that s 400.9 must be read subject to s 10.5 of the Criminal Code which, his Honour later held, protected the Commissioner's use of the information if its acquisition was indeed justification or excuse under law. In that regard, section 263 of the ITAA 1936 "makes lawful that which would otherwise be unlawful" (
FCT v Australia and New Zealand Banking Group Ltd 79 ATC 4039; (1979) 143 CLR 499; [1979] HCA 67 per Mason J at [14]). The primary judge said of s 263 (at [94]):

" What s 263 does is to make lawful conduct which would otherwise be unlawful under Australian law. The potential for a source of information to be abroad casts light upon what Parliament must have intended by the "universal expression" of the access (s 263) and breadth of assessing information base (s 166) stated in the ITAA36 which Parliament intended the Commissioner to enjoy for the purposes of that Act and the ITAA97. For the purposes of Australian law, the Commissioner is intended to enjoy full and free access for the purposes of the ITAA36 and the ITAA97 abroad also. That this expression of Australian parliamentary intent would afford the Commissioner no defence in a foreign court under a foreign law in respect of a trespass is no reason in an Australian court to read down the generality of language of the section in terms of its effect under Australian law. That the information which comes into the Commissioner's possession may have its origin in a secret numbered account, perhaps protected by foreign secrecy laws or other foreign criminal sanctions is nothing to the point so far as the Commissioner is concerned in the making of an assessment. That is the purpose revealed by considering the width of income which falls for assessment and the intended access and information base Parliament intends the Commissioner to enjoy for the purposes of administering our income tax legislation."

48. His Honour also noted (Reasons at [91]) that the Commissioner's duty is to determine what is the assessable income and is directed by Parliament to do so from "the returns, and from any other information in his possession, or from any one or more of these sources" s 166 of the ITAA 1936. His Honour said (Reasons at [91]):

"For that purpose, our Parliament has declared that he or any officer authorized by him in that behalf is, inter alia, to have at all times full and free access to all buildings, places, books, documents and other papers for any of the purposes of the ITAA36 and the ITAA97: s 263(1) of the ITAA36.

(Emphasis added)"

49. Speaking of the Commissioner's officers, the primary judge found (Reasons at [95]) that they were "both actually and intentionally acting for the purposes of ITAA36 and ITAA97 and for no other purposes". His Honour said:

"It is clear to the point of demonstration that, when Senior Assistant Commissioner Farrell, Deputy Commissioner Monaghan and Assistant Commissioner O'Neill interviewed Mr Kieber abroad and, for that purpose, accessed the LGT documents they were both actually and intentionally acting for the purposes of the ITAA36 and the ITAA97 and for no other purposes. Section 400.9 of the Criminal Code in no way inhibited their access. Were s 400.9 to be applicable, it would render access unlawful from the very first moment possession was obtained for the purpose described in s 263. In the face of s 263, s 400.9 of the Criminal Code, whatever might otherwise have been its application to them as Australian residents, had no application at all. The facts of this case do not evidence conscious maladministration in the sense which I have described above. To the contrary, they evidence conscious and conscientious administration."

50. His Honour went on to explain that, even if his conclusions as to the operation of s 166 and s 263 of the ITAA 1936 were incorrect, the circumstances of the present case did not warrant a finding of conscious maladministration on the part of the Commissioner affecting the making of the assessment. His Honour said (Reasons at [103] - [105]):

" As the Commissioner's submission correctly highlighted, in the United States there has developed a body of authority which permits the Internal Revenue Service (IRS) to use information obtained from a third party in circumstances where that third party has illegally obtained that information: Burdeau v McDowell; United State v Janis. An Australian example analogous to these United States cases is
Awad v Commissioner of Taxation 2000 ATC 4625; (2000) 104 FCR 106. In Awad, the third party had, without the involvement of the Commissioner, failed to comply with the requirements of an Australian state law in obtaining the information which later came into the Commissioner's possession and was used by him for the purposes of taxation legislation, including assessment. The court found that there was no basis raised upon which the assessment should be quashed. Here, such laws as Mr Kieber may have or did violate to obtain the information were not even the laws of any Australian jurisdiction. A fortiori in this case, the innocent receipt by the Commissioner of the information and its subsequent use for assessing means that the assessment should not be quashed.

