Re Varro Patrick Clarke v Deputy Commissioner of Taxation [1989] FCA 179 (18 May 1989)

FEDERAL COURT OF AUSTRALIA

Re: VARRO PATRICK CLARKE
And: DEPUTY COMMISSIONER OF TAXATION
No. QLD G361 of 1988
FED No. 248
Income Tax - Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Income Tax - s. 264(1)(b) notice - investigation of named taxpayers - power of Commissioner to obtain access to solicitor's trust account records - whether notice requiring production of all trust account cash books valid - questions of legal professional privilege - observations on practice of sealing up irrelevant parts of documents.

Administrative Law - Application to review decision to issue notice to produce documents under s. 264(1)(b) of the Income Tax Assessment Act 1936 - whether width of notice exceeded that permitted by statute - whether notice issued for unauthorized purposes.

Administrative Law - Application to review decision to issue notice to produce documents under s. 264(1)(b) of Income Tax Assessment Act 1936 - whether time allowed for compliance with notice was so unreasonable that decision to issue notice should be set aside.

Income Tax Assessment Act 1936 (Cth.) s. 264(1)

Administrative Decisions (Judicial Review) Act 1977 (Cth.) s. 5(2)(g)

HEARING

BRISBANE
18:5:1989

Counsel for applicant: Mr. J. Griffin Q.C. and Mr. P. Flanagan
instructed by: Varro Clarke & Co.

Counsel for respondent: Mr. J. Logan

instructed by: Australian Government Solicitor

ORDER

The notice issued pursuant to s. 264(1)(b) of the Income Tax Assessment Act 1936, requiring the applicant to produce all trust account cash books for Varro Clarke & Co. for the period 1 January 1980 to 30 June 1987, is invalid.

The respondent pay the applicant's costs, to be taxed if not agreed.

Each party have liberty to apply within seven days in respect of any other orders sought.

NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

DECISION

This is an application pursuant to the Administrative Decisions (Judicial Review) Act (1977), in which the applicant seeks an order of review in respect of two decisions by the Deputy Commissioner of Taxation. The amended application seeks a review of decisions to -

"(a) Issue a notice pursuant to section 264(1)(b)
of the 'Income Tax Assessment Act 1936' as
amended, requiring the applicant to produce
all trust account cash books for Varro Clarke
& Co for the period 1st January, 1980 to 30th
June 1987; and
(b) Institute prosecution proceedings against the
Application (sic) pursuant to section 8D(1)(b)
of the 'Taxation Administration Act 1953' as
amended, for failing to comply with the said
section 264(1)(b) notice."

2. The s. 264 notice at the centre of these proceedings is in the following terms:-

"NOTICE TO PRODUCE DOCUMENTS
INCOME TAX ASSESSMENT ACT : PARAGRAPH 264(1)(b)
TAKE NOTICE that in exercise of the powers and
functions conferred upon me as Deputy Commissioner
of Taxation by delegation from the Commissioner of
Taxation under the provisions of the Taxation
Administration Act 1953, I, TREVOR MICHAEL NEWTON,
do by this notice require you pursuant to Section
264 of the Income Tax Assessment Act 1936 to
attend at the Australian Taxation Office, Third
Floor, Citibank Centre, 199 Charlotte Street,
Brisbane on Tuesday, the eleventh day of October
1988 at ten o'clock in the forenoon before either
Peter Jorgensen, Ian Rodgers or Lee Palmer,
officers employed in the Australian Taxation
Office whom I hereby authorise in that behalf, and
in connection therewith I do further require you
to produce at that said place and time all Trust
Account Cash Books for Varro Clarke and Co for the
period 1 January 1980 to 30 June 1987 in your
custody or under your control until the duly
authorised officers advise that further production
is no longer required.
This information is sought in relation to the
income or assessment of A.J. and S.A.J. Wilson of
115 Herston Road, Kelvin Grove and their related
trust, company and partnership entities for the
period 1 January 1980 to 30 June 1987.
Dated this fourth day of October 1988"

3. Section 264(1) relevantly 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 -
...
(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."

