Smorgon and Ors. v. Federal Commissioner of Taxation and Ors.

Judges:
Stephen J

Court:
High Court

Judgment date: Judgment handed down 19 October 1976.

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Stephen J.: Section 264 of the Income Tax Assessment Act empowers the Commissioner to require anyone to furnish him with information and to give evidence before him, or before a duly authorized officer, about his own or another's income or assessment; there is also power to require the production of books and papers.

In August of this year the Commissioner sought to exercise powers under sec. 264 in relation to the affairs of Mr. Samuel Smorgon, of a number of his relatives and associates and of many hundreds of companies and trusts, most of them associated, in one way or another, with the Smorgon family.

Notices were accordingly served upon Mr. Smorgon and upon Australia and New Zealand Banking Group Ltd. These required the recipient to attend in Melbourne at a stated time and place and there give evidence before a Mr. Peters concerning the income of, or concerning the ascertainment of the amount of taxable income and the tax payable thereon by, all of these individuals, companies and trusts, their names being set out in a schedule to each notice.

The notices also required production of certain books and papers. That addressed to Mr. Smorgon required him to produce such as were contained in two safe deposit boxes at a particular branch of the Bank, together with all other papers which he had ``concerning the said matters''. The notice to the Bank required the production of seven different categories of books and papers, together with all other papers in the Bank's custody ``concerning the said matters''.

These two notices, the only ones with which I am concerned, had been preceded by certain earlier notices but they are the subject of other proceedings between the parties. The service of the two notices has provoked the present litigation, which consists of two distinct actions. The first, action no. 77 of 1976,

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concerns only the notice to the Bank. In it Mr. Smorgon sues on his own behalf and on behalf of most of the other parties named in the schedule to that notice. He does so pursuant to Order 16, rule 12 of the Rules of this Court. The defendants are the Bank, the Commissioner, a Deputy Commissioner and Mr. Peters. The relief claimed is an injunction restraining the Bank from compliance with the notice served upon it, an injunction restraining the remaining defendants from acting pursuant to that notice and from requiring the Bank to comply with it and a declaration that the notice is not valid.

In action no. 76 of 1976 the roles are largely reversed, the Commissioner, the Deputy Commissioner and Mr. Peters are plaintiffs and Mr. Smorgon, two of his relatives and two companies, all four of whom appear in the schedule to the notices, are defendants; so too is the Bank and its managing director. This action concerns both notices. The relief claimed, so far as presently relevant, consists of a declaration that the two notices are valid, a declaration that Mr. Smorgon and the Bank are each required to give evidence and produce documents as contemplated in the notices, an injunction restraining the Bank and its managing director, pending the production of those documents, from delivering them to anyone but the plaintiffs and an injunction restraining the other five defendants from taking possession of them, including those in safe deposit boxes, pending their production to the plaintiffs. In this action the defendants other than the Bank and its managing director counterclaim for a declaration that neither of the two notices is valid.

During September, upon application by the parties, I granted interlocutory relief so as to maintain the status quo and preserve intact the various documents in question. The two actions have now come on for trial upon the material contained in the affidavits in support of those applications, supplemented by further affidavits. The facts are not in dispute but the interpretation to be given to sec. 264 and the effect and adequacy of the two notices and of the authorization of Mr. Peters were much debated before me. I gratefully acknowledge the assistance which all counsel have afforded me both in their identification of the real issues in dispute and by their mutual co-operation in ensuring that those issues, and those issues only, should be debated before me.

My several conclusions and my reasons for arriving at each of them can best be stated under a series of distinct headings.

Section 264(1)(b) - its construction

I will restrict what I have to say to para. (b) of the subsection since it is with it alone that I am presently concerned; para. (a), short as it is, appears to involve its own difficulties of interpretation. The entire subsection reads:

``264(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority -

• (a) to furnish him with such information as he may require; and
• (b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.''

