Re Industrial Equity Limited and Bankers Trust Australia Limited v Deputy Commissioner of Taxation; Ronald James Crawley; Peter Thomas Carroll and Frank Breen [1989] FCA 359 (6 September 1989)

FEDERAL COURT OF AUSTRALIA

Re: INDUSTRIAL EQUITY LIMITED AND BANKERS TRUST AUSTRALIA LIMITED
And: DEPUTY COMMISSIONER OF TAXATION; RONALD JAMES CRAWLEY;
PETER THOMAS CARROLL AND FRANK BREEN
No. G254 of 1989
FED No. 516
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Administrative Law - Application to review the decision of the Commissioner of Taxation to issue authorisation for access under section 263 of the Income Tax Assessment Act - whether the access was for purposes of the Act - whether access itself is a purpose within section 263 - meaning and purpose of taxation audit.

Income Tax Assessment Act 1936 - s263

Administrative Decisions (Judicial Review) Act 1977

HEARING

SYDNEY
6:9:1989

Counsel and solicitors for Sir Maurice Byers QC
the applicant Dr G Flick

Mr A Slater
instructed by
Rosenblum and Partners

Counsel and solicitors for Mr A Emmett QC

the respondent Mr P Roberts

Ms R Henderson
instructed by the Australian Government
Solicitor

ORDER

The interim injunction is dissolved.

The application is dismissed.

The applicants are to pay the costs of the respondents.

NOTE: Settlement and entry of orders are dealt with in accordance with order 36 of the Federal Court Rules.

DECISION

This is an application under the Administrative Decisions (Judicial Review) Act 1977 (Judicial Review Act) for a review of two decisions made by and conduct of the respondents on or about 13 April 1989. The first decision, made by the Deputy Commissioner of Taxation, Sydney (the first respondent) through his delegate Ronald James Crawley (the second respondent) was to issue to Peter Thomas Carroll (the third respondent) a document headed "Authorisation for Access", directed to Bankers Trust Australia Ltd (the second applicant). The second decision was made by the same respondents to seek access to and search the premises of the second applicant for documents relating to Industrial Equity Ltd (the first applicant). The conduct relied on amounted to the same activity as comprised in the decisions. The occupation and role of the fourth respondent is not made clear.

2. The grounds of the application are:

1. That the decisions and conduct involved an error of law.
2. That the making of the decisions and the conduct were improper
exercises of the power conferred by section 263 of the Income
Tax Assessment Act 1936.
3. That the decisions and conduct were not authorised by section 263
of the Income Tax Assessment Act 1936.
4. That the decisions and conduct were exercises of power that were
so unreasonable that no reasonable person could have so
exercised the power.

3. The applicants ask that the decision be set aside and that an injunction be granted to prevent the respondents from seeking access to the premises of the second applicant.
The Facts

4. Section 263 of the Income Tax Assessment Act 1936 (the Act) provides:

The Commissioner, or any officer authorised by him
in that behalf, shall at all times have full and
free access to all buildings, places, books,
documents and other papers for any of the purposes
of this Act, and for that purpose may make extracts
from or copies of any such books, documents or papers.

5. Pursuant to this section, on 13 April 1989, the second respondent as delegate of the first respondent, authorised the third respondent to enter the premises of the second applicant in the following precise terms:

AUTHORISATION FOR ACCESS
In the exercise of the powers and functions delegated to me
by the Commissioner of Taxation in accordance with the
provisions of Section 8 of the Taxation Administration Act
1953, I, Ronald James Crawley, hereby authorise Peter Thomas
Carroll, an officer of the Australian Taxation Office to,
and state that the said Peter Thomas Carroll is authorised
to, have full and free access pursuant to SECTION 263 OF THE
INCOME TAX ASSESSMENT ACT 1936, to all of the premises owned
or occupied by BANKERS TRUST AUSTRALIA LIMITED AND
ASSOCIATED COMPANIES or at which the documents of BANKERS
TRUST AUSTRALIA LIMITED AND ASSOCIATED COMPANIES are stored
or held and to the books, documents and papers or classes of
books, documents and papers relating to all transactions
conducted with, for, or on behalf of INDUSTRIAL EQUITY
LIMITED AND ASSOCIATED ENTITIES for the years ended 30 June
1984 to 30 June 1988 for any of the purposes of the Income
Tax Assessment Act 1936. For any such purpose, he is
authorised to make extracts from or copies of books,
documents and papers located or found on the premises
referred to above.

