MAY v DFC of T

Judges:
Goldberg J

Court:
Federal Court

Judgment date: 1 October 1998

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Goldberg J

Introduction

The applicant applies pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (``the ADJR Act'') for an order of review in respect of a decision by the respondent to exercise power pursuant to s 264(1)(a) of the Income Tax Assessment Act 1936 (Cth) (``the Act''). Section 264(1) of the Act provides:

``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.''

As a result of the decision sought to be reviewed a notice pursuant to s 264(1)(a) of the Act was served on the applicant which required compliance by him and, failing compliance, the applicant exposes himself to prosecution for an offence under s 8C of the Taxation Administration Act 1953 (Cth).

Background

The applicant is a member of a firm of solicitors Herbert Geer & Rundle (``the firm''), which gives legal advice to clients of the firm including advice on matters relating to income tax legislation. On 15 October 1997 the applicant received a telephone call from Mr Andrew Werbik, an employee of the Australian Tax Office, who told him that he was calling as part of a national project and asked him some questions concerning employees. A note of the conversation prepared by Mr Werbik states that he mentioned ``employee benefit trusts'' and that the applicant ``assented that this service was provided''. The applicant cannot recall if he did assent to that proposition. Nothing significant turns on the point and I accept that such a conversation took place.

On 10 November 1997 the applicant attended a conference with representatives of the Australian Tax Office including Mr Werbik. Mr Werbik told the applicant that he was speaking to him as part of a national project which related to employee share plans and employee benefits trusts. Mr Werbik said that the purpose of the project was to determine whether legislative amendments previously made were effective in practice. Mr Werbik asked the applicant for copies of deeds (presumably in relation to employee benefits trusts); the applicant declined to provide them. At the meeting the applicant was given a letter from the respondent dated 10 November 1997 which enclosed a notice of the same date pursuant to s 264 of the Act. The notice required the applicant to furnish the respondent with the information described in the schedule to the notice. That information related to any employee share acquisition plan, employee benefits trust or similar arrangement which had been prepared or marketed by the firm in the period 1 July 1994 to 30 June 1997. The information and documents referred to fell into eleven categories. The notice required the information to be provided by 26 November 1997 but the applicant was told at the meeting that he would be given 28 days for compliance.

On 12 November 1997 the applicant received a letter from the respondent which enclosed a further notice dated 12 November 1997 issued pursuant to s 264 of the Act. The notice required the applicant to provide the information described in the schedule to the notice in relation to any employee share acquisition plan, employee benefits trust or similar arrangement which had been prepared or marketed by the firm in the period from 1 July 1994 to 30 June 1997. The applicant was required to provide the information by 8 December 1997.

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ATC 4963

On 9 December 1997 the applicant sent a letter to the respondent in relation to the 12 November 1997 notice in which he sought clarification of what the respondent meant by ``the arrangement(s)'' in the schedule to the notice and in which he expressed the view that a large proportion of the information which appeared to be sought was of a type which would be the subject of legal professional privilege. The covering letter of 12 November 1997 had relevantly stated:

``Please note that section 264 does not override legal professional privilege but does override the privilege against self- incrimination.''

On 28 January 1998 the respondent wrote to the applicant in response to his letter of 9 December 1997 stating that he did not accept that the notice was invalid and gave the applicant until 12 February 1998 to respond to the notice. On 10 February 1998 the applicant wrote to the respondent and reiterated the matters raised in his letter of 9 December 1997 saying that the respondent's letter did not ``elucidate'' any of those matters.

On 14 May 1998 the respondent wrote a letter to the applicant in which the notices served on the applicant under cover of the letters dated 10 November 1997 and 12 November 1997 were formally withdrawn. The letter enclosed a new notice dated 14 May 1998 issued pursuant to s 264(1)(a) of the Act. Relevantly, the letter stated:

``It is noted that during discussions on 15 October and 10 November 1997 with officers of the Australian Taxation Office and yourself, you have shown an understanding of the term `employee benefits trust' and acknowledge that Herbert Geer & Rundle had prepared Employee Benefit Trusts. The word `arrangement' in this notice incorporates Employee Benefits Trusts. Accordingly this notice is using terminology which is clear and familiar to you.

...

Please note that section 264 does not override legal professional privilege but does override the privilege against self- incrimination.

The information requested in the attached notice is requested for the purposes of the Income Tax Assessment Act 1936 and 1997, as amended. In very limited circumstances, some information may be given to certain parties as prescribed in taxation law. Further details on Privacy can be found in the brochure `Safeguarding your Privacy' available at your nearest Taxation Office.''

The s 264(1)(a) notice

The notice required the applicant to furnish the information described in the schedule for the period 1 July 1994 to 30 June 1997 to the respondent in writing at the Australian Taxation Office no later than 4.00 pm on 11 June 1998. The schedule was in the following form:

``The following information is requested in relation to all employee share acquisition plans, employee benefits trusts or similar plans which have been established or prepared by Herbert Geer & Rundle in the abovementioned period:

• 1. Explanatory details of the manner in which an arrangement is intended to operate and the perceived benefits of entering into an arrangement.
• 2. Names and addresses of employer participants who have purchased, implemented or entered into an arrangement. Where the employer participant is a company please also provide the Australian Company Number.
• 3. For each employer participant identified by name, indicate:
  • (a) (i) the number of employer shares issued for each financial year and
    • (ii) the premium applicable to each share; and
  • (b) where an arrangement involves the employer participant making contributions into a trust, the amount of those contributions for each financial year in the relevant period.
• 1. For each employer participant identified by name, supply the names and Australian Company Numbers of all special purpose companies incorporated, purchased or otherwise acquired, in connection with an arrangement.
• 2. In relation to 4, provide details of the terms of the Memorandum and Articles of Association of the special purpose companies.

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  ATC 4964

• 3. Where a trust is used in an arrangement, provide details of the terms of the trust deed including the names of the settlor, trustees, appointors and beneficiaries.
• 4. For each employer participant, indicate whether you or your firm have in your possession, custody or control any resolutions and/or directors' minutes passed in connection with an arrangement.
• 5. Details of the fee structure used by Herbert Geer & Rundle to determine professional fees and disbursements payable by an existing or prospective client for the establishment, implementation or setting up of an arrangement.
• 6. Details of any financial dealings between Herbert Geer & Rundle and/or persons acting on behalf thereof, and any employer participants and/or persons acting on behalf of those employer participants, in relation to the payment of subscription monies or share premiums for shares issued pursuant to an arrangement.
• 7. Details of any financial dealings between Herbert Geer & Rundle and/or persons acting on behalf thereof, and any employer participants and/or persons acting on behalf of those employer participants, in relation to the payment of contributions into any trust pursuant to an arrangement.
• 8. Particulars of any taxation determinations and/or private binding rulings sought in relation to an arrangement.''

