Canadian Pacific Tobacco Co Ltd v Stapleton [1952] HCA 32; (1952) 86 CLR 1 (29 July 1952)

HIGH COURT OF AUSTRALIA

CANADIAN PACIFIC TOBACCO CO. LTD. v. STAPLETON [1952] HCA 32; (1952) 86 CLR 1

Evidence

High Court of Australia
Dixon C.J.(1)
McTiernan(2), Williams(3) and Kitto(4) JJ.

CATCHWORDS

Evidence - Contempt of court - Company - Managing director - Unpaid income tax - Sequestration of estate - Stay of proceedings - Disposal of company's assets only in ordinary course of business - Undertaking to Court by company and another director - Disposal of assets - Breach by company and the director - Evidence - Confessional statements obtained from director by departmental officer - Admissibility of evidence - Information - Acquired in course of employment - Divulged in course of duty - Income Tax and Social Services Contribution Assessment Act 1936-1952 (No. 27 of 1936 - No. 4 of 1952), ss. 16 (1), (2), (3), 232, 263.

HEARING

Brisbane, 1952, June 24, 27. 27:6:1952
Sydney, 1952, July 29. 29:7:1952
APPEAL from Dixon C.J.

DECISION

DIXON C.J. The question which is raised appears to be very important in the ultimate decision of the case, so far as I can judge at the present stage, and for that reason I do not propose to pronounce a definite opinion upon it which would exclude Mr. Gibbs from raising the question again at a final stage of the proceedings. My present view is that the evidence is admissible. (at p4)

2. The question arises in this way. An officer, Mr. Tobin, armed with a customary authority, interviewed one of the respondents to this motion, Mr. Pooley, and obtained from him statements amounting to admissions, that is to say, confessional statements, by questioning him. At the beginning of the interview he handed him his authority. It does not appear whether Mr. Pooley read the authority or not, and owing to the fact that a typiste has typed across two material parts of the authority, after the words "Under the Income Tax" the words "and Social Services Contribution Act", he perhaps would have some difficulty in reading it. (at p4)

3. But at all events it says: "The bearer, Alfred Edward Tobin, whose signature appears below, being an officer under the Income Tax and Social Services Contribution Assessment Act 1936-1951, is hereby authorised to have at all times a full and free access to all buildings, places, books, documents and other papers for any purpose of the said Act and as provided by the said Act for that purpose to make extracts from or copies of any such books, documents or papers. Any person who obstructs or hinders any officer acting in the discharge of his duty under the Income Tax and Social Services Contribution Assessment Act 1936-1951 is guilty of an offence, for which the Act provides a penalty not less than 1 pound or more than 50 pounds". (at p4)

4. That is signed by the Deputy Commissioner of Taxation, and a copy of s. 263 of the Act is given under his signature. Section 232 of the Act says: "Any person who obstructs or hinders any officer acting in the discharge of his duty under this Act or the regulations shall be guilty of an offence. Penalty: Not less than One pound or more than Fifty pounds". (at p4)

5. Section 16 of the Act is directed, according to the marginal note, to the preservation of secrecy or observance of secrecy by officers. The material parts of that section are the first three sub-sections. The first of those sub-sections is concerned with the definition of "officer" for the purpose of the remaining sub-sections. (at p4)

6. That expression is made to mean "a person who is or has been appointed or employed by the Commonwealth or by a State, and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person, disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax". (at p4)

7. The officer in the present case falls, in a general sense, within the definition: but it is necessary to state the purpose for which he interviewed the respondent Pooley. The purpose arose out of those circumstances. The commissioner proceeded against Coward for income tax and additional tax amounting to a very large sum. The commissioner recovered judgment and proceeded upon that judgment in the Bankruptcy Court, where an order for sequestration was obtained. (at p5)

8. He proved in the bankruptcy for the debt upon which he petitioned, and no other proofs were lodged. (at p5)

9. In the bankruptcy motions were launched to set aside a great number of transactions and orders were made by the Court of Bankruptcy setting them aside. From the orders so made, an appeal was brought to this Court. (at p5)

10. One of the appellants is the company, and an application was made to me sitting in Chambers for an order staying the execution of the decree, which order I made upon terms of an undertaking not to part with assets. The undertaking was given by the company, and it is for breach of that undertaking that these proceedings are brought. (at p5)

