Citibank Limited v. Federal Commissioner of Taxation & Ors

Judges:
Lockhart J

Court:
Federal Court

Judgment date: Judgment handed down 2 September 1988.

Lockhart J.

I give the following summary of my reasons for judgment because, as I recognise in the judgment, the search, ``visit'' or ``raid'', as it is variously described in the evidence, with which this case is concerned, was a significant exercise of the Commissioner of Taxation's powers under sec. 263 of the Income Tax Assessment Act 1936, provoked a strong reaction from Citibank, and has attracted considerable public interest. This summary ought not to be understood, of course, to any way qualify or modify the findings and conclusions expressed in my reasons for judgment.

This case concerns the scope of sec. 263 of the Income Tax Assessment Act 1936, and arises from a search of the premises of Citibank Limited by some 37 officers of the Australian Taxation Office which occurred on 15 June 1988 at 11.30 a.m.

Section 263 confers a wide right or power upon the Commissioner of Taxation and upon officers authorised to take access under the section. On the one hand, I recognise that the Commissioner is charged with important functions in the administration of the Income Tax Assessment Act and the collection of revenue. At the same time, it is a fundamental principle of the common law that Australians have rights and privacy which must be respected. In my view, as sec. 263 of the Act in its nature is an encroachment upon liberty, it should be construed so that the encroachment is no greater than the statute allows, expressly or by necessary implication.

The person - whether the Commissioner of Taxation or his delegate - called upon to authorise the exercise of sec. 263 powers must consider the relevant circumstances and decide whether it is appropriate in the circumstances to authorise the exercise of the power. The written authorisation under sec. 263 must show on its face the premises to be searched and the books, documents and other papers or classes thereof which are the subject of the search, although in

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some circumstances a general description of the documents or class of documents will be appropriate, and the practical application of these requirements will vary from instance to instance. In the present case, none of the authorities make reference to the particular building, documents or classes of documents to which access is sought, and in my opinion all the authorities are bad for want of specificity and particularity.

The letters of authorisation issued to the officers involved in this search were signed by the Commissioner and the wallet authorisations were signed by the Deputy Commissioners, Melbourne and Sydney. In signing the letter authorisations, the Commissioner had regard to the decision of a Full Court of this Court in
Sharp v. D.F.C. of T. 88 ATC 4259. In my opinion the Commissioner may delegate his power to grant and to sign authorisations under sec. 263, pursuant to sec. 8 of the Taxation Administration Act 1953, and the Deputy Commissioners of Taxation, Melbourne and Sydney, had authority to sign the wallet authorisations in issue in this case.

However, the Commissioner did not take into account certain relevant considerations in issuing the letter authorisations, and specifically did not take into account the circumstances of the particular search. This was a consequence of the Commissioner's view of the operation of sec. 263.

I have noted that the evidence is not sufficient to support the inference that in signing the letters of authorisation the Commissioner took into account the policy, if any, of the Australian Taxation Office to couple action against particular taxpayers with publicity so as to encourage ``voluntary compliance'' by other taxpayers. Had any such policy been taken into account by the Commissioner, it would have been a wholly impermissible matter for the Commissioner to take into account when deciding to issue the letters of authorisation.

Mr Booth, a taxation officer, whose decision was central to this case, formed the opinion that it was necessary to obtain access to the premises of Citibank having regard to the information available to him at the time. Mr Booth's election to rely upon sec. 263 rather than sec. 264 was a choice properly open to him.

It is permissible for documents to be inspected and copied under sec. 263 although they fall outside the ambit of the specific purpose which the decision maker had in mind when deciding to conduct the search, provided those documents have relevance to taxation legislation.

It was impermissible for Mr Booth to take into account the consideration that the search be started and finished within no more than two hours, for the purpose of rendering futile any right to injunctive relief which Citibank may have had or any injunction which Citibank may have obtained from the courts.

Mr Booth should have had regard to the question of legal professional privilege in determining how the search was to be conducted, and the search should have been conducted so that any claim for legal professional privilege could have been made. Although Mr Booth considered the question of legal professional privilege, the measures taken to allow the claim for legal professional privilege to be made effectively by Citibank or its clients were inadequate. The failure to pay proper regard to the question of legal professional privilege vitiates the decision to conduct the search.

It was unreasonable for officers of the Taxation Office to refuse to delay the search to allow Citibank to obtain legal advice.

In the result, Citibank's application succeeds. I shall stand the matter over to a date to be fixed in the near future so that the parties may consider my reasons for judgment, and to allow Citibank to bring in short minutes of order to give effect to my reasons for judgment.

Lockhart J.:

Reasons for judgment

On 15 June 1988 at approximately 11.30 a.m. 37 officers of the Australian Taxation Office entered the premises of Citibank Limited (``Citibank'') in Margaret Street, Sydney. Citibank occupies a number of floors in the building where it conducts its business as a bank. The taxation officers proceeded in groups to different parts of the premises, to which they had previously been assigned by their ``team leaders'', and proceeded to search for documents many of which were copied and the copies taken away. It appears that this search, ``visit'' or ``raid'', as it is variously described in the evidence, was

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the largest operation of entry and search of private premises ever undertaken by the Commissioner who relies for its authority on sec. 263 of the Income Tax Assessment Act 1936 (``the Act''). The search provoked a strong reaction from Citibank and has attracted great public interest.

The Commissioner is charged with the important functions of administering the Act and other taxation legislation, investigating tax avoidance and tax evasion arrangements and collecting revenue. Obviously the performance of those functions requires that the Commissioner have wide powers including those of requiring that information be furnished to him and requiring the production of records (sec. 264 of the Act); and the powers of entering into premises, searching for documents and copying documents (sec. 263). There is an evident legislative intention to invest the Commissioner with such powers. On the other hand it is a fundamental principle of the common law that Australians have rights and privacy which must be respected.

Citibank is a large bank with offices in Sydney. It is mindful of its obligations to its clients arising from the common law to keep the affairs of its clients confidential. It may be, and I say this with no disrespect to Citibank itself, that large institutions such as banks have a long purse, and the ability to engage skilled legal advisers and to employ their own able in-house counsel. It is not difficult to imagine that such institutions could, even within the bounds of accepted standards of commercial morality, make the Commissioner's task of investigation difficult and sometimes thwart him in the execution of his duties.

The events of 15 June must be examined in the light of the history of the Commissioner's investigation into certain corporate clients of Citibank. Since November 1987 Mr D.F. Booth, a senior officer of the Taxation Office engaged in Melbourne as a taxation auditor, has been investigating a tax avoidance arrangement described in the evidence as an offshore redeemable preference share arrangement (``the preference share arrangement'') in which various companies, including some large public companies, were thought to be participants.

Although Mr Booth was not investigating Citibank itself, he believed that there were books and records held at the offices of Citibank relating to the taxation affairs of the various companies who were in his view participants in the preference share arrangement. He also believed that Citibank held at its offices documents relating to other arrangements of a similar kind to the preference share arrangement, the names of the participants in those other arrangements not being known to him. He held the view that the amount of income tax involved in the various arrangements might be as high as $100 million.

Mr Booth and other taxation officers spoke to officers of Citibank and visited its premises on many occasions between December 1987 and June 1988. I see no purpose in reciting the details of Mr Booth's enquiries, so a brief reference will suffice. Mr Booth's discussions took place with various officers of Citibank, in particular with Mr Colin Wilmot, Citibank's Public Officer and its Manager of Taxation. Based on a series of incidents over some weeks or months, Mr Booth formed the opinion that Mr Wilmot was frustrating access to the records which Mr Booth desired to see.