Four questions arise. The first concerns the meaning of the word ``assessment''; does it, as contended for by Mr. Liddell appearing on behalf of the Commissioner, bear its defined meaning, ``the ascertainment of the amount of taxable income and of the tax payable thereon'' or does it, on the contrary, bear the much narrower meaning contended for by Mr. Webb, on behalf of Mr. Smorgon? This narrower meaning would, if I understood it correctly, confine ``assessment'' to the completed process which has resulted in the attachment of a liability upon a taxpayer; it would exclude the process of assessment but relate rather to the fact that a notice of assessment had or had not issued and, if the former, to its contents. In particular it would not extend to any question of outgoings or their character as allowable deductions.

I reject any such narrow interpretation. The definition of ``assessment'' in sec. 6(1) may, in my view, quite appropriately be applied to the word where it appears in sec. 264(1)(b). I can discern no intention to the contrary; indeed even in the absence of any definition of ``assessment'', the use of the word in para. (b) appears to me to be one descriptive of the entire process whereby, from the interaction of

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taxable income and allowable deductions, there first emerges a taxpayer's taxable income, from which his tax may then be calculated and notified to him. In
The King v. D.F.C. of T. (S.A.): exparte Hooper (1926) 37 C.L.R. 368 Isaacs J. referred to part of this process as

``the Commissioner's ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer''

- at p. 373;

see also
Batagol v. F.C. of T. (1963) 109 C.L.R. 243 per Kitto J. at p. 251 and per Owen J. at pp. 255-257. It is evidence which may bear upon that process and which, by casting light upon some relevant fact, may affect this ``consideration of all relevant circumstances'' by the Commissioner that a person can be required to give under para. (b). It will extend to evidence as to whether or not an outgoing has in fact been incurred and, if it has, whether it constitutes an allowable deduction, for, as Dixon J. said in
Richardson v. F.C. of T. (1932) 48 C.L.R. 192 at p. 203,

``In ascertaining the taxable income for the purpose of assessment, the questions must be dealt with whether assessable income has been omitted from, or excessive deductions have been included in, a return.''

I accordingly conclude that the word ``assessment'' in para. (b) should be given its defined meaning. I note that this is the view upon which the Commissioner's two notices have been drawn, they do not repeat verbatim the relevant words of para. (b) but instead expand them by substituting for ``assessment'' its defined meaning - ``the ascertainment of the amount of taxable income and of the tax payable thereon''.

The second question is whether sec. 264(1)(b) empowers the Commissioner to require a corporation to attend and give evidence. In purported exercise of his powers under para. (b), the Commissioner has by notice required the Bank itself to attend before Mr. Peters and give evidence and, by its ``proper officer'', to produce documents.

Uninstructed by authority I would have little hesitation in concluding that the first part of para. (b), relating to attendance and the giving of evidence, applies only to natural persons capable of physical attendance and of actually giving evidence before the Commissioner or his representative. A corporation cannot, of course, itself ``give evidence''. It may authorize an individual to depose to facts on its behalf and is obliged to do so in the course of litigation when required to make discovery of documents, answer interrogatories and the like. But it is not then itself giving evidence, the oath remains that of the individual, upon whom alone the sanctions which are designed to deter perjury may operate. The corporation may be bound by admissions contained in the evidence of such a duly authorized individual but the evidence will remain that of the individual witness.

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

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

Such an interpretation gives no unduly narrow operation to the first part of para. (b). The Commissioner remains free to serve notices upon natural persons in any way concerned with the affairs of the corporation. They must attend and may be questioned as to their own knowledge of the corporation's

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affairs; if it turns out that they do not possess the relevant knowledge they can no doubt be required to identify those who do have that knowledge and those others may then, in turn, be required to appear and give evidence.