11. Mr. Tobin, the officer in question, was inquiring into transactions which were in breach of that undertaking and might be supposed, if they had taken place, to endanger in some degree the execution of the order made by the Bankruptcy Court, or its fulfilment, if they were successful. (at p5)

12. The first question that arises is whether, in prosecuting that inquiry, he was acting by reason of his employment or in the course of his employment. I am disposed to the view that he was. The result of that view is that he did acquire, or has acquired, information respecting the affairs of another person, namely, the company and possibly Mr. Pooley, in the course of his employment or by reason of his appointment. (at p5)

13. The provision then goes on to say, and uses the expression, "disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to Income Tax". (at p5)

14. From the facts I have stated, it would appear that it is doubtful whether the information disclosed can be regarded as "obtained under the provisions of this Act"; that is to say, whether the information could be considered as disclosed or obtained under the provisions of the Act. (at p5)

15. On the whole, I am inclined to think that it is. A very wide meaning should be given to those words, because of the policy of s. 16(1). Having regard to the fact that the authority was produced, to the terms of s. 232 which are very wide and to the fact that the end in view, the end result so to speak, of the proceedings is the vindication of the revenue and the collection of the sums owing, I am disposed to think that the definition is sufficiently fulfilled. (at p6)

16. That being my view, it is necessary to proceed to sub-s. (2), which says: "An officer shall not either directly or indirectly, except in the performance of any duty as an officer, and either while he is, or after he ceases to be an officer, make a record of, or divulge or communicate to any person any such information so acquired by him". (at p6)

17. There is a minor point on the construction of the sub-section, which it is perhaps better to mention before proceeding to apply it; that is, whether the words "to any person" attach themselves to the word "divulge" as well as to the word "communicate". (at p6)

18. The point would be of no materiality if it were not for the doubt as to whether the Court could be considered "a person" within the meaning of the provision. It would be of no materiality except for that reason, because it could hardly be information divulged except to a person, that is to say, unless you give a restricted meaning to "person" which excludes bodies such as courts. (at p6)

19. I am inclined to think that the words "to any person" do attach themselves to the word "divulge". There is, of course, a presumption that a modifying prepositional phrase of that sort following the verb does attach itself to the last preceding verb and not to preceding verbs separated from it by an alternative. But, when the whole provision is looked at, and the use of the words "make a record of" and then of the words "any such information" is considered, together with the position the intervening words take, it seems to me more probable that the draftsman was using the expression "to any person" in relation to both the words "divulge" and "communicate". If that is so, the section probably cannot apply to courts, which would hardly be called persons. (at p6)

20. But, in any case, I think that the words "except in the performance of any duty as an officer" ought to receive a very wide interpretation. The word "duty" there is not, I think, used in a sense that is confined to a legal obligation, but really would be better represented by the word "function". The exception governs all that is incidental to the carrying out of what is commonly called "the duties of an officer's employment"; that is to say, the functions and proper actions which his employment authorizes. (at p6)

21. In a case of this description I should think that did include the making of an affidavit in this Court, in a proceeding for the ultimate obtaining of revenue, even if the word "divulge" is used in a sense which includes the giving of evidence. (at p7)

22. Sub-section (3) provides that "An officer shall not be required to produce in court" (certain documents) "or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties as an officer, except when it is necessary to do so for the purpose of carrying into effect the provisions of this Act or of any previous law". (at p7)

23. In spite of the word "exclusion" in the passage that was read from O'Flaherty v. McBride [1920] HCA 60; (1920) 28 CLR 283, at p 288 , I think that this provision gives only a protection to the officer against compulsion, and does not make inadmissible evidence which the officer is prepared to give under instructions from his superiors or the commissioner. (at p7)

24. For those reasons I am of opinion, as at present advised, that the evidence is not excluded by the provision of s. 16. (at p7)

25. But it is then said that, having regard to the manner in which the evidence was obtained, I have a discretion to exclude it, because there is some degree of unfairness, considered from the point of view of Mr. Pooley, having regard to the situation in which he was placed. He was asked to give information and was shown an authority, which on its face would lead him to suppose that he was compelled to answer, and to answer truthfully. (at p7)