In late May Mr Booth decided that preparations should be made for the search of Citibank's premises by a team of taxation officers. He selected officers initially from the Melbourne Taxation Office and later from the Sydney Taxation Office. Before 15 June Mr Booth gave those officers instructions at briefing sessions as to how the search was to be conducted. Mr Booth kept Mr Crotty, the Senior Assistant Deputy Commissioner (Taxpayer Audit Group) in Melbourne informed of his plans at relevant times. When Mr Booth gave instructions to the officers who were to be engaged in the search he told them that they were specifically looking for material relating to the preference share arrangement, and that the search was not a ``fishing expedition''; but that they were to use their discretion if they found anything else on the Citibank premises which they thought was relevant for the purposes of taxation. Mr Booth spoke to Mr Crotty on Friday 10 June and told him that the search was planned for the following week. Mr Crotty said that, as Mr Booth was the person ``on the spot'', he must make the decisions.

On 14 June Mr Booth attended the offices of Citibank with Ms Monika Rezek and Ms Cheng Lim, two members of his audit team who were officers of the Australian Taxation Office.

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During that day Mr Booth had several meetings with Mr Wilmot and Mr Roger Chippendale, the Senior Tax Counsel at Citibank, and was given access to certain documents. Mr Booth kept Mr Crotty informed of the developments on 14 June.

On 15 June Mr Booth, Ms Rezek and Ms Lim attended the offices of Citibank at 9.30 a.m. and a conversation took place with Mr Wilmot at about 10 a.m. At about 10.30 a.m. Mr Booth decided that the group of taxation officers whom he had co-ordinated should exercise the right of access conferred by sec. 263 of the Act and that they should enter the premises of Citibank and search for and make copies of documents. Most members of the group of taxation officers had previously been organised into six teams, each comprising five persons, and a separate group of three people with computer expertise. Each group of five persons consisted of two officers appointed to examine documents and select those which were to be copied, one officer to make copies of documents, one officer to carry documents and messages and one officer to liaise with Citibank staff and provide advice to the team on questions of the rights of taxation officers under sec. 263 and questions of legal professional privilege if they arose. In addition, Mr Booth had arranged to have available the services of a locksmith who was a taxation officer; in the event the locksmith remained outside the premises and it was not necessary to call upon him to open any locks.

Mr Booth had selected seven areas within the bank's premises as areas which should be examined. He was familiar with those areas because of his visits to Citibank over the previous months. At about 11.30 a.m. on 15 June Mr Booth and the other 36 officers entered the premises of Citibank and there conducted the search which is under challenge in these proceedings.

As one might expect, with 37 taxation officers moving about Citibank's premises and inspecting and making copies of documents, and where that process was interspersed with conversations with staff of Citibank, a rather confusing picture emerges as to the events of the day. A number of taxation officers and a number of Citibank staff were called to give evidence. Although there is a fair degree of common ground as to what occurred and what was said during the day, there are also areas of dispute. Those areas of dispute are mainly in relation to details which in my view do not matter in the ultimate outcome of the proceedings. It is hardly surprising that the recollection of the various witnesses called, albeit that it was tested only some two months or so after the day of the search itself, was precise on some matters and imprecise on others and that versions differed. But this case raises questions of principle which determine its outcome, not variances in evidence of this kind.

During the course of the search many documents were inspected and copied by the taxation officers, and the copies removed from the premises of Citibank. Some of these documents related to the preference share arrangement, but most of them related to other taxation matters, including other arrangements having a flavour of tax avoidance or at least of tax minimisation.

These proceedings were brought by Citibank seeking review of various decisions of the respondents under the Administrative Decisions (Judicial Review) Act 1977. This Court's jurisdiction was invoked under that Act, under sec. 39B of the Judiciary Act 1903 and under the accrued jurisdiction of the Court.

The validity of the authorisations issued to the taxation officers and the scope of sec. 263

Each of the 37 officers involved in the search of Citibank's premises had been given written authorisations of two kinds. First, each of them held a black wallet measuring about three square inches when folded, which bore on its face under the Australian Coat of Arms the words ``Australian Taxation Office''. Inside the wallet there appears a photograph of the officer who is its bearer together with his or her signature. The substance of the writing inside the wallet is as follows:

``Australian Taxation Office

Authorisation for Access

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 (blank space)

an officer of the Australian Taxation Office, whose signature and photograph appear below, to exercise all powers under

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Section 263 - Income Tax Assessment Act 1936

Section 127 - Fringe Benefits Tax Assessment Act 1986

Section 12E - Sales Tax Procedure Act 1934

Section 44 - Estate Duty Assessment Act 1914

Section 68 - Payroll Tax (Territories) Assessment Act 1971

Section 4 - Taxation (Unpaid Company Tax) Assessment Act 1982

Section 4 - Trust Recoupment Tax Assessment Act 1985

Section 58 - Bank Account Debits Tax Administration Act 1982

This authorisation expires on 30 June, 1989

............

Deputy Commissioner of Taxation

PHOTO''

Some of the wallets also set out the provisions of sec. 263 of the Act and sec. 127 of the Fringe Benefits Tax Assessment Act 1986.

These authorisations were all signed by the Deputy Commissioner of Taxation, Melbourne or Sydney. I shall refer to these authorisations as ``the wallet authorisations''.

All but three of the taxation officers involved in the search received an additional authorisation in the form of a letter on the letterhead of the Australian Taxation Office from the Commissioner of Taxation, Mr T.P. Boucher, and signed by him. This authorisation reads as follows, taking the authorisation issued to Mr Booth as a representative example:

``In the exercise of the powers and functions conferred on me in accordance with the provisions of section 8 of the Taxation Administration Act 1953, I hereby authorise Douglas Franklin BOOTH, an officer of the Australian Taxation Office, to exercise all powers under

Section 263 - Income Tax Assessment Act 1936

Section 127 - Fringe Benefits Tax Assessment Act 1986

Section 12E - Sales Tax Procedure Act 1934

and in accordance with the above Acts, to have full and free access at all times to all buildings, places, books, documents and other papers for any of the purposes of the Acts mentioned, and for that purpose to make extracts from, or copies of, any such books, documents or papers.

This authorisation expires on 30 June 1989.

(T.P. Boucher)

COMMISSIONER OF TAXATION''

Three of the taxation officers received a different form of authorisation to that just mentioned which was on the letterhead of the Australian Taxation Office and issued and signed by the Commissioner of Taxation in the following form:

``I, Trevor Percy Winston Boucher, Commissioner of Taxation, hereby authorise

(Name)

an officer of the Australian Taxation Office, whose signature appears below, to exercise all powers under:

Section 263 - Income Tax Assessment Act 1936

Section 127 - Fringe Benefits Tax Assessment Act 1986

Section 12E - Sales Tax Procedure Act 1934

Section 44 - Estate Duty Assessment Act 1914

Section 68 - Payroll Tax (Territories) Assessment Act 1971

Section 4 - Taxation (Unpaid Company Tax) Assessment Act 1982

Section 4 - Trust Recoupment Tax Assessment Act 1985

Section 58 - Bank Account Debits Tax Administration Act 1982.

This authorisation expires on 30 June 1989.

(T.P. Boucher)

COMMISSIONER OF TAXATION

6.4.88

(Signature of officer)''

The two forms of letter of authorisations, signed by the Commissioner of Taxation differ in form, but those differences are not material for present purposes. Each authorisation

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purports to authorise the person to whom it is directed to exercise all the powers under the various sections of the particular Acts there specified. No reference is made to any particular occasion on which the power may be exercised or to the particular premises, persons or documents involved. Apart from the particular sections of the Acts specified, the only limitation expressed in these letters is as to their expiry date, in each case 30 June 1989. I shall for convenience refer to them as ``the letter authorisations''.