In treating the first part of para. (b) as having no application to corporations I have not disregarded those important areas of the law in which mental states have come to be attributed to corporations, the state of mind of an individual being treated as that of the corporation. This the law achieves, where personal fault or a guilty mind must be sought for, by recourse to the so-called organic theory, as in
Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. (1915) A.C. 705 and The Lady Gwendolen (1965) P. 294, where ship-owning companies were held liable for ``actual fault or privity''. In
H.L. Bolton (Engineering) Co. Ltd. v. T.J. Graham & Sons Ltd. (1957) 1 Q.B. 159 Denning L.J. at pp. 172-3 spoke of this theory when he said:

``The state of mind of these managers is the state of mind of the company and is treated by the law as such. So you will find that in cases where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company.... So also in the criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the directors or the managers will render the company itself guilty. That is shown by
Rex v. I.C.R. Haulage Ltd. (1944) K.B. 551, to which we were referred and in which the court said: `Whether in any particular case there is evidence to go to a jury that the criminal act of an agent, including his state of mind, intention, knowledge or belief is the act of the company... must depend on the nature of the charge, the relative position of the officer or agent, and the other relevant facts and circumstances of the case'.''

and see
John Henshall (Quarries) Ltd. v. Harvey (1965) 2 Q.B. 233 at p. 241 per Lord Parker C.J. In
Tesco Supermarkets Ltd. v. Nattrass (1972) A.C. 153 Lord Reid said, at p. 170:

``I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company.''

However, as Lord Reid observes, the attributed personality of a corporation is a fiction and, as appears from the speech of Viscount Haldane L.C. in Lennard's case, especially at pp. 713-4, it has been in areas in which the ends of justice have been thought to require the attribution of mental states to corporations that the organic theory has been employed and developed.

The area with which sec. 264 is concerned is remote indeed from those in which vicarious liability and the organic theory of corporations have been applied. If evidence is to be sought concerning a taxpayer's affairs it should be to those natural persons best able to supply that evidence that resort should be had, not to artificial creations of the law, having no mind or mouth and on which legal personality has, for good but presently irrelevant reasons, been fictitiously conferred. I cannot attribute to Parliament the intention of requiring the giving of evidence by an entity incapable of testifying, for that purpose clothing such a requirement with the garments of rationality by applying to it doctrines of imputed knowledge, imported from quite other areas of law, and having it speak through a proper officer perhaps lacking in any first-hand knowledge of the matters enquired after.

This being my initial reaction to the question posed, I find the matter not to be devoid of authority. In the context of the Foreign Tribunals Evidence Act 1856 (U.K.) the Court of Appeal has on a recent occasion had to consider a not dissimilar question. In
Penn-Texas Corporation v. Murat Anstalt (1964) 1 Q.B. 40 the Court of Appeal was unanimously of the view that a foreign

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corporation could not be required to attend before an examiner for the purpose of giving evidence on oath. By a majority it also decided that a corporation could be required to attend by its proper officer and produce documents. As to the first of these two conclusions Willmer L.J. said, at p. 56:

``If evidence is to be taken by the `English mode', I do not see how it is possible to take the evidence of a limited company, whether by its proper officer or otherwise. If the proper officer attends for examination, it is he who goes into the witness-box; it is he who takes the oath; it is he who is liable to be prosecuted for perjury; it is he, in short, who is the witness. I do not think it helps to say that when interrogatories are answered by the proper officer of a company, his answers are the company's answers and bind the company. I do not think that touches the question whether an officer can go into the witness-box and give oral evidence which can be said to be that of the company. The answers given by him would be his answers, based upon his own memory and knowledge; and though any admission by him would no doubt be binding on the company, the evidence would still be his evidence and not that of the company.''