As noted, reference was made in the course of submissions to Bunning v Cross in relation to the existence of a discretion to permit the use of unlawfully obtained evidence in criminal proceedings. To that reference might be added
Pearce v Button (1985) 8 FCR 388 at 402-403 as to a like discretion as to the use of such evidence in civil cases. It is interesting to note that a like position appears to prevail in Germany, having seemingly arisen in a case in respect of information having a similar nature to that in the LGT documents the use of which grounded a search authority in relation to a suspected offence of criminal tax evasion. The Federal Constitutional Court has recently held that, "[With] regards to the constitution, there is no rule of law which says that, in the case of legally defective evidence procurement, the use of evidence obtained in this manner would always be inadmissible … [t]he evaluation of the question, what consequences a possible breach of criminal procedure has on process regulations and whether this includes, in particular, a prohibition for use of evidence is primarily a matter for the expert courts.": Bundesverfassungsgericht [German Constitutional Court], 2 BvR 2101/09, 9 November 2010, at [43] (as translated from the German). In the lower courts in Germany objections to the use of such information had been over-ruled: LG Bochum [Bochum District Court], 2 Qs 10/08, 22 April 2008; and LG Bochum [Bochum District Court], 2 Qs 2/09, 7 August 2009.

It does not follow from the existence of a discretion to receive, in court, in a criminal or civil case evidence obtained illegally by a government agency that what does or does not constitute conscious maladministration is a matter of discretion. Pearce v Button is though relevant in this sense [sic]. In the exercise of the discretion which he found existed, Pincus J (at 403) regarded it as relevant to take into account that the customs officers concerned "did not consciously break the law or consciously demand more of the bank, in particular, than they thought the law entitled them to". That, with respect, is a pithy expression of why the conduct of those officers did not constitute "conscious maladministration" of, in that case, Australian customs legislation. It might be paraphrased as a way of describing why, on the facts which I have found, there was no conscious maladministration by those officers who interviewed Mr Kieber abroad in this case. They did not consciously break any Australian law or consciously obtain from Mr Kieber more than they thought Australian law entitled them to. The same may be said in respect of those who made the amended assessments (or, more accurately, it has not been proved that they consciously used information which they knew was unlawfully obtained)."

The arguments in this court

The taxpayers' arguments

51. The taxpayers argue that the primary judge erred in failing to recognise that, once the LGT Communiqué was admitted for the purpose of proving what information was available to the ATO officers who made the amended assessments, it was also admissible, by reason of s 60 of the Evidence Act to prove the truth of the matters asserted in it. Additionally, the taxpayers submit that the primary judge did not exercise his discretion under s 136 of the Evidence Act but instead merely excised from the LGT Communiqué those parts that did not comply with the requirements of s 69(2) of the Evidence Act.

52. Next, the taxpayers argue that the LGT documents were the proceeds of crime in relation to a foreign indictable offence. It is said that Mr Kieber's conduct was a crime under both Liechtenstein law and Australian domestic law. As to the former point, the taxpayers now rely only upon § 131a of the LCC to establish criminality under the law of Liechtenstein. The appellants do not now contend that an offence against s 400.9 of the Criminal Code is made out on the basis that the relevant foreign offence was s 124 of the LCC. As to the second point, they rely upon s 477.1 of the Criminal Code or s 308C of the NSW Crimes Act to establish criminality under Australian domestic law.

