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High Court of Australia |
FEDERAL COMMISSIONER OF TAXATION v. AUSTRALIA AND NEW ZEALAND BANKING GROUP
LTD. (1979) 143 CLR 499
Income Tax (Cth)
High Court of Australia
Stephen J.(1)
Gibbs A.C.J.(2), Mason(3), Jacobs(4) and Murphy(5) JJ.
CATCHWORDS
Income Tax (Cth) - Commissioner of Taxation - Powers - To require person to produce books, documents and other papers in his custody or under his control - Documents in bank safe deposit box - Whether in custody or under control of bank - Whether depositor has custody or control - Notice to produce - Not directed to documents concerning income or assessment of named persons - Validity - Income Tax Assessment Act 1936 (Cth), ss. 263, 264 (1).
1979, March 13.
The following written judgments were delivered: -
GIBBS A.C.J. The Commissioner of Taxation and his officers have for some
the present proceedings, who may conveniently, if inaccurately,
be described
as "the Smorgons", and of the very many private companies, firms and
superannuation funds with which those persons are,
or are believed to be,
associated. In the course of this investigation officers of the Commissioner
served on the Smorgons, and also
on The Australia and New Zealand Banking
Group Ltd. ("the Bank"), notices given in intended exercise of the powers
conferred by s. 264 (1) of the Income Tax Assessment Act 1936 (Cth), as
amended ("the Act"). The notices were signed by Mr. L. T. Fitzgerald, a Deputy
Commissioner of Taxation, as delegate of
the Commissioner of Taxation. The
recipients of the notices challenged their validity and an action was brought
by the Commissioner,
Mr. Fitzgerald, and Mr. N. L. Peters, an officer of the
Taxation Department whose connexion with the case will shortly appear, as
plaintiffs, against the Smorgons and the Bank for declaratory relief and for
injunctions. In the action, which came before Stephen
J., three broad issues
fell for decision. First there was the question of the validity of four
notices which required the Bank by
its appropriate officer to attend before
Mr. Peters and produce all books, documents and other papers contained in four
named safe
deposit boxes in a branch of the Bank in Melbourne. This question
was decided by Stephen J. in favour of the Bank, and the plaintiffs'
action
against the Bank was accordingly dismissed. From that decision the plaintiffs
have appealed. The second issue was as to the
validity of notices which
required each of the Smorgons to attend before Mr. Peters, and give evidence
before him, and produce the
books, documents and other papers contained in the
various safe deposit boxes. Stephen J. held that these notices were valid and
effective, and made declarations accordingly. From this part of the decision
the Smorgons have appealed. The third issue was whether
his Honour should have
granted further relief, namely declarations that the plaintiffs were entitled
to access to the documents in
the boxes, and that the Smorgons should produce
to Mr. Peters such of the documents referred to in the notices as were in
their possession,
custody or control, and an injunction restraining the
Smorgons from taking possession of the documents or any other material
contained
in the boxes pending the production of the same to the plaintiffs.
Stephen J. did not grant this relief, and the plaintiffs have
cross-appealed
against his refusal or failure to do so. (at p516)
2. It is convenient to set out the provisions of s. 263 of the Act as well as
those of s. 264 (1), since the Commissioner relies on the former section as
throwing light on the meaning of the latter. The two sections are as
follows:
"263. 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 any of the purposes of this Act, and for that
purpose may make extracts
from or copies of any such books, documents or
papers.
264. (1) The Commissioner may by notice in writing require any person,
whether a taxpayer or not, including any officer employed
in or in connexion
with any department of a Government or by any public authority -
(a) to furnish him with such information as he may require; andauthorized 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." (at p517)
(b) to attend and give evidence before him or before any officer
3. At the outset there arises the question whether Mr. Fitzgerald, who at the
time was Deputy Commissioner of Taxation in Melbourne,
was entitled to give
the notices. The power granted by s. 264 (1) is conferred on the Commissioner.
However, by s. 8 of the Taxation Administration Act 1953 (Cth.), as amended,
it is provided, inter alia, as follows:
"(1) The Commissioner of Taxation may, in relation to a matter or class
of matters, or in relation to a State or part of the
Commonwealth, by writing
under his hand, delegate to a Deputy Commissioner of Taxation or other person
all or any of his powers or
functions under this Act or an Act which is an Act
with respect to taxation (except this power of delegation).
(2) A power or function so delegated may be exercised or performed by
the delegate with respect to the matter or to the matters
included in the
class of matters, or with respect to the State or part of the Commonwealth,
specified in the instrument of delegation."
On 8th December 1976 the Commissioner of Taxation, Mr. W. J. O'Reilly,
delegated to the person for the time being occupying or performing
the duties
of the office of Deputy Commissioner of Taxation, Melbourne, such of his
powers and functions under the Act specified
in the Schedule to the
delegation, or under those Acts as amended from time to time, as are
respectively specified in the Schedule.
The relevant portion of the Schedule
is in the following terms:
----------------------------------------------------------------------------
---- "ACT POWERS AND FUNCTIONS DELEGATED
----------------------------------------------------------------------------
---- Income Tax All of my powers and functions
except Assessment
those under section 8, section 14, sub-Act sections (5) and (6) of
section 51AA, 1936 section 55, section 136, section 147,
sub-section (1) of section 160AL, section 188, section
189, section 196, section 200,
sub-sections (1), (2)
and (5) of section 220, sub-sections (1) and (2) of section 221S,
sub-sections (1) and
(2) of section 221T, section 262
and section 265B."
It was submitted in argument that this delegation was defective in two
respects, viz., that, being a grant of residual powers, it
was not in relation
to a matter or class of matters (and it was of course not in relation to any
State or part of the Commonwealth)
and that it was not a delegation of
existing but rather of future powers, since it refers to powers under the Acts
"as amended from
time to time". I cannot accept these submissions. The
singular words "a matter" in s. 8 (1) must be read as including the plural (s.