The schedule also contained definitions of some of the terms used in the schedule. In particular, ``arrangement'' was defined as meaning:

``all employee share acquisition plans, employee benefits trusts or similar plans which have been prepared by Herbert Geer & Rundle in the relevant period.''

The expression ``the relevant period'' was defined as meaning:

``the period from 1 July 1994 to 30 June 1997 inclusive.''

The expression ``similar plans'' was defined as meaning:

``an arrangement that has the following features:

• • an employer participant makes contribution into another entity, usually for the purpose of motivating, retaining, benefiting or remunerating employees;
• • that entity may be a company or trust; and
• • the entity provides benefits (cash or otherwise) to employees of the employer participant.

This includes, but is not limited to, employee welfare funds, employee bonus trusts and employee incentive plans.''

The expression ``employer participants'' was defined as meaning:

``former and existing clients of Herbert Geer & Rundle who have purchased, implemented or entered into an arrangement.''

The expression ``your firm'' was defined as meaning:

``the partnership known as Herbert Geer & Rundle as composed from time to time.''

On 9 June 1998 the applicant sent a letter to the respondent in which he enclosed a notice pursuant to s 13(1) of the ADJR Act requesting the respondent to furnish to him a statement in writing in relation to the notice dated 14 May 1998 setting out:

``... the findings on material questions of fact, referring to the evidence or other material on which the said findings were based and giving the reasons for the decision or decisions set out in the Schedule hereto.''

The schedule set out the following decisions:

``1. The decision to exercise certain powers and functions in order to require the applicant to furnish information details of which are set out in a Notice addressed to the applicant dated 14 May, 1998 a copy of which is attached hereto as Attachment A.

2. The decision to require the applicant to furnish the information by a particular time, being 11 June 1998 at 4.00 pm.

3. In respect of each and every piece of information referred to in the Schedule in Attachment A, the decision to require the applicant to furnish that piece of information.

4. In respect of every piece of information referred to in paragraph 3 herein, the decision to require the production thereof at a particular time, being 11 June 1998 at 4.00 pm.''

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ATC 4965

On 7 July 1998 the respondent wrote a letter addressed to the Senior Partner, Herbert Geer & Rundle, providing a statement of reasons pursuant to s 13(2) of the ADJR Act. The letter relevantly stated:

``A. The findings on material question of fact were :

• a. The Commissioner of Taxation (`the Commissioner') as part of a project involving employee share acquisition plans and benefit trusts sought information from your Mr May regarding the setting up and the operation of the arrangements established or prepared by Herbert Geer & Rundle (`the Firm').
• b. The Firm's Mr May was informed by telephone on 15 May 1997 [later amended to 15 October 1997] of the project being undertaken by the Commissioner and the information the Commissioner required from the firm. During the telephone communication it was established that your Firm prepared employee benefit trust arrangements for clients.
• c. On 10 November 1997 Mr May attended an interview with Andrew Werbik, Silvana Camilleri and Paul Cattapan of this office during which information was sought regarding share acquisition plans and benefit trusts set up by the Firm for its clients.
• d. The answers furnished by Mr May were considered unsatisfactory. He questioned the basis of the enquiries made by the Commissioner's representatives and declined to answer further questions.
• e. The Commissioner in the circumstances, considered it fair and reasonable for the proper administration of the ITAA to serve on Mr May a notice pursuant to section 264(1)(a) of the ITAA formally setting out the information required to be supplied by the Firm.
• f. The above notice was served on 12 November 1997 and required the information to be furnished by 8 December 1997
• g. By letter dated 9 December 1997, Mr May of the Firm claimed the term `arrangement' was not clear and alluded that a large portion of the information sought may be subject to legal professional privilege. The information purported to be subject to legal professional privilege was neither identified not [sic] itemised.
• h. On 27 January 1998 the information requested pursuant to the section 264(1)(a) notice of 12 November 1997 remained outstanding.
• i. In a letter dated 28 January 1998, the Commissioner advised that the notice issued on 12 November 1997 was valid and further time to comply with the notice was granted.
• j. On the 13 May 1998 the information sought in the notice of 12 November 1997 still remained outstanding.
• k. For the proper administration of the ITAA, the Commissioner still considered it necessary to obtain the information held by the Firm in relation to employee share acquisition and benefit trust arrangements established by the Firm for its clients.
• l. In the circumstances it was decided to formally withdraw the notices issued on 10 and 12 November 1997. It was further considered fair and reasonable to issue a new notice pursuant to section 264(1)(a) of the ITAA requiring compliance by 11 June 1998.

B. Evidence or other material on which the findings were based .

• a. Minutes of telephone conversation between Mr May and Mr Andrew Werbik of this office on 15 October 1997.
• b. Minutes of interview with Mr May on 10 November 1997.
• c. A section 264 notice dated 12 November 1997 personally delivered to the offices of Herbert Geer & Rundle.
• d. Letter dated 28 January from the Commissioner.
• e. Letter dated 10 February 1998 from the Firm.
• f. A section 264 notice dated 14 May 1998 personally delivered to Mr Tom May.
• g. Letter dated 11 June 1998 from Herbert Geer & Rundle requesting a

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  ATC 4966

  statement of reason in relation to our issue of the section 264 notice.
• h. Taxpayers' Charter.