4. In essence, the applicant's claim is that the notice is invalid. Three broad grounds for invalidity are advanced:-

1. The requirement for the production of documents
in the notice is impermissibly wide.
2. The time allowed for compliance, having regard to
questions of legal professional privilege which had
to be considered, was unreasonably short.
3. The notice was not issued bona fide, but for
unauthorised or "fishing" purposes.

5. The central protagonists are Mr. Varro Clarke and Mr. Peter Jorgensen. Mr. Clarke is the principal of a firm of Brisbane solicitors, while Mr. Jorgensen is an auditor in the employ of the Australian Taxation Office. Mr. Jorgensen and fellow officers have been investigating the financial affairs of a Mr. and Mrs. Wilson ("the taxpayers") and several of their related corporate entities, including Zamfield Pty.Ltd. and Shiral Investments Pty. Ltd.. The Taxation Office suspects the taxpayers of being involved in a tax avoidance scheme involving a foreign financial corporation, offshore loans and asset stripping.

6. The applicant has for some fifteen years acted as solicitor for the taxpayers' interests. He serves as a director - without any beneficial shareholding - in the abovementioned companies.

7. Mr. Jorgensen deposes that at the end of May 1988 he telephoned Mr. Clarke and asked him for access to his trust account records including cashbooks for the period 1 July 1982 to 30 June 1985. By letter dated 2 June 1988, Mr. Clarke advised that he claimed privilege in relation to the records of his Trust Account. He said:-

"In making your request you have not named a
specific taxpayer or transaction nor have you in
any other way indicated any limit to your proposed
search so as to ensure that your search is for the
purpose of assessment of or recovery from a
specific taxpayer or specific taxpayers."

Mr. Clarke referred to an opinion received from senior counsel as to the rights and obligations of an investigator under the Income Tax Assessment Act. He said:-

"In the circumstances we deny that you have any
right to make a general search of our Trust
Account records."

8. A week later Mr. Jorgensen, in a telephone conversation with Mr. Clarke's partner revealed that the investigations were in relation to taxpayers Mr. and Mrs. Wilson, referred to Packer v. Deputy Commissioner of Taxation (1984) 55 ALR 242; (1985) 1 Qd R 275, and said that the commission was entitled to access trust account records. On 14 July 1988, Mr. Jorgensen visited Mr. Clarke at his offices and informed him of the documents to which he wanted access. Mr. Clarke was quite willing to release his ledger cards, but asked that Mr. Jorgensen put his request in writing. As a result of his conversations, a Section 264(1)(a) "Notice to Furnish Information" dated 15 July 1988 under the hand of G. A. Barry, Acting Deputy Commissioner of Taxation issued. This notice required Mr. Clarke "to furnish the following information:

1. Trust account ledger cards, receipt books, cash books
and any other books of account associated with your
trust account for the period 1 January 1982 to 30 June
1985; and
2. This information is sought in relation to the taxation
affairs of A.J. and S.A.J. Wilson of 115 Herston Road,
Kelvin Grove, and their related trust, company and
partnership entities;"

9. Mr. Jorgensen says that he telephoned Mr. Clarke's office on 18 and 19 July unsuccessfully. He says he received no return phone call. On 19 July 1988 Mr. Clarke sent a letter to the Taxation Office expressing concerns in relation to the above Section 264(1)(a) Notice. In that letter, he said:-

"It is our view that a general or negative search
of our trust account cash book would firstly
breach confidentiality and secondly would be
outside the ambit of section 264."

and later:-

"Our concern remains in the threat of the
generality of your enquiry."

10. On 1 August 1988, Mr. Jorgensen and another Taxation officer attended Mr. Clarke at his offices in Brisbane. At this meeting Mr. Clarke produced copies of the ledger sheets as requested by the Taxation Office and, after the officers had inspected the ledger sheets in private for approximately an hour, arranged for thirteen ledger sheets to be photocopied and given to the officers. He did not, however, produce his trust account cash books.