6. In a letter dated 24 April 1989 the applicants requested a statement of reasons under section 13 of the Judicial Review Act for the decision to authorise this access. The statement was supplied with a covering letter dated 10 May 1989. The reasons were:

I refer to your letter of 24 April 1989 in which you
requested a statement of reasons under Section 13 of the
Administrative Decisions (Judicial Review) Act 1977 in
relation to my decision to seek access to the premises owned
or occupied by Bankers Trust Australia Limited and to
documents in relation to Industrial Equity Limited.
Findings on material questions of fact:
(a) The Commissioner of Taxation was and is conducting
an audit into the affairs of Industrial Equity
Limited and associated entities for the period 1
July 1984 to 30 June 1988.
(b) Industrial Equity Limited was a client of Bankers
Trust Australia Limited during the period in
question.
(c) I believe and believed that Bankers Trust Australia
Limited, Tower Building Australia Square, holds
books, documents and other papers relevant to the
affairs of Industrial Equity Limited during the
period in question.
(d) I believe that gaining access to the books,
documents and papers held by Bankers Trust Australia
Limited in relation to Industrial Equity Limited
will assist in the taxation audit.
(e) It is most important that the Commissioner be in
possession of all the material facts and information
necessary to determine the taxation liability of
Industrial Equity Limited and associated entities.
Evidence or other material on which the findings are based
were:
(f) Returns of income held by this office for Industrial
Equity Limited and associated entities.
Reasons for the decision to exercise the powers pursuant to
section 263 of the Income Tax Assessment Act 1936:
(g) Gaining access to any books, documents and papers
held by Bankers Trust Australia Limited in relation
to Industrial Equity Limited for the period in
question may assist in the taxation audit.

7. The covering letter of 10 May 1989 stated that the decision to seek access was not related to the determination of the first applicant's 1986 tax assessment and that the inspection would take place at 10.30 am on Friday 12 May 1989.

8. On 11 May 1989 the first and second applicants made an application in this Court for an interlocutory injunction to stop the respondents from gaining access pending this hearing. An injunction in the following terms was granted:

Upon the first applicant by its counsel giving the
usual undertaking as to damages, I order until
further order that the respondents, their servants,
agents and delegates be restrained from entering the
premises of the second applicant to gain access to
documents relating to the first applicant and
associated entities for the period 1 July 1983 to 30
June 1988 inclusive.

The Applicants' Case
The purposes for which section 263 may be used

9. It is clear that the section allows the Commissioner access to book s, documents and other papers and creates the conditions under which an official examination of books can take place. The applicants say that the phrase "for any of the purposes of this Act" relates to functions of the Commissioner extraneous to the examination of documents. They say that the Commissioner's stated purpose, that of gaining access to documents which may assist a taxation audit, is not a "purpose" within section 263. For it to be authorised by section 263 would be to say that section 263 itself is a purpose of the Act. This is described by the applicants as a fundamental misconception of the section. They contend that the power is given for purposes other than the examination of books itself. In other words, the power can only be exercised for purposes found elsewhere in the Act.

10. The applicants also argue that the permission given by the section to make extracts and copies from books and documents "for that purpose" does not mean for the purpose of access but for the other statutory purpose being served by the access. The applicants say that this part of the section is seeking to restrict the power to the making of extracts and copies for the purposes of the Act.

11. In Federal Commissioner of Taxation v Citibank Ltd (1989) 85 ALR 588 at 609, French J admirably researched the history of section 263 as follows:

Section 263 of the Income Tax Assessment Act 1936 derives
from the first Commonwealth legislation on the topic of
income tax namely the Income Tax Assessment Act 1915.
Section 55 of that Act provided that:
"55. The Commissioner, or any officer authorized
by him in that behalf, shall at all times have full
and free access to all buildings places, books,
documents, and other papers for the purpose of
ascertaining the taxable income of any person and
for that purpose may make extracts from or copies of
any such books, documents, or papers."
That provision was not original, reflecting as it did, the
language of s52(2) of the Land and Income Tax Assessment
Act 1907 (WA) which in turn adopted the text of s83(2) of
the Land and Income Assessment Act 1900 (NZ). The same form
of words was used in the Land and Income Taxation Act 1910
(Tas) s171(II) and was adopted by New South Wales in s85 of
the Income Tax (Management) Act 1928 (NSW). It also appears
in s44 of the Estate Duty Assessment Act 1914 (Cwth). Like
s263, and its State and trans-Tasman predecessors, s55 was
accompanied by a more coercive partner in s56, the
predecessor of the present s264. Some of the history of the
"full and free access" formula in later statutes was
summarised by Murphy J in F.C.T. v Australia and New Zealand
Banking Group Ltd [1979] HCA 67; (1979) 143 CLR 499 at 544; 9 ATR 483 at 503.
The section was amended in 1918 to insert the words "any of
the purposes of this Act" in place of the words "the purpose
of ascertaining the taxable income of any person" (No. 18 of
1918 s.36). In the original text the words "that purpose"
could be read as a reference to the single purpose of
"ascertaining the taxable income of any person". It could
not so easily be construed in the amended form having regard
to the plurality of purposes for which access could be
exercised, namely "any of the purposes of this Act". There
was either a grammatical slip in the amendment process which
has been perpetuated in successive Acts, or a deliberate
legislative intention to refer to the single purpose of
"full and free access".