C. The reason for the decision .

• a. The Commissioner as part of a project involving employee share acquisition and benefit trusts arrangements sought information from the Firm regarding the arrangements established for its clients.
• b. The Firm declined to furnish the information.
• c. The Commissioner, for the proper administration of the ITAA, considered it necessary to obtain the information held by the Firm regarding employee share plans and benefit trusts.
• d. Subsection 264(1)(a) of the ITAA provides that the Commissioner may by notice in writing require any person, whether a taxpayer or not, to furnish the Commissioner with such information as he may require.
• e. The information sought from the Firm was considered necessary to determine the taxation implications applicable to arrangements established by the Firm for its clients.
• f. The decision to request the particulars contained in item 1 of the section 264 notice was considered necessary to determine how the arrangement was intended to operate and what the perceived benefits were for entering into the arrangement.
• g. The decision to request the particulars contained in item 2 of the section 264 notice was considered necessary to assist in seeking further information from the party or parties, who may be in the best position to supply such information.
• h. The decision to request the particulars contained in item 3 of the section 264 notice was taken to determine the extent and scope of the arrangement and to assess the volume of contributions in share plan and trust arrangements respectively.
• i. The decision to request the particulars contained in item 4 of the section 264 notice was considered necessary to enable the Commissioner to determine the flow of funds between the various entities that were involved in the arrangement and to enable further enquiries to be made in relation to the company if required.
• j. The decision to request the particulars contained in item 5 of the section 264 notice was considered necessary to determine the nature of the legal rights and obligations arising from a share plan arrangement.
• k. The decision to request the particulars in item 6 of the section 264 notice was considered necessary to determine the nature of the legal rights and obligations arising from a benefit trust arrangement.
• l. The decision to request the particulars contained in item 7 of the section 264 notice was considered necessary to determine whether the Firm is in a position to assist with the supply of additional information or documents with respect to particular employer participants.
• m. The decision to request the particulars contained in item 8 of the section 264 notice was made to determine whether the arrangements are tailored specifically for individual participants or more akin to a mass marketed exercise.
• n. The decision to request the particulars contained in item 9 of the section 264 notice was made to ascertain whether a contribution made into a share plan arrangement was financed by the employer participant, Mr May or by the Firm or persons acting on their behalf.
• o. The decision to request the particulars contained in Item 10 of the section 264 notice was made to ascertain whether a contribution made into a trust arrangement was financed by the employer participant, Mr May or by the Firm or persons acting on their behalf.
• p. The decision to request the particulars contained in item 11 of the section 264 notice was made to ascertain whether the Firm has received from the Com- missioner any taxation determinations and/or any private rulings in relation to the arrangement.
• q. Having regard to the nature of the information sought and the previous requests made to Mr May, the 28 days

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  ATC 4967

  given to comply with the notice and the time to respond to each piece of information sought was considered to be fair and reasonable.''

In his application for an order of review the applicant stated that the grounds of the application are that the respondent, in making the decision to exercise power pursuant to s 264(1)(a) of the Act, as a result of which the notice dated 14 May 1998 was served on the applicant:

• (a) improperly exercised the power conferred upon him: s 5(1)(e) of the ADJR Act;
• (b) erred in law: s 5(1)(f) of the ADJR Act.

The grounds alleged that the eleven items in the schedule fell outside the respondent's stated purpose for the decision to serve the notice, constituted an impermissible fishing expedition and that the decision must have been motivated by an irrelevant consideration. It was also alleged that the respondent failed to take account of a relevant consideration, namely that in complying with the notice the applicant might expose his clients, his partners and other persons to a penalty without giving them an opportunity to be heard on the legality or validity of the power being exercised by the respondent.

The submissions

The applicant submitted that in exercising the power to serve the notice the respondent acted ultra vires as the sole purpose for which the power was exercised, and the notice issued, was to determine the taxation implications applicable to arrangements established by the firm for its clients, this being the purpose specified in paragraph C(e) of the statement of reasons.

The applicant accepted that this is a proper purpose for the service of the notice but said that the eleven categories of information sought in the notice (or at least some of them) on their face do not satisfy this purpose and fall outside it. It is also said that items 5 and 6 in effect, seek the contents of documents which can only be sought pursuant to s 264(1)(b) of the Act. The applicant pointed to the fact that the notice requires information to be provided not only in relation to plans and trusts established by the firm for its clients but also in relation to plans and trusts prepared by the firm but which were never established for the firm's clients. Put another way, the notice seeks information about plans and trusts which were prepared but never used for clients. It follows, it is said, that the exercise of power must necessarily have been exercised for an improper purpose or on the basis of an irrelevant consideration or otherwise based on an error of law. It is said that the improper purpose is not one that is necessarily outside the possible purposes of the Act, but that it is one outside the permissible purpose, given that the reason for the exercise of the power is known and that reason is limited to specific matters. It is not necessary therefore, said the applicant, to identify the ulterior purpose.

The respondent agreed that the purpose specified in paragraph C(e) of the statement of reasons sets out the purpose for which the decision was made to serve the notice but added that in paragraphs C(f) to C(p) of the statement he gives particular reasons for the decision to seek each of the eleven categories of information described. The respondent said that no improper purpose, irrelevant consideration or error of law has been identified nor is there any evidence of such matters. Reference was made to the evidence that the information described in the notice is sought as part of a national project in relation to employee share plans and employee benefits trusts. The respondent contended that the issue is not whether the information sought in the notice satisfies the description in paragraph C(e) of the statement of reasons but whether he has given the notice under s 264(1)(a) for the purposes of the Act. The respondent said that he has so given the notice because the evidence shows that he served the notice for the purpose of determining the taxation implications of plans prepared by the firm during a specified period. In this context the respondent is using the term ``prepared'' as meaning ``created'' or ``brought into existence''. The respondent said that paragraph 1 of the notice, fairly read, does not cover arrangements prepared but abandoned by the firm and not offered to clients, but that the fact that the respondent may be seeking information about plans that may ultimately not have been implemented does not mean that the purpose of the notice is something other than the purpose of attempting to determine the taxation implications of plans that ultimately were carried into effect.

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ATC 4968

It was also submitted by the applicant that the firm's clients' contractual right of confidentiality is interfered with by the service of a valid notice under s 264. It is said that the validity and lawfulness of the taking away of that right is dependent upon the validity and lawfulness of the notice so that a procedural right to be heard should be given, in the notice itself, to enable clients of the firm to challenge the validity of the notice if so advised. It is said that this right does not go to the decision to serve the notice but rather that the notice should in its terms, give those persons directly affected by the interference with their contractual right of confidentiality an opportunity to be heard not on the decision to serve the notice but on the validity of the notice. It follows, it is said, that the exercise of power must have failed to have regard to this relevant consideration.

The respondent submitted that he is not obliged to comply with the requirements of natural justice in deciding whether to serve a notice pursuant to s 264 of the Act and that his power under s 264 overrides any contractual duty of confidence. It follows, said the respondent, that a client cannot have a legitimate expectation that he or she will be given a right to be heard in relation to a notice which may affect his or her interests.