Harman L.J. regarded a view to the contrary as ``a quite untenable proposition'' - at p. 67 - and this for the reasons his Lordship then gave at pp. 68-69. Davies L.J. was of no different view - at pp. 73-74. In Penn-Texas Corporation v. Murat Anstalt (No. 2) (1964) 2 Q.B. 647 a differently constituted Court of Appeal, presided over by Lord Denning M.R., considered again whether a corporation could be ordered to attend before an examiner by its proper officer and produce specified documents. In the course of affirming the existence of power to make such an order Lord Denning stated that a corporation could give evidence by its proper officer. He instanced the case of affidavits of documents or answers to interrogatories being sworn by such an officer and the production of documents from its custody on a subpoena duces tecum. His Lordship added that ``it may be that a limited company cannot give evidence at large in answer to a subpoena ad testificandum. The first ruling in Penn-Texas (No. 1), if correct, shows that it cannot'' - at p. 662. Pearson L.J., at p. 665, was little more enthusiastic in his treatment of Penn-Texas (No. 1).

In Penn-Texas (No. 2) the Court was, however, concerned only with a challenge to the correctness of the second of the Court's conclusions in Penn-Texas (No. 1), that relating to the production of documents, and not at all with the question of the power to require a corporation to attend to be examined on oath, either by its proper officer or otherwise; a matter which, so long as Penn-Texas (No. 1) stands, must be regarded, for English law, as settled by that decision and as of the highest persuasive authority in this Court. It also accords, as I have already indicated, with what would have been my own uninstructed opinion of the matter.

For these reasons I conclude that sec. 264(1)(b) has no application to corporations when it refers to attendance and to the giving of evidence. It was suggested by Mr. Liddell that the provisions of sec. 252 of the Act, relating to public officers of companies, might be called in aid to overcome whatever difficulties might otherwise be thought to affect the first part of sec. 264(1)(b) in its application to a corporation. I have considered this possibility and, in particular, the terms of para. (f), (g) and (i) of sec. 252(1) but they do not in my view suffice to make good the contention that the provision be applied to corporations.

If the Commissioner is concerned to elicit facts which he believes to be known to officers of a company (and, as I have said, it will always be they and not the company itself which has such knowledge) he may require those officers to attend and give evidence; he may ask them not only as to those facts but as to the identity of all those others who may have knowledge of them. He may not, however, as sec. 264(1)(b) presently stands, purport to require the company to attend, whether by its public officer or in some other form.

This brings me to the third question of construction involved in sec. 264(1)(b), whether or not the latter part of the paragraph is independent of the former, whether, that is, those whom the Commissioner may require to attend and give evidence, and they alone, may also be required to produce papers. This is a problem of construction which also confronted their Lordships in Penn-Texas (No. 1) but, of course, on quite different words, that decision accordingly affording no assistance here.

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I have concluded that the second part of para. (b) is independent of what immediately precedes it; it is not a power ancillary to, and only capable of exercise in aid of, the first part. On the contrary it is a self-contained provision - cf. per Street J. in
Re Lindsay Toole & Co. (In liq.) (1966) 84 W.N. (N.S.W.) (Pt. 1) 318. It depends for its effective meaning upon the opening words of sec. 264(1), but not upon anything in the first part of para. (b). This is made apparent by its opening words, ``and may require''. The repetition there of the words ``may require'', first used in the first line of sec. 264(1), gives to the whole sub-section two distinct limbs, each describing distinct powers possessed by the Commissioner to require certain conduct on the part of others. The first limb relates to requiring persons to furnish information and to attend and give evidence, the second relates to requiring the production of papers. The typographical arrangement of the sub-section fails to bring this out, but as In re Allsop (1914) 1 Ch. 1 (at p. 15 - and see at p. 10) reminds us, this cannot be allowed to obscure the grammatical meaning and logic of the provision.

This construction would not be open were I to accept Mr. Webb's submissions concerning the last question of construction arising under sec. 264(1)(b). He contended that ``relating thereto'', appearing at the end of the paragraph, referred back to ``evidence'' rather than to ``income or assessment''. I have, however, concluded to the contrary and there accordingly remains no obstacle in the way of treating the second part of para. (b) as a provision independent of what goes before it. This conclusion I found upon what I would regard as the ordinary grammatical construction of para. (b), requiring ``relating thereto'' to be associated with the proximate preceding nouns ``income or assessment'' rather than with the remoter noun ``evidence''. This appears to me to be the sense of the whole sentence. Accordingly I construe this latter portion of para. (b) as empowering the Commissioner to require the production of books, documents and papers ``relating'' to the ``income or assessment'' relevantly in question.