23 (b) of Acts Interpretation Act 1901 (Cth) as amended). The delegation is of
all the powers of the Commissioner under all the sections of the Act except
those specified,
and it is therefore a delegation in relation to all matters
to which the powers mentioned in any section of the Act, except the specified
sections, may be applicable. The delegation is one in relation to matters
notwithstanding that the matters in relation to which it
is made are numerous
and are not specifically and individually mentioned. Further, a delegation may
validly be made under s. 8 of powers under the Act "as amended from time to
time". The history of the Act reveals that it has been amended very
frequently,
and it is likely to undergo further amendment in the future. It
would be most inconvenient if a new delegation had to be made every
time an
amendment was made to the Act, and nothing in s. 8 suggests that the
Parliament intended such a result. If it matters, s. 264 has not been amended
since the delegation was made. The
delegation was in my opinion a valid one.
(at p518)
4. I may now turn to the question of substance that arises in the proceedings between the plaintiffs and the Bank. That is whether any books, documents and papers in the safe deposit boxes were in the custody or under the control of the Bank within s. 264 (1). If they were not, it is clear that there was no power to require the Bank to produce them. The Bank maintains at its branch what it calls safe deposit facilities, which are made available to any person ("the depositor") with whom the Bank chooses to enter into an agreement in a standard and familiar form. Although the notices and the pleadings refer to safe deposit "boxes", the depositor, by the agreement, is granted the use of a safe deposit "locker"; it may be surmised that the locker contains a box. Each safe deposit locker is double locked: two keys are needed to unlock it. One of those keys is held only by the Bank. The other key is made in duplicate, and the two identical keys are given to the depositor, who retains one and places the other in a sealed envelope and delivers it to the Bank which, under the agreement, is to retain it in safekeeping and use it only to replace the key held by the depositor, upon his written request, in the event of the loss or destruction of the latter key (cl. 3). The depositor is entitled under the agreement to have access to the locker during the normal hours when the safe deposit facilities are open to the public for business (cl. 5) but in case of emergency the Bank is entitled to close the facilities for such periods as the Bank shall consider reasonably necessary (cl. 6). The Bank is entitled to terminate the use of a locker at any time by notice in writing, and if it does so, and the depositor fails to remove his property from the locker, the Bank may remove the same (cl. 8). It is clear that it is within the physical power of the Bank to open any locker without the aid or concurrence of the depositor. To do this it would be necessary for the Bank to use the duplicate key which it retains for safekeeping and if it did so, without the written request of the depositor and otherwise than in the circumstances mentioned in cl. 8, it would commit a breach of its agreement with the depositor, unless, in using the key, it was acting under the compulsion of a legal requirement which overrode its contractual duty. However, whatever may be its contractual obligations, the Bank is physically able to abstract from the locker, and produce to the authorized officer, anything movable that the locker contains. If the documents which the Bank is required to produce are kept in a box inside the locker, and the box is secured with a padlock or in some other way, the Bank would have no power to force it open, but could produce the documents by producing the box containing them. On the other hand the depositor can only obtain access to the locker if the Bank provides a key - subject to the terms of the agreement the Bank is, of course, contractually bound to do so. (at p519)
5. In this situation it may be a nice question whether the relationship between a depositor and the Bank is one of bailment, and whether the Bank has possession of the documents in the box in the safe deposit locker. But s. 264 does not speak of "possession"; it uses the wider, and vaguer, words "custody" and "control". The two words are sometimes used as synonyms. In Pollock and Wright: Possession in the Common Law (1888), at p. 26, a distinction is drawn between "physical control, detention, or de facto possession", which is said to be "an actual relation between a person and a thing . . . matter of fact", and "legal possession", which is "a definite legal relation of the person to the thing possessed". The learned author goes on to state that in this connexion physical control is generally called "custody". 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 p 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 the 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 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 to 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? (at p520)
6. Stephen J. accepted that the section is concerned with the existence of the ability to produce the documents, but he held that the Bank lacks the ability to produce such documents as may be in a safe deposit box. He held that the Bank lacks physical custody of the contents of a box, because by its agreement with the depositor and by the circumstances surrounding the disposition of keys to the box it has disclaimed all power over the contents, and has thereby relinquished that degree of positive physical custody which may otherwise attach to articles situated in its premises. He further held that the agreement with the depositor and the arrangement as to the keys has effectively prevented the Bank from ever having had such control as will enable it to produce the documents to the Commissioner. With the greatest respect, I cannot share this view. In my respectful opinion the Bank has the custody, or physical control, of the documents in the lockers. The documents are in its power in fact; it holds the keys that enable it to open the locker, take out the box and produce the documents - if necessary, in the box in which they are contained. It appears to me that the physical retention of the two keys by the Bank gives it control of the documents contained in the locker to which the keys give access, and that any agreement or arrangement made by the Bank with the depositor does not affect the question whether the Bank has the documents in its control and is able to produce them. The Bank has actual custody or physical control of the contents of the locker, even if it has bound itself by contract to refrain from exercising the power which it has in fact. It can open the locker and produce its contents even if it has agreed not to do so. (at p521)