The letter authorisations were signed by Mr Boucher as Commissioner of Taxation because of the problems that were perceived to flow from the judgment of a Full Court of this Court in
Sharp v. D.F.C. of T., given on 18 April 1988 and reported in 88 ATC 4259. It was argued before the Full Court that the written authorisations produced to the appellants, members of a firm of chartered accountants, by taxation officers pursuant to sec. 263 did not satisfy the terms of subsec. 263(2) because they were not properly signed. The authorisations had been signed by a Deputy Commissioner in his own name, whereas it was argued that subsec. 263(2) required that they should be signed by the Commissioner. The appellants contended that the powers of delegation given to the Commissioner under sec. 8 of the Taxation Administration Act 1953 did not extend to authorising the Deputy Commissioner to sign in his own name a document which sec. 263 required to be signed by the Commissioner. The Full Court held that this argument raised a serious question to be tried and that it was appropriate to grant interlocutory relief. It was that judgment which led to the issue of the letter authorisations in the present case.

The letter authorisations are cast in language which renders them susceptible to more than one construction. I am satisfied, however, that, properly construed, they purport to authorise the persons named in them to exercise the sec. 263 powers of access to premises and documents, search and copying of documents. The letter authorisations are not themselves instruments of delegation under sec. 8 of the Taxation Administration Act delegating to the persons named in them the Commissioner's power to authorise others to exercise the sec. 263 powers. Section 8 of the Taxation Administration Act, as amended by sec. 296(a) of the Taxation Laws Amendment Act 1984, Act No. 123 of 1984, provides that the Commissioner may, by writing signed by him, delegate to a Deputy Commissioner or to any other person any or all of the Commissioner's statutory powers, other than the power of delegation under sec. 8 itself.

Section 263 of the Act is the critical section for present purposes, so I shall set it out in full:

``263(1) The Commissioner, or any officer authorised 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.

263(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.

263(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.''

Prior to its amendment by Act No. 62 of 1987, effective from 5 June 1987, sec. 263 was not divided into subsections and read as subsec. 263(1) presently reads. The amendment to the section was obviously made for the purpose of overcoming the deficiencies of the section in its earlier form exposed by the judgment of the High Court in
O'Reilly v. The Commissioners of the State Bank of Victoria (No. 1) 82 ATC 4671; (1983) 153 C.L.R. 1 to which reference shall be made later.

Section 127 of the Fringe Benefits Tax Assessment Act 1986, sec. 12E of the Sales Tax Procedure Act 1934, sec. 44 of the Estate Duty Assessment Act 1914, sec. 68 of the Payroll Tax (Territories) Assessment Act 1971 and sec. 58 of the Bank Account Debits Tax Administration Act 1982 are provisions akin to sec. 263 and designed to achieve broadly the same purpose.

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Section 264 of the Act is material for present purposes so I shall set it out in full. That section provides:

``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.

264(2) The Commissioner may require the information or evidence to be given on oath and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath.

264(3) The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend.''

Section 264 also has its equivalents in certain of the other legislation to which I have referred, for example sec. 128 of the Fringe Benefits Tax Assessment Act 1986.

The Commissioner may exercise the power of entry, search and copying conferred by sec. 263 either himself or by officers authorised by him. The section does not in terms require that there be written authorisations to the officers. However, subsec. 263(2) prohibits officers entering or remaining on the premises if, on being requested by the occupier for proof of authority, the officers do not produce an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under the section. In my view the assumption which underlies the subsection is that a written authority is required before the power may be exercised by officers.

The Commissioner may delegate his power of authorising others to enter and search premises to a Deputy Commissioner or other person under sec. 8 of the Taxation Administration Act without power of subdelegation. The authority of the Commissioner to delegate his powers under sec. 263 has not been doubted, save perhaps in the reasoning of the Full Court in Sharp's case (supra) at pp. 4265-4266. It will be necessary to refer to that case, and to the question of the delegation of the Commissioner's power to authorise entry under sec. 263, below. In my view, where the Commissioner has delegated his powers of authorisation under sec. 263, then the Commissioner's delegate may himself authorise officers to act under sec. 263.

Section 263 confers large powers upon the Commissioner and officers authorised thereunder. Whether the section creates a right in the Commissioner or confers a power upon him has been the subject of some judicial discussion, but nothing turns on this for present purposes. The section authorises the Commissioner to enter upon premises, to search for documents and to make extracts from or take copies of them, all for the purposes of the Act. The occupier is bound to provide the Commissioner or his officers with all reasonable facilities and assistance for the effective exercise of powers under the section and he is liable to a penalty for contravention of the section.

As the section encroaches upon liberty it should be construed so that the encroachment is no greater than the statute allows, expressly or by necessary implication. That rule of statutory construction expresses policies which are, as will be noted below, central to the common law, and has been frequently and forcefully stated by courts in Australia and in the United Kingdom. In the context of the common law right of passage, Higgins J. observed in
Melbourne Corporation v. Barry (1922) 31 C.L.R. 174 at p. 206 that:

``any interference with a common law right cannot be justified except by statute - by express words or necessary implication. If a statute is capable of being interpreted without supposing that it interferes with the common law right, it should be so interpreted.''

As Danckwerts L.J. observed in
Allen v. Thorn Electrical Industries Limited (1968) 1 Q.B. 487 at p. 505:

``Existing legal rights are not to be taken away except by clear words in the statute. If two constructions are possible, the construction which produces unreason and

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hardship is to be avoided, and the construction which interferes with the legal rights of the subject to a lesser extent and produces the less hardship is to be preferred.''

This last-mentioned passage was expressly approved by Stephen J. in
F.C. of T. v. Australia and New Zealand Banking Group Limited (Smorgon's case) 77 ATC 4522 at p. 4527; 79 ATC 4039; (1977-1979) 143 C.L.R. 499 at p. 509. See also Sharp's case at pp. 4264 and 4266 and
Inland Revenue Commissioners v. Rossminster Limited (1980) A.C. 952 per Lord Salmon at pp. 1017 and 1021; and Lord Scarman at pp. 1021-1022; and the remarks of Lord Denning M.R. in the Court of Appeal at pp. 971, 972 and 977.

These doctrines are deeply rooted in our common law and are forcefully expressed in early cases of which notable examples are
R. v. Wilkes (1763) 2 Wils. K.B. 151; 95 E.R. 737;
Huckle v. Money (1763) 2 Wils. K.B. 205; 95 E.R. 768;
Entick v. Carrington (1765) 2 Wils. K.B. 275; 95 E.R. 807;
Home v. Bentinck (1820) 2 Brod. & B. 130; 129 E.R. 907.

On the other hand courts must be careful lest they construe statutory powers too narrowly and unduly curtail a power which the legislature intended the Commissioner to have to further his due administration of the Act.

What then is the degree of specificity or particularity required of an authorisation for an authorised officer under sec. 263? Is it sufficient that such an authorisation is in the form of a general warrant, a characteristic of all forms of authority used on 15 June 1988 in this case, or is some greater degree of specificity or particularity required? Will the Australian Taxation Office be unduly hampered in its operations if some senior officer were to be required to give careful consideration to each particular occasion on which a sec. 263 authority is signed by him? Is the Commissioner or any of his delegates entitled to authorise any officer to exercise the powers conferred by sec. 263 in general terms, as is the case here, without the Commissioner or his delegate having any particular search in mind or any particular premises or documents or purpose of the Act in contemplation? The balancing of competing interests is required to answer these questions, including the intrinsic values of privacy and of confidentiality and the demands of the revenue. That balancing is a task which the courts have faced in other contexts, particularly in relation to search and seizure powers in the criminal law: Manson, ``Questions of Privilege and Openness: Proposed Search and Seizure Reforms'' (1984) 29 McGill L.J. 651 at p. 654; Murray, ``The Reasonable Expectation of Privacy Test'' (1986) Ottawa L.R. 25 at pp. 29-30.

