Sharp & Anor v. Deputy Federal Commissioner of Taxation & Ors

Judges:
Bowen CJ
Sheppard J
Burchett J

Court:
Full Federal Court

Judgment date: Judgment handed down 18 April 1988.

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Bowen C.J., Sheppard and Burchett JJ.

This is an appeal brought by leave, from a judgment of a single Judge of this Court (Beaumont J.) [reported at 88 ATC 4165] in which a claim for interlocutory relief was refused. The appellants claim relief under the Administrative Decisions (Judicial Review) Act 1977 against the Deputy Commissioner of Taxation for the Commonwealth of Australia (presumably the Deputy Commissioner for New South Wales) and a number of his officers. The claim for interlocutory relief does not appear to have been formulated in any document filed of record. However, it arises out of a demand made by Mr Fitton, one of the respondents, for the production to him by the first appellant, Mr Sharp, of ``fax books'' kept in the course of its business by the second appellant, Greenwoods & Freehills Pty. Limited. The fax books are apparently books in which copies of communications sent by telephone facsimile transmission are kept. Mr Fitton's demand for the books was made pursuant to sec. 263 of the Income Tax Assessment Act 1936. The demand was made on 10 February 1988 at the second appellant's office. Mr Sharp, who is a director of the second appellant, asked for an opportunity to obtain legal advice. After discussion, an arrangement was made whereby photocopies of the fax books were made and the photocopies placed in a sealed envelope. Mr Fitton undertook not to open the envelope for a period of 14 days. The envelope was tendered before the learned Judge who directed that it be marked ``Confidential'' and that it remain in the Court's custody and not be opened without the order of the Court. The appellants sought the continuation of this order until the final hearing of the application in which the appellants seek judicial review of the decision of the respondents to have access to the fax books. His Honour refused to continue the order except for a short period to enable the appellants to make application for leave to appeal. The order was further continued by Burchett J. who granted leave.

Beaumont J. refused interlocutory relief because it was his view that, as the evidence stood at the time he dealt with it, there was no serious question to be tried. His Honour did not, therefore, need to deal with the question of the balance of convenience. It was submitted by counsel for the appellants that his Honour was wrong in concluding that there was no serious question to be tried with the consequence that his discretion had miscarried. We were asked to exercise that discretion in favour of granting the relief which was sought on the basis that the balance of convenience plainly favoured the preservation of the status quo. If the Commissioner were allowed to inspect the documents, a substantial part of the subject matter of the litigation would be lost. To that extent the proceedings would become of academic interest only.

Appeals against a refusal to grant interlocutory relief are, as we have indicated, appeals against the exercise of a discretion. Furthermore, notwithstanding that the subject matter of such an appeal is the grant or the refusal to grant interlocutory relief, the appeal is still one which relates to a matter of practice and procedure. After saying that an interlocutory order for an injunction is a matter

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ATC 4261

of practice and procedure, Gibbs C.J. and Aickin, Wilson and Brennan JJ. said in
Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148 C.L.R. 170 at p. 177:

``Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand,
Niemann v. Electronic Industries Ltd. (1978) V.R. 431, at p. 440; on the other hand,
De Mestre v. A.D. Hunter Pty. Ltd. (1952) 77 W.N. (N.S.W.) 143, at p. 146. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In
re the Will of F.B. Gilbert (dec.) (1946) 46 S.R. (N.S.W.) 318, at p. 323:

• `... I am of opinion that,... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.'

See also,
Brambles Holdings Ltd. v. Trade Practices Commission (1979) 40 F.L.R. 364, at p. 365; 28 A.L.R. 191, at p. 193;
Dougherty v. Chandler (1946) 46 S.R. (N.S.W.) 370, at p. 374. It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration.''

Section 263 of the Income Tax Assessment Act was at all relevant times in the following form:

``263(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 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 for a contravention of this subsection: $1,000.''