12. With profound respect, I am not sure that these are the only choices. If "any of the purposes of this Act" is read as "any one of the purposes of the Act", the words "for that purpose" would have a ready and easily ascertainable meaning. What that interpretation and the second choice posed by French J do not resolve is whether access itself is "any one" of those purposes.
The relevance of section 264

13. The applicants say that it is necessary to read section 263 with section 264, of which subsection (1) provides:

(1) The Commissioner may by notice in writing require
any person, whether a taxpayer or not, including any
officer employed in or in connexion with any
department of a Government or by any public
authority -
(a) to furnish him with such information as
he may require; and
(b) to attend and give evidence before him or
before any officer authorized by him in that
behalf concerning his or any other person's
income or assessment, and may require him to
produce all books, documents and other
papers whatever in his custody or under his
control relating thereto.

In O'Reilly v The Commissioners of the State Bank of Victoria [1983] HCA 47; (1983) 153 CLR 1, Mason, Murphy, Brennan and Deane JJ said at 47-8:

Section 263 needs to be read with its immediate neighbour
s264. (Having set out section 264 they continued:)
It can be seen that s. 264(1)(a) expressly covers the case
where the Commissioner requires particular information. In
terms, it empowers the Commissioner, by notice in writing,
to require any person to furnish him with such information.
The paragraph is to be read in conjunction with s.223(1)
which provides that any person "who fails to duly furnish"
information or to comply with any requirement of the
Commissioner shall be guilty of an offence. Section
264(1)(b) expressly provides for the case where the
Commissioner requires the attendance of a person to give
evidence or the actual production of books, documents or
other papers in his custody or under his control. It
expressly authorises the Commissioner to require such
attendance or production. It is to be read with s.224 which
provides that a person who refuses or neglects duly to
attend and give evidence or to answer questions put to him
or to produce any book or paper required of him shall,
unless just cause or excuse for the refusal or neglect is
shown by him, be guilty of an offence.

In The Commissioner of Taxation of The Commonwealth of Australia v The Australia and New Zealand Banking Group Ltd (the 1979 Smorgon Case) [1979] HCA 67; (1979) 143 CLR 499 at 519-520, Gibbs ACJ said:

In Stephen's Digest of Criminal Law, 5th ed. 1894 p 243, in
a passage cited in Moors v. Burke (1919) 26 CLR, at p 270,
it is said: "The word custody means such a relation towards
the thing as would constitute possession if the person
having custody had it on his own account." The meaning
which the words are intended to bear in s.264 depends,
amongst other things, on the context in which they appear.
The object of the section is to give the Commissioner power
to require the production of documents which relate to the
income or assessment of any person, and "assessment" in this
provision has the wide meaning given to it in s.6 of the Act
- "the ascertainment of the amount of taxable income and of
the tax payable thereon": see Smorgon v Australia and New
Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475 at 480. The
aim is the practical one of having documents produced so
that an officer of the Taxation Department can obtain from
them information concerning the income or assessment of some
person. The section is not concerned with the legal
relationship of the person to whom the notice is given to
the documents which he is required to produce: it is
concerned with the ability of person to whom the notice is
addressed to produce the documents when required to do so.
Therefore, in my opinion, a notice can be given under the
section to any person who has physical control of the
documents in question, whether he has or has not the legal
possession. For example, if an employer gives his books of
account to a servant to keep on his behalf, a notice under
s.264(1) can be given to the servant, who has physical
control, although the master has the legal possession.
However, "control" in s.264(1) is not limited to physical
control, and in the example given the notice could be given
to the master, who has legal control of the documents, as
well as the servant. Indeed I can see no reason why a
notice cannot be given to a person who wrongfully has
physical control of the documents, or to a person who has
parted with possession but retains a right to legal
possession: the question is, has the person to whom the
notice is given such custody or control as renders him able
to produce the documents?

In South Western Indemnities Ltd v Bank of New South Wales [1973] HCA 52; (1973) 129 CLR 512 at 519, Barwick CJ said:

I should observe upon one other argument of the applicant.
It was submitted that because of the inclusion of the words
"whether a taxpayer or not" in s.264, and their absence in
s.263, the access given by s.263 should be construed as
limited to business places, books etc. relating to the
affairs of a "taxpayer". It is then submitted that a
Territorial resident in receipt only of Territorially
sourced income is not liable to be assessed for income tax
and is therefore not a taxpayer, notwithstanding the
definition of "taxpayer" in s.6.
But, in my opinion, upon its proper construction, s.263 is
not limited in its application to the affairs of a person
who in fact is in receipt of assessable income. It suffices
that the exercise of the power given by the section is for
the purposes of the Act, which of course include an
investigation into whether or not a person is or has been in
receipt of assessable income. Such an investigation cannot
be limited to buildings, books, etc. of a person who is
liable to taxation but must extend to any person.