Legal principles

Before turning to a consideration of the applicant's submissions it is helpful to understand the extent and scope of the power granted by s 264 of the Act. It is a very extensive and wide ranging power. In
FC of T & Ors v The ANZ Banking Group Ltd; Smorgon & Ors v FC of T & Ors 79 ATC 4039; (1977-1979) 143 CLR 499 (``Smorgon's case'') Mason J said at ATC 4052-4053; CLR 535:

``Except in one respect the powers given by sec 264 should be circumscribed only by reference to the limitations which are expressed in that section. Thus, in sec 264(1)(b) the power to compel evidence is restricted to evidence `concerning his or any other person's income or assessment' and the power to require production is confined to documentary records `relating thereto', that is, to `his or any other person's income or assessment'. However, the power to require information contained in para (1)(a) is not similarly limited. As it is a power given to the Commissioner for the purpose of enabling him to perform his functions under the Act it must be circumscribed by reference to this purpose.

...

And, for a similar reason there is nothing in the suggestion that an issue or dispute of fact must first arise between a taxpayer and the Commissioner before the Commissioner can invoke sec 264. There is simply no basis for the implication of such a limitation. The strong reasons which inhibit the use of curial processes for the purposes of a 'fishing expedition' have no application to the administrative process of assessing a taxpayer to income tax. It is the function of the Commissioner to ascertain the taxpayer's taxable income. To ascertain this he may need to make wide-ranging inquiries, and to make them long before any issue of fact arises between him and the taxpayer. Such an issue will in general, if not always, only arise after the process of assessment has been completed. It is to the process of investigation before assessment that sec 264 is principally, if not exclusively, directed.''

Section 264 of the Act enables the respondent to undertake a roving inquiry and a fishing expedition into income or assessment of taxpayers: Smorgon's case (supra) at ATC 4046, 4052-4053; CLR 524, 535-536;
Eighth Oupan Pty Ltd v DFC of T 86 ATC 4309, 4314; (1986) 10 FCR 559, 565;
Industrial Equity Ltd & Anor v DFC of T & Ors 90 ATC 5008 at 5015; (1990) 170 CLR 649 at 662. The only constraint upon the power given under s 264(1)(a) is that it must be exercised to enable the respondent to perform his functions under the Act.

It does not appear that the Commissioner is required to act in accordance with the rules of natural justice nor is the Commissioner required to give an addressee of a notice under s 264 a hearing before deciding to serve the notice. So much was decided by Northrop J in
Sixth Ravini Pty Ltd and Eighth Oupan Pty Ltd v DFC of T 85 ATC 4307 at 4313. On appeal his Honour's decision was upheld and the appeal dismissed (86 ATC 4309; 10 FCR 559), the appellant abandoning the submission that the appellant was entitled to a hearing before the Deputy Commissioner before a decision was made to serve a notice under s 264. I do not consider that any of the observations in decisions such as

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ATC 4969

Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648;
Attorney- General (NSW) v Quin (1990) 170 CLR 1;
Annetts v McCann (1990) 170 CLR 596;
Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 or
Oates v Attorney- General (Cth) (1998) 156 ALR 1 require a re- consideration of the proposition that the Commissioner is not required to give an addressee of a notice under s 264 a hearing before deciding to serve the notice. Such a decision does not impinge upon any vested right or immunity or any legitimate or reasonable expectation of the addressee. I will return to this issue.

The applicant's submission that the information sought in the notice fell outside the respondent's purpose in serving the notice was made on a close reading, and analysis, of the words used in the statement of reasons and the schedule to the notice. The respondent submitted that the notice was not a statutory instrument and said that one should have regard to
Commonwealth of Australia v Duncan (1982) 44 ALR 249 at 255 where Franki J said:

``In my opinion, this court should not look over critically at the words used in decisions by members of administrative tribunals, many of whom are not lawyers.''

This observation was adopted in relation to a statement of reasons given pursuant to s 13 of the ADJR Act in
Tagle v Minister for Immigration and Ethnic Affairs (1983) 46 ALR 379 at 386. More recently, similar observations have been made by members of the High Court in
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259. The majority of the Court (Brennan CJ, Toohey, McHugh and Gummow JJ) accepted as ``well settled'' the propositions stated by a Full Court of the Federal Court (Neaves, French and Cooper JJ) in
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287. The majority said at 272:

``... that a court should not be `concerned with looseness in the language... nor with unhappy phrasing' of the reasons of an administrative decision-maker. The Court continued: `The reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error.'

These propositions are well settled. They recognise the reality that the reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over- zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed.''

At 291 Kirby J said:

``The reasons under challenge must be read as a whole. They must be considered fairly. It is erroneous to adopt a narrow approach, combing through the words of the decision- maker with a fine appellate tooth-comb, against the prospect that a verbal slip will be found warranting the inference of an error of law.''

However it must not be forgotten that there are serious consequences if an addressee of a s 264 notice does not comply with it as he or she will, thereby, be exposed to prosecution for an offence under s 8C or s 8D of the Taxation Administration Act 1953 (Cth). In
Fieldhouse v DFC of T 89 ATC 5038; (1989) 25 FCR 187 (also reported as
Perron Investments Pty Ltd & Ors v DFC of T 89 ATC 5038; (1989) 20 ATR 1299), Lockhart J, speaking of a notice under s 264 of the Act said at ATC 5050; FCR 204:

``... Compliance ought not to involve the recipient in abstruse questions of construction demanding the extraction (and performance) of some valid obligation from a matrix of invalidity. I do not think, according to its true meaning, sec 264 authorises the issue of a demand containing a complex interweaving of requirements very many of which are beyond power.''

Hill J said at ATC 5053; FCR 208:

``... Where information is required by the section to be furnished, the request for information should be so framed as to be sufficiently clear to convey to the addressee what information is sought and a notice which was unintelligible would obviously be bad. However, it does not follow from this that the question of the validity of a notice should be approached carpingly by engaging in a narrow analysis of each word in an attempt to find some latent ambiguity in it. Rather the approach to be adopted is to ask in respect of any particular request whether a reasonable man in the position of the addressee of the notice can fairly comply

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ATC 4970

with it and not be thereby exposed to the possibility of penalty for non-compliance having regard to the manner in which the notice is formulated.''