Subsections (2) and (3) were added to the section by the Taxation Laws Amendment (No. 2) Act 1987 (No. 62 of 1987), sec. 62 and Sch. 4, which came into force on 5 June 1987. Until then, sec. 263 contained only the provisions which now appear as subsec. (1).

The principal submission made to the learned primary Judge on behalf of the then applicants (the appellants here) was that the respondents' purpose in purporting to exercise the power of access granted by sec. 263 was not bona fide for the purposes of the Act and was excessive in the circumstances. It was said that, although the only relevant purpose could be the assessment of taxable income, it should be inferred from the width and general nature of the respondents' request that they had in mind some other object. His Honour held that there was nothing in the evidence which suggested that the respondents had anything in their contemplation other than an investigation into

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ATC 4262

whether or not `a person' was or had been in receipt of assessable income. There was no evidence of any ulterior purpose.

It was also submitted on behalf of the appellants that the respondents were seeking access to the fax material for the purpose of gathering information rather than for the purpose of assessing ``a taxpayer's taxable income under the Act''. His Honour said that the evidence was consistent only with the respondents having as their purpose the investigation of the question whether ``a person or persons'' have a liability to tax under the Act. His Honour concluded his reasons by saying, amongst other things, that there was no basis in the evidence for any suggestion that the respondents had any purpose other than that of investigating ``whether a person or persons'' may have been liable for tax.

The evidence substantially relied upon by the respondents and obviously accepted by his Honour for the purpose of the interlocutory application which was before him was that of Mr Fitton. He stated the beliefs and suspicions which he had formed and which led to his making the decision to demand access under sec. 263 of the Act. These were stated as follows:

``(a) The second applicant was a firm of accountants and taxation consultants.

(b) A number of clients of the second applicant were the subject of taxation audits into alleged profit shifting schemes under which, in very general terms, Australian taxpayers remitted funds to non-resident United Kingdom companies whose directors were resident in tax havens such as Monaco. In some cases, the funds were lent back through a direct or indirect route to entities associated with the taxpayer in Australia; in other cases the funds remained offshore. I suspected that the United Kingdom companies were controlled by the Australian taxpayers. The effect of the schemes was that Australian entities obtained a substantial deduction for interest paid offshore and that, although the Australian taxpayers obtained the benefit of that interest, no tax (other than withholding tax) was paid in respect of the interest.

(c) I believed that the facsimile books contained evidence of the sending of facsimile transmissions which constituted steps in the schemes referred to in paragraph (b) above. I also believed that the facsimile books showed the date and destination of facsimile transmissions, the clients on whose behalf they were sent and the clients reference numbers.

(d) I suspected that other clients of the second applicant might have been engaged in similar schemes. I therefore decided to have access to the facsimile books in order to ascertain the names of clients on whose behalf facsimile transmissions had been sent to Monaco or to other tax havens. This information would, in appropriate cases, be used to decide whether to make further enquiries in order to ascertain whether any of those clients were engaged in similar schemes.''

In the course of his reasons his Honour referred to some authorities, these including
Southwestern Indemnities Ltd. v. Bank of New South Wales and F.C. of T. 73 ATC 4171; (1973) 129 C.L.R. 512 and
O'Reilly v. The Commissioners of the State Bank of Victoria 83 ATC 4156; (1983) 153 C.L.R. 1. In the former case Barwick C.J. said (at ATC pp. 4174-4175; C.L.R. pp. 519-520):

``But, in my opinion, upon its proper construction, sec. 263 is not limited in its application to the affairs of a person who in fact is in receipt of assessable income. It suffices that the exercise of the power given by the section is for the purposes of the Act, which of course include an investigation into whether or not a person is or has been in receipt of assessable income. Such an investigation cannot be limited to buildings, books, etc. of a person who is liable to taxation but must extend to any person.