7. Section 264 (1) does not itself cast any duty on the person to whom the notice is given, but s. 224 of the Act provides that any person who refuses or neglects to produce any book or paper required of him by the Commissioner or any officer authorized by him shall, unless just cause or excuse for the refusal or neglect is shown by him, be guilty of an offence. There is thus a statutory duty to comply with a notice under s. 264 (1), and any contractual duty owed by the Bank to the depositor is subject to, and overridden by, this statutory duty: cf. Parry-Jones v. Law Society (1969) 1 Ch 1, at p 9 , Brayley v. Wilton (1976) 2 NSWLR 495, at pp 496-497 , and the discussion by Stephen J. in Smorgon v. Australia and New Zealand Banking Group Ltd. (1976) 134 CLR, at pp 486-490 . Further, in my opinion, the existence of the contractual duty provides no just cause or excuse for refusing or neglecting to produce the documents. It is likely that documents which relate to the income or assessment of a taxpayer will often be entrusted by him to another, for example, to a Bank, a solicitor or an accountant. The Parliament cannot have intended that a person whose taxation affairs were under consideration could protect his documents from disclosure simply by binding the person to whom they were entrusted to refrain from producing them. It is true that the taxpayer himself might be required to produce the documents, but in some cases it might not be possible to give notice to the taxpayer, and in any case the most effective way to obtain production might be to require the person who had the documents in his actual custody or under his physical control to produce them. The terms of a contract made between the taxpayer and the custodian of his documents would appear quite irrelevant for the purposes of s. 264 (1), and there is nothing in the provisions of the sub-section that would support the view that the existence of a contractual duty, or an arrangement short of a contract, to refrain from producing the documents should be regarded either as having the effect that the documents were not in the custody or under the control of the person who in fact had them in his custody or under his control, or as providing just cause or excuse for failing to produce them. (at p522)
8. It follows from what I have said that a requirement addressed to one person is no less valid because a valid requirement might also have been addressed to another. More than one person may have the control of a document within the meaning of the section. In the present case the Bank has the physical control, whereas the Smorgons (or at least some of them) have the legal control: both may be required to produce the documents. (at p522)
9. It is true that a bank to whom a notice is given in circumstances such as the present may be placed in a position of considerable difficulty. In many cases the bank will have no knowledge as to what is contained in a safe deposit locker; it may not know whether it contains any documents or whether any documents that it does contain relate to the income or assessment of the person concerned. If the bank causes the locker to be opened, and finds inside it a locked box or sealed envelope, it has no right to open the box or the envelope to see what it contains. If a bank which is required to produce the documents contained in a safe deposit locker does produce the contents of the locker and it is found that they are not documents which relate to the income or assessment of the person named in the notice, the bank may be liable to the depositor for breach of contract. On the other hand, if the bank fails to produce the contents of the locker, and they are found to be documents which do relate to the income or assessment of the person named, it may be liable for a breach of s. 224. On behalf of the plaintiffs it was suggested that the Commissioner is entitled to require production of any document so that he may examine it for the purpose of discovering whether it does relate in some way to a taxpayer's income or assessment. The words of the section are not so wide. The Commissioner is given a power to require the production of books, documents and papers only of the kind described - books, documents and papers "relating thereto". I agree with the view expressed by Stephen J. in Smorgon v. Australia and New Zealand Banking Ltd (1976) 134 CLR, at p 486 that the words "relating thereto" refer back to the words "income or assessment", and not to the remoter word "evidence". 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. If a bank were charged with a contravention of s. 224 the burden would lie on the prosecution to establish that the documents which were not produced were of the kind mentioned in s. 264 (1) (b). If that were proved, the bank would escape conviction if it proved that it had just cause or excuse for its refusal or neglect, and it would no doubt have just cause or excuse if it had an honest belief (or at least an honest and reasonable belief) that the documents were not of that kind. In its present form the section creates practical difficulties both for the Commissioner and for a custodian of documents to whom a notice is addressed. However, for the reasons that I have given, the notice was appropriately addressed to the Bank notwithstanding that the documents mentioned in it were said to be contained in the safe deposit boxes. (at p523)
10. It then becomes necessary to consider an argument that was addressed on behalf of the Smorgons, and adopted by the Bank, that the power conferred by s. 264 (1) had not been properly exercised, because a necessary condition precedent had not been fulfilled. The condition precedent said to be implicit in the section was stated in several ways: that the notice can only be given if the documents required provide evidence on a particular issue as to which evidence is lacking; that the notice must be directed to an issue of fact which is existing and has been defined; that a notice can only be given if the Commissioner or his delegate has formed an opinion that evidence on a particular question is necessary; that the Commissioner or his delegate must have made an enquiry as to what matters are in dispute and must then have given notice requiring evidence about particular matters. These submissions find no support in the words of s. 264 (1), unless it is held that the power to require the production of documents is merely ancillary to the power to require a person to attend and give evidence, and that the documents to be produced are those that relate to the evidence to be given. I have already said that I agree with Stephen J. that the words "relating thereto" do not refer to the word "evidence". I agree also with his Honour's views, expressed in Smorgon v. Australia and New Zealand Banking Group Ltd. (1976) 134 CLR, at pp 485-486 , that the power conferred by the second part of s. 264 (1) (b) is independent of that conferred by the preceding words of that paragraph; 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. (at p524)
11. In reaching these conclusions I have not been assisted by the provisions of s. 263. That section creates problems of its own. It grants the Commissioner full and free access to, inter alia, buildings and documents. "Access" in this context, must mean the right to enter the building, and to examine the documents. It has been held in a number of cases that a statute which confers on a public officer a right to enter premises prima facie authorizes the use of reasonable force to effect the entry, since if the officer were entitled to enter only with the consent of the occupier no statutory authorization would be required: Grove v. Eastern Gas Board (1952) 1 KB 77, at pp 82, 88-89 ; Fowler v. Taylor (1957) VR 593, at p 596 ; Egg Marketing Board (N.S.W.) v. Cassar (1978) 1 NSWLR 90 . However the words of s. 263 are far too generally expressed to make such an interpretation possible; the right granted is to have access at all times, to all buildings and documents, and for any of the purposes of the Act, and it is not expressed to be subject to the production of any warrant or authority, or to be limited in any other way. If the section authorized the Commissioner to gain such access by force, it would bring about the most serious invasion of the ordinary rights of the subject, and the section would not be given that effect unless the clearest words required it. However in the present case counsel for the plaintiffs did not contend that the section allows the Commissioner to use force to obtain the access to which the section entitles him. It was submitted that s. 263 declares the right of the Commissioner to access, and that s. 264 provides a means by which the Commissioner can enforce that right. It is no doubt true that s. 264 does enable the Commissioner, in some cases, to achieve the access to which s. 263 refers, but this circumstance does not throw any light on the meaning of s. 264. It is not necessary either to enlarge or to restrict the ordinary meaning of the words of s. 264 for the purpose of enabling that section to operate harmoniously with s. 263. (at p525)