At ATC 5056; FCR 212 Hill J, in response to the submission that the notice under s 264 was ambiguous, adopted the following passage from the judgment of Northrop, Deane and Fisher JJ in
Pyneboard Pty Ltd v Trade Practices Commission (1983); 57 FLR 368 at 375:

``The requirement that a notice under sec 155(1) convey, with reasonable clarity, to the recipient what information he is required to furnish or what documents he is required to produce is not to be applied in a precious or hypercritical fashion (see
Melbourne Home of Ford Pty Ltd & Ors v TPC (1980) ATPR ¶40-174 at p 42,412; (1980) 47 FLR 163). Artificial dissection, in the cause of determined obfuscation, can introduce an argumentative element of uncertainty into words which, when read reasonably in context, are adequate to convey a plain and clear meaning. Provided a notice makes it reasonably clear, in the circumstances in which it is given and on a fair reading of its terms, what information or documents are required, the requirements of sec 155(1) as to clarity will be satisfied. In this regard, the mere fact that parsing and analysis in the artificial atmosphere of the courtroom can lead to the identification of a number of latent ambiguities will not invalidate what, as a matter of common sense, is reasonably clear.''

The issues

The construction of the notice

The applicant submitted that the purpose for which the information was sought was to determine the taxation implications applicable to arrangements established by the applicant's firm for its clients. It was then said that by requesting information in the schedule relating to share acquisition plans, employment benefits trusts or similar plans which had been ``established or prepared'' by the firm the information requested went beyond that which was necessary to determine the taxation implications applicable to arrangements actually established. Similarly, it was said that the definition of ``arrangement'' in the notice as meaning all employees' share acquisition plans, employee benefits trusts or similar plans which have been prepared by the firm in the relevant period suffers from the same vice. This was demonstrated, it was said, by item 1 in the schedule which sought explanatory details of the manner in which an ``arrangement'' was intended to operate and the perceived benefits of entering into an ``arrangement''. By reference to the definition of ``arrangement'' it was said that item 1 was seeking details of plans and trusts which had been prepared but not necessarily offered to clients or implemented by them. Putting the matter another way, it was submitted that item 1 sought details of all the work that the firm had carried out whether or not offered to or implemented by clients. It was accepted by the applicant that it was a proper subject for inquiry as to details of arrangements implemented for clients of the firm but it was said that it was not within the purpose identified by the respondent to investigate, for example, arrangements which the firm had developed but put on one side and not offered to, or implemented for, clients.

The applicant did not suggest that the respondent had any particular purpose in seeking the information which was improper but rather said that whatever the purpose was, it was not the purpose which the respondent had stated in paragraph C(e) of the statement of reasons and therefore it was improper, whatever it was, because it was not within the proclaimed purpose. The applicant submitted that the other purpose may be extraneous to the purpose allowed by s 264(1)(a) of the Act or it may be within the scope of the power but the relevant point was that it was not within the purpose that the respondent had expressed in the statement of reasons. It followed said the applicant, that the respondent had acted improperly or taken into account an irrelevant consideration or made an error of law. It was said that whatever the purpose was it was not within the scope of s 264(1)(a) of the Act or within the purpose specified in paragraph C(e) of the statement of reasons to have a roving inquiry into all of the work that the firm may have carried out concerning plans, ideas or arrangements that the firm may have developed but which were never put into effect or established for clients.

The respondent submitted that the notice was in fact issued in relation to plans prepared by the firm for its clients. So much is identified in paragraph C(e) of the statement of reasons as it is not unreasonable to assume an arrangement

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ATC 4971

``established'' by the firm was ``prepared'' by it. The respondent submitted that the notice was only directed to plans actually marketed to clients and that it was appropriate for the respondent, within the purpose identified in paragraph C(e) of the statement of reasons, to see whether plans and trusts had not been proceeded with or had been prepared and purchased as he was attempting to work out the tax implications of the arrangements established.

Mr Davies, who appeared for the respondent, submitted that the notice covered plans prepared by the firm and not used by clients and sought plans made available by the firm whether or not they were carried into effect. He said that item 1 was not concerned with plans not made available to clients for their consideration.

It seems to me that an arrangement ``established'' by the firm for clients is a reference to an arrangement made available to clients. I do not consider that the expression ``established'' necessarily covers actual implementation although it may do so in a particular case. In that sense the expressions ``established'' and ``prepared'' are not necessarily synonymous.

It is apparent from the notice that the respondent is concerned to obtain information relating to the plans and trusts prepared for clients and to be made available to them for their consideration. It may be that this covers information in relation to plans and trusts not actually implemented but this does not mean that the notice has been tainted by an improper purpose.

Properly construed, the notice requires the applicant to provide information in relation to all employee share acquisition plans, employee benefits trusts and similar plans which the firm has not only established (that is to say actually offered to any client or which were created or set up or constituted for clients) but which the firm has also prepared (that is to say, created or brought into existence whether or not any such plan or trust was actually offered to or made available to a client of the firm or implemented or carried into effect by any client of the firm). I reach this conclusion having regard to the opening paragraph of the schedule and the definition of ``arrangement''. The definition of ``arrangement'' refers to all plans and trusts ``which have been prepared'' by the firm in the relevant period. Thus far there is no reason to limit the plans and trusts to those actually implemented or carried into effect. The word ``prepared'' is clear and unambiguous, it is used to refer to those plans and trusts brought into existence or made by the firm. When one then goes to the opening paragraph of the schedule one finds that information is requested, not in relation to all ``arrangements'', but rather in relation to all plans and trusts which have been established or prepared by the firm. There may not be congruity in the two expressions used but what is clear is that the information is sought not only in relation to plans and trusts ``established'' but also in relation to plans and trusts ``prepared'' by the firm.

Although the respondent submitted that the notice was directed to plans and trusts actually marketed to clients I do not consider that the notice is so limited. Although it might be said that a firm of solicitors would not prepare a plan or trust of the type described unless it was either for a client or proposed to be submitted to a client I can conceive of situations where such a plan or trust was prepared, that is to say, brought into existence but not proceeded with by being put to any particular client. For example it might be submitted to counsel for advice and advice might be received that the plan or trust did not comply with relevant provisions of the taxation legislation.

The applicant submitted, on the basis of this construction, that the information sought does not relate to, or fall within, the purpose of determining the taxation implications applicable to arrangements ``established'' by the firm for its clients because a plan or trust prepared but not offered to, taken up, adopted or used by a client can have no taxation implications for any client. I consider that approach is a too narrow and confined reading of the expressions used in the notice and the statement of reasons. The purpose for which the information is sought is the taxation implications applicable to employee share acquisition plans and employee benefits trusts arrangements established by the firm for its clients. These are the arrangements identified in paragraph C(e) of the statement of reasons. It does not follow that other plans and trusts prepared by the firm, but not taken up, adopted or used by clients may not assist the respondent in relation to, or provide him with an understanding of, the taxation implications applicable to employee share acquisition plans

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and employee benefits trusts arrangements actually implemented and carried into effect which were prepared and implemented by the firm. Changes in terminology used and changes in content may be of assistance in relation to understanding plans, trusts and arrangements actually carried into effect.