Section 264 authorises the giving of a notice to any person to furnish information. It was appropriate in such a provision to make it clear that the notice could be given to persons who were not taxpayers as defined in the Act. In contrast with sec. 264 in this respect sec. 263, in giving to the Commissioner a right to access, gave rise to no similar need. It was quite sufficient to use universal expressions such as `at all times' and `to all buildings', etc. No further emphasis was required. No limitation could be suggested. As I have indicated, the sole limitation or qualification is that the access

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ATC 4263

should be sought for `the purposes of the Act'.''

In O'Reilly's case, Gibbs C.J. and Wilson and Dawson JJ. said (ATC pp. 4158-4159; C.L.R. p. 42) that the section stated the nature of the Commissioner's right in wide and unqualified terms. Mason J. (as he then was) and Murphy, Brennan and Deane JJ. said (ATC pp. 4162-4163; C.L.R. p. 48) that the express provision that the Commissioner or his authorised officer should have ``full access'' prima facie conveyed that the availability of entry or examination to which the Commissioner or an authorised officer was entitled, extended to any part of the relevant place or building and to the whole of the relevant books, documents and other papers. Implicit in the grant of full and free access was a grant of power to the Commissioner or his authorised officer to take whatever steps were, in all the circumstances, reasonably necessary and appropriate to remove any physical obstruction to access. They added that, like all statutory powers, the power must be used bona fide for the purposes for which it was conferred and that that involved its exercise not being ``excessive'' in the circumstances of the case.

The question in O'Reilly's case was a different question from the one in issue here, namely, whether the person in charge of the premises was bound by a positive duty actively to assist the Commissioner or an authorised officer in obtaining access.

The principal submission made by the appellants before us was that the section did not justify the taking of copies of documents unless the Commissioner was investigating, or about to investigate, the affairs of a named or identified taxpayer or possible taxpayer. It was not necessary for the Commissioner to specify the name or names of the taxpayer or possible taxpayers to the person to whose buildings, places and so on access was sought. However, the taxpayer must exist and must be identified by the Commissioner or his servants or agents as being the subject of assessment, or investigations leading to an assessment. In argument the proposition was modified to embrace a situation where the Commissioner had grounds to believe some particular entity existed, though he could not specify its name or describe it precisely. The section did not give power to the Commissioner to range through the affairs of citizens in the speculative hope or expectation that he might find a name which he could identify as a taxpayer, or possible taxpayer, and then embark upon an investigation.

Counsel distinguished the authorities which were referred to in the judgment. He said that all were concerned with named or identified taxpayers. This was so in the Southwestern Indemnities case. What was said by Barwick C.J. needed to be read with this in mind. Counsel made a number of other submissions one of which was that, if the Commissioner's construction of the section were adopted, the section could not be characterised as a law relating to taxation. This showed that the construction contended for by the Commissioner could not have been that intended by Parliament with the consequence that the wide words of the section should be read down.

Counsel for the respondents relied on the dicta in the two authorities referred to and certain others as well. He said that the words of the section are clear and disclose that the power conferred was intended to be a wide and comprehensive one. He contrasted the provisions of sec. 263 with those of sec. 264 which restrict the Commissioner to requiring information or the giving of evidence concerning the income of a particular person, whether the person on whom the notice is served or some other person. He used the language of sec. 264 as an indication that Parliament intended the ambit of sec. 263 to be at large so long as the purpose of its invocation was a purpose of the Act.

Counsel for the appellants relied upon a separate point not raised before his Honour. The point concerns the form of the authority displayed by the personal respondents, including Mr Fitton, to officers of Greenwoods & Freehills. Mr McLean is a director of Greenwoods & Freehills. He said that Mr Sharp introduced him to Mr Fitton and the other personal respondents. Mr Sharp asked Mr Fitton if he and the other two officers would produce their authorisations under sec. 263 of the Act. Each produced a small pocket wallet containing what appeared to be a photograph of themselves and an authorisation over the signature of the Deputy Commissioner of Taxation for New South Wales. Mr Fitton's authority is in evidence. It is headed with the Australian Coat of Arms and the words ``Australian Taxation Office - Authorisation

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ATC 4264

for Access''. The substance of the authority, so far as relevant, is as follows:

``In the exercise of the powers and functions delegated to me by the Commissioner of Taxation in accordance with the provisions of section 8 of the Taxation Administration Act 1953, I hereby authorise (the officer in question) an officer of the Australian Taxation Office, whose signature and photograph appear below, to exercise all powers under

s. 263 - Income Tax Assessment Act 1936

...