It follows that the reasons which have caused me to conclude that a corporation cannot be required to attend and give evidence are not necessarily to be carried over into the second part of para. (b). In fact an examination of that part suggests no reason why, if a corporation has in its custody or under its control papers relating to a person's income or assessment, the Commissioner may not require their production. Whereas the possession of knowledge by a corporation is indeed a fiction its custody or control of tangibles is not, any more than is its ownership of property. The law has evolved concepts of custody, control, possession and ownership which are as readily applicable to corporations as to natural persons. A corporation which is required to produce papers can only do so through its agents but that of course occasions no difficulty in the operation of this provision.

I turn now to a different aspect of sec. 264 which has arisen for decision in these proceedings.

Section 264 in its application to confidential information

Mr. Webb contended that the information and, in particular, the documents in the possession of the bank and which the notice addressed to it was designed to elicit came to it because of the relationship of banker and customer existing between his clients and the Bank. Out of this relationship arises, so it is said, an obligation owed by the Bank to those customers. That obligation is to preserve the confidentiality of that information and those documents. It arises ex contractu as a term to be implied from the relationship of banker and customer
Tournier v. National Provincial and Union Bank of England (1924) 1 K.B. 461.

Assuming, as I do for present purposes, that the information and documents here in question would all come within the scope of this obligation, the foregoing may readily enough be accepted. The question is, however, whether that in any way affects the operation of sec. 264. It will only do so if the section is to be construed so as not to encroach upon the Bank's contractual duty of confidence and its customer's corresponding contractual right to have that confidence preserved. The duty is not an absolute one; it is subject to a number of exceptions, one of which applies to the case of disclosure by a banker under compulsion of law - Tournier's case at p. 473 per Bankes L.J. - or, as Diplock L.J. put it in
Parry-Jones v. Law Society (1969) 1 Ch. 1 at p. 9, disclosure when the law of the land requires it. In such a case disclosure will be no breach of contract by the banker of which the customer can complain.

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It is not, however, directly with the effect of disclosure upon rights and liabilities as between the Bank and its customers that I am concerned but rather with the suggested effect that the existence of this duty of confidence should have upon the operation of sec. 264. It is said that the section should be read subject to it so as not to require the disclosure of information that would otherwise fall within the ambit of the duty. There is, of course, some circuity in the contention. If the duty is a qualified one which does not extend to disclosure under compulsion of law, the existence of the duty may be thought to have but little part to play as an aid in determining the extent to which the law may compel that disclosure.

The submission in substance invokes the principle that where two alternative constructions of legislation are open, that which is consonant with the common law should be preferred - per Wills J. in
R. v. Bishop of Salisbury (1901) 1 Q.B. 573 at p. 577. It was largely upon that footing, and having regard also to the high grounds of public policy upon which legal professional privilege is founded, that the decision in
C. of I.R. v. West-Walker (1954) N.Z.L.R. 191, was arrived at. A majority of the New Zealand Court of Appeal there concluded that, under statutory provisions similar to sec. 264, a solicitor could not be required to disclose to the Revenue authorities such information and such documents as would be protected by what was described as the common law privilege attaching to communications between solicitor and client.

Mr. Webb relied upon this decision whereas Mr. Liddell pointed to the decision of the English Court of Appeal in Parry-Jones v. Law Society, in which it was held that a solicitor could not, in reliance upon the cor actual duty of confidence, resist disclosure of books and documents to an auditor authorized in that behalf under solicitors' trust account audit rules made under the Solicitors Act 1957.