53. The taxpayers rely upon the finding by the primary judge that a reasonable suspicion is to be attributed to the Commissioner's officers that Mr Kieber had obtained the LGT documents in breach of Liechtenstein criminal law. They argue that s 400.9(4) of the Criminal Code provides that no fault element is involved in the requirement that it was reasonable to suspect that the property received or imported by the offender was the proceeds of a crime in relation to a foreign indictable offence. On this basis, it is argued that even if the LGT Communiqué is not admissible to prove the truth of the assertions in it, the LGT Communiqué would still provide a sufficient basis for the Commissioner's officers to reasonably suspect that Mr Kieber had stolen the LGT data and sought to blackmail the Prince so that LGT documents were the proceeds in relation to a foreign indictable offence.

54. The taxpayers argue that the learned primary judge erred in failing to hold that s 263 of the ITAA 1936, on its true construction, confers on the Commissioner authority to override an objection raised by a person refusing to grant access to a building or documents. On the facts of this case, Mr Kieber voluntarily transferred the LGT documents; accordingly, s 263 was not engaged. Further, the taxpayers argue that learned primary judge erred in failing to appreciate that s 263 of the ITAA 1936 does not permit full and free access to documents located or obtained outside of Australia.

55. Invoking the observations of the majority in Futuris, the taxpayers argue that the primary judge erred in confining "conscious maladministration of the assessment process" to a case where the Commissioner's agents had knowingly contravened s 400.9 at the time of receiving the LGT documents. The taxpayers argue that the contents of the LGT documents were not "other information" to which the Commissioner could have recourse pursuant to s 166 of the ITAA 1936 in making the amended assessments. They submit that the reference in s 166 to "other information" cannot be construed as a reference to information known to have been obtained by the Commissioner's officers by criminal conduct on their part. They argue that s 166 should be interpreted in this way to encourage officers of the Commissioner to observe the law of the land in the discharge of their statutory functions.

56. The taxpayers also argue that the primary judge should have drawn a
Jones v Dunkel (1959) 101 CLR 298 inference as to the state of mind of the Commissioner's officers at the time of making the assessment on the basis that the evidence favoured the conclusion that a deliberate decision had been made by them to obtain and use the documents knowing that they had been obtained by criminal conduct. Support for this conclusion is said to come from the primary judge's satisfaction that these officers knew of the LGT Communiqué and the Public Prosecutor's press release. On this basis, the appellants argue that the Commissioner's officers were, at best, reckless in their disregard for whether or not the LGT documents had been unlawfully obtained: in short, the making of the amended assessments constituted a conscious maladministration of the assessment process as the Commissioner, or his officers, made a deliberate decision to use the LGT documents even though it was reasonable to suspect that they had been illegally obtained.

The Commissioner's arguments

57. The Commissioner argues that the primary judge was correct in ruling that certain representations of fact in the LGT Communiqué should be excluded from evidence under the rule against hearsay. It is said that the hearsay statements should not have been admitted at all because they served no purpose other than as proof of asserted facts. Alternatively, the Commissioner argues, that if the primary judge is found to have erred in not admitting the statements in the LGT Communiqué for all the purposes pursuant to s 60 of the Evidence Act, that would not alter the outcome of the case.

58. Pursuant to a notice of contention, the Commissioner argues that the primary judge erred in finding that the Commissioner's officers had a reasonable suspicion that the disks handed to them by Mr Kieber were the proceeds of crime, on the basis that the facts do not establish a basis for such a suspicion about matters of fact essential to that conclusion. In relation to the issue raised by s 400.9(1)(b)(i), viz, whether "it is reasonable to suspect that the property is the proceeds of crime in relation to a foreign indictable offence", it is argued that the primary judge erred in attributing to the Commissioner's officers a reasonable suspicion that Mr Kieber had taken the disks handed over to the Commissioner's officers from the LGT Group in breach of § 131a of the LCC. The Commissioner argues that since the only relevant foreign offence is § 131a of the LCC, under which Mr Kieber had never been charged, tried or convicted, this tends strongly against a finding that it was reasonable to suspect that Mr Kieber had committed a foreign indictable offence.