12. The next question that arises is whether the notices given to the Bank were sufficient in form. 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. Similar reasoning was applied, correctly in my opinion, by Burt C.J. in Snow v. Keating (W.A.) (1978) 19 ALR 373; 8 ATR 507; 78 ATC 4125 where the notice required a taxpayer to give evidence but did not specify the person concerning whose income or assessment the evidence was sought. (at p526)
13. One of the notices given to the Bank in the present case was in what has been called "the short form": it required the Bank to produce all documents in certain safe deposit boxes without showing that those documents related to the income or assessment of any person. The notice was invalid and the plaintiffs did not seek to argue to the contrary. Another notice, dated 14th February, required the Bank to attend and produce books, documents and papers before Mr. Peters in connexion with the income of and/or the ascertainment of the amount of taxable income and the tax payable thereon by certain named persons and continued, somewhat ungrammatically, with the words: "to produce at the said place and time all books, documents and other papers" located in the specified safe deposit boxes, without stating that those documents related to the income or assessment of the persons named. I need not take time in considering whether this badly worded notice did contain a sufficient indication that it required the production of documents of the kind described in s. 264 (1), since two further notices, dated 23rd February 1977, in effect replaced it. Those notices required the Bank to attend before Mr. Peters in connexion with the income of, and/or the ascertainment of the amount of taxable income and the tax payable thereon by the persons named in the Schedule, to produce: "the following books, documents and other papers in your custody or under your control relating thereto, being all books, documents and other papers located in" the named safe deposit boxes. It was submitted that there was a repugnancy between the reference to documents relating to the income or the ascertainment of the amount of taxable income and the tax payable thereon by the named persons on the one hand, and "all documents" on the other. Obviously the notices are framed on the assumption that all the documents in the safe deposit boxes are documents which relate to the income or assessment of the named persons. If that assumption is correct the notices are valid. These notices are in my opinion sufficient in form. (at p526)
14. For the reasons I have given the various arguments advanced on behalf of the Bank must fail, except as to two of the notices. However it was quite frankly conceded on behalf of the plaintiffs that the Commissioner did not know if any documents of the kind described in s. 264 (1) were contained in the safe deposit lockers. The Commissioner merely suspected that the lockers contained documents of that description. By par. 7 of the statement of claim the plaintiff made the following allegations: "The said boxes or some or one of them contain or may contain documents and materials relevant to the enquiry referred to in paragraph 5 hereof." These allegations were not admitted by the Bank, and the Smorgons denied them. No evidence was given in support of the allegations. The plaintiffs sought a declaration in the follwing terms: "A declaration that each of the said notices referred to in paragraphs 9 and 10 hereof is and was at all times material valid pursuant to the provisions of the Tax Act." The notices referred to in par. 9 were those given to the Smorgons and the notices referred to in par. 10 were those given to the Bank. The plaintiffs also sought a declaration that the Bank should produce to Mr. Peters such of the documents as are referred to in each of the notices served upon it as are in its possession, custody or control. In my opinion the plaintiffs are not entitled to obtain the latter declaration merely on the basis of suspicion that the documents described in the notices may be in a locker in the Bank. Indeed, it is open to question whether in the circumstances the plaintiffs are entitled to any declaratory relief. However the Bank has, understandably, fully argued before Stephen J. and before this Full Court the question whether a requirement under s. 264 (1) (b) might validly be given to the Bank to produce documents contained in a safe deposit locker, and the further questions with which I have dealt, and it seems to me desirable that so much of the present protracted dispute as has been the subject of these arguments should now be determined. In these circumstances it seems to me proper to make a declaration that the two notices dated 23rd February 1977 were not invalid for the reasons suggested. However in my opinion no declaration should be made that the notices were valid, since that question depends on whether in fact the lockers did contain documents all of which relate to the income or assessment of the named persons. (at p527)
15. The further question that remains to be decided on the appeal brought by
the Smorgons is whether the notices given to those
parties were sufficient in
form. Omitting immaterial words each of those notices read as follows:
". . . I, LEO THOMAS FITZGERALD, do by this Notice require you to attend
. . . and give evidence before Norman Leslie Peters
. . . concerning the
following matters -
(a) the income of; and/orby -
(b) the ascertainment of the taxable income and the tax payable thereon
16. I would accordingly dismiss the Smorgons' appeal. However, for the
reasons that I have given in relation to the declaration
sought against the
Bank, I respectfully consider that the declarations which his Honour made
against the Smorgons were too wide.
Those declarations were as follows:
"(i) That each of the notices given by the Secondnamed Plaintiff as the
delegate of the Firstnamed Plaintiff on 14th February
1977 to each of the
first nine named Defendants, and the Eleventhnamed Defendant and Twelfthnamed
Defendant and referred to in paragraph
9 of the Statement of Claim herein was
validly given pursuant to the provisions of Section 264 (1) of the Income Tax
Assessment Act
1936;
(ii) That each of the first nine named Defendants, the Eleventhnamed
Defendant and the Twelfthnamed Defendant is required to
attend before the
Thirdnamed Plaintiff to give evidence concerning the income or assessment of
the persons referred to respectively
in the said notices and to produce all
such books, documents and other papers contained in the safe deposit boxes
numbered 800, 1019,
1370 and 1848 which are located at the premises of the
Thirteenthnamed Defendant as relate to the income or assessment of any one
or
more of such persons."
The notices were validly given only if in fact all the documents in the boxes
relate to the income or assessment of the named persons.