Proper construction of section 263

14. The applicants submit that this indicates that the power of access is a power given to the Commissioner against the individual, in aid of the Commissioner's functions; in relation to books and documents, they say that the two sections are directed towards the same end, but section 263 is wider.

15. The applicants emphasise what they say is the ancillary nature of section 263 as expressed by Gibbs CJ, Wilson and Dawson JJ in O'Reilly at 41:

The answers to these questions depend on the proper
construction of s.263. That section grants to the
Commissioner, and to any authorized officer, "full and free
access" to, inter alia, all buildings and documents, for any
of the purposes of the Act. The ordinary dictionary meaning
of "access" is "a way or means of approach". The words
"shall have" in the section obviously cannot indicate mere
futurity; they are used to confer a right. The words of the
section, considered as a whole, confer upon the Commissioner
a right to enter buildings and look at documents for the
purposes of the Act. The right is to be "full and free",
which means, in effect, that it is unrestricted, except, of
course, by the requirement that it may only be exercised in
good faith for the purposes of the Act.

16. Thus the applicants stress that there must be found a bona fide exercise by the Commissioner of the power for one or more of the purposes of the Act. As Mason, Murphy, Brennan and Deane JJ said in O'Reilly at 48:

As a matter of ordinary language, access to buildings and
places involves availability of entry to them: access to
books and documents involves availability of examination of
their contents. The express provision that the Commissioner
or his authorized officer shall have "full" access prima
facie conveys, at the least, that the availability of entry
or examination to which the Commissioner or an authorized
officer is entitled extends to any part of the relevant
place or building and to the whole of the relevant books,
documents and other papers. The express provision that the
access shall be "free" conveys, at the least, that access is
to be without physical obstruction. Implicit in the grant
of full and free access which the section contains is a
grant of power to the Commissioner or an authorized officer
to take whatever steps are, in all the circumstances,
reasonably necessary and appropriate to remove any physical
obstruction to that access. Like all statutory powers,
that power must be used bona fide for the purposes for which
it was conferred and that involves that its exercise be not
excessive in the circumstances of the case.

17. The applicants interpret their Honours as saying that there must not only be a purpose of the Act extraneous to the sections but that the exercise is not to be too excessive or large.
Amendment of assessment

18. The applicants submit that section 263 is directed to the purpose of determining the individual's liability to the Crown. This liability is achieved by assessment, original or amended: see sections 166-170 and 6(1) of the Act. The applicants say that as original assessment has taken place in each of the years involved here, access can only be utilised as part of the process involved in amendment. They say that if the Commissioner wishes to amend, he must notify the taxpayer and state his reasons for seeking to amend. The applicants further submit that the process of assessment is a calculation, based on the returns and other available information, to determine the amount of assessable income. They say that there must be something to entitle the Commissioner to conclude or assert that the original assessment is erroneous. They point to the fact that in this case the Commissioner has not said that he wants the material for the purpose of amending, but that his desire for access is part of a policy of auditing the top one hundred companies.

19. These submissions cannot be literally correct because they would require the Commissioner to provide reasons for amending or considering amendment before making inquiries, seeing the necessary documents and deciding whether to amend. Whilst it is true that the Commissioner does not expressly justify access as required to determine tax liability as such, only that the papers and documents may assist the audit, he does assert that the audit will facilitate the determination of tax liability and that that is its purpose.
Curiosity?

20. The applicants even asserted that the Commissioner is seeking to invoke section 263 out of curiosity. Curiosity of what kind and to what end was not stated, but because the Act does not authorise any such purpose, this submission is tantamount to suggesting that the Commissioner is a meddler or busybody and is therefore acting in bad faith. To support this intriguing proposition, the applicants point only to the covering letter of 10 May 1989 where the Commissioner states he is not concerned with the amended assessment of 1986, yet he still wants material from that year. As it seems to me, the possibility that that material might assist the audit of the returns of preceding or succeeding years is at least as available an inference as that advanced by the applicants.
Nature of assessment

21. The applicants argued that an assessment is what they described as a "definitive statement of the relationship between the taxpayer and the revenue authorities". They pointed to the observations of Isaacs J in The King v Deputy Commissioner of Taxation (SA); Ex Parte Hooper [1926] HCA 3; (1925) 37 CLR 368 at 373:

An "assessment" is not a piece of paper: it is an official
act or operation; it is the Commissioner's ascertainment, on
consideration of all relevant circumstances, including
sometimes his own opinion, of the amount of tax chargeable
to a given taxpayer. When he has completed his
ascertainment of the amount, he sends by post a notification
thereof called "a notice of assessment". And then, says
the Act (sec.54), "income tax shall be due and payable
sixty days after the service by post of a notice of
assessment." The section adds that, where by amendment of an
assessment additional income tax is thereby payable by a
taxpayer, it is due and payable thirty days after notice of
amended assessment. But neither the paper sent nor the
notification it gives is the "assessment". That is and
remains the act or operation of the Commissioner.