59. Alternatively, it is argued that the primary judge should have found that even if Mr Kieber's conduct constituted an offence under § 131a of the LCC the double criminality requirement under s 400.9 of the Criminal Code was not satisfied. The primary judge is said to have erred insofar as he may have accepted that had Mr Kieber's conduct occurred in Australia it would have constituted the Australian offences raised by the taxpayers. The Commissioner argues that s 477.1 of the Criminal Code and s 308C of the NSW Crimes Act require "additional conduct", as compared to § 131a of the LCC; a reasonable suspicion of such "additional conduct" can not be shown on the facts. Specifically, it is argued that the "additional conduct" required by s 477.1 of the Criminal Code is that access must have been caused by a means of a "telecommunications service" and that the data was accessed with the intention of committing, or facilitating, the commission of a serious offence against a law of the Commonwealth. In the case of s 308C of the NSW Crimes Act, the additional conduct necessary to constitute the offence is said to involve an intention to commit a serious indictable offence in New South Wales. Therefore, it is submitted by the Commissioner that, without more, the Australian offences raised by the taxpayers are not made out.

60. Further, the Commissioner argues that the primary judge was correct in finding that in receiving and bringing the LGT documents into Australia the Commissioner's officers were at all times justified by s 263 of the ITAA 1936 and 10.5 of the Criminal Code.

61. Finally, the Commissioner argues that, even if s 400.9 was breached by the tax officers, there was no conscious breach or conduct amounting to conscious maladministration in the making of the amended assessments. The Commissioner submits that the primary judge correctly held that nothing in the language or context of s 166 of the ITAA 1936 supports a conclusion that information obtained in circumstances which might have involved an inadvertent breach of s 400.9 of the Criminal Code was not "information" for the purposes of s 166 of the ITAA 1936.

Consideration

62. It may be said immediately that, even if the LGT Communiqué is admitted in evidence in full, and every inference available on the evidence is drawn against the Commissioner as to the knowledge possessed by his officers regarding the circumstances in which Mr Kieber came by the documents received by them, the taxpayers' case remains beset by evidentiary and substantive difficulties. These deficiencies are fatal to the taxpayers' appeals.

Section 400.9 of the Criminal Code

63. The primary judge did not make detailed findings in relation to all the elements of an offence by the Commissioner's officers under s 400.9 of the Criminal Code. It may be that his Honour did not consider that he needed to do so, having regard to the clear conclusion he had reached that, on any view, the conduct of the Commissioner's officers was justified by s 263 of the ITAA 1936. In addition, his Honour may have proceeded on the footing that his finding that the Commissioner's officers acted entirely in good faith, without conscious disregard for the law of Australia, meant that the taxpayers' case of conscious maladministration must inevitably fail. However that may be, we do not consider that the evidence enabled findings to be made in the taxpayers' favour as to the elements of a prima facie case of a breach of s 400.9 by any of the Commissioner's officers. We turn now to a consideration of those elements.

64. Insofar as the taxpayers seek to rely upon Mr Kieber's contravention of § 131a of the LCC in order to establish a reasonable suspicion as to the commission of a "foreign indictable offence" for the purposes of s 400.9(1)(b)(i) of the Criminal Code, an inference that Mr Kieber's intent at the time of procuring the information was to unjustly enrich himself would hardly have been reasonable on the evidence which was available to the Commissioner's officers. There was no evidence that, during the more than four years since he obtained the LGT information, Mr Kieber had sought to enrich himself by any demand for money.

65. The taxpayers also urge that inferences of fact, on which their argument depends, may readily be drawn to establish a reasonable suspicion on the part of the Commissioner's officers that the disks were the proceeds of crime. We are not persuaded that this is so. Insofar as the taxpayers seek to rely upon s 477.1 of the Criminal Code for the purposes of s 400.2(3) and (4) of the Criminal Code, the evidence did not support a reasonable suspicion that Mr Kieber obtained access to data in LGT's computer system "by means of a telecommunications service" within the meaning of s 477.1(b) of the Criminal Code. Such evidence as there was on this issue pointed to the conclusion that Mr Kieber took the existing disks "off the shelf". Further, there was no basis in the evidence for a reasonable suspicion that when Mr Kieber accessed LGT data, he acted with the intention of committing a serious offence against a law of the Commonwealth of Australia.