11. Mr. Jorgensen claims he needed to see the trust account cash books so that he could cross check with the entries in the loose leaf ledger sheets and thereby satisfy himself that all the relevant ledger sheets had been produced. The requested access to the trust account cash book was said to be based on s. 263, which gives the Commissioner power to "have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act". Mr. Clarke took exception to the request, pointing out that the Taxation Office had not had the courtesy to reply yet to the concerns he had expressed in his letter of 19 July. Mr. Clarke stated his belief that the Taxation officers were on a fishing expedition in relation to the cash book. There are no substantial differences in the notes of Mr. Jorgensen and Mr. Clarke respectively of the events of 1 August.

12. On the next day, 2 August 1988, Mr. Clarke wrote to the Taxation Office, complaining of the conduct of Mr. Jorgensen, referred to the "precise areas of concern" outlined in the letter of 19 July 1988, which letter had been unanswered, and concluding:-

"We respectfully suggest that there is no right
under Section 263 to allow your officers the right
to gain entry to a general cash book for a general
search to locate matters of particular interest."

13. On 5 August 1988, a Mr. I. R. Rodgers wrote to Mr. Clarke outlining the Commissioner's assertion of a right to access to trust account records pursuant to s. 263 and s. 264. He cited Packer's Case as support for the view that legal professional privilege does not attach to trust account records per se. The letter ominously concluded:-

"In conclusion I would advise that the Commissioner
has recently publicly announced that he would be
seeking better acceptance by practitioners that
our access and information gathering powers are
not limited to situations where the affairs of a
nominated person are under scrutiny. He
maintained that within certain limits, we are
entitled and duty bound to enquire at a more
general level, such as identifying persons engaged
in a particular activity.
The enquiries proposed by my officers are
necessary to verify the correctness of information
provided to the Commissioner relative to a persons
assessable income and the restricted access to
your trust account proposed by you, would, in my
opinion hinder those officers in the conduct of
their legitimate enquiries."

14. In August and September, 1988, Mr. Jorgensen continued his efforts to gain access to the trust account cash books, by telephoning Mr. Clarke several times. Meanwhile Mr. Clarke was seeking advice of senior counsel as to his position, and advised the taxation office to that effect on 10 August 1988, and also on 16 August 1988. On 23 August 1988, Mr. Clarke suggested that the matter be left in abeyance at least until the determination of appeals by the Full Court of the Federal Court in the case of Allen, Allen & Hemsley. On 13 September, Mr. Clarke wrote advising that senior counsel was of the opinion that the appropriate course was for the matter to be left until the results of the appeals in both the Allen, Allen & Hemsley and the Citibank cases were known.

15. Mr. Jorgensen deposes to information coming to him on 21 September 1988 suggesting that assets of Shiral Investments Pty. Ltd. were being transferred to Zamfield Pty. Ltd.

16. On either 22 or 23 September, 1988, a meeting occurred between Mr. Clarke, his counsel Mr. Griffin Q.C., Mr. Jorgensen and another Taxation officer at Mr. Griffin's chambers.

17. Significantly, (and this assertion goes uncontradicted by Mr. Jorgensen) Mr. Clarke alleges that at this time Mr. Jorgensen "informed me that the Taxation Department wished to see my Trust Account Books, not only in relation to the affairs of the Wilsons and their associated entities, but also several other taxpayers as well." Mr. Jorgensen informed the meeting that he was considering having a new Section 264 Notice prepared.

18. On 28 September 1988, Mr. Jorgensen contacted Mr. Clarke and informed him that a new Section 264 Notice would be issued requiring the production of documents, and suggested the date in the notice be 10 a.m. on 6 October 1988. Mr. Clarke advised that he wished to take the advices of his counsel, and would call back. Mr. Jorgensen deposes that Mr. Clarke did not call back.

19. On 4 October 1988, a second Section 264 Notice was issued. That Notice is set out at the beginning of the reasons for judgment, and issued under the hand of T. M. Newton, Deputy Commissioner of Taxation. Mr. Clarke received this Notice on or about 6 October 1988. The Notice required production of the stated documents by 11 October 1988, thus allowing a period of five days, spanning a weekend, for compliance.