Again in Federal Commissioner of Taxation v Hoffnung & Co. Ltd. (1928) 42 CLR 39 Isaacs J said at 54-55:

But all this depends on whether the assessment of 26th April
1919 was an "assessment" contemplated by the Act and whether
the notice of that date was a notice intended by the Act.
In the first place, the notice itself does not on its face
bear out those requirements. It describes the matter as
"tentative". The "assessment" and the notice of assessment
required by the Act to fix the taxpayer with liability for a
Crown debt carrying interest and penalties must be definite
and certain or as it has been described throughout the
argument "definitive", as opposed to "provisional". There
is no evidence, or at all events no satisfactory evidence,
to displace the self description in the notice.

In Batagol v The Commissioner of Taxation of the Commonwealth of Australia [1963] HCA 51; (1963) 109 CLR 243, Kitto J considered the nature and effect of an assessment at 251-2:

The word "assessment" is defined in s.6 to mean, unless the
contrary intention appears, the ascertainment of the amount
of taxable income and of the tax payable thereon. There is
nothing in s.170 to show the contrary intention. But the
definition is not sufficient by itself to answer the
question before us, because "ascertainment" is a word the
force of which depends upon the context. It is here used in
an Act under which the service of a notice of assessment is
the levying of the tax. Assessment in the sense of mere
calculation produces no legal effect. No step that the
Commissioner may take, even to the point of satisfying
himself of the amount of the taxable income and of the tax
thereon, has under the Act any legal significance. But if
the Commissioner, having gone through the process of
calculation, serves on the taxpayer a notice that he has
assessed the taxable income and the tax at specified
amounts, the tax becomes by force of the Act due and payable
on the date specified in the notice or (if no date is
specified) on the thirtieth day after the service of the
notice: s.204. Thus, and thus only, there is brought about
an "ascertainment" of the taxable income and of the tax, in
the sense that thereafter it is possible to say what could
not have been said before: that amounts have been fixed so
that they are to be taken for all purposes (except those of
appeal: see s.177) to be the result flowing from the
application of the Act in the particular case. The
respective amounts of the taxable income and the tax have
been rendered certain. The word "ascertainment" being
understood in this sense, the definition of "assessment"
means, in my opinion, the completion of the process by which
the provisions of the Act relating to liability to tax are
given concrete application in a particular case with the
consequence that a specified amount of money will become due
and payable as the proper tax in that case. The idea
coincides with that which Isaacs J expressed in Federal
Commissioner of Taxation v Hoffnung & Co Ltd (1928) 42 CLR
39 in relation to war-time profits tax when he said: "If an
assessment definitive in character is made, it assumes that,
so far as can there be seen, a fixed and certain sum is
definitely due, neither more nor less. In short, it
ascertains a precise indebtedness of the taxpayer to the
Crown" (p55). On this construction of the Act nothing done
in the Commissioner's office can amount to more than steps
which will form part of an assessment if, but only if, they
lead to and are followed by the service of a notice of
assessment.
When the group of sections which includes s.170 is examined,
it becomes, I think, quite clear that this is the concept
which "assessment" in s.170 is intended to express. The
making of assessments by the Commissioner is the subject of
provisions in ss.166, 167, 168 and 169, and from these it is
clear that assessment is a process which by force of the Act
is definitive of the amount of the taxpayer's liability,
though subject of course to review and appeal. Another
section, s.171, oddly enough by its very infelicity of
expression shows that a notice of assessment is essential to
the existence of an assessment. It speaks of "any
assessment issued". Then the next section, s.172, by
describing an amendment in the taxpayer's favour as one by
which his liability is reduced, emphasises the essential
character of an assessment as the creation of a tax
liability of specific amount. See also the proviso to s.185.

At 256, Owen J agreed with the definition or explanation of an "assessment" given by Isaacs J in Hooper, but said at 257:

The present case is concerned with the use of the word
"assessment" not in its defined sense but as conveying the
meaning that every necessary step has been taken to create a
debt due and payable by the taxpayer to the Crown.

Section 263 and the right to privacy
In the 1979 Smorgon case Mason J described section 263 at 535 as:

. . . . . . . . a general provision giving the Commissioner a right
of access. It makes lawful that which otherwise would be
unlawful, eg. entry upon premises, the examination of a document.