I have not found it possible to reconcile aspects of the reasoning in these two decisions. In Parry-Jones a clear distinction is drawn between the privilege relating to legal proceedings and that arising from an implied contractual term and which subsists ``between solicitor and client similar to the confidence which applies between doctor and patient, banker and customer, accountant and client and the like'' - per Lord Denning M.R. at p. 7. Indeed Diplock L.J., at p. 9, would deny the latter the character of a privilege at all; it was, he thought, no more than a contractual duty of confidence. In West-Walker, on the other hand, the four members of the New Zealand Court of Appeal who constituted the majority of the Court were careful to distinguish a mere contractual duty of confidence from the privilege long recognized by the common law which applied, for reasons fundamental to the due administration of justice, to protect from disclosure communications between solicitor and client.

I refrain from adding to these conflicting views yet one more voice since in the present case I am in no way concerned with the relationship of solicitor and client. When that of banker and customer is in question it is abundantly clear that the duty of confidence which there arises is no more than a simple contractual one which, like any other contractual term, will be subject to the operation of the general law. As Diplock L.J. said in Parry-Jones, at p. 9, speaking of such a mere contractual duty, ``Such a duty of confidence is subject to, and overridden by, the duty of any party to that contract to comply with the law of the land''. Only by applying to the contractual characterization given to the solicitor's so-called privilege by the English Court of Appeal the consequences which the New Zealand Court of Appeal assigns to that which it characterizes so differently would it follow that something like an express reference to disclosure by bankers would be required before sec. 264 could operate in the present case. To adopt such an approach would, of course, be a quite illegitimate use of precedent.

Perhaps the furthest that Mr. Webb can take the matter is to require clear and unambiguous language, such as Gresson J. sought for in West-Walker at p. 213, before it should be concluded that sec. 264 will operate as the Commissioner would wish it to; to require ``irresistible clarity'' -
Re Director of Investigation and Research and Canada Safeway Ltd. (1972) 26 D.L.R. (3d.) 745 at p. 747 - may be to ask too much of any draftsman. But it cannot be right to deny to sec. 264 any operation in relation to confidential information possessed by bankers

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merely because its words do not expressly refer to the banker-customer relationship. That relationship is but one of a large, though imprecisely defined, class of relationships involving contractual duties of confidentiality, as Megarry J. pointed out in
Royal Bank of Canada v. I.R. Commrs. (1972) 1 Ch. 665 at p. 680. To require the legislature, if it is to give effect to its will, to name each in turn would be to impose a quite unsupportable judicial restraint upon legislative power. If the legislature plainly says that those having information shall disclose it to the Commissioner then no mere contractual duty of confidentiality can stand in the way. In my view it is just such language which appears in sec. 264 and I regard it as effective to require the Bank to make such disclosure as the Commissioner may require. I have, in effect, in the context of a revenue statute, arrived at a view very similar to that expressed by Street J. in
A.N.Z. Bank Ltd. v. Ryan (1968) 88 W.N. (Part 1) 368 at p. 373. Just as sec. 263 gives to the Commissioner full and free access to ``all buildings, places, books, documents and other papers'' so sec. 264 is expressed in no less wide and emphatic terms; any person, whether a taxpayer or not, may be required to furnish information, to attend and give evidence and to produce all books, documents and other papers. Any undue hardship which the requirements of sec. 264 might be thought to impose in particular cases is to a degree capable of mitigation by the terms of sec. 224, which provides that non-compliance with a requirement to attend and give evidence or to produce book or papers involves the commission of an offence ``unless just cause or excuse for the refusal or neglect is shown by him''.

Accordingly I conclude that the contractual duty of confidentiality arising from the relationship of banker and customer does not at all affect the power of the Commissioner to invoke the provisions of sec. 264(1)(b) in relation to information within the knowledge of the Bank's officers or to documents in the possession of the Bank which concern a customer's income or assessment.

I turn now to examine the two notices which the Commissioner has in fact served.

The notice to the Bank

This was attacked upon a number of grounds, with two of which I have already dealt; that it is addressed to a corporation and that, instead of using the statutory term ``assessment'', it sets out the words by which ``assessment'' is defined in sec. 6(1) of the Act.