20. In a letter dated 7 October 1988, Mr. Clarke again asserted his claim that the trust account cash books that he was required to produce were the subject of legal professional privilege. The letter asserted that the trust account cash book:-

"...relate to the affairs of practically all of
this firm's clients between 1980 and 1987, and
such clients have not been contacted and invited
to waive privilege. Even if that were the
appropriate course, it would be physically
impossible to carry it out by Tuesday next. On
that basis, therefore, the time allowed by the
Notice is not 'reasonable' (Ganke v. DFC of T
75 ATC 4097)."

The letter then stated:-

"What objection is taken to, in particular, is the
requirement to produce privileged documents which
relate to a vast number of this firm's clients
whose affairs are not under investigation. As we
have said many times previously, the issue whether
the Commissioner has power to issue a Notice of
such width will in our view not be settled until
the appeals in the Allen, Allen and Hemsley, and
Citibank, cases are heard."

21. Mr. Clarke offered, subject to the consent of the Wilsons and their associated entities, to inform the Commissioner of the entries in his cash books which related to those parties.

22. On 10 October, Mr. Rodgers asserted the Commissioner's belief in the validity of the notice, and required Mr. Clarke to attend in accordance with the notice. Mr. Rodgers said:-

"In your letter you advise that the Cash Books
described in the notice will not be produced
..."
(my emphasis)

There was no statement in the letter pointing out that, contrary to Mr. Clarke's statement, the notice did not "relate to practically all of this firm's clients between 1980 and 1987".

23. The letter concluded:-

"The matter of the validity of the notice will also
be decided in the appropriate place. In my
opinion, the notice specifically describes the
documents to be produced and the word
'information' used in the final paragraph of the
notice is merely a word used to describe
generally, these documents."

24. On 11 October 1988, Mr. Clarke attended the Brisbane office of the Taxation Office, where he met Mr. Jorgensen and two other officers, but did not produce any documents. Mr. Clarke deposes that at that meeting:-

"These tax officers were informed by me that I had
gained the consent of Allen John Wilson and
Shirley Amelia Jean Wilson to inform them of all
entries in our Trust Account cash books relating
to the Wilsons and any associated or related
entities."
(my emphasis)

He later deposes:-

"I have not received any reply from the Australian
Taxation Office in relation to my proposal to
supply all entries in my firm's trust account cash
books relating to the Wilsons and any associated
or related entity."
(my emphasis)

25. I note the difference in the "offers".

26. On or about 25 October 1988, Mr. Clarke received a complaint and summons charging him with an offence under s. 8D(1)(b) of the Taxation Administration Act 1953 for his failure to produce the trust account cash books on 11 October 1988. It is significant, in my view, that the offence alleged in the complaint is as follows:-

"On the eleventh day of October 1988 at Brisbane in
the State of Queensland VARRO PATRICK CLARKE did,
contrary to Section 8D(1)(b) of the Taxation
Administration Act 1953 as amended, fail to
produce all trust account cash books for VARRO
CLARKE AND CO, for the period 1 January 1980 to 30
June 1987 when and as required under or pursuant
to a taxation law to the extent that he was
capable of so doing...",

and there then follows a number of averments.

27. The proceedings in this Court were instituted on 7 November 1988. The proceedings in the Magistrates Court have been adjourned.

28. On the hearing of the application, the claim for a declaration that the documents required to be produced pursuant to the said section 264(1)(b) notice, were the subject of legal professional privilege, was not pursued.

29. The correctness of the decision to prosecute was also not pursued before me, in that if any one of his three substantive objections succeeded and the Section 264 Notice was declared invalid, then the prosecution against Mr. Clarke would not continue. It falls purely, if not simply, for this Court to decide the question of the validity of the Notice dated 4 October 1988.

30. Mr. Clarke gave oral evidence to the effect that the trust account cash books for the firm Varro Clarke and Co. for the period 1 January 1980 to 30 June 1987 exist, have been maintained over that period, are audited regularly by and on behalf of the Law Society, and that the books themselves are a readily identifiable bundle. They number seven or eight, each of more than a hundred pages. He confirmed that they were not brought on 11 October 1988 to the tax office.