66. Similarly, insofar as the taxpayers seek to rely on s 308C of the NSW Crimes Act, the evidence did not show a basis for a reasonable suspicion that Mr Kieber had caused an unauthorised computer function to obtain his hard disk copy of the LGT database.

67. On behalf of the taxpayers much was sought to be made of expressions of concern by the Commissioner's officers in their internal memoranda that there might be a question mark over the admissibility of the information obtained unlawfully by Mr Kieber in proceedings in court against the taxpayers. But the issue is not whether that information should be excluded from evidence in the exercise of the court's discretion: it is whether the Commissioner's officers themselves contravened s 400.9 of the Criminal Code in obtaining information on which the amended assessments proceeded.

68. A reasonable suspicion may be attributed to the Commissioner's officers that Mr Kieber had obtained information from LGT by unlawful means; but the question is whether receiving information reasonably suspected of having been obtained unlawfully is proscribed by s 400.9 of the Criminal Code. In this regard, the evidence did not establish the receipt or importation by officers of the Commissioner of "money or other property" which could reasonably be suspected as being the proceeds of crime. Section 400.9(1)(a) of the Criminal Code proscribes the receipt or the importation of "money or other property" that under s 400.9(1)(b) is reasonably suspected of being the "proceeds of crime". The proceeds of crime must be "money or other property". There are two points to be made here: first, the expression "money or other property" is not apt to describe "information" considered separately from the thing in which it is contained; secondly, the context in which the expression was used in the Criminal Code shows that the provision should not be read so expansively as to encompass information considered separately from the physical form in which it is contained or recorded.

69. As to the first point, generally speaking, information is not property. In
Boardman v Phipps [1967] 2 AC 46 at 127-128, Lord Upjohn said:

" In general, information is not property at all. It is normally open to all who have eyes to read and ears to hear. The true test is to determine in what circumstances the information has been acquired. If it has been acquired in such circumstances that it would be a breach of confidence to disclose it to another then courts of equity will restrain the recipient from communicating it to another. In such cases such confidential information is often and for many years has been described as the property of the donor, the books of authority are full of such references; knowledge of secret processes, "know-how," confidential information as to the prospects of a company or of someone's intention or the expected results of some horse race based on stable or other confidential information. But in the end the real truth is that it is not property in any normal sense but equity will restrain its transmission to another if in breach of some confidential relationship."

70. The protection afforded to confidential information by the general law does not depend upon conceptualising information as property. In
Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 437-438, Deane J said:

" It is unnecessary, for the purposes of the present appeal, to attempt to define the precise scope of the equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information not involving any tort or any breach of some express or implied contractual provision, some wider fiduciary duty or some copyright or trade mark right. A general equitable jurisdiction to grant such relief has long been asserted and should, in my view, now be accepted: see The Commonwealth v. John Fairfax & Sons Ltd. Like most heads of exclusive equitable jurisdiction, its rational basis does not lie in proprietary right. …

[Footnotes omitted]."

71. As to the second point, s 400.9(1)(a) of the Criminal Code refers to property in the sense of a thing capable of being received and imported. The proscriptions in s 400.9(1) are upon receiving and moving property, not upon obtaining or using information. It is instructive in this regard to contrast the language of s 400.9(1)(a) (which speaks of the receipt or possession of "money or other property") with the language of s 477(1)(a) (which speaks of causing unauthorised access to data held in a computer by means of a telecommunications service). In the light of this contrast it is not to be supposed that "property" in s 400.9(1) is intended to be synonymous with "data held in a computer".