Counsel for the Commissioner said in argument that there were approximately 4,000 authorisations signed by a Deputy Commissioner of the kind which are involved in this case and currently on issue within the Australian Taxation Office. The fact that such an authorisation has been commonly issued, and that the Commissioner has understood such an authorisation to be sufficient for the purposes of sec. 263, cannot, however, be determinative of the question of law.

The language of sec. 263 can be relied upon to support either a greater or a lesser degree of specificity in an authority issued for the purposes of sec. 263; but the section must be construed to give effect to its evident purpose having a proper regard for the rights of citizens to be secure from undue invasion into their premises, documents and privacy, and to the principles of statutory construction applicable where common law rights are in issue.

The section does not confer in terms a power of search; but plainly the power of search exists, whether it be an express power or an implied power necessarily arising from the power of full and free access to buildings, places, books, documents and other papers and the power for that purpose to make extracts from or copies of such books, documents or papers.

Counsel for Citibank placed strong reliance upon the line of authority concerning sec. 10 of the Crimes Act 1914 (Cth) and related sections in other legislation, in particular
Crowley and Ors v. Murphy (1981) 52 F.L.R. 123;
Arno v. Forsyth (1986) 65 A.L.R. 125;
R. v. Tillett; Ex parte Newton (1969) 14 F.L.R. 101;
Australian Broadcasting Corporation v. Cloran (1984) 4 F.C.R. 151. These cases are not precisely in point when construing sec. 263 of the Act, but they provide a useful analogy and background to the Court's consideration of the meaning and operation of the section. Those cases are part of a wider stream of authority, all of which

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emphasise the care with which courts must approach statutory encroachments upon the basic rights of people to freedom of the person, premises and property. The wider principles articulated by the warrant cases are equally applicable to sec. 263.

Officers of the Taxation Office do not need to rely on sec. 263 in most cases to obtain copies of documents or on sec. 264 to obtain information, and in most cases the Taxation Office rightly proceeds informally, with the relevant officer exercising his common law entitlement to ask questions, and relying upon the co-operation of the person to whom the questions are put: see
Clough v. Leahy (1904) 2 C.L.R. 139 per Griffith C.J. at pp. 156-157; Williams, Investigations by Administrative Agencies, 1987, p. 263. In the ordinary course of events most people will co-operate and give information or furnish documents or copies of them voluntarily. The sec. 263 power must, however, be relied upon in cases where there is no practical alternative to its exercise. These cases will include circumstances involving institutions such as banks which have a contractual duty to keep confidential the affairs of their clients.

Plainly the revenue must be protected, but so must the rights of citizens. It is obvious that the Commissioner himself, in whom the sec. 263 power is primarily vested, cannot personally supervise each occasion of the exercise of the power. The Commissioner may, however, delegate this power to Deputy Commissioners, regional officers and others who can keep a watchful eye on the particular exercise of the power which is called for from time to time.

In my opinion, the person - whether the Commissioner or his delegate, who presumably will be a senior and trusted officer of the Taxation Office - who is called upon to authorise the exercise of sec. 263 powers must apply his own mind to the question of the exercise of such powers, must consider the relevant circumstances and must decide whether it is appropriate in all the circumstances to authorise the exercise of the power to enter a person's premises, search for and copy documents. The power conferred by sec. 263 is a compulsory power. There is a fine line, even in our society, between responsible exercise of large powers and authoritarian cynicism. The Commissioner and his delegates must consider the circumstances of the particular exercise of the sec. 263 power to ensure that that line is not transgressed.

Where sec. 263 is invoked, the proper balance between the protection of the citizen from undue invasion of his premises, records and privacy on the one hand and the protection of the revenue on the other is secured by requiring not only that the authorising officer, whether the Commissioner or his delegate, give due consideration to the particular circumstances which call for the issue of an authorisation under the section; but by requiring also that the written authorisation show on its face the premises to be searched and the books, documents and other papers which are the subject of the search. Generally, the premises will be identified by specific description, but there may be occasions where this is impossible or impracticable; for example, where it is known that the occupier of particular premises occupies other premises, the identity of which is unknown to the authorising officer at the time he issues the authorisation. The occupier of the premises may, for example, be a person engaged in large scale illegal activities; although some of the premises which he occupies are known, others may not be known. In such a case it would be sufficient for the description in the authorisation to refer to the known premises and to the others by some general description. The degree of specificity required in a sec. 263 authority is likely to be lessened where urgent search is required and where movement of documents from place to place to avoid the search must be prevented. Sometimes the specific documents that are to be searched for will be known to the authorising officer in which case they can be specified in the authorisation. Often this will not be the case and a general description of the documents or class of documents is all that is known, in which case it can be so stated.

In my view, therefore, an authorisation under sec. 263 must identify, on its face and with sufficient particularity, the premises to which access is sought and the documents or class of documents to be searched for and copied. The practical application of these requirements will vary from instance to instance. An authorisation of this kind enables both the taxation officer who is to conduct the search and the occupier of the premises which are to be entered and searched to better understand the nature of the search, the rights of the searcher

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and the duties of the occupier under subsec. 263(3). Authorisations fulfilling these requirements also manifest that the mind of the authorising officer has been directed to the particular occasion of the search.

Authorisations which fulfil these requirements would not create undue difficulties in the Australian Taxation Office. They are minimal requirements which must be observed when other forms of compulsory process issue, including warrants under the Telecommunications (Interception) Act 1979 authorising the interception of telecommunications and the Customs Act 1901 authorising the use of listening devices. The analogy with the requirements of a warrant under sec. 10 of the Crimes Act is here particularly close, and is founded in the common source of the law's recognition of the need to balance the policies of law enforcement, whether of criminal or of revenue laws, and the commitment to the inviolability of the person which has been central to the history of English law: see Crowley v. Murphy (supra) at p. 141.

There is nothing singular about sec. 263 or the position of the Australian Taxation Office which calls for any lesser standards. It is important to mention at this point that the documents which the officer inspects and copies, when searching premises pursuant to sec. 263, arm him with material which he can use against the occupier of the premises being entered and against other persons whose documents are in the possession of the occupier or who are mentioned in the documents. None of the persons whose interests may be affected have any control over the exercise of the sec. 263 power except, in the case of the occupier, the right to require production of the requisite authority. It is no answer to say that the power must be exercised reasonably or that sec. 16 of the Act restricts the use to which the documents or their contents may be put. All statutory powers must, in the absence of specific statutory provision to the contrary, be exercised reasonably and for the purpose for which they are given. Section 16 ensures that taxation officers observe their statutory duty of secrecy with respect to the documents or their contents, but it does not prevent their use in courts where a taxation issue is involved. Accepting that the statutory power will be exercised reasonably and for proper purposes, the power is in its nature a substantial intrusion upon individual rights, and the proper construction of sec. 263 and the requirements for an authorisation to exercise the sec. 263 power, have to be determined with the nature of that intrusion in mind.

Counsel for the Commissioner argued that the absence from sec. 263 of any requirement in terms that the Commissioner (or his delegate) consider any particular matters before authorising an officer to enter and search premises and the absence of any requirement as to the contents of the authorisation itself assist the conclusion that those requirements cannot be implied. Counsel for the Commissioner pointed also to the general language of sec. 263 that the Commissioner or officers authorised by him 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...'' as supporting his argument.

The Commissioner, when himself exercising the sec. 263 powers, needs no writing evidencing his authority to exercise those powers; but if he chooses to take access under sec. 263 himself he must obviously, in the proper exercise of the statutory power, consider the circumstances of the particular case and conclude that the occasion requires him to enter particular premises and inspect and copy particular documents or classes of documents. He cannot enter premises willy-nilly, for that would be an abuse of a power which must be exercised reasonably having regard to the particular circumstances. There is no reason in logic or in principle why the requirements placed upon the Commissioner's decision to issue an authority under sec. 263 should be less exacting than those governing the personal exercise of the sec. 263 power, and there is every reason why the authority produced to an occupier pursuant to subsec. 263(2) should allow the occupier to know the result of the Commissioner's consideration of the relevant circumstances, in so far as that is reflected in specifying the premises or documents or class of documents to which access is required.