Similarly the
Smorgons were obliged to produce all the documents in the boxes only if they
related to the income or assessment of
the named persons. I would substitute
declarations narrower in scope. (at p529)
17. The final matter for decision is that which is raised by the cross-appeal of the plaintiffs. The additional relief which the plaintiffs sought against the Smorgons was rightly refused, since it has not been proved that any documents of the requisite description are contained in the lockers, or that any access to which the Bank is entitled has been denied it. It is therefore unnecessary to consider further the provisions of s. 263. (at p529)
18. For the reasons that I have given, I would make the following orders: (at p529)
19. (I) Allow with costs the appeal by the Commissioner of Taxation and
others against the Australia and New Zealand Banking Group
Ltd., order that
orders numbered (1) and (2) made by Stephen J. be set aside and that in lieu
thereof it be ordered as follows:
(1) Declare that two of the notices dated 23rd February 1977 and
referred to in par. 10 of the statement of claim (being the
notices which
require the thirteenth defendant to produce certain books, documents and other
papers in its custody or under its control
relating to the income of and/or
the ascertainment of taxable income and the tax payable thereon by the persons
referred to in the
schedule annexed thereto, namely all books, documents and
other papers located in safe deposit boxes numbered 800, 1019, 1370 and
1848)
were not invalid by reason of their form, or by reason of the fact that they
require the production of books, documents and
papers contained in safe
deposit lockers at a branch of the thirteenth defendant, or by any
insufficiency in the delegation of power
to the secondnamed plaintiff.
(2) Order that the costs of and incidental to the action against the
thirteenth defendant be taxed and paid by the thirteenth
defendant to the
plaintiff. (at p529)
20. (II) Dismiss with costs the appeal by George Smorgon and others against
the Commissioner of Taxation and others, but substitute
the following
declarations for those made by Stephen J.:
(i) Declare that none of the notices given by the second-named plaintiff
as the delegate of the firstnamed plaintiff on 14th
February 1977 to each of
the first nine named defendants and the eleventhnamed defendant and the
twelfthnamed defendant and referred
to in par. 9 of the statement of claim was
invalid by reason of its form or by any insufficiency in the delegation of
power to the
secondnamed respondent.
(ii) Declare that each of the first nine named defendants, the
eleventhnamed defendant and the twelfthnamed defendant is required
to attend
before the thirdnamed plaintiff to give evidence concerning the income or
assessment of the persons referred to respectively
in the said notices. (at
p530)
21. (III) Dismiss with costs the cross-appeal by the respondents, the
Commissioner of Taxation and others. (at p530)
MASON J. There are here two appeals and a cross-appeal brought from the decision of Stephen J. delivered on 9th December 1977, in which his Honour dismissed an action for a declaration that certain notices issued by the Commissioner of Taxation ("the Commissioner") pursuant to the powers conferred by s. 264 (1) of the Income Tax Assessment Act 1936, as amended ("the Act") directed to The Australia and New Zealand Banking Company Limited ("the Bank") were valid, but declared that similar notices directed to the Smorgons were valid. The decision arose out of a further attempt by the Commissioner to require the production of documents relating to the income and assessment of the Smorgons, following Stephen J.'s judgment in Smorgon v. Australia and New Zealand Banking Group Ltd. [1976] HCA 53; (1976) 134 CLR 475 (at p530)
2. In the present case each notice was issued by the Commissioner under s. 264 (1) and sought to compel the person to whom it was directed to produce for inspection by the Commissioner's delegate the contents of certain safe deposit boxes situated in the Bank premises. The Commissioner issued several notices to the Bank, each in slightly different form, so that the Court has to consider the validity of various forms of notice. (at p530)
3. Three main classes of objection were taken by the Bank and the Smorgons in relation to the validity of all the notices. First, the ambit of the Commissioner's investigatory powers under ss. 263 and 264 (1) was canvassed and it was argued that certain conditions precedent to the exercise of the Commissioner's rights under each section should be implied so as to prevent the Commissioner from undertaking a "fishing expedition". Secondly, it was argued that the notices were defective in form as they were each expressed too widely and therefore on their face exceeded the Commissioner's power under the section. Thirdly, in relation to the notices directed to the Bank, it was submitted that the Bank lacked "custody" or "control" of the documents within the safe deposit boxes and could therefore not be compelled to produce them. (at p531)
4. It is convenient to deal with this third point first. Section 264 (1) of
the Act provides:
"The Commissioner may by notice in writing require any person, whether a
taxpayer or not, including any officer employed in
or in connexion with any
department of a Government or by any public authority -
(a) to furnish him with such information as he may require; andauthorized 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." (at p531)
(b) to attend and give evidence before him or before any officer
5. The rights of the customer and the Bank with respect to each safe deposit
box are regulated by pro forma written agreements to
which the Bank and
individual members of the Smorgon family are parties. Each agreement
provides:
"I/We . . . HEREBY ACKNOWLEDGE having received from the Bank two
identical keys numbered as in the schedule in respect of the
said Safe Deposit
Locker (herein referred to as 'the Locker') the Bank holding a third and
different key by means whereof the Locker
may be double locked and in
consideration of the Bank granting me/us the use of the Locker upon the terms
and conditions herein contained
I/we agree with the Bank as follows:-
. . .all times until the same is returned to the Bank
2. To retain one of the said identical keys under my/our own control at
. . .Locker at any time by notice in writing signed by the Manager for the time being of the said Branch or any other officer of the Bank authorised in that behalf. Upon determination of my/our use of the Locker, I/we shall remove all property from the Locker and surrender the key thereof to the Bank whereupon the Bank is to refund to me/us any unexpired portion (calculated on a monthly basis) of the charge paid in advance for the use of the Locker. In default of my/our removing such property the Bank may remove the same and make such arrangements for the custody thereof at my/our risk and expense as the Bank shall think fit.