72. The evidence suggests that the copy of the LGT database in disk form taken by Mr Kieber was further copied by him and that this further copy was delivered by him to the Commissioner's officers. There is no basis apparent from the evidence available to the Commissioner's officers or to this Court for concluding that the disks onto which Mr Kieber copied the LGT data were not owned by him. The Commissioner's officers had no reason to suspect that disks which Mr Kieber provided to the Commissioner's officers were not his property. While the information stored in the copy of the database handed over to the Commissioner's officers may have been "derived" from an offence by Mr Kieber, that information was not property. While the physical copy of the database in hard disk form was property, there was no evidence that it was derived or realised from the commission by Mr Kieber of any offence. It may be said that the disks which were Mr Kieber's property were "enhanced" by the data they contained, but the disks themselves were not property which could reasonably be suspected of being the proceeds of crime on the evidence which was available to the Commissioner's officers, even after February 2008.

73. Further, in this regard it may be noted that s 400.1 of the Criminal Code was subsequently amended so that it now provides that:

" proceeds of crime means any money or other property that is wholly or partly derived or realised, directly or indirectly, by any person from the commission of an offence against a law of the Commonwealth, a State, a Territory or a foreign country that may be dealt with as an indictable offence (even if it may, in some circumstances, be dealt with as a summary offence)."

74. It may be accepted that the disks which Mr Kieber gave to the Commissioner's officers contained stolen data. But, as we have observed, the disks themselves were not property reasonably suspected of being the proceeds of crime, there being nothing in the evidence to warrant a reasonable suspicion that those disks were not Mr Kieber's property. The amendment subsequently made to the definition of "proceeds of crime" might well alter that position on the basis that the disks were "partly derived" from the commission of an offence against § 131a of the LCC. But the circumstance that the amendment was made does not suggest that this was what the legislation always intended; rather it tends to confirm that the terms of the legislation before the amendment were not apt to achieve that result:
Grain Elevators Board (Victoria) v Dunmunkle Corporation (1946) 73 CLR 70 at 84-85.

Conscious maladministration

75. In Futuris, Gummow, Hayne, Heydon and Crennan JJ said at [60]:

"Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld. Remarks by Hill, Dowsett and Hely JJ in
Kordan Pty Ltd v Federal Commissioner of Taxation are in point. Their Honours said:

'The allegation that the Commissioner, or those exercising his powers by delegation, acted other than in good faith in assessing a taxpayer to income tax is a serious allegation and not one lightly to be made. It is, thus, not particularly surprising that applications directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful. Indeed one would hope that this was and would continue to be the case. As Hill J said in
San Remo Macaroni Co Pty Ltd v Federal Commissioner of Taxation it would be a rare case where a taxpayer will succeed in showing that an assessment has in the relevant sense been made in bad faith and should for that reason be set aside.'

[Footnotes omitted]."

76. Those observations highlight that their Honours were concerned, in their reference to conscious maladministration, with bad faith in the exercise of the decision-making power under challenge and the need for proof of an allegation of bad faith against the Commissioner or his officers. Their Honours were concerned with actual bad faith, not with some form of "constructive" bad faith established by unwitting involvement in an offence.

77. The passages from the decision of the majority in Futuris set out above are concerned with the state of mind of the officers of the Commissioner involved in the making of the assessment. They emphasise the importance of fidelity on the part of those officers to the purposes of the legislation. If Mr Kieber had merely told the Commissioner's officers of the contents of the documents he had taken from LGT, or had brought the documents into Australia himself and handed them over to the Commissioner's officers here, the taxpayers would have no argument. It is difficult to discern a rational basis for distinguishing these hypothetical examples from the present case in terms of the vice of "conscious maladministration" which is apt to vitiate an assessment.