In my view the Commissioner or his delegate must likewise consider the particular circumstances of the occasion which appears to call for the exercise of the sec. 263 powers before authorising an officer under that section; and the written authority must itself describe the premises to be entered and the documents

ATC 4726

or class or classes of documents to be inspected. Nothing short of this adequately protects the occupier of the premises; the person whose documents are within the premises, whether the property of the occupier or not; and the person whose dealings or affairs are referred to in the documents. Where the search is of a bank or similar institution, the chambers of a barrister, the offices of a solicitor or the surgery of a doctor or dentist, to mention but a few of the premises that may be the subject of entry under sec. 263, the documents that may be expected to be found there will necessarily include confidential documents belonging to others and will necessarily relate to and mention others, including clients and patients.

Citibank was, of course, under a duty of confidence owed to its various clients, as an express or implied contractual obligation arising from the nature of its relationship with its clients:
Smorgon v. Australia & New Zealand Banking Group Ltd. (1976) 134 C.L.R. 475 per Stephen J. at pp. 487-490. It is equally clear that Citibank's duty of confidence is subject to and overridden by a statutory obligation such as that imposed by sec. 263 or 264: Smorgon's case (supra) per Stephen J. at p. 506, per Gibbs A.C.J. at p. 522; Crowley v. Murphy (supra). In my view, a decision maker, reaching a decision to conduct a search under sec. 263, and determining the scale of the search and the manner in which it is to be conducted, must have regard to the effect of the search upon those whose interests are affected, and as a corollary of that obligation must have regard to the effect of the search upon a bank's ability to comply with its duty of confidentiality owed to its clients. The wider the scope of the proposed search, and the larger the intrusion into the affairs of clients other than those under investigation, the greater the relevance which this factor ought to be accorded in the decision-making process. This is not to allow a privileged situation to banks, or indeed to other financial institutions and to solicitors and accountants and other professional people who owe duties of confidence to their clients; but rather to require that the decision maker have regard to all relevant circumstances, which will include the circumstance of the duties of confidence owed by such persons, and the circumstance of the intrusion into the privacy of other clients of such persons consequent upon the exercise of a statutory power overriding the duty of confidence.

Where the Act is silent about the matters which must be considered before the powers conferred by sec. 263 are exercised and about the contents of written authorisations, I have a preference for a construction which affords some reasonable degree of protection to existing legal rights of individuals and corporations; and I lean against a construction which unnecessarily erodes those rights and supports the exercise of unlimited bureaucratic power. That preference, as I have noted, has ample precedent in the development of the common law.

In the present case all authorities relied on by the Commissioner are couched in the most general terms. They refer to a plurality of statutes which confer powers of entry and search in language which is similar in some statutes but dissimilar in others. Mere enumeration of a number of statutes in the authorities does not of itself vitiate them because they must be construed distributively: see Smorgon's case (supra). All authorities are otherwise limited only to the extent of their duration. None of the authorities make reference to the particular buildings, books, documents or classes of documents to which access is sought, whether described specifically or even in general terms. In my opinion all the authorities with which this case is concerned are bad for want of specificity and particularity.

The decision of the Commissioner and the decision of the Deputy Commissioner to issue authorisation

The letters of authorisation were signed by Mr Boucher, the Commissioner of Taxation, and directed to each of the 37 officers involved in the search. The form of the authorisation given to three of the officers varied from the form given to the others, but not in any respect which is material for present purposes. The wallet authorisations were all signed by the Deputy Commissioner for the city where the relevant taxation officer was stationed, that is either Melbourne or Sydney.

As I said earlier, the letter authorisations signed by Mr Boucher are properly construed as authorisations to the persons named therein of the powers of entry etc. conferred upon the Commissioner by sec. 263. The letter authorisations were not signed by the

ATC 4727

Commissioner at the direction of any other person; but were signed by him at the request of a Miss Oates and indirectly of Mr Booth. Miss Oates was the officer of the Taxation Office to whom Mr Booth directed his request that the letter authorisations be signed by the Commissioner. Mr Booth gave evidence to the effect that he regarded the signing by the Commissioner of the authorisations as a mere formality; that the authorities were on word processing equipment; and that all Miss Oates required from him were the names of the officers to be authorised so that they could then be placed into the word processor and in due course printed. Miss Oates told Mr Booth that the major factor governing when the letter authorities would be available was the Commissioner's availability to sign the authorities. This evidence was not denied and neither the Commissioner nor Miss Oates gave evidence. I accept Mr Booth's evidence on this question.

A statement under sec. 13 of the Administrative Decisions (Judicial Review) Act 1977 was signed by the Commissioner for the purposes of this case on 2 July 1988. It appears from the sec. 13 statement that on 6 June 1988 the Commissioner was requested to sign authorities to Mr Booth and a Mr Rosenbaum, another taxation officer who was involved in the search, and that the primary reason for his decision to issue the authorities was his understanding of the Full Court's decision in Sharp's case (supra) which he thought cast doubt on whether written authorisations for the purposes of sec. 263 and other similar provisions in other legislation could be signed by Deputy Commissioners. Mr Boucher considered it prudent, pending the final outcome of Sharp's case, to sign the letter authorisations.

As mentioned earlier, Sharp's case (supra) was a judgment of a Full Court of this Court given in an appeal brought, by leave, against the refusal of a single judge of the Court to grant interlocutory injunctive relief restraining the Commissioner from exercising powers under sec. 263. Although the Full Court held that there was a serious question to be tried as to whether authorisations under sec. 263 must be signed by the Commissioner personally, it is plain from their reasons at p. 4266 that their Honours had reached no final view on that matter. That of course is properly the case where interlocutory injunctive relief is involved.

Section 8 of the Taxation Administration Act expressly confers upon the Commissioner a power to delegate his powers or functions under a taxation law, other than the power of delegation. It was not doubted by the High Court in O'Reilly (No. 1) (supra) (see Gibbs C.J. at ATC pp. 4673-4675; C.L.R. pp. 10-13, Mason J. at ATC p. 4679; C.L.R. p. 20 and Wilson J. at ATC pp. 4685-4687; C.L.R. pp. 30-33) that the Deputy Commissioner, as delegate of the Commissioner, could sign an authorisation for the purposes of sec. 263. The subsequent case of O'Reilly (No. 2) appears to have proceeded on the assumption that the authorisation in question in that case, which was not signed by the Commissioner himself and, indeed, was signed by a facsimile of the signature of a Deputy Commissioner, was valid.

The answer to the question whether the statute requires the power to sign an authorisation to be exercised personally by the person designated or in the name of the person designated depends upon the nature of the power and the circumstances of the case: see O'Reilly (No. 1) (supra) per Gibbs C.J. at ATC p. 4673; C.L.R. p. 11. Since the grant of and signature of a sec. 263 authorisation are powers or functions of the Commissioner, they may be lawfully delegated by him pursuant to sec. 8 of the Taxation Administration Act, and his delegate then exercises the power or function of signature in his own right, and not as agent of the Commissioner. See
Re Reference Under Ombudsman Act (1979) 2 A.L.D. 86 per Brennan J. at pp. 93-95 and
Owendale Pty. Limited v. Anthony (1968) 117 C.L.R. 539, per Windeyer J. at p. 562, Taylor J. at p. 598 and Owen J. at p. 611. I reject, therefore, the argument that the two Deputy Commissioners of Taxation for Melbourne and Sydney did not have authority to sign the written authorisations in this case.