26. It is not suggested that his statement was involuntary within the meaning of common law rule, and was therefore inadmissible. But it is said that the situation in which he was left was such that the Court in the exercise of its discretion should exclude the evidence. (at p7)

27. Whatever Mr. Pooley may have thought about it, I am not disposed to take that view of the unfairness of his position. He was asked reasonably simple questions about a transaction. If he thought that they were liable to incriminate him, he might have refused and stated that ground; and he might have endeavoured to reason with the officer against his persisting in placing him in the position of embarrassment under s. 232. (at p7)

28. He did not take that course, and perhaps it may be said that a layman might not be expected to argue the matter out with an officer. (at p7)

29. But I see no real reason why in the circumstances of the present case the evidence should be excluded on the exceptional grounds which apply in criminal proceedings to give the court a discretion. (at p7)

30. I need not go into the questions which were raised both in R. v. Lee [1950] HCA 25; (1950) 82 CLR 133 and in McDermott v. The King [1948] HCA 23; (1948) 76 CLR 501 , but the situation which the observations in these cases contemplate is of an entirely different order from that in which, in my opinion, the witness Pooley was placed. (at p8)

31. For those reasons, which I have stated somewhat at length, I am at present of opinion that this evidence should be admitted. I have stated my reasons at length because I am not desirous at this stage of the case completely to exclude Mr. Gibbs from canvassing the matter again if he thinks fit, and he will have the advantage of knowing what as at present is the view I take as to the admission of the affidavit evidence. The case may proceed on that basis. (at p8)

32. After certain further evidence had been tendered, his Honour adjudged the respondent Pooley guilty of contempt and made an order imposing punishment. (at p8)

33. From that decision the respondents to the application appealed to the Full Court of the High Court on various grounds, the principal ground being that the affidavit of Alfred Edward Tobin, sworn on 30th May 1952, was wrongly admitted in evidence. (at p8)

34. A.R.J. Gilmour, for the appellants. Tobin's affidavit was wrongly admitted in evidence. The Chief Justice placed reliance upon the contents of that affidavit in arriving at his conclusion against these appellants. If that evidence had not been before the Court it may be that his Honour would have arrived at a different conclusion. Tobin was not an officer within the meaning of s. 16 of the Income Tax and Social Services Contribution Assessment Act 1936-1952 at the time he obtained the information referred to in his affidavit. It was obtained by him in the course of his employment under the Act. The Chief Justice's interpretation of sub-s. (3) of s. 16 was too liberal. His interpretation was that it merely empowered the officer to withhold the evidence under objection and did not absolutely exclude him from giving that evidence. Words of that import, particularly with the penalty imposed, go further than was held to be the case in O'Flaherty v. McBride [1920] HCA 60; (1920) 28 CLR 283, at p 288 and make the information absolutely privileged and inadmissible. The word "required" should be read as "allowed" or "permitted". The words in sub-s. (3) "an officer shall not be required" are stronger than the words applying the principle expressed by Lord Wright in Rowell v. Pratt (1938) AC 101, at pp 104-106 and stronger than the words in s. 17(2) of the Agricultural Marketing Act 1931 (Imp.) (21 & 22 Geo. V. c.42) there under consideration, because prohibition is directed to the court as well as to the person who would be infringing the section. In its literal sense sub-s. (3) is a direct prohibition to the court to require that that evidence be produced. In sub-s. (2) an officer is bound not to make any disclosure to any person whatsoever. Sub-section (2) is directed to an officer, prohibiting any disclosure to any person whatsoever. The prohibition applies not only to direct disclosures but also to indirect disclosures. The giving of such evidence by an officer in a court would, unless he were protected by an order of the court, be a disclosure not only to the court itself but also to all persons, members of the public in general, who may be in the court in their right of being present therein. The words "shall not be required" are directed to the court, that is, that the court is not to require the witness to divulge the information. Sub-section (2) does not refer to the court as a person. It does not refer to disclosure in court so far as the court is concerned, but disclosure in the court would be disclosure to the public generally. Sub-sections (2) and (3) together make such evidence inadmissible. The matter is beyond the stage where the officer gave the evidence for the purpose of carrying into effect the provisions of the Income Tax and Social Services Contribution Assessment Act 1936-1952. These are proceedings for contempt of court, which is not in any way related to the provisions of that Act. The matter complained of is the breach of the undertaking; not the disposal of the assets. There is not any necessary connection between these proceedings and the Bankruptcy Court or the administration in bankruptcy. A statutory provision corresponding to s. 16 was discussed in Honeychurch v. Honeychurch (1943) SASR 31 . The effect of sub-ss. (2) and (3) of s. 16 is to absolutely exclude the evidence of this officer unless it is admissible as being necessary for the purpose of carrying into effect the provisions of the Act. These proceedings are not necessarily coupled with the bankruptcy, and do not, in the particular circumstances, come within the principles of carrying into effect the provisions of the said Act. If that evidence were excluded then, it is submitted, on the reasoning of the Chief Justice as appears in his reasons for judgment, this Court could not be satisfied that his Honour, as a primary tribunal of fact, would have been prepared to make the order. The orders made by the Chief Justice should be set aside and the matter remitted for re-hearing. (at p10)