D.J. CORTESE

Deputy Commissioner of Taxation.''

The signature ``D.J. Cortese'' is indecipherable. That is not a criticism of Mr Cortese; many signatures suffer from the same problem. Some may think it might have been as well for the Deputy Commissioner's name to be printed underneath the signature. But on the argument addressed to us, that is not a matter of any relevance.

There was no objection by counsel for the respondent to this submission being relied upon notwithstanding that the point had not been taken below. However, counsel relied on sec. 8 of the Taxation Administration Act 1953 which, so far as relevant, is as follows:

``8(1) The Commissioner may, either generally or as otherwise provided by the instrument of delegation, by writing signed by the Commissioner, delegate to a Deputy Commissioner or any other person all or any of the Commissioner's powers or functions under a taxation law or any other law of the Commonwealth or a Territory, other than this power of delegation.

(2) Subject to sub-section (5), a power or function so delegated, when exercised or performed by the delegate, shall, for the purposes of the taxation law or the other law, as the case may be, be deemed to have been exercised or performed by the Commissioner.''

The essential submission made by counsel for the appellants was that subsec. 263(2) required the authority to be signed by the Commissioner. The authorities in question were not signed by the Commissioner but were signed by the Deputy Commissioner, Mr Cortese. Notwithstanding that it should be assumed that a delegation pursuant to sec. 8 of the Taxation Administration Act had been given to Mr Cortese by the Commissioner, Mr Cortese had not purported to sign the authority as Commissioner. He had signed as Deputy Commissioner. The delegation which was referred to at the beginning of the authority may have been effective to delegate the Commissioner's powers and functions but that did not authorise the Deputy Commissioner to sign in his own name a document required to be signed by the Commissioner. Rather any authority conferred by it was an authority to sign such a document in the Commissioner's name or, perhaps, on the Commissioner's behalf.

The powers conferred by sec. 263 were extremely wide. They enabled the Commissioner to invade private premises and to have access to books, documents and other papers provided he did so for a purpose of the Act. Such a provision ought not be given any but a strict construction and those seeking to rely on its operation should be required to show that the provisions of the section had been fully complied with.

Counsel for the respondents put their case in two ways. In the first place, it was contended that Mr Cortese's signature could be regarded as affixed on behalf of the Commissioner with authority, and thus as a signature by the Commissioner. This approach has a number of difficulties. In the first place, Mr Cortese did not purport to sign on behalf of the Commissioner, but quite expressly on his own behalf; the words immediately under the signature read ``Deputy Commissioner of Taxation''. (Emphasis added.) It is true that at the commencement of the authorisation there is a recital of a delegation under sec. 8 of the Taxation Administration Act. But what is recited does not appear to be a delegation to sign on behalf of the Commissioner a document of authorisation, but rather a delegation of the right personally to authorise, as Deputy Commissioner, the exercise of powers under sec. 263. For the critical words are: ``I hereby authorise...'' (Emphasis added.)

Furthermore, the authorities approve, as a method of signing a document, the writing of the signatory's name by another person who is authorised to do so. They do not approve, as a method by which one person may sign a document, the placing upon it of the sole

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ATC 4265

signature of another person. See
London County Council v. Agricultural Food Products Ltd. (1955) 2 Q.B. 218, where Romer L.J. stated the principle as follows (pp. 223-224):

``It is established, in my judgment, as a general proposition that at common law a person sufficiently `signs' a document if it is signed in his name and with his authority by somebody else; and in such case the agent's signature is treated as being that of his principal.''