8. The Bank is entitled in its discretion to terminate my/our use of the
. . ."Clause 1 authorizes the Bank to charge for the use of the box, cl. 7 prohibits the placement of dangerous goods in the box and by cl. 9 the Bank accepts and limits its responsibility to that "legally required of gratuitous bailees having the custody of the property of other persons". (at p532)
6. Clearly in the circumstances of this case, where no action to terminate any of the agreements has been taken by any of the parties to them, the Bank is contractually bound not to use the duplicate key which it holds (cl. 3). However, it was not contested that if on its true construction the Act required the Bank to deliver up the contents of the boxes to the Commissioner pursuant to the notices then the Bank would commit no breach of contract by doing so. The real question is whether, given the disposition of keys and location of the boxes within the premises of the Bank, together with the exercise by the Bank of what Stephen J. called "negative superintendence as guardian of the security of the boxes", the Bank has the contents of the boxes in its custody or under its control within the meaning of s. 264. (at p532)
7. The primary definition of "custody" in the Shorter Oxford English Dictionary is "Safe keeping, protection; charge, care, guardianship". Without more, the degree of protection for the security of the contents of the boxes which the Bank provides justifies the conclusion that the documents were in the custody of the Bank. It is of no consequence that the Smorgons have rights of access (specifically provided by cl. 5 of the agreements) to the contents of the boxes, though it may be that during any period of time when the customer actually avails himself of his right of access to the box and has it open the contents are no longer in the custody, or at any rate the sole custody, of the Bank. In my opinion the Bank has custody of the contents of a locked safe deposit box situated on its premises. (at p533)
8. The content of "control" is somewhat different from that of "custody"; however, both are "wide enough to include many types of possession which are not commensurate with full ownership" (Johnston Fear & Kingham v. The Commonwealth [1943] HCA 18; (1943) 67 CLR 314, at p 324 , per Rich J.). It is difficult to ascribe a precise meaning to "control" in s. 264 as the content of the word is normally dictated by its context and can vary from sole absolute dominion over the object "controlled" to "something weaker than 'restraint', something equivalent to 'regulation'" (Bank of New South Wales v. The Commonwealth [1948] HCA 7; (1948) 76 CLR 1, at p 385 , per Dixon J.). Although the use of the composite expression "in his custody or under his control" does not assist us in determining the precise limits of the meaning of "control", it does evidence a legislative intention to employ the words in their widest sense. (at p533)
9. In the circumstances of this case where the Bank has the actual ability to open the boxes without damage to them, though contractually bound not to do so, and where no box can be opened without the Bank first providing access to it and a key, it is my opinion that the Bank does have "control" over the documents to a sufficient degree to come within the scope of that word as it is used in s. 264 (1) (b). (at p533)
10. There is to my mind no reason to limit the scope of "custody and control" to "exclusive custody and control". The decision in Dollfus Mieg et Compagnie S.A. v. Bank of England (1949) Ch 369 is of no assistance in this case. The decision of Jenkins J. that the bailor (the Tripartite Commission which represented the governments of the United Kingdom, France and the United States) retained possession, for the purpose of the rules relating to sovereign immunity, of certain gold bars held on a bailment by the Bank of England in a "Gold set-aside Account" (that is, held in a vault with other gold but kept separate for the purpose of returning it in specie) was in no way inconsistent with the exercise of custody or control by the bank. The decision said nothing about the nature of the bailment from the bank's point of view. (at p533)
11. Even the view that custody, or possession, must reside exclusively in one person at any given time (Paton, Bailment in the Common Law (1952), pp. 6-9) does not relieve the Bank from compliance with a lawful notice to produce documents under s. 264. Whether or not Professor Paton is right in his suggestion that on true analysis the bank in the Dollfus Mieg Case (1949) Ch 369 had exclusive possession yet Tripartite Commission retained control over the disposition of the gold bars, it seems clear that in that case, as in the present case, there was scope for the exercise of some "control" by both the bailor and bailee. In these circumstances the Bank falls, at the least, within the ambit of the exercise of "control" under s. 264 whether or not it also has possession or custody of the documents. (at p534)
12. Section 264 appears in Pt VIII of the Act - "MISCELLANEOUS". The section is preceded by ss. 262A and 263. Section 262A, which was introduced into the Act in 1943, requires every person carrying on a business to "Keep sufficient records in the English language of his income and expenditure to enable his assessable income and allowable deductions to be readily ascertained" and to retain such records for at least seven years. Sections 263 and 264 then arm the Commissioner with rights and powers to inspect documents. The rights and powers so conferred are not limited to the records which a person carrying on a business is obliged to keep by s. 262A. (at p534)
13. By s. 263 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 any of the purposes of the Act. This right of access is not confined to documentary records which relate to the income of the person in whose possession they are at a given time. The Commissioner's right of access extends to documentary records for any of the purposes of the Act. He may therefore examine, but not seize, documentary records relating to the income of a person other than the person who has possession of the records. (at p534)
14. The power conferred upon the Commissioner by s. 264 to require a person to furnish information, to attend and give evidence and to require the production of books, documents and other papers enables him to obtain information and inspect documents when the "full and free access" given by s. 263, for whatever reason, is inadequate to enable him to inspect documentary records, though I can see no reason why the exercise of the power should be restricted to these circumstances. Section 264 makes no reference back to s. 263; nor does s. 264 condition the power which it confers upon an exercise of the right of access given by the earlier section, or an attempt to exercise that right. The later section should therefore be construed according to its terms. They are not to be cut down and distorted by the making of a vague and indefinite implication based on the existence of the earlier provision. The fact is that ss. 263 and 264 serve two different purposes. Section 263 is a general provision giving the Commissioner a right of access. It makes lawful that which otherwise would be unlawful, e.g. entry upon premises, the examination of a document. The succeeding section arms the Commissioner with inquisitorial and coercive powers. However, this difference supplies no reason for departing from the language of s. 264 which is expressed in the widest terms. (at p535)