31. In my opinion, the s. 264 notice of 4 October 1988 is invalid, as being too wide.

32. In my opinion the notice requires the production of all the trust account cash books of Mr. Clarke's firm from 1 January 1980 to 30 June 1987, whether they relate to the income or assessment of the Wilsons and their related entities or not. So much is plain from the terms of the notice. That conclusion is reinforced by the terms of the complaint, and the history of the matter detailed above.

33. It is further supported by the claim by Mr. Jorgensen that access to the cash books was sought to confirm that the ledger sheets that were in fact produced to him constituted the entirety of the ledger sheets that should have been produced to him; that is to say, Mr. Jorgensen claimed that he was entitled to look at all the cash books so as to verify that full disclosure had been made.

34. It was submitted on behalf of the Deputy Commissioner that "the notice on its face merely required production of documents concerning the Wilsons and their related trust company and partnership entities". It was submitted that the final sentence of the notice had this effect.

35. I reject both of these contentions. I am of the opinion that they seriously misrepresent the honesty of Mr. Jorgensen's dogged but mistaken pursuit of access to all of the trust account cash books. In my view, Mr. Jorgensen has consistently claimed to be entitled to require the production of all of the cash books and to inspect all of them. The notice was intended to give effect to that purpose, and on its face required the production of all of the cash books, without limitation. The final sentence did not limit the extent of the production required, but purported to give the justification for the width of the request.

36. In Federal Commissioner of Taxation v. ANZ Banking Group Ltd. [1979] HCA 67; (1977-79) 143 CLR 499 ("the Smorgon Case"), Gibbs ACJ. said at 525:-

"To be valid a notice to produce documents under s.
264 (1)(b) must of necessity identify with
sufficient clarity the documents which are
required to be produced. However the notice must
in my opinion go further: it must show the person
to whom it is addressed that any document which he
is required to produce is one whose production the
Commissioner is entitled to require. Where a
notice is addressed to a taxpayer who is required
to produce documents which relate to his own
income or assessment, the very description of the
documents (for example, "your books of account")
may be enough to show that the notice is within
the power conferred by the section. Where however
the notice is addressed to one person, requiring
him to produce the documents of another, the
notice must show that those documents relate to
the income or assessment of a particular person,
who must be identified. The power is confined to
giving a requirement of a particular kind - a
requirement to produce documents relating to the
income or assessment of some person - and a notice
requiring the production of documents not so
related is beyond the scope of the power."

Mason J. said at 536:-

"The Commissioner's power to require production
under s. 264(1)(b) is limited to documents
relating to a person's income or assessment.
Consequently, the Commissioner may not legally
require the production of all the contents of a
specified box or even all the documents therein,
but only such of them as relate to a person's
income or assessment.
...
What par. (1)(b) has in mind is that a notice may
be given requiring the recipient to produce 'all
books, documents and other papers' in his custody
or control 'relating thereto', that is, to the
income or assessment of the person whose name is
stated in the notice. It is then for the
recipient to decide for himself, difficult though
the task may be, which of the documents answer the
description. If his decision is wrong he exposes
himself to prosecution and penalty.",

and later:-

"As the Commissioner's coercive power to require
production is limited, any notice given in
exercise of the power must in terms conform to the
statutory limitations if it is to be valid. It
will in my view conform to those limitations only
if it clearly confines the documents to be
produced to the class of which the Commissioner is
authorized to require production, though it may go
on to include particular documents on the footing
that they fall within that class. If not so
limited, the notice fails on its face to express
the limitation which the section places on the
Commissioner's authority. Because the exercise of
the power casts onerous obligations on the
recipient of a notice, and because the recipient
(not being the taxpayer) is only justified,
vis-a-vis the taxpayer, in producing the
taxpayer's documents without his consent in
response to a valid demand, it is for the
Commissioner so to formulate his notice that this
limitation on his authority is drawn to the
attention of the recipient."