35. E. J. Moynahan, for the respondent-applicant was not called upon to argue. (at p10)

The following judgments were delivered:-
McTIERNAN J. In my opinion this appeal should be dismissed. (at p10) 2. The principal question is the construction of s. 16 of the Income Tax and Social Services Contribution Act 1936-1952. I agree with the construction which the Chief Justice placed upon the section. That is expressed in the judgment which his Honour delivered at the hearing of the motion, after the argument upon the objection, founded upon s. 16, to the admission of Mr. Tobin's affidavit. He was an "officer" within the meaning of s. 16 of the Act. Having regard to the proceedings out of which the motion arose, the exception in sub-s. (2) of s. 16 applied to the affidavit, because the furnishing of the information which it contained for use as evidence in the motion, was connected with the office in which Mr. Tobin was employed by the Commonwealth. The furnishing of this information for use as evidence in the motion was done in performance of Mr. Tobin's duty as an officer. The question then arises whether the admission of the affidavit was prohibited by sub-s. (3). Mr. Tobin was not required to give the evidence contained in the affidavit. There is nothing in sub-s. (3) which made the affidavit inadmissible. The sub-section excludes the obligation of an officer to produce certain documents and give certain evidence, except in the circumstances which it mentions. This is as far, as Rich J. said in delivering the judgment of the Court in O'Flaherty v. McBride (1930) 28 CLR, at p 286 as the sub-section goes. If an officer is not "required" to give evidence there is nothing in the sub-section which excludes his evidence. I am of opinion that the affidavit was rightly admitted in evidence. (at p10)

3. The next question is whether the finding that there was a breach of the undertaking was correct. When the evidence provided by Mr. Tobin's affidavit is taken into consideration there can be no doubt that the Chief Justice was well justified in arriving at the conclusion that there was a breach of the undertaking. (at p10)

4. For these reasons I think the appeal should be dismissed. (at p10)

WILLIAMS J. I agree. Mr. Gilmour's main submission, as I understand it, is that Mr. Tobin's affidavit is not admissible because there arises from s. 16, sub-s. (3), of the Income Tax and Social Services Contribution Assessment Act 1936-1952, which provides that an officer shall not be required to produce in court any return, &c., or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duty as an officer except &c. a necessary implication that he is prohibited from doing those things. (at p11)

2. In my opinion there is no justification for making such an implication, or for giving the sub-section a wider meaning than its express terms. In express terms the sub-section only protects an officer from being required to do those things, it does not forbid his doing them. The difference between compellability and competency to give evidence is well known and the sub-section is concerned only with compellability and not with competency. (at p11)

3. I agree that his Honour the Chief Justice rightly admitted Tobin's affidavit and it is not contested that, on the evidence as a whole, that affidavit forming part of it, his Honour was justified in coming to the conclusion to which he came. (at p11)

KITTO J. I agree. I may say that I am sure the careful argument to which we have listened from Mr. Gilmour has placed before us every consideration which could fairly be urged against the conclusion to which his Honour the Chief Justice came. However, I am satisfied that the conclusion which his Honour has expressed is correct. I agree with the reasons which he gave for it. (at p11)

ORDER

Appeal dismissed.