In my opinion, the Commissioner signed the letter authorisations as a precautionary measure lest Sharp's case rendered them necessary. The evidence establishes that the practice within the Australian Taxation Office enabled Mr Booth to decide to undertake the entry and search of Citibank's premises in this case, and that it is more likely than not that the Commissioner gave no consideration to whether this particular

ATC 4728

entry and search was necessary or desirable; to what documents or classes of documents were to be inspected; to whether it was necessary for 37 officers to engage in the search; to which taxpayers were being investigated whose affairs related to the search; to the previous history of Mr Booth's investigations which culminated in the search; to the likelihood that there would be found on the premises of Citibank documents to which a claim for legal professional privilege could attach; and to the steps which should be taken to safeguard the rights of persons with respect to such documents.

These matters were in my view relevant to be taken into account, and the Commissioner, in issuing the letter authorisations, was bound to take them into account:
Minister for Aboriginal Affairs v. Peko-Wallsend Limited (1986) 162 C.L.R. 24 per Mason J. at pp. 39-42.

I have come to the conclusion that on the evidence the inference should be drawn that the Commissioner failed to take into account relevant and material considerations, which failure vitiated his decision to issue the letter authorisations impugned in these proceedings. Having regard to the fact that these considerations were peculiarly within the Commissioner's knowledge, the inference that they were not considered is more confidently drawn. The rule in
Jones v. Dunkel (1959) 101 C.L.R. 298 is productive of difficulties, but in my view the prerequisites for its application are satisfied on the facts of this case. It was within the power of the respondents to give the evidence which was not given and considerable significance may be attached to the failure of the respondents to adduce that evidence where the absent witnesses were at the highest level within the Australian Taxation Office. The inference that relevant considerations were not taken into account by the Commissioner may fairly be drawn from the evidence given by Mr Booth; and the rule permits it more readily to be drawn where the Commissioner might have testified to the contrary had the respondents chosen to call him to give evidence. It is clear that the question of the considerations taken into account in the issue of the authorisations was a matter which was in issue between the parties; and the evidence of the Commissioner would have led to the elucidation of that issue. Where the rule in Jones v. Dunkel is capable of applying to the failure of Ministers of the Crown and of senior corporate executives to give evidence, it is equally capable of applying to the failure of senior public servants to do so, if the requirements for its application are otherwise satisfied. See Jones v. Dunkel (supra);
Electronic Industries Limited v. The Mayor of the City of Oakleigh (1973) V.R. 177 per Gowans J. at p. 189 and
Lebanese Moslem Association v. Minister for Immigration and Ethnic Affairs (1986) 67 A.L.R. 195 per Pincus J. at pp. 199-200; Cross on Evidence, 3rd Australian ed., para. 1.42-1.44. I draw that inference, and conclude that the Commissioner's issue of the letter authorisations is vitiated by that failure.

I turn to the question whether an irrelevant consideration was taken into account by the Commissioner in signing the letter authorities.

A press release issued on the morning of the search, on the authority of the Deputy Commissioner of Taxation, Melbourne. It was not issued with the knowledge of Mr Booth.

The press release was in the following terms:

``STATEMENT BY THE DEPUTY COMMISSIONER OF TAXATION, MELBOURNE, MR. RAY CONWELL

Taxation Office takes access to offshore tax avoidance arrangement documents

The Deputy Commissioner of Taxation, Melbourne, Mr Ray Conwell said today that a team of auditors from his office had this morning visited the premises of a large Sydney-based financial institution to exercise powers under the Income Tax Assessment Act to take access to, and make copies of, documents relating to the implementation of a tax avoidance arrangement that involved the transfer of hundreds of millions of dollars offshore to acquire redeemable preference shares in tax-haven based companies.

The action had been taken under powers contained in the income tax law that allowed taxation officers full and free access to buildings and authorised the copying of documents which the Australian Taxation Office considered could be relevant to the taxation affairs of individuals and companies.

The Deputy Commissioner said that the Taxation Office believes that the redeemable preference share arrangement has been used

ATC 4729
for tax avoidance purposes by a number of major Australian companies.

While the arrangement consists of a series of transactions, the essence of it is that income, which would normally be taxable in Australia as interest, is converted in an overseas tax-heaven into income from dividends. Because of the rebate provisions of the income tax law that applied prior to the 1987-88 income year, all dividend income received by Australian companies was effectively not subject to Australian tax. Mr Conwell said that the Commissioner of Taxation had ruled in Taxation Ruling IT 2456 that the general anti-tax avoidance provisions (Part IVA) of the income tax law could apply to strike down arrangements of this kind.

The visit to the institution's premises had been in the planning stages for several weeks. However, Mr Conwell said, the decision to use the access powers of the law to obtain documents relevant to the arrangement had finally been taken because of the difficulties that had been encountered in obtaining comprehensive details of the arrangement and its participants, from the institution concerned.

MELBOURNE

11.50 am

15 June 1988''

The press release is a curious feature of this case. It was argued that it is inexplicable except on the basis of enforcing the Department's policy of ``voluntary compliance'', in effect using a prominent bank as an example of what may happen to others, especially banks and other financial institutions, if they do not voluntarily comply with the Australian Taxation Office's perception of the obligations of taxpayers under the Act and other revenue legislation.

There is more than one inference that can be drawn from the issue of the press release in all the circumstances; but even with the aid of Jones v. Dunkel (supra) it is not permissible to draw from the evidence in this case the inference that it was at the relevant time the policy of the Australian Taxation Office to target or single out appropriate persons or institutions in the community who were perceived as not complying with the Office's perception of their obligations under relevant tax legislation, to take action in some form against them, including the exercise of powers under sec. 263, and to couple that action with publicity so as to have the largest possible impact on persons to ensure ``voluntary compliance'' by the targets of the action and by others.

If there was a policy of the Australian Taxation Office of ensuring ``voluntary compliance'' and if regard was had to it by any decision maker and positively relied on by him in reaching any of the impugned decisions, it would have been a wholly impermissible consideration.

It is not clear from the evidence when the wallet authorisations were signed by the Deputy Commissioners, Sydney and Melbourne; but it appears that they were signed before the search was considered and without it being specifically in contemplation. Those authorisations are bad for want of particularity and specificity for the reasons given earlier. The wallet authorisations were issued in consequence of decisions by the Deputy Commissioner to issue them; but they were not decisions referable to any specific occasion for the exercise of the powers conferred by sec. 263 with respect to particular premises and documents or classes of documents.

The Deputy Commissioners, therefore, did not give consideration to the particular premises to be searched, the taxpayers whose affairs were being considered, the documents or classes of documents to which access was sought, which taxing statute was involved, and the question of legal professional privilege. Those decisions of the Deputy Commissioners are bad in law. This is the inevitable consequence of the view taken by the Commissioner and the Deputy Commissioners that authorisations pursuant to sec. 263 could be of the general kind of which all authorisations in this case are examples.

The scope of the term ``officers'' under sec. 263 of the Act

The person whom the Commissioner may authorise under sec. 263 is ``any officer authorized by him in that behalf''. Although there was some initial suggestion in the opening address of counsel for Citibank that the persons authorised by the Commissioner and the Deputy Commissioner were not ``officers'' within the meaning of that expression in sec.

ATC 4730

263, that submission was not pressed in final address. I need therefore say very little about it. I note, however, that the word ``officer'' is not defined in the Act, although it is defined in subsec. 16(1) but for the purposes of that section only. It is defined in sec. 2 of the Taxation Administration Act as meaning ``an officer or employee of the Australian Public Service''. It is also defined in sec. 21 of the Acts Interpretation Act 1901, but not in terms which are of assistance in the construction of the word ``officer'' where it appears in sec. 263. ``Officer'' is also defined in the Public Service Act 1972. Each of the persons who gave evidence in this case swore that he or she was either a ``public servant employed by the Australian Taxation Office'' or was ``employed in the office of the Australian Taxation Office'' as a taxation officer. In my view it is not necessary to determine finally in this case the proper construction to be placed upon the expression ``officer'' where it appears in the context of sec. 263 except to say that the expression is sufficiently wide to include all persons who were engaged in the search in the present case, they being public servants employed by the Australian Taxation Office as taxation officers.