There remain other grounds upon which this notice is attacked. It is said to be bad for unreasonableness and for oppression and also because it contains no reference to any sanction which may follow a failure to comply with its requirements. In addition it will also be necessary to examine for possible uncertainty the last of the eight categories of documents the production of which are called for.

Questions of unreasonableness and oppression may best be considered when dealing with the notice to Mr. Smorgon since the Bank, which is the only party directly affected by the present notice and which will alone suffer from whatever want of reasonableness or oppression that notice may display, makes no complaint to that effect.

The failure of the notice to refer to the penalty for which the Act provides in the case of non-compliance cannot, I think, constitute a flaw going to its validity. Such authority as was relied upon by Mr. Webb did not go so far and neither the words of sec. 264 nor any applicable principle of law which might be thought to add some gloss to those words would justify such a conclusion.

The terms in which the last of the eight categories of documents are described in the notice I regard as quite unsatisfactory. What are thereby required to be produced are:

``(viii) all other books, papers, writings and other documents concerning the said matters which are in your custody.''

The ``matters'' there referred to, which alone might be capable of giving to this requirement any understandable content, are no doubt the two matters appearing earlier in the notice, the income and the assessment of each of the hundreds of persons both natural and artificial whose names are scheduled to the notice. The vice lies not, however, in the sheer number of such persons but rather in the uncertainty involved in describing documents by reference to these two ``matters''. A particular taxpayer may not himself be aware of the particular basis upon which he has been assessed to tax; he certainly may well be

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ignorant of the basis upon which the Commissioner may be proposing to assess him in the future. To a third party such as the Bank it must often be quite impossible to determine what documents in its possession will answer the description of documents ``concerning'' the process of assessment which the Commissioner has adopted or may be proposing to adopt in relation to a particular taxpayer. The consequence is that, in my view, para. (viii) of the notice is a nullity since it does not constitute a requirement such as is contemplated by sec. 264 having any certain content. Its presence in the notice has, I think, no generally invalidating effect but is mere surplusage.

It follows that I would not regard a notice which did no more, by way of requiring production of documents, than to repeat the words of the latter part of sec. 264(1)(b) as an effective exercise of the Commissioner's power. These words describe the ambit of that power but do not provide a suitable formula for insertion in a notice. Such notice, given in exercise of the power, must instead specify with some degree of particularity, as do para. (i) to (vii) of the notice to the Bank, what documents are being sought. Failing this there will be no valid requirement.

The notice to Mr. Smorgon

Much of what I have said concerning the notice to the Bank will apply also to this notice. However a number of additional matters affect only the notice to Mr. Smorgon.

First it is said that the failure to refer, in this notice, to the particular legislative power invoked by the Commissioner, sec. 264(1)(b), is a defect going to validity. While it is no doubt desirable that such a notice should contain reference to the statutory provisions authorizing it, the omission cannot, I think, in any way affect validity.

Then Mr. Webb takes two related objections to this notice and to the notice addressed to the Bank. He says that they are unreasonable and oppressive and are bad on either ground. They are criticized because they do not specify and particular topic upon which evidence is sought. The consequence is that the person to whom this notice is directed can neither prepare himself for the questions he may be asked nor tell in advance whether the topic being investigated falls within the permitted areas of ``income or assessment'' specified in sec. 264. The position is, it is said, aggravated by the inclusion in the one notice of reference to very many individual taxpayers. Allied to these submissions was the general proposition that the Act does not empower the Commissioner to investigate at large, he has no general roving commission to enquire into the affairs of taxpayers; yet the form of these notices showed that it was just such an activity that he was presently engaged upon.

In my view the Commissioner is given the powers conferred by sec. 264 for the very purpose of assisting him in his task of ascertaining a taxpayer's taxable income. Any such use of those powers is an entirely proper one; whatever may be thought justifiably to attract the approbrious description of a general roving commission, the present notices give no indication that they form any part of such an activity.