22. In the applicants' submission, both the language of section 263 and the rule of construction that statutory powers should not be implied to infringe the common law, require dismissal of what they assert is the Commissioner's inferential assertion that he may examine books, documents and the like, for any purpose or for no purpose. In Citibank at first instance (1989) 83 ALR 144, Lockhart J said at 152:

As the section encroaches upon liberty it should be
construed so that the encroachment is no greater than the
statute allows, expressly or by necessary implication. That
rule of statutory construction expresses policies which are,
as will be noted below, central to the common law, and has
been frequently and forcefully stated by courts in Australia
and in the United Kingdom. In the context of the common law
right of passage, Higgins J observed in Melbourne
Corporation v Barry [1922] HCA 56; (1922) 31 CLR 174 at 206 that " . . . any
interference with a common law right cannot be justified
except by statute - by express words or necessary
implication. If a statute is capable of being interpreted
without supposing that it interferes with the common law
right, it should be so interpreted."
As Danckwerts LJ observed in Allen v Thorn Electrical
Industries Ltd (1968) 1 QB 487 at 505: "Existing legal
rights are not to be taken away except by clear words in the
statute. If two constructions are possible, the
construction which produces unreason and hardship is to be
avoided, and the construction which interferes with the
legal rights of the subject to a lesser extent and produces
the less hardship is to be preferred". This last-mentioned
passage was expressly approved by Stephen J in F.C.T. v
Australia and New Zealand Banking Group Ltd (Smorgon's case)
[1979] HCA 67; (1979) 143 CLR 499 at 509; 16 ALR 721 at 729. See also
Sharp's case at 4264 and 4266 and Inland Revenue
Commissioners v Rossminster Ltd [1979] UKHL 5; (1980) AC 952 per Lord
Salmon at 1017 and 1021; and Lord Scarman at 1021-2; and the
remarks of Lord Denning MR in the Court of Appeal at 971,
972 and 977.
These doctrines are deeply rooted in our common law and are
forcefully expressed in early cases of which notable
examples are R v Wilkes [1799] EngR 484; (1763) 2 Wils KB 151; 95 ER 737;
Huckle v Money [1799] EngR 225; (1763) 2 Wils KB 205; 95 ER 768; Entick v
Carrington [1765] EWHC J98; (1765) 2 Wils KB 275; 95 ER 807; Home v Bentinck
[1820] EngR 447; (1820) 2 Brod & B 130; 129 ER 907.
On the other hand, courts must be careful lest they construe
statutory powers too narrowly and unduly curtail a power
which the legislature intended the Commissioner to have to
further his due administration of the Act.

In Citibank on appeal, French J wrote a most learned and comprehensive review of the history and development of this concept, concluding at 614:

Australia is a liberal democracy with a broad tradition of
at least nominal resistance to encroachment upon established
rights and freedoms. That view is reinforced by its
adherence to the International Covenant on Civil and
Political Rights, which relevantly provides in Art. 17,
inter alia, that:
"No-one shall be subject to arbitrary or unlawful
interference with his privacy, family, home or
correspondence . . ."
The nature of this society and its tradition of respect for
individual freedoms, will support an approach to
construction which requires close scrutiny and a strict
reading of statutes which would otherwise remove or encroach
upon those freedoms. But where the natural meaning of the
words is clear, the will of the Parliament must be respected.

In Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 Deane J said at 116:

It is a settled rule of construction that general provisions
of a statute should only be read as abrogating common law
principles or rights to the extent made necessary by express
words or necessary intendment.

Dawson J said at 123:

In the interpretation of statutes there is a presumption
that there is no intention to interfere with basic common
law doctrines unless the words of the statute expressly or
necessarily require that result.

23. The applicants argue that there is thus no warrant to give an ample interpretation to section 263; it must be read according to its words which require purposes extraneous to the section. Because there is no express provision in the Act to conduct a tax audit, the applicants say that the extraordinary power provided by section 263 cannot be given to the Commissioner merely by the use of those words. There has to be an objectively valid statutory purpose, and a brake on the Commissioner's discretion as to what documents he will look for, and when and where he will look for them.
Constitutional inhibitions

24. The applicants say that even if it were otherwise constitutionally possible to confer an absolute discretion on the Commissioner by the use of a word such as audit, that would not be an exercise of a power in relation to taxation. They referred to Shrimpton v The Commonwealth [1945] HCA 4; (1945) 69 CLR 613 which held that under our Constitution, it is not possible to give an unfettered discretion to an official because it may be used for purposes other than the sanctioned purpose. Dixon J said at 629-30:

In the first place, I think s.46(b) of the Acts
Interpretation Act 1901-1941 operates to prevent such an
interpretation because, if an intention to give such a power
were ascribed to it, the regulation would amount to an
attempt to give a controlling authority wider than the power
would allow.
In the next place, I think the word "absolute" is actually
concerned, not with insuring that the purposes for which the
Treasurer may use his discretion are unlimited, but rather
with the finality or conclusiveness of his decision. But
finality, in the sense of complete freedom from legal
control, is a quality which cannot, I think, be given under
our Constitution to a discretion, if, as would be the case,
it is capable of being exercised for purposes, or given an
operation, which would or might go outside the power from
which the law or regulation conferring the discretion
derives its force. An exercise of a power, whether
legislative or administrative, cannot rise higher than its
source, viz., the power itself, and an attempt under the
power to make unexaminable what is done in ostensible
pursuance of a further delegation of authority must, to that
extent, fail. Regulation 9 (2) should be construed down,
and the discretion understood as relating to the purposes
which in point of constitutional validity justify the
regulation and as being "absolute" only within those limits.
I do not think the presence of this provision, so
interpreted, vitiates Part III of the Economic Organization
Regulations.