Mr Booth's decision to enter Citibank's premises

Mr Booth's decision to enter the premises of Citibank and gain access to documents there is the critical decision in this case. He had made arrangements well in advance of 15 June for the search but did not make the final decision to conduct it until the morning of 15 June. There was no necessity within the practice of the Australian Taxation Office for him to inform his superiors of that decision though, in fact, he did keep them informed in a general way of his discussions with Citibank officers and of his view that ``contingency plans'' were required to gain access to Citibank's documents.

Mr Booth was conducting an audit of the TNT Group and in the course of that audit he discovered transactions involving various companies which suggested to him that they and others were involved in the preference share arrangement or arrangements of a similar kind. He formed the view that Citibank was promoting those arrangements. There is dispute in the evidence as to whether Citibank was in fact promoting them, and I do not need to decide that question. However, I am satisfied that Mr Booth genuinely believed that Citibank was promoting the arrangement and that his belief was based on reasonable grounds, having regard to the information available to him at the time the view was formed. Mr Booth had, as I said earlier, numerous discussions with officers of Citibank, especially Mr Wilmot, and had been afforded some access to Citibank's records and books. There is dispute as to whether Mr Wilmot and other officers of Citibank co-operated with Mr Booth, but I do not find it necessary to decide that question. It is sufficient for present purposes that I find that Mr Booth formed the opinion that there may have been documents present in the premises of Citibank to which he had not been given access at the time he made his decision to enter the premises. In my opinion it has not been established that this belief of Mr Booth was not based on reasonable grounds.

I reject the contention of counsel for Citibank that Mr Booth authorised the search because he intended to punish Citibank for not giving assistance to him.

Mr Booth formed the view that a large team of taxation officers would be required to gain access to Citibank's documents. He gave evidence that he held this view because of the number of floors occupied by Citibank in the building in Margaret Street, Sydney; because he thought it necessary to prevent the possible movement of files; and in order to be ``in and out'' of Citibank's premises as quickly as possible, thus causing the minimum inconvenience to Citibank and to the Australian Taxation Office.

There is also evidence from Mr Booth and other witnesses in the case, including taxation officers who attended on the search, that Mr Booth wanted to take Citibank by surprise; and that, at the briefing sessions which he conducted for officers who took part in the search, they were told that they were likely to have access to the premises of Citibank for a maximum of two hours before they would be legally restrained, and were to remove all the copies of documents from the premises which they made as quickly as possible. Mr Booth admitted that the reason for his not forewarning Citibank of the intended search was that ``they may have obtained access to the court before he got access to them [i.e. the documents]''.

In my opinion Mr Booth wished to take Citibank by surprise and chose to conduct the

ATC 4731

search with 37 officers so that all relevant parts of the Citibank's premises could be entered and searched as quickly as possible, certainly within the space of two hours, because he feared that after that time there was a real likelihood that injunctions would issue from a court restraining the further conduct of the search. The decision to conduct the search with 37 taxation officers and to conduct it with a view to no more than two hours elapsing from the commencement to the conclusion of the search was not a mere incident to the decision to search; it was at the heart of the decision. It was a massive visit on a scale never previously experienced in this country.

In my opinion it was impermissible for Mr Booth to take into account, when making his decision to search the Citibank premises, the consideration that the search be conducted so as to prevent Citibank from obtaining any practical benefit from its legitimate legal right to approach the courts for injunctive relief if the court thought it proper to grant that relief in all the circumstances.

Mr Booth's decision has therefore an inherent vice in its attempt to render futile any right to injunctive relief which Citibank may have had or any injunction which Citibank may have obtained, and in my view that vice is sufficient to lead to the decision being set aside.

Mr Booth's decision should also be set aside on an independent ground relating to legal professional privilege which, for convenience, I shall deal with later.

Considerable reliance was placed for various purposes by counsel for Citibank upon sec. 264 of the Act and its relation to sec. 263. The principal submission advanced was that Mr Booth should have resorted to the powers available under sec. 264 before invoking the powers of entry and search under sec. 263. In my opinion that submission is without substance. The circumstances were such that Mr Booth could invoke either sec. 263 or 264 powers or both. The possibility that the Commissioner might exercise such an election, on the basis that the powers in sec. 263 and 264 are independent of each other, is implicit in the reasoning of the High Court in Smorgon's case (supra) per Gibbs C.J. at 79 ATC p. 4046; C.L.R. p. 523, per Mason J. at ATC pp. 4051-4052; C.L.R. pp. 534-535 and per Murphy J. at ATC 4058; C.L.R. p. 546. He chose to resort to sec. 263 and his decision in this respect was not erroneous.

The conduct of the search

The taxation officers engaged in the search inspected many books, papers and documents found on Citibank's premises and made copies of and extracts from many of those writings. Most of the material inspected and copied did not relate to the preference share arrangement.

The events of 15 June were confusing. As might be expected, there were differences in the evidence of the various witnesses who were called as to what was said and done on this occasion. I do not think it necessary to resolve the individual conflicts between the witnesses of which there were many. The evidence given by the witnesses on these matters seemed to me to be given truthfully, although my assessment of the reliability of the witnesses varied from witness to witness.

It was submitted by counsel for Citibank that, before entry, Mr Booth or one of his officers should have sought out a person in authority in Citibank on the premises and given him or her every reasonable opportunity to inspect the various authorities held by the officers concerned. Support for this view was said to be derived from the legislative history of sec. 263. In my view the submission is erroneous. Subsection 263(2) makes it plain that officers engaged in the search of premises have no right to enter premises or to remain there if, on being requested by the occupier for proof of authority, they fail to produce the written authorities. I do not think that either the history of the section or the terms of the section itself support the proposition that there is an obligation on the searcher to first find a person in authority within the hierarchy of the occupier and present on the premises before his right to enter arises. Not only is there nothing to be found in the terms of the section which supports the proposition, but in some circumstances it would obviously be impractical for this to be done; where, for example, premises are vacant or a person in authority is not present.

There is a confusing picture as to whether officers, and if so which of them produced their authorisations, be they the letter authorisations or the wallet authorisations, to employees of Citibank. As to the production of authorisations by the 37 officers, I am satisfied that, whenever

ATC 4732

an employee of Citibank requested an officer to produce his or her authorisation that was done, although sometimes in circumstances where it would have been difficult for the employee to read the authorisation if he or she chose to do so. Some employees of Citibank requested identification of taxation officers engaged in the search and, when that request was made, the officers produced their wallet authorisations. The wallet authorisations do at least serve the purpose of a means of identification of its bearer.

During the search Mr Wilmot asked officers involved in the search for the search to be suspended whilst he obtained legal advice. He apparently did obtain legal advice and then made arrangements with Mr Rosenbaum, a taxation officer engaged in the search, about the treatment of certain documents for which a claim for legal professional privilege was to be made by Citibank.

A request was made by two senior executives of Citibank, Mr Sime and Mr Thom, of officers engaged in the search for a delay for the purpose of obtaining legal advice, but that request was refused. Mr Sime is a vice-president and a general manager of Citibank and Mr Thom is the managing director of Citibank. In my opinion it was unreasonable for the taxation officers to refuse this request. It was obvious to all officers engaged in the search that, since it was a bank, Citibank would have in its possession documents to which a claim for legal professional privilege may properly attach. In all the circumstances a request to delay for some time whilst legal advice was obtained by Citibank was perfectly reasonable and should not have been denied.