Further, the respondent considered it necessary to obtain that information for the proper administration of the Act: see paragraph C(c) of the statement of reasons. That proposition is not challenged and the applicant has not identified or propounded what is the improper purpose, the irrelevant consideration or the error of law which he says has moved the respondent to require the information to be provided pursuant to s 264(1) of the Act.

I am not satisfied that the respondent, in requesting information in relation to all employee share acquisition plans, employee benefits trusts or similar plans as defined in the notice, prepared by the firm but not established in the sense in which I have explained these expressions, has made his decision to serve the notice for an improper purpose or as a result of taking into account an irrelevant consideration or pursuant to an error of law.

In any event, even if it be correct to say that it is beyond the purpose of determining the taxation implications applicable to arrangements established by the firm for its clients to require information to be supplied in relation to plans and trusts prepared by the firm but not taken up, adopted or used by clients, the question must still be asked and answered whether the information is sought for the purpose of enabling the respondent to perform his functions under the Act: Smorgon's case (supra) ATC 4052-4053; CLR 535. As Mason J observed in Smorgon's case (supra) at ATC 4052-4053; CLR 535 the power to require information contained in s 264(1)(a) is not limited, as is s 264(1)(b), to documents or information relating to a person's income or assessment. Even if it can be shown that the information sought is not relevant to the respondent's stated reason for seeking the information it is still open to the respondent to justify the seeking of the information on the basis that it is sought for the purpose of enabling the respondent to perform his functions under the Act.

The information sought, on its face, and in the context of the whole of the statement of reasons, has not been shown, in my opinion, to be sought for any purpose other than to enable the respondent to perform his functions under the Act. Indeed on its face and in the context of the whole of the statement of reasons it seems to me that the information is sought to enable the respondent to perform his functions under the Act. It is sought as part of a project involving employee share acquisition and benefit trusts arrangements (paragraph C(a) of the statement of reasons) and the respondent, for the proper administration of the Act, considered it necessary to obtain the information held by the firm regarding employee share plans and benefit trusts (paragraph C(c) of the statement of reasons). There is also evidence that Mr Werbik told the applicant on 10 October 1997 that he was speaking to him as part of that national project and that the purpose of the project was to determine whether legislative amendments previously made were effective in practice. Against the whole of this background there is a sufficient connection between plans and trusts prepared by the firm but not shown to clients, and plans and trusts established for clients and taken up, adopted or used by them to warrant the conclusion that the information is sought for the proper administration of the Act and to enable the respondent to perform his functions under the Act. That connection is that a comparison of plans and trusts prepared but not used with plans and trusts established and used may give the respondent an insight into, and understanding of, the taxation implications of the plans and trusts actually used.

It is still necessary, however to consider each of the items numbered 1 to 11 in the schedule because particular information is sought in respect of which further submissions of invalidity are made.

Item 1

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

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established and implemented the position is more ambiguous because it is not clear whether in such circumstances the relevant intention and perception is that of the applicant, the firm or any person who was a client of the firm on whose behalf the arrangement was established and implemented. In my opinion the information required by this item is sufficiently ambiguous as not to come within the terms of s 264(1)(a) of the Act because the information sought is not clear. It was accepted in Fieldhouse (supra) at ATC 5043, 5050, 5055; FCR 195, 204, 210 that a provision in a notice served pursuant to s 264 of the Act, if invalid, can be severed and the valid part of the notice maintained. In my opinion, this is an appropriate matter for severance as item 1 is separate and distinct in its terms from the remaining items and it and its invalidity are not intertwined with the other items. The validity of the remaining items do not depend upon the validity of item 1. The applicant should not be required to provide the information sought in this item.

Item 2

The applicant submitted that the requirement of names and addresses of employer participants who had ``purchased'' an arrangement went beyond the purpose for which the information was sought as item 2 was not confined to arrangements ``established'' by the firm in the sense that it was the firm that had implemented the arrangement and carried it into effect. It was submitted that an employer participant might have purchased an arrangement and either not implemented it or had it implemented by someone other than the firm in which case it would not have been established by the firm for its client and would therefore be outside the purpose identified in paragraph C(e) of the statement of reasons. It may be that an employer participant had an arrangement prepared by the firm but implemented by someone other than the firm but, in my opinion, that situation does not invalidate item 2. Even if an employer participant purchased an arrangement and had it implemented or carried into effect by someone other than the firm, the arrangement ``purchased'' is an arrangement which, by reference to the definition of ``arrangement'', has been prepared by the firm and therefore falls well within the purpose identified. Even if an employer participant has ``implemented'' an arrangement through the agency of someone other than the firm the relevant arrangement is still one ``prepared'' by the firm. In my opinion, the item is clear and unambiguous and does not go beyond the valid purpose for which the respondent is entitled to require the information to be supplied.

Items 3 and 4

No separate submission was addressed by the applicant to these items and the applicant accepted that these items stand or fall by reference to the success of his submissions on item 2.

Items 5 and 6

The applicant accepted that these items were dependent in part on the submission in relation to item 2 but made a further submission that the information sought in these items could only be sought pursuant to s 264(1)(b) of the Act, relying on
Geosam Investments Pty Ltd & Ors v ANZ Banking Group Ltd & Ors 79 ATC 4418; (1979) 25 ALR 445. In that case certain documents relating to the income or assessment of certain taxpayers were in the safe deposit boxes of the respondent. The Commissioner of Taxation was entitled to require the production of such documents under s 264(1)(b) of the Act and he asked the bank to give him particulars of the documents in the boxes. The plaintiffs sought an injunction against the Commissioner on the basis that the information required by the notice did not fall within the category of information required for the purposes of the Act. Gibbs J refused to grant an injunction. He noted that the Commissioner was entitled to require the production of the documents under s 264(1)(b) of the Act and that the Com- missioner's problem was to discover which documents he might require to be produced. He noted that the Commissioner sought to resolve this problem by asking the bank to give particulars of the documents and held that that information was information ``which is required by the Commissioner for the purposes of the Act'' (ATC 4419; ALR 446). His Honour continued:

``In reaching that conclusion, I accept that when the notice asks for particulars it asks only for a general description of any book, document or paper and not for complete details of its contents. It is quite obvious that the Commissioner would not be able to obtain, under para (a), full information as to

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the contents of a document which he could not have produced under para (b), but what he can require is information which will enable him to know which books, documents and papers he can require to be produced. I therefore refuse the application.''