25. In addition, as discretions cannot constitutionally go beyond one subject matter of tax, there are thus, the applicants submit, both constitutional principles and good reasons at common law requiring that the section be read in a limited sense.
The Respondents' Submissions
Taxation audits

26. It is clear enough that changes to the Act by Act No. 46 of 1986 altered the previous scheme significantly and gave greater importance to the conduct of audits. The object of these amendments was explained in the second reading speech of the Acting Treasurer Mr Hurford. (Second Reading Speech, Taxation Laws Amendment Bill, House of Representatives, 17 April 1986). This makes clear that the new scheme, within which the Commissioner may exercise his long held powers under section 263, was for assessment simply on the basis of the return and any submissions or documents provided by the taxpayer. At the Commissioner's discretion, an audit of the return may be conducted in due course. The Macquarie Dictionary defines audit as including "an official examination and verification of accounts and records, especially of financial accounts". The respondents say that that is what this audit is about, viz. a detailed examination and verification of Industrial Equity's taxation returns. They say that if the applicants' argument is accepted, the 1986 legislative scheme would have been unsuccessful and have failed to achieve its stated goal.

27. The respondents point out that there has been no challenge to the decision to audit the first applicant which was taken fifteen months ago without objection from the applicants. The Commissioner then says that he is auditing the taxation returns for the years 1984-1988 (except 1986 which is subject to current legal proceedings) in furtherance of the basic purpose of the Act, viz. to determine the liability of the first applicant to taxation. Although the existing assessments bring some finality, they do not necessarily mean that there is an end to the matter, because section 170 empowers the Commissioner to amend any return even if tax has been paid on the previous assessment. One way the facts necessary for amendment can be achieved is by exercising the powers provided by section 263. Section 170 provides that the power to amend for the purpose of assessing more tax can be exercised within 3 or 6 years, or at any time, depending on the circumstances revealed by the checking or auditing process. For example, the first applicant's 1984 and 1985 returns are, by section 170(3), presumably beyond the reach of the Commissioner now if the first applicant made "full and true" disclosure of all the material facts necessary for the assesments for those years.

28. Despite the applicants' retort that there is no evidence before the Court that this audit is about verifying and checking returns, and that it is obviously not, because the Commissioner's interest is in the years 1984-1988 whereas the new scheme has only been in existence since 1986, (and thus little or nothing turns on the 1986 amendments), the respondents say that access may and is designed to assist the taxation audit. They point out that they were not asked for reasons for deciding to conduct the audit, but only for seeking access. The respondents submit that examination and verification of returns are clearly purposes of the Act.
Scope of section 263

29. The language of section 263 indicates that it is a very wide power: see my observations in Perron Investments & Ors v Commissioner of Taxation, unreported 15 March 1989 (presently on appeal). The respondents submit that the section permits the Commissioner to have full and free access for any of the purposes of the Act, and for the purpose of having full and free access, he may make extracts. The respondents say that the singular noun makes clear that it is referring back to the purpose of having full and free access. As I said earlier, I am not sure that this is so but it is not necessary to be decided in this case.
In Citibank on appeal at 594-5, Bowen CJ and Fisher J said:

Sub-sections (2) and (3) of s.263 were inserted in the
section in 1987 following the decision of the High Court in
O'Reilly's case. The Court there held that s.263, as it
then stood did not oblige a person to take positive steps to
enable the Commissioner more easily or effectively to enjoy
his right of access. The addition of sub-s(3) did no more
than impose such an obligation on the occupier. Sub-section
(2) may well have been added in aid of this obligation as a
form of protection to the person obliged to render
assistance. It provides that, if requested, an officer must
produce an authorisation in writing, failing which he is not
entitled to enter or remain in the building. The
subsection is silent as to the form or content of the
authorisation. The fact that this written authorisation is
only required to be produced on request tends to indicate
that its existence is not, as a matter of law, a condition
precedent to the exercise of the right of access.

30. Lockhart J had held at first instance that the authority must be specific as to what was being sought, but the Full Court said that this was not so. So long as it is an authority to do something for the purposes of the Act, that is all that is necessary.
The significance of section 264

31. In Smorgon v Australia and New Zealand Banking Group [1976] HCA 53; (1976) 134 CLR 475 at 489, Stephen J speaking of section 264 in words which are equally applicable to section 263, suggested that its application is not limited by the usual curial constraints regarding "fishing" expeditions. In other words, it is not a condition of the operation of the section that an issue or dispute has in fact arisen between the relevant taxpayer and the Commissioner. With characteristically skilful clarifying flourish, French J in Citibank added at 616:

And given the general character of the authorisations, it is
difficult to accept that they were issued in pursuance of a
"tall poppy" campaign.