The position of a person required to attend and give evidence and who does not know in advance what precise topics will be enquired after is not necessarily the invidious one which has been suggested. He will only be able to answer such questions as are within his unrefreshed recollection and will suffer no penalty either for want of knowledge or for failure of recollection. Nor does the inclusion of the names of even very large numbers of taxpayers in the one notice appear to me to go at all to the question of unreasonableness; to receive one composite notice rather than many separate notices can, I would have thought, make no practical difference.

It is of some significance that the Bank has made no suggestion that it finds compliance with its notice oppressive or unreasonable although it is required to produce a great body of books and records. All that Mr. Smorgon is required to produce is the contents of a safe deposit box and this can, in itself, be in no way unreasonable or oppressive. As to the questions which he might be asked, all that can be required of him is that he state that which he knows and I see nothing in that to which objection may be taken on these grounds. If, in the course of questioning, answers were to be sought relating to matters unrelated to the income or assessment of the persons named in the schedule to the notice addressed to him he could not properly be required to answer such

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questions and his refusal to do so would be no breach of the Act. There is, however, nothing before me which would suggest that such a situation would be likely to arise in the present case.

I accordingly reject the view that either notice is bad unreasonableness or oppression.

The form of authorization to Mr. Peters

The Deputy Commissioner purported to authorize Mr. Peters as the person before whom the Bank and Mr. Smorgon should appear and give evidence and produce books and papers. He did so by a short form of written authority. However the terms of that authorization were to

``exercise the powers and functions delegated to me under section 264(2) of the Australian Income Tax Assessment Act 1936-1976.''

Section 264(2) does confer powers upon the Commissioner, a power to require information or evidence to be given on oath and either verbally or in writing; it also confers a function, that of administering an oath. But these were certainly not the powers and functions which this authority was intended to confer on Mr. Peters; one may surmise that the authority should have referred to sec. 264(1) rather than to the succeeding sub-section. At all events it is clear that in the event Mr. Peters was never authorized to take the evidence which the Bank and Mr. Smorgon were required to give before him.

Conclusions

It follows that while the notice to the Bank was wholly beyond power since it was addressed to a corporation, the notice to Mr. Smorgon was within power. Neither notice was defective for want of reference to the penalty that might attend non-compliance nor did the failure, in Mr. Smorgon's notice, specifically to refer to sec. 264 invalidate it. Each notice was ineffective to the extent that it required the production of all other documents ``relating to the said matters'' but the inclusion of that purported requirement did not of itself affect the validity of the remainder of the notice. Neither notice was bad as either unreasonable or oppressive. Each notice wrongly required attendance and the giving of evidence before someone who was never duly authorized in that behalf.

I understand it to be common ground between the parties that neither notice can in any event now be relied upon since the dates specified for attendance before Mr. Peters are now long past. Recognizing this, Mr. Liddell was principally concerned to have determined the matters which have been debated before me, so that, were new notices to be served, they might conform to the terms of this judgment.

Counsel have indicated that they desire, after publication of my reasons for judgment, to have an opportunity of making submissions as to costs. It will, I think, also be convenient to make no orders at this stage but rather to indicate what appear to me to be appropriate orders, permitting the parties to make such submissions as they may be advised. The following therefore represents the orders which, subject to those submissions, I would propose making. I would make no declarations or injunctions as sought by the plaintiffs in action No. 76 of 1976. On the counterclaim in that action there would be a declaration that the notice dated the twenty-fourth day of August 1976 and directed to the Bank was not a valid notice under sec. 264 of the Act. I would make no declaration as to the other notice directed to Mr. Smorgon. In action No. 77 of 1976 I would refuse the injunctions sought, there now being no question of the occurrence of any of the acts therein referred to. I would however make the declaration which is sought in that action, being a declaration in like terms to that earlier referred to. Any submissions as to the form of orders and as to costs will, due to my absence in Sydney, necessarily have to take the form of concise written submissions which should be submitted within 14 days, copies being exchanged between the parties.