78. The observations of the majority in Futuris do not support the proposition that any breach of the law by officers of the Commissioner in the course of processes anterior to, or even in the course of, making an assessment, suffices to establish conscious maladministration which is apt to vitiate the assessment. Conscious maladministration, as explained in Futuris, involves actual bad faith on the part of the Commissioner or his officers. The findings of the primary judge to which we have referred at paragraphs [49] and [50] of these reasons negative bad faith on the part of the Commissioner's officers.

Section 166 of the ITAA 1936

79. Conscious maladministration as explained in Futuris relates to the integrity of the assessment. Even if the circumstances in which the information in question became available to the Commissioner's officers involved unlawful conduct on their part, that would not necessarily deny the integrity of the assessment. What matters for that purpose is the accuracy of the information and the competence and honesty of those officers involved in making the assessment.

80. The views of the majority in Futuris do not bear upon the proper interpretation of s 166 of the ITAA 1936. Their views are concerned with making the point that an assessment which is the result of bad faith towards a taxpayer is not an assessment worthy of that description in the ITAA 1936. It may be accepted that such a purported assessment would be contrary to s 13(4) of the Public Service Act. But the reasons of the majority of the High Court in Futuris do not support the notion that an assessment, made in good faith on the basis of information believed to be accurate, may be vitiated by reason of a breach of s 13(4) of the Public Service Act in the course of obtaining that information.

81. We are unable to interpret s 166 of the ITAA 1936 in the way urged by the taxpayers. Section 166 imposes a duty upon the Commissioner. The interpretation of s 166 urged by the taxpayers would limit the performance of that duty to cases where the Commissioner is able to satisfy himself that his officers had not infringed any law in the gathering of the available information. It would be a remarkable state of affairs if the Commissioner were entitled, and indeed obliged, to refrain from doing what is expressed to be his duty by the terms of s 166 of the ITAA 1936 by reason of a suspicion on his part, even a reasonable suspicion, that some illegality on the part of his officers may have occurred in the course of gathering the information. A clear expression of legislative intention so to qualify the duty imposed on the Commissioner would be required to relieve him of his duty under s 166. We are unable to see that such a limitation is consistent with the unqualified language in which the duty is cast upon the Commissioner and the high importance of making an assessment based on the information available to the Commissioner. The expense and inconvenience of casting such a burden on the Commissioner, and the difficulty of defining precisely the kinds of unlawful conduct which might preclude the Commissioner from doing the duty cast on him by the unqualified language of s 166, are further reasons why the interpretation propounded by the taxpayers should be rejected.

82. We are also unable to see that such a qualification is necessary in order to ensure that the Commissioner's officers are discouraged from disobeying the law in carrying out their functions under the ITAA 1936. One may confidently say that, in carrying out their investigations, the Commissioner's officers are subject to the law of the land; if they transgress the law of the land, then they will suffer the consequences. It is an entirely different thing to say that the interest of the Australian community in the making of taxation assessments based on the most accurate information available, an interest embodied in s 166 of the ITAA 1936, should be defeated by a default on the part of the Commissioner's officers which has no bearing on the accuracy of the assessment. Thus, the desirability of encouraging officers of the executive government to abide by the law of the land affords no reason to confine the operation of s 166 of the ITAA 1936 by subjecting it to the limitations urged by the taxpayers.

Section 263 of the ITAA 1936

83. In relation to s 263 of the ITAA 1936, there is, we think, something to be said for the taxpayers' argument that, if specific legal authority were necessary to make access to the information provided by Mr Kieber lawful in the overseas location where that occurred, then s 263 did not provide it.

84. Section 263 is, in terms, a command addressed to all persons from whom the Commissioner's officers may require access. It is difficult to attribute to the Parliament an intention by s 263 of the ITAA 1936 to command the obedience of residents of foreign countries in those countries. But, for the reasons we have already given, it is not necessary finally to resolve this question.

Conclusion

85. For the reasons given, we conclude that the primary judge was right to dismiss the taxpayers' applications.

86. Each appeal should be dismissed.

87. In each case, the appellant should pay the respondent's costs of the appeal