Mr Booth gave instructions to the taxation officers at briefing sessions that they were entering the premises of Citibank specifically for documents connected with the preference share arrangement and that the occasion was not to be used as a fishing expedition; but that, in the event of their finding other documents relating to taxation, they were to use their discretion as to whether they were inspected or copied. I am satisfied that the taxation officers engaged in the search did not disobey this instruction. I am satisfied that documents were copied by taxation officers on 15 June where they formed the view, be it soundly based or otherwise, that the documents were relevant to the preference share arrangement or to some other taxation purpose.

Certain of the documents copied did relate to the preference share arrangement, but a large number of the documents copied related to other matters which had taxation implications. Indeed, the bulk of them were in this latter category. Each of the taxation officers who gave evidence swore that he or she believed that all documents which were copied were copied for purposes relevant to the operation of the Act. The overwhelming number of documents copied did concern tax avoidance schemes of one kind or another. In my view, although some of the documents copied were on the periphery of relevance to taxation implications, they probably represented only a small proportion of the documents copied.

In my opinion it is permissible for a search to be made at premises under sec. 263 and documents inspected and copied there even if they fall outside the ambit of the specific purpose which the decision maker had in mind when deciding to conduct the search. Certainly a search cannot be used for a general fishing expedition of a person's documents. There must be some reasonable basis for the view of the decision maker that documents may be in the possession of the occupier of certain premises which are likely to have a bearing on or relate to a particular matter or matters with which the Act is concerned. But once the power conferred by sec. 263 has been properly invoked and the search is being conducted and other documents come to light that fall outside that specific purpose, generally speaking I see no reason why they should not be copied or extracts made from them provided they have relevance to the Act or other taxation legislation. See
Southwestern Indemnities Ltd. v. Bank of N.S.W. (1973) 129 C.L.R. 512 per Barwick C.J. at p. 520; Smorgon's case (supra);
Clyne v. D.F.C. of T. 85 ATC 4597 per Morling J. at p. 4599; Williams, Investigations by Administrative Agencies, p. 315.

Legal professional privilege

There remains the question of legal professional privilege. It must be accepted in my view since the judgment of the Full High Court in
Baker v. Campbell (1983) 153 C.L.R. 52 that sec. 263 does not override legal professional privilege. Baker v. Campbell is an authoritative statement that the doctrine of legal

ATC 4733

professional privilege is not confined to judicial and quasi-judicial proceedings and that, in the absence of some legislative provision restricting its application, the doctrine applies to all forms of compulsory disclosure of evidence. Section 263 is a section which requires the compulsory disclosure of evidence and I see no basis for negating the application of legal professional privilege to the section.

The Judges who were in the majority in Baker v. Campbell must have been aware of the practical problems that beset the invocation of the doctrine of legal professional privilege where it may be claimed outside judicial or quasi-judicial proceedings, difficulties which were adverted to by the minority in Baker v. Campbell, especially by Mason J., and by a Full Court of this Court in Crowley v. Murphy (supra). Hence this case must be approached on the footing that the decision maker, being Mr Booth, should have had regard to the question of legal professional privilege when deciding how the search was to be conducted. In addition, the search should in fact have been conducted so that any claim for legal professional privilege that might be asserted by Citibank or by any of its clients whose documents were on Citibank's premises and in whom the primary claim would repose, could be invoked.

I turn first to Mr Booth's decision. Mr Booth did consider the question of legal professional privilege before he decided to make the search. He decided that each team of officers should have appointed to it ``competent, experienced officers'' who were to consider questions of privilege. If a claim was made for privilege by an employee of Citibank, documents were to be put into an envelope to be sealed so that a court or some third party could rule on the claim.

Whilst in some circumstances measures of this kind would be sufficient to justify a decision to make a search where the possibility of claims for legal professional privilege would arise, the measures taken were in my view inadequate in the present case. The premises to be searched were those of a large bank looking after the affairs of many clients. It was obvious to Mr Booth that there were numerous documents of various kinds on Citibank's premises that would be inspected by the taxation officers and that some of them would be susceptible of claims of immunity from inspection on the ground of legal professional privilege. For a decision to be made leaving the question of a determination of legal professional privilege to officers who were competent and experienced, but who did not necessarily have any legal qualifications, in circumstances where the visit was made by some 37 officers who were instructed to complete their task within a maximum of two hours, was in fact to pay little more than lip service to the recognition of the possibility of the claim being made. It must be remembered that once a document has been inspected and copied by officers of the Australian Taxation Office, for all practical purposes a claim for privilege in any subsequent legal proceedings would be largely valueless, especially where a necessary party to any litigation involving Citibank or any of its clients would be the Commissioner or a Deputy Commissioner.

It is not for me to attempt to spell out the kinds of precautions that could have been built into the search to safeguard any claim for privilege, an attempt not undertaken in Baker v. Campbell. One method that might have been adopted, however, would have been to ensure that, once access had been gained to Citibank's premises and before the search of documents was undertaken, notice be given to appropriate employees of Citibank so that they could obtain either house counsel, if any, or a qualified solicitor from the office of their solicitors at relatively short notice to assist in any assertion of a claim for privilege. If there was any legitimate fear - which in my view would have been groundless in this case and which I do not think was entertained in any event - that documents might be moved about or even outside the premises of Citibank to frustrate the search, adequate safeguards could have been adopted to prevent the fear from being realised. In the circumstances of this case the failure to pay proper regard to the question of legal professional privilege in my view vitiates the decision. It was incumbent upon Mr Booth to establish, when he decided to undertake the search on 15 June, a sufficient mechanism to enable Citibank to assert a claim for legal professional privilege. This was not done.

As to the conduct of the search itself, I have already referred to the fact that both Mr Sime and Mr Thom were denied the opportunity of obtaining legal advice about the search and, therefore, about questions of legal professional privilege. Where a search was conducted by 37

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officers of the Taxation Office, under instructions to keep the search to a maximum of two hours, and given the confusion that a surprise search of this magnitude would obviously create and did in fact create among employees of Citibank, inadequate opportunity was given to Citibank to obtain legal advice to allow any meaningful claim for legal professional privilege relating to documents of its clients to be asserted.

It is significant in this connection that Ms Rezek understood herself to be at liberty to make, and did in fact make, copies of any document whether or not it related to the transaction in question so long as it had, in her view, some relevance for the purposes of the Act. The documents copied by Ms Rezek included documents about which it might reasonably be expected that a claim for legal professional privilege might be made. Her understanding was that she was entitled to copy such documents, and that so long as a claim for protection on the ground of legal professional privilege was not in fact made by an employee of Citibank she was entitled to take the copies with her. Ms Rezek took the view, however, that she was not bound to accord to any person the opportunity of knowing what had been copied or of making a claim for privilege. She played an important role in the search itself and was one of the people primarily involved in discussions with Citibank officers before 15 June. Her evidence in my view illustrates the inadequacy of the attention given by Mr Booth to this question and the consequent inadequacy of its treatment on the actual conduct of the search; yet she was one of the more experienced investigation officers involved in the search. It is relevant, in this context, that a search conducted on the scale of the one in question would involve greater difficulties for the occupier of the premises in monitoring copying of documents and asserting a claim for privilege, where appropriate, than would a search on a smaller scale, particularly where the search was undertaken with no prior indication to the occupant of its imminence.

The decision of Mr Booth to conduct the search in the manner in which it was conducted, and the method of the search in fact, in my view each denied Citibank the fundamental right of asserting or claiming legal professional privilege which the High Court recognised in Baker v. Campbell, and which is founded in the considerations of public policy to which the court there referred.

In my opinion the application of Citibank succeeds. I will not make orders today, but shall stand the matter over to a date to be fixed in the near future so that the parties may consider my reasons for judgment. I direct Citibank to bring in short minutes of order on that date to give effect to these reasons.

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