32. In the 1979 Smorgon case, Sir Harry Gibbs spoke about what is involved in sections 263 and 264 at 524:

As Stephen J points out, the repetition of the words "may
require" gives the paragraph two distinct limbs, each
describing distinct powers. The apparent policy of the
section supports this view. For the purpose of ascertaining
a person's taxable income the Commissioner may need to see
the documents that relate thereto, even though there is no
oral evidence that can be given on the question. There is
no justification for reading into s.264 (1)(b) a condition
precedent which it does not express. There are likely to be
many cases in which documents that relate to a taxpayer's
taxable income will be of great assistance to the
Commissioner in performing his duties under the Act,
although the Commissioner is unable, before seeing the
documents, to say that they are relevant to a particular
issue. It would be an unwarranted limitation on the power
given by the section to hold that the Commissioner can only
obtain documents if he knows that they provide evidence on a
particular matter. The apparent intention of the Parliament
is that the Commissioner is entitled to have produced any
books and documents that relate to the taxpayer's income or
assessment, even if he does not know what those books and
documents may reveal. A document may be required to be
produced only if it in fact relates to the income or
assessment of the person in question, but if it is of that
description, that is enough. In other words the
Commissioner is entitled to make what was described as a
"roving enquiry" into the income or assessment of a
particular taxpayer and for that purpose to have produced
such documents as relate to that income or assessment.

Mason J said at 536:

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 s.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 s.
264 is principally, if not exclusively, directed.

33. The respondents say that section 264 does not have to be read down by reference to section 263, but agree with the applicants that they must be looked at jointly as they are inspired by the same policy. There is no requirement that the Commissioner must have some basis or reason for suspicion. As long as the Commissioner is acting for the purposes of assessing taxation or deciding whether or not to exercise the power to amend, that is a purpose of the Act.
Onus of proof

34. The respondents point out that the question as to whether the attempt to gain access is statutorily blessed depends upon the applicants who bear the burden of proof. The applicant must prove that there is some improper purpose or failure to abide by the Act, or that the audit is other than for determining taxable income.
Curiosity?

35. In answer to the applicants' claim that curiosity is motivating the respondent, they explain that they are conducting an audit, in accordance with a policy to audit the top one hundred companies. It does not matter how the Commissioner organises his resources as long as what he is doing is in furtherance of the purposes of the Act, namely determining income and taxation. The respondents say that the applicants have simply not made out this assertion.
Conclusions

36. The question here is not whether the Commissioner can audit the top one hundred companies; nor has objection been taken to the first applicant being chosen as one of the companies to be audited. The issue for determination is whether section 263, which has significant civil consequences, can be used to conduct this operation on the grounds that a general taxation audit is a purpose of the Act.

37. It is for the applicants to make out the claims they make. Whilst I suppose it is possible in a given case that the Commissioner could be inadequately motivated when seeking to exercise powers under section 263, it is not easy in the present case to see what the Commissioner would be doing in seeking access, except for a purpose of the Act. The stated reasons for seeking access say that the Commissioner has had regard to the returns furnished by Industrial Equity, that Industrial Equity is a client of Bankers Trust and that Bankers Trust holds books and documents relevant to Industrial Equity's affairs, and that gaining access will assist in the taxation audit and in determining the taxation liability of Industrial Equity. Nothing put forward by the applicants casts any doubt on these assertions; indeed they are in substance admitted.

38. In these circumstances the applicants' assertions amounted at best to a rather bold play on words. The Commissioner's prime functions are to determine tax liability with accuracy and collect tax found to be due. These are clearly principal purposes of the Act. An audit is one of the ways used to achieve these purposes; it is not, or is not legitimately used as, a way of obtaining general information or of being a nuisance to a taxpayer. As far as I can see, the Commissioner has no power to use section 263 to conduct a statistical, information-gathering or other lesser exercise - and the applicants have not pointed to a reason why he would be doing or trying to do so here. Nor is it likely that these applicants believe that that is what he is doing here - they would not stoutly refuse access if they believed that they were merely being asked to participate in some type of financial or other census-type operation in relation to their affairs. If that was all that this use of section 263 was about, the parties would undoubtedly be able to reach agreement on the supply of the desired information, or something less than the proposed complex and expensive access would suffice to obtain it.

39. I am quite satisfied that the conduct of an audit to seek verification of the taxation liability of a taxpayer is one of the Act's purposes. I find that the purpose of this section 263 notice was to assist the respondents to carry out their statutory functions in these regards. I reject the proposition that the respondents are motivated by intrigue or some form of idle or other unidentified curiosity. It is not necessary to decide in this case whether access under section 263 may be sought for no purpose or is a purpose itself.

40. The interim injunction will be dissolved. The application will be dismissed with costs.