(Emphasis added.)

In the same decision, Denning L.J. (pp. 222-223) made it clear that, in such a case, the name written as a signature would be the name of the principal, but the agent should identify himself by some such means as the subscription of ``p.p.'' or per procurationem, followed by his own initials. It was held these additions to the signature, though desirable, were not essential. See also 195
Crown Street Pty. Ltd. v. Hoare (1969) 1 N.S.W.R. 193 at p. 201, per Asprey J.A.

In
Goodman v. J. Eban Ltd. (1954) 1 Q.B. 550 Romer L.J. (at p. 563) cited Stroud's Judicial Dictionary (third ed.) for the proposition (for which the fourth edition could now be cited) that ``speaking generally a signature is the writing, or otherwise affixing, a person's name, or a mark to represent his name, by himself or by his authority with the intention of authenticating a document as being that of, or as binding on, the person whose name or mark is so written or affixed''. Also in Goodman's case, Denning L.J. said (p. 561):

``In modern English usage, when a document is required to be `signed by' someone, that means that he must write his name with his own hand upon it.''

Denning L.J. was in dissent, the majority approving the use of a rubber stamp bearing a facsimile of the signature required.

The London County Council case was distinguished in
Motel Marine Pty. Ltd. v. I.A.C. (Finance) Pty. Ltd. (1964) 110 C.L.R. 9, where it was held that the expression ``signed personally'' excluded signing by an agent.

So far, attention has been focused upon the question whether, assuming that the Deputy Commissioner had in fact authority to sign the name of the Commissioner, the signature ``D.J. Cortese'', written over the words ``Deputy Commissioner of Taxation'', should be treated as the signature of the Commissioner. This is not the end of the matter. For the Commissioner, it was argued that the power or function of signing an authorisation is a power or function of the Commissioner which was delegated by him to the Deputy Commissioner pursuant to sec. 8 of the Taxation Administration Act. The authority commences with a recital of ``the powers and functions delegated to me''. Again there are difficulties. The document does not suggest that the powers and functions delegated, or any of them, included the power or function of affixing a signature; rather, the delegation is of the power to authorise, so that the signature is that of the delegate as the functionary doing the authorising. In the exercise of the powers, he ``hereby authorise(s)''.

The appellant's point is that sec. 263(2) is not concerned to confer on the Commissioner a power to authorise. The authorisation is assumed, and for good reason, since it is to be found in subsec. (1), which commences:

``The Commissioner, or any officer authorized by him in that behalf...''

An authorisation under subsec. (1) is something the Commissioner is empowered to issue, and that power, or the function of exercising it, may be delegated pursuant to sec. 8 of the Taxation Administration Act. But subsec. (2) is not directed to empowering the Commissioner to do anything; it is a subsection describing the document an officer must produce if he is to be entitled to enter private premises and demand access to the private possessions which may be there. The appellant contends that there is here no function to be delegated; or if there is, it is the function of bringing into existence a document answering the statutory description, namely, one ``signed by the Commissioner''. If the bare power of affixing the Commissioner's signature was delegated, the delegation was not performed, as the document does not purport to be signed with the Commissioner's signature, whether per procurationem or in any other way.