As has been observed in Smorgon's case (supra) the power under s 264(1)(b) of the Act is not at large but is limited to documents relating to a person's income or assessment. Items 5 and 6 do not seek the production of the memoranda and articles of association or the trust deeds. However, they do seek ``details'' of the terms of those documents. It seems to me that such an expression is tantamount to seeking all the terms of those documents. The respondent submitted that these items were seeking the same particulars as were sought in Geosam (supra). It was said that the items did not require every term of the memoranda and articles of association and trust deeds to be supplied. However, the items did not make it clear which terms are required and which terms are not. The question arises whether the respondent can in fact obtain full information in relation to the memoranda and articles of association and the trust deeds pursuant to s 264(1)(b) of the Act. If he can then it seems to me that the respondent is not denied seeking information of the kind referred to in items 5 and 6. In Fieldhouse (supra) at ATC 5052; FCR 207 Hill J explained the observation of Gibbs J in Geosam (supra at ATC 4419; ALR 446) in the following passage:

``Section 264 empowers the Commissioner to do three things. First, he may under sec 264(1)(a) require the addressee to furnish him with `information' in the sense of `knowledge'. It would seem as a matter of language that if that is all the Commissioner desires to do he need not identify in the notice the person in connection with whose income or assessment the request for information is made: FC of T v The Australia and New Zealand Banking Group Ltd 79 ATC 4039 at p 4052; (1979) 143 CLR 499 at p 535, per Mason J. The comment of Gibbs J in Geosam Investments Pty Ltd & Ors v Australia & New Zealand Banking Group Ltd 79 ATC 4418 at p 4419; (1979) 25 ALR 445 at p 446, that the Commissioner would not be able to obtain under sec 264(1)(a) full information as to the contents of a document which he could not have had produced under para (b) was probably directed at an argument that both under sec 264(1)(a) and 264(1)(b) the information or document must be one required for the purposes of the Act rather than as suggesting a limitation upon sec 264(1)(a) inconsistent with the view of Mason J.''

It seems to me that so long as it can be said that the information sought in items 5 and 6 is sought not only for the purposes of the Act but also in relation to the income or assessment of a taxpayer or taxpayers that the respondent is entitled to require that information. It is apparent from the statement of reasons and the earlier items in the schedule that the respondent is seeking the information in relation to the income or assessment of the employer participants involved in each company and trust. It follows that the information sought in items 5 and 6 is not beyond power.

Item 7

The validity of this item depends upon the validity of item 2 and as I have already determined, the use of the expression ``purchase'' does not invalidate that item or render it beyond power.

Item 8

This item is more controversial. Not only does it seek the firm's fee structure in respect of fees payable by existing clients, it also seeks details of the fee structure used to determine fees payable by prospective clients for the establishment, implementation or setting up of an arrangement. The applicant submits that the item relates to how the firm proposes to do business in the future and not to any issue in relation to the taxation implications of arrangements prepared by the firm. On one view the item might relate to the firm's taxation affairs but that is not the purpose of the serving of the notice. The respondent submits that the item seeks information as to the fee structure and not the fees actually charged to any client. It is submitted that the fee structure may be relevant if, for example, the fee structure referred to a fee which was calculated by reference to a percentage of deductions claimed. In such circumstances, it is said, the fee structure is part of the overall plan and may be relevant for the purposes of Pt IVA of the Act. In the statement of reasons it was said that

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the decision to request the particulars in item 8 was made:

``to determine whether the arrangements are tailored specifically for individual participants or more akin to a mass marketed exercise.''

However, such a purpose does not, in my opinion, bear upon the taxation implications applicable to any plan or trust established or prepared by the firm. In my opinion, item 8 travels beyond the purpose for the notice identified by the respondent and does not appear to relate to any matter in respect of which the respondent is seeking to perform his functions under the Act. As with item 1, this item is an appropriate matter for severance. It is separate and distinct in its terms from the other items and it and its invalidity are not intertwined with the other items. The validity of the other items do not depend upon the invalidity of item 8. The applicant should not be required to provide the information sought in this item.

Items 9 and 10

In his statement of reasons the respondent says that the decision to request the particulars was made to determine whether contributions made into a share plan arrangement or trust arrangement were financed by the employer participant, the applicant or by the firm or persons acting on their behalf. The applicant submits that any such financing by these persons, as distinct from finance provided by clients of the firm, would not assist the respondent in considering the taxation position of the firm's clients nor would it bear upon the taxation implications of the arrangements established by the firm for its clients. The respondent submits that such an absolute statement cannot be made as it may be that moneys paid by the employer participants were channelled back to the financier. In my opinion, the information sought is not so remote from the taxation implications applicable to the arrangements established by the firm for its clients or from the performance of the respondent's functions under the Act that it can be said that it is outside the purpose for which the notice was served.

Item 11

It is submitted by the applicant that it cannot be ``necessary'' in considering the taxation arrangements of entities to seek information from the applicant as to documents produced by the Australian Tax Office. It is also submitted by the applicant that the item is ambiguous because it is not made clear by whom the particular rulings, the subject of the item, were sought. On one view the item is a curious request because one would expect in the ordinary course that the respondent would know what taxation determinations and private binding rulings had been made by him. However, the fact that the respondent asks for the provision of information which is information which is, or may be, within his knowledge or within his power to obtain without reference to any person outside the staff of the Australian Taxation Office does not mean that the information is sought for an improper or an invalid purpose. The information is not sought in relation to any determination or private binding ruling actually made or given but is rather sought in relation to the seeking of the taxation determinations or private binding rulings. A request or application for a taxation determination or private binding ruling would obviously obtain information relevant to taxation implications applicable to any such arrangement. In my opinion, the information sought in item 11 is not beyond power.

Should the notice provide an opportunity for clients of the firm to be heard on the validity of the notice?

The second general attack on the validity of the notice was not so much an attack on the decision to serve the notice but rather an attack on the procedure which should be provided for once the notice is served.

The covering letter under which the notice was served recognised that s 264 does not override legal professional privilege in the sense that an addressee of a notice served under s 264 cannot be compelled to produce documents or provide information which is properly the subject of privilege from production on the ground of legal professional privilege. However, as was pointed out in Fieldhouse (supra at ATC 5047; FCR 200) the question whether legal professional privilege applies and is to be claimed arises when the addressee of the notice is obliged either to provide the information required or to attend and give evidence or produce documents. It does not arise at the time a decision is made to serve the notice or the time when the notice is

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in fact served. The issue of legal professional privilege arises not in relation to the validity of a notice served pursuant to s 264 but rather in relation to the duty of the addressee of the notice to provide the information or produce the documents and answer questions: Fieldhouse (supra) ATC 5047-5048, 5060; FCR 201-202, 217.