37. Jacobs J. agreed with Mason J., save as to the appeal by the Smorgons. In respect of the notices in those appeals, Jacobs J.'s conclusion, at 541, was:-

"In my opinion each notice thus sufficiently
indicates that the books, documents and papers
required to be produced are those relating to the
matters upon which evidence is required to be
given, and the requirements of s. 264(1) are met."

Murphy J. at 547 reached the same conclusions as Jacobs J.

38. The third ground is substantially met by my findings as to the first ground. The Taxation officers wanted to view Mr. Clarke's Trust Account records, not only to examine them for entries that related to the Wilsons and the associated entities, but for entries relating to taxpayers other than the Wilsons and those entities. A general examination was sought.

39. Gibbs ACJ. in the Smorgon Case at 523 made it plain:-

"The only documents that the Commissioner may
require to be produced are those that relate to
the income or assessment of some person, and, for
reasons which I shall state later, that person
must be named or otherwise indicated in the
notice."

Stephen J., at first instance in the Smorgon Case, said that the power in s. 264(1)(b) "is confined to those documents which relate to a person's income or assessment, that is the effect of the concluding words, 'relating thereto.'"

40. Murphy J., at 544, said (speaking of s. 263):-

"Like all powers, it must be exercised in good
faith, for the purposes for which it was
conferred, and having regard to those affected by
its exercise (see British Equitable Assurance Co.
Ltd. v. Baily (1906) AC 35, at p 42; Isles v.
Daily Mail Newspaper Ltd. [1912] HCA 18; (1912) 14 CLR 193, at
p 202 per Isaacs J.)."

41. In Werribee Council v. Kerr [1928] HCA 41; (1928) 42 CLR 1, Knox C.J. at p 8 quoted with approval the observation of the Privy Council in Municipal Council of Sydney v. Campbell (1925) AC at 342:-

"A body...authorized to take land compulsorily for
specified purposes, will not be permitted to
exercise its powers for different purposes, and if
it attempts to do so, the Courts will interfere."

42. In Arthur Yates and Company Pty. Ltd. v. The Vegetable Seeds Committee [1945] HCA 55; (1946) 72 CLR 37, Latham C.J. said at 67:-

"If a power is conferred in terms which require it
to be used only for a particular purpose, then the
use of that power for any other purpose cannot be
justified."

He said at 68:-

"(I)f...a power (to do an administrative act) is
given only for a particular purpose, the power can
be validly exercised only for that purpose.",

and Dixon J. said at 84:-

"The present case falls, I think, well within the
principles upon which a purported exercise of
power is invalidated because of an inadmissible
purpose."

43. As to the ground that the decision to issue the notice is impeachable because it did not permit a reasonable time for compliance, the submission seems to be that the time was so short that no reasonable person could issue such a notice (vide s.5(2)(g) of the Administrative Decisions (Judicial Review) Act 1975). This is said to be so because, as the notice sought access to records which related to all the clients of Varro Clarke and Co. over a seven year period, it would have been necessary for Mr. Clarke to consider whether any items were or might be privileged, and in any such case, contact the affected client.

44. Legal professional privilege is confined to confidential communications between legal adviser and client made for the purpose of giving or receiving advice or for the use in existing or anticipated litigation: Grant v. Downs [1976] HCA 63; (1976) 135 CLR 674; Baker v. Campbell [1983] HCA 39; (1983) 153 CLR 52 at 112 per Deane J., at 122 per Dawson J.; Packer v. Deputy Commissioner of Taxation (supra). The nature of trust account ledgers is such that in general legal professional privilege does not attach to them. The privilege would apply only in rare cases.

45. It seems to me that the position of trust account cash books is similar.

46. In Packer, Andrews S.P.J. expressed the view that "prima facie" trust account ledgers generally do not make "a disclosure of privileged communications between solicitor and client" (at 279 and 245 respectively).

47. Shepherdson J. said, at 295:-

"I should add that this is not to say that trust
account ledgers can never be the subject of legal
professional privilege - whether such privilege
exists will depend on the particular ledger and
whether or not that ledger is written up in such a
way that it records the advice given by the
solicitor to the client."