At the root of these contentions is a question of statutory construction. When sec. 263(2) refers to ``an authority in writing signed by the Commissioner'', does it contemplate that the document may in fact be signed by ``a Deputy Commissioner or any other person'', in his own name, in reliance upon a delegation of the

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ATC 4266

power to give an authority? In answering this question, it should be borne in mind that subsec. (2) and (3) of sec. 263 were inserted together by an amendment which was effected in 1987. As amended, the section not only authorises entry into private premises and access to documents and papers which may be therein, but also requires the occupier, who may or may not have any rights in respect of the documents and papers, to ``provide the Commissioner or the officer with all reasonable facilities and assistance...''. If facilities and assistance are not provided, a penalty may be incurred in the sum of $1,000. In that context, there is much to be said for a strict construction of subsec. (2). Such extreme powers should not be exercised except upon precise compliance with the statutory mandate. If, in the case of serious crime, the police require a judge's authorisation for less far-reaching invasions of privacy by telephonic interception, why should not a strict view be taken of the authority the statute requires to be produced to justify entry into private premises and the commandeering of the assistance of an occupier for the examination of private papers? Parliament may have thought the exercise of such a power, not by police officers or sheriffs but by officials of the Taxation Office, ought to require the production of an authority on the face of it incontrovertible, rather than a document the effect of which would depend upon the existence and validity of other instruments of delegation withheld from production.

Looked at in this light, the authority in writing may be seen as intended to make the position plain, to settle at once any dispute. It is to show the direct authorisation of the Commissioner under the Act. The point of it is to leave no doubt that the demands made by the officers are justified. So the Act specifies a method of authentication. It would be contrary to the statutory method to understand the section as implicitly creating a delegable power to produce a document at variance with the express terms of the Act. That would present the occupier with a difficult question of statutory construction, and an assertion of delegation which he could not immediately check. Such a dubious warrant would hardly achieve the purpose of clarifying his rights and obligations. When it is realised that a delegation under sec. 8 of the Taxation Administration Act is not necessarily to a Deputy Commissioner, but may be to ``any other person'', it becomes apparent that on the respondent's argument sec. 263 may merely ensure the occupier is informed obscurely that a document signed by ``any other person'' will turn out, upon investigation and legal analysis, according to the department, to count as an ``authority... signed by the Commissioner''.

This is not the occasion to express any final view on the point which has been advanced for the first time before us. The only question with which we are concerned is whether his Honour's decision to refuse interlocutory relief should be disturbed. But enough has been said in relation to the point to indicate to us that, whatever the strength or weakness of the first point may be, the second point does raise a question of substance.

As to the first point, the terms of the section and the dicta to be found in the authorities, particularly the Southwestern Indemnities case and O'Reilly's case, disclose that the Commissioner's view of the section has much to support it. It is not in terms limited to the taxation affairs of any named or identifiable person. There is no authority which suggests that the section is limited in this way and there is the contrast between sec. 263 and 264 upon which counsel for the respondent relies. Nevertheless, we should bear in mind that, in the words of the Judges of the High Court in the Philip Morris case earlier quoted, the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration. We do not suggest that there is anything intrinsically unjust in his Honour's conclusion that the first matter relied upon by counsel for the appellants did not raise a substantial question to be tried. But that conclusion must be looked at in context. If the Commissioner is given access to the documents in advance of the final hearing and it is ultimately found that he was not entitled to have that access, he will have been given something to which he was not in law entitled. More importantly, he will have achieved his object, and the matter so far as the appellants are concerned will have become academic. In those circumstances, there was much to be said for the view that weak though the appellants' case as put to his Honour was, there were countervailing considerations which militated in favour of the grant of interlocutory relief; see
Aboriginal Development Commission v. Ralkon

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ATC 4267

Agricultural Co. Pty. Ltd. (1987) 74 A.L.R. 505 at pp. 509-510.

Nevertheless, if the point on which his Honour decided the matter had remained the only point in the case, we may have had difficulty in concluding that his Honour's judgment disclosed a wrong exercise of discretion. The position has changed because of the second point now relied upon. As we have said, it does, in our opinion, raise a serious question to be tried. The balance of convenience is plainly such that inspection ought not be permitted until the final hearing takes place. In those circumstances, we have reached the conclusion that the appeal should be allowed, the order made by his Honour set aside and the order preventing the respondents from inspecting the documents continued until further order of a Judge of this Court. The costs both of the appeal and of the proceedings below should be costs in the principal application.