The applicant submitted that, independently of the legal professional privilege which exists as between solicitor and client, there is also a contractual relationship of confidence which will be overridden or interfered with by the service of a notice pursuant to s 264 of the Act. It was accepted by the applicant that any contractual duty of confidence was subject to and overridden by the terms of s 264:
Smorgon & Ors v FC of T & Ors; FC of T & Ors v Smorgon & Ors 76 ATC 4364, 4371-4372; (1976) 134 CLR 475, 489-490; Smorgon's case (supra) at ATC 4045, 4055; CLR 521, 540; Fieldhouse (supra) at ATC 5053; FCR 208. However, it was because any contractual duty of confidence between the applicant and any client of the firm yielded to the operation of a valid notice that the applicant submitted that the respondent should give any client of the firm a right to be heard not as to the decision to issue the notice but as to the validity of the notice. In support of this submission the applicant relied upon the decision in Oates v Attorney-General (Cth) (supra) and the authorities referred to in it.

The applicant submitted that the notice should contain a statement similar to the statement in the covering letter that s 264 does not override legal professional privilege stating words to the effect:

``You do not have to comply with this notice unless and until you have notified your clients, the people whose affairs are referred to and until you have given them an opportunity to decide whether they want to do something about this notice because their interests are affected.''

The applicant submitted that the firm's clients should be given the right to be heard not on the decision to issue the notice but on the validity of the notice itself on the basis that account should be taken of the effect that compliance with the notice would have on the interests of the firm's clients. The applicant submitted that the notice would not be vitiated if the notice provided for a procedure whereby clients of the firm would be given the opportunity to challenge the validity of the notice.

The difficulty with the applicant's submission is that although a client of a solicitor may have a reasonable or legitimate expectation that matters discussed or raised in confidence between solicitor and client will not be disclosed to any third party without the consent of the client, the client can have no reasonable or legitimate expectation that that confidentiality can be maintained in the face of a notice served pursuant to s 264 of the Act. Once a s 264 notice is served on a solicitor, the solicitor's clients have no right or expectation that the solicitor will not disclose any aspect of their affairs which is not covered or protected by legal professional privilege: Smorgon's case (supra). That may be, submits the applicant, but the notice may not comply with s 264 and may be beyond power in which circumstance a client should be given the opportunity to challenge the notice.

There is a fundamental flaw in the applicant's submission. As I have noted earlier there is no obligation upon the Commissioner to comply with the requirements of natural justice and give the addressee an opportunity to be heard before deciding to serve a notice pursuant to s 264 and serving the notice: Sixth Ravini Pty Ltd and Eighth Oupan Pty Ltd v DFC of T (supra) 4313. A similar conclusion was reached by Pincus J in
Allen, Allen & Hemsley v DFC of T 88 ATC 4734 at 4747 in relation to a decision to issue an authority to an officer to exercise powers under s 263 of the Act. In support of this conclusion his Honour cited Eighth Oupan Pty Ltd v DFC of T (supra). In
Norwest Holst Ltd v Secretary of State for Trade [1978] 1 Ch 201 the Court of Appeal had to consider a provision similar to s 264(1)(b) of the Act and held that there was no need for the rules of natural justice to be applied. In
Minosea Pty Ltd v ASC (1994) 14 ACSR 642 Lindgren J had to consider whether an exercise of power pursuant to s 33 of the Australian Securities Commission Act 1989 (Cth) giving a person a notice requiring production of certain documents attracted the requirements of procedural fairness. His Honour considered Norwest Holst Ltd v Secretary of State for Trade (supra), Eighth Oupan Pty Ltd v DFC of T (supra) and Allen, Allen & Hemsley v DFC of T (supra). His Honour accepted the submission that there had

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in recent years been considerable liberalisation of the criteria according to which courts imposed obligations of procedural fairness in connection with the exercise of statutory powers but nevertheless rejected this submission that an obligation of procedural fairness existed in relation to the decision of the Australian Securities Commission to issue the notice.

The applicant did not contest the conclusion to be derived from these cases but said nevertheless the respondent had to take into account the fact that rights of persons, other than the addressee of the notice, might be affected as a result of the service of the notice and that those persons had a right to be heard after the notice was served as to whether or not the notice was valid. It was said that in failing to provide in the notice that persons whose rights might be affected by the service of the notice should be given notice of the service of the notice and an opportunity to challenge it, the respondent failed to take into account a relevant matter and that as a result the service of the notice was vitiated.

However, I consider that that submission is inconsistent with the conclusion to be derived from the authorities to which I have referred. Even though the affairs or business circumstances of third parties may be disclosed as a result of the service of a notice under s 264(1)(a) of the Act I do not consider that they have a reasonable or legitimate expectation that they will be given an opportunity to be heard in relation to it. This is more especially so when there is no doubt that such contractual right of confidence they may have in relation to their dealings with an addressee of such a notice will be overridden as a matter of law by the service of a notice. If there be any expectation of a client in such circumstances, it is an expectation that the client's solicitor will only respond to a lawful notice properly served and will not disclose the affairs of the client unless the solicitor is lawfully required to do so. In such circumstances it is the obligation of the solicitor to challenge a notice if any ground of invalidity is exposed and not the right or entitlement of the client whose affairs may be covered by the notice to do so.

The respondent submitted that there was no evidence to establish whether any information sought in the notice, if disclosed by the applicant to the respondent, would result in a breach or erosion of the contractual duty of confidence imposed on the applicant. That may be so but for the purposes of the argument I have proceeded on the basis that some of the information sought, because of its nature and characterisation, may be such that the applicant is under a contractual duty of confidentiality not to disclose it to third parties unless required to do so by law.

Conclusion

It follows from these reasons that save for items 1 and 8 in the schedule to the notice, the notice is otherwise valid and must be complied with by the applicant. The order of the Court will be that save for items 1 and 8 in the schedule thereto the applicant comply with the requirement to furnish to the respondent the information sought in the notice dated 14 May 1998 served on the applicant by 4.00pm on 30 October 1998. Subject to what the parties may say as to costs I consider that the applicant has substantially failed in relation to the attack made upon the validity of the notice and that he should pay 90% of the respondent's costs of the application including reserved costs.