See also Allen Allen & Hemsley v. Deputy Commissioner of Taxation NSW (1988) 81 ALR 617, where Pincus J. expressed the view that only in a most unusual case would an entry in a ledger be privileged. An appeal from his judgment was dismissed by the Full Court of the Federal Court on 19 April 1989. Bowen C.J. and Fisher J. said at p 9 of their judgment:-

"On the matter of legal professional privilege
(Pincus J.) cited and applied the relevant
authorities, which we need not repeat. These
indicate that only in the most exceptional
circumstances can an entry in a trust account
ledger be privileged as disclosing the contents of
communication between solicitor and client."

48. A notice under s. 264 must allow a reasonable time for compliance. In Ganke v. Commissioner of Taxation (1975) 25 FLR 98, Nagle J. (with whom Street C.J. and Begg J. agreed) said, at 105:-

"...I feel that where one implies into the section
a giving of time, or a prescribing of time, that
time must be 'a reasonable time'. To this effect
I wish to call attention to the remarks of Wallace
P. in Reg. v. Skurray (1967) 86 WN (Pt. 1)
(NSW) 1, at p 3: 'It is well settled, and good
sense, that where a penal provision requires an
act to be done either without a time being
stipulated, or even where the act must be done
'forthwith' a reasonable time is implied
sufficient to enable performance to be effected.'"

Yeldham J. indicated in Ganke v. Commissioner of Taxation (1982) 78 FLR 455 at 458 that normally, whether a reasonable time had been allowed was a question of fact. The test is an objective one. He concluded:-

"I think that a conclusion that a period of
fourteen days was sufficient to enable a public
company to lodge returns for seven years is so
unreasonable that it denotes an error of law on
the part of the tribunal of fact."

49. The time frame here was very short, but the nature of the enquiries to be made, the volume of material to be examined, the likely extent of the existence of circumstances calling for further enquiry of affected clients, are factors that in my opinion do not permit a conclusion that the time allowed for compliance was so unreasonable that no reasonable person in the position of Mr. Newton could have fixed it.

50. Whether the shortness of time would have been a sufficient defence to non-compliance with the notice is a different question, and one which it is unnecessary for me to address.

51. Finally, as the Smorgon Case makes clear, a valid s. 264 requirement obliges the addressee "to decide for himself, difficult though the task may be, which of the documents answer the description. If his decision is wrong, he exposes himself to prosecution and penalty": per Mason J. at p 537.

52. It seems to me that where certain entries only, or a part only, of a document answers the description, it is a sufficient compliance with the notice if the relevant entries, or part, is produced. The rules relating to discovery of relevant documents seem to me to afford suitable guidance.

53. In Bray's "The Principles and Practice of Discovery" (1885), available in a 1985 reprint by Legal Books Pty. Ltd., the learned author said at p 233:-

"Where one part of a document is relevant and
another part irrelevant (or only consequentially
relevant or irrelevant to a particular matter in
question) or where protection can be claimed for
one part and not for another part, the part which
is irrelevant or consequentially relevant or can
be protected may as a rule be sealed up and so
concealed from inspection on the party's oath as
to its nature, under the same conditions as if the
part so concealed constituted a separate document."

54. A modern exposition is to be found in B. Cairns "The Law of Discovery in Australia" 1984, Law Book Co., at p 38; and see Re Pickering; Pickering v. Pickering (1888) 25 Ch D 247, Turner v. Attenborough (1895) 17 ALT 186, and Halsbury 4th Ed. Vol. 13 at para. 42.

55. In summary, the purported s. 264 notice is not authorised by s. 264 of the Income Tax Assessment Act 1936. I am not satisfied that the time for compliance was so short that the decision to issue the notice with such a time to comply was an exercise of the power conferred by s. 264 so unreasonable that no reasonable person could have so exercised the power.

56. I make the declaration sought in paragraph 1 of the application, namely that the notice dated 4 October 1988 requiring the applicant to produce all trust account cash books for Varro Clarke & Co. for the period 1 January, 1980 to 30 June 1987 is invalid.

57. I give liberty to apply within 7 days in respect of any further orders.

58. The respondent is to pay the applicant's costs, to be taxed if not agreed.