15. Except in one respect the powers given by s. 264 should be circumscribed only by reference to the limitations which are expressed in that section. Thus, in s. 264 (1) (b) the power to compel evidence is restricted to evidence "concerning his or any other person's income or assessment" and the power to require production is confined to documentary records "relating thereto", that is, to "his or any other person's income or assessment". However, the power to require information contained in par. (1) (a) is not similarly limited. As it is a power given to the Commissioner for the purpose of enabling him to perform his functions under the Act it must be circumscribed by reference to this purpose. (at p535)
16. The expression "relating thereto" refers back to "his or any other person's income or assessment", not to "attend and give evidence", despite the somewhat inappropriate setting out of the sub-section. It is therefore within the Commissioner's power to require a person, who is not required to attend to give evidence, to produce books, documents and other papers pursuant to s. 264 (1) (b). In this respect I agree with the remarks of Stephen J. in the earlier Smorgon Case, when he said (1976) 134 CLR, at p 485 : "the second part of par. (b) is independent of what immediately precedes it; it is not a power ancillary to, and only capable of exercise in aid of, the first part. On the contrary it is a self-contained provision. . . . It depends for its effective meaning upon the opening words of s. 264 (1), but not upon anything in the first part of par. (b)." (at p535)
17. The consequence of all that I have said is that the Commissioner is at liberty to choose to require the production of documents or the attendance of persons pursuant to s. 264 without first exhausting his right of access pursuant to s. 263. (at p535)
18. 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 inquires, 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. (at p536)
19. What I have already said about s. 264 also determines the view I take of the formal objections to the Commissioner's notices which were raised by the Smorgons in this case. As Stephen J. has pointed out, the notices to each of the Smorgons are in the same form. Each requires the addressee to attend and give evidence before a Mr. Peters, whom the notice authorizes for that purpose. The evidence to be give is stated to concern the income of, and the ascertainment of the taxable income and the tax payable thereon by, a large number of named individuals, firms, funds and companies in respect of a period of twelve years of income. The notices go on to require the production of all books, documents and papers in one or more of four numbered safe deposit boxes. (at p536)
20. Four notices were addressed to the Bank. Three of them, the long form of notice, one dated 14th February 1977 and two dated 23rd February 1977 require the Bank, by its proper officer, to attend before Mr. Peters, again authorized for that purpose, and, in connexion with the income of, and the ascertainment of the amount of taxable income and the tax payable thereon by, the taxpayers for the same twelve years, to produce all books, documents and papers in the four safe deposit boxes. The fourth notice to the Bank (the short form), also dated 23rd February 1977, without referring to anyone's income or tax, simply requires the production by the Bank of all books, documents and papers in the four safe deposit boxes. (at p536)
21. 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. For this reason there is a fatal defect in the short form of notice addressed to the Bank dated 23rd February 1977 as it does not describe the documents required to be produced except by reference to their location. (at p537)
22. 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. (at p537)
23. The existence of this hazard is not a sufficient basis for the conclusion that the section requires the Commissioner to give a notice in such terms as would enable the recipient on reading it and on examining the documents in his custody or control to determine whether they fall within the ambit of the Commissioner's powers. To so hold would be to impose an impossible burden on the Commissioner. In many, if not most, cases he will be unaware of the contents of the documents of which he seeks production. And there will be cases in which a recipient who is not the taxpayer will lack the degree of knowledge of the taxpayer's affairs and of the Commissioner's approach to his assessment that is necessary to determine whether the documents relate to the taxpayer's income or assessment. Not only would the suggested requirement frustrate the object of conferring the power, it would be inconsistent with the section as I have explained it. (at p537)
24. It is not in dispute that a notice given under par. (1) (b) may validly require the production of something less than all the books, documents and other papers in the custody or control of the recipient relating to the income or assessment of the named person. It may, for example, specify particular documents. Such a notice, if correctly drawn, will make it clear that the requirement extends to the particular documents because they are included in the class of documents of which the Commissioner is authorized to require production. (at p537)
25. 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. (at p538)
26. The two notices to the Bank dated 23rd February 1977 in the long form contain an appropriate description of the documents to be produced and are valid. The class is limited to documents relating to the income of, and/or the ascertainment of the amount of taxable income of, and the tax payable thereon by, the named persons, though this description of the class is immediately followed by the assertion that the class consists of all the documents in the safe deposit boxes. However, the notice dated 14th February 1977, which is also in the long form, merely describes the documents to be produced as those which are located in the safe deposit boxes, without in any way asserting that they are documents which relate to the income or assessment of the named persons. It is therefore invalid. (at p538)
27. All the notices to the Smorgons use a third formula for describing the
documents and a more difficult question arises in relation
to them. After
calling upon the addressee to give evidence before Mr. Peters concerning the
income and/or the ascertainment of the
taxable income and tax payable by the
persons who are named, the notices state:
"AND IN CONNECTION THEREWITH I DO FURTHER HEREBY REQUIRE YOU to produce
at the said place and time all books, documents and
other papers located in
safety deposit box numbered (number) situate at the Australia and New Zealand
Banking Group Limited, Stock
Exchange Branch, 351 Collins Street, Melbourne."
(at p538)
28. In my view the demand to produce documents contained in this form of
notice goes beyond that which the Commissioner may legally
make. The words "in
connection therewith" refer back to the investigation, that is, the
investigation of the income and taxable income
of the persons named and the
tax payable thereon, and do not seek to define the relationship between the
subject matter of the investigation
and the documents. A person receiving such
a notice may deduce that certain documents in the safe deposit box need not be
produced
because their character is so remote that they can have no relevance
to the investigation. However, the notice itself in terms purports
to require
the production of "all books, documents and other papers" in the box without
indicating that they relate to the income
or assessment of the persons named.
It is not to the point that all the documents in the box may, for all we
presently know, fall
within the ambit of the Commissioner's power. I have
given my reasons for concluding that the demand for production must be so
formulated
that it expresses the limitation imposes by the section. (at p539)
29. Another matter raised by the Smorgons relates to the delegation by the Commissioner to the Deputy Commissioner, Melbourne, of his powers under s. 264, for the notices were executed by the Deputy Commissioner, Melbourne, as the delegate of the Commissioner. The actual instrument of delegation was dated 8th December 1976 and was executed by the Commissioner pursuant to s. 8 of the Taxation Administration Act 1953. The instrument was expressed to be a delegation under that Act of "such of my powers and functions under the Acts specified in the Schedule to this Delegation, or under those Acts as amended from time to time, as are respectively specified in that Schedule". In the Schedule, against the marginal heading "Income Tax Assessment Act 1936" there appear the words "All of my powers and functions except those under", followed by a list of sections and subsections which do not include s. 264. (at p539)
30. It was submitted, first, that the delegation was not authorized by s. 8 of the Taxation Administration Act because it permits the Commissioner to delegate "in relation to a matter or class of matters, or in relation to a State or part of the Commonwealth . . . all or any of his powers or functions" under a taxation statute and not otherwise. What the Commissioner has done is to delegate his powers under s. 264 to the Deputy Commissioner in relation to each and every matter. None the less it is a delegation in relation to a class of matters, the class being the whole of the matters. It was argued, secondly, that the reference in the delegation to "those Acts as amended from time to time" constituted it as a delegation of prospective powers. There are a variety of answers to this argument of which only the most obvious need be mentioned. First, the reference is intended to do no more than correctly describe the statutes by their current titles from time to time so as to negative the suggestion which might otherwise be made that the delegation has no application to the statute once it is amended. Next, s. 264 has not been amended at any time, so that the delegation is not relevantly of a prospective power. (at p539)
31. The cross-appeal by the Commissioner, the Deputy Commissioner and Mr. Peters against the Smorgons seeks, first, a declaration that they or one or more of them are entitled under s. 263 to access to the documents in the safe deposit boxes. There is an allegation in the statement of claim filed by the cross-appellants that they were refused access to the boxes. This allegation was traversed by the Bank and the Smorgons. At the hearing before Stephen J. no evidence was directed to this issue. It is therefore not surprising that no mention of it is made in his Honour's judgment. When asked, Mr. Liddell, for the cross-appellants, though at first disavowing reliance on s. 263, later in the argument reluctantly embraced the section, despite the absence of evidence on the point. For this reason alone it is inappropriate that any declaration should now be made upon the question. However, in the light of my earlier comment on s. 263 that its effect is to make lawful what otherwise would be unlawful, I would go on to say that the section does not impose an obligation on the owner or occupier of premises or on the person having custody or control of a safe deposit box, to produce a key to the Commissioner or his representative to enable him to gain access. It is not a section which arms the Commissioner with a coercive power or which imposes obligations on persons to make the statutory right of access effective. (at p540)
32. The case for the order for production by the Smorgons of the documents in the safe deposit boxes hinges on the validity of the notices directed to them. As I have held them to be invalid, the order should not be made. (at p540)
33. The third order sought in the cross-appeal is an injunction restraining the Smorgons from taking possession of material in the boxes pending production. No argument was addressed to this topic and for that reason I would not make the order sought. The question is none the less a live question. Can the Smorgons remove the documents from the boxes after a valid notice for production under s. 264 has been given to the Bank? I do not think that they can. The Bank's obligation to produce attaches to documents in its custody and control at the time when notice to produce was given to the Bank and by reason of the existence of that obligation the Bank cannot disable itself from performing its statutory obligation. It is not to the point that the Smorgons have contractual rights as against the Bank; they are overriden by the statutory obligation. (at p540)
34. For these reasons I would allow the Commissioner's appeal and the appeal by the Smorgons. I would dismiss the cross-appeal. I would make appropriate declarations of invalidity on all the notices issued by the Commissioner except the two notices in the long form directed to the Bank dated 23rd February 1977. (at p541)
JACOBS J. In my opinion the two notices to the Bank in the long form (as it has been described) dated 23rd February 1977 were valid notices. I agree with the reasons of Mason J. for this conclusion, and there is nothing that I wish to add to his reasons. I also agree that the other two notices to the Bank were defective in the manner and for the reasons which Mason J. describes. I would therefore allow the appeal of the Commissioner and his officers in respect of the two notices first referred to. (at p541)
2. On the appeal by the Smorgons against the finding of Stephen J. that the
notices to them under s. 264 (1) were valid I take a
different view from Mason
J. I would dismiss the Smorgons' appeal. The notices each required the
particular member of the Smorgon
family to attend and give evidence
"concerning the following matters -by -
(a) the income of; and/or
(b) the ascertainment of the taxable income and the tax payable thereon
3. As to the other objections to the notices, I find none of them sustainable for the reasons which Mason J. has given. (at p542)
4. In the statement of claim the Commissioner and other plaintiffs alleged that the Smorgons and the Bank refused to permit them to have access to the safe deposit boxes or to the books, documents and other papers contained in the boxes. A declaration was claimed that the plaintiffs were entitled to access to the documents contained in each of the boxes. The Smorgons and the Bank each denied the allegation that they had so refused. The Smorgons by counterclaim sought a declaration that they were not obliged to give the Commissioner and the other plaintiffs access to the safe deposit boxes or to the books, documents or other papers contained therein. Stephen J. made neither declaration. The issue whether or not access had been denied does not appear to have been litigated before him. The Commissioner and his officers do not, as against the Bank, appeal against the fact that Stephen J. did not make the declaration sought, but in their cross-appeal to the Smorgons' appeal they seek a declaration of entitlement to access under s. 263. I am not satisfied that the matter was litigated before Stephen J. There can be no doubt that the Commissioner and his officers are entitled to access because s. 263 distinctly says so. Of the precise rights or duties given or incurred as a consequence of his statutory right I do not propose to attempt any exposition. There is no proof that the Commissioner or his officers made particular requests to the Bank or the Smorgons which were refused. Much could turn on the nature of the request and the nature of the refusal to permit access when considering whether the refusal was of a kind which could amount to the obstruction of a public officer in the exercise of his statutory power and thus be a misdemeanour at common law. (See Halsbury's Laws of England 4th ed., vol. 11, par. 928: R. v. Smith (1780) 2 Dougl KB 441 (99 ER 283) .) If it were so, this would in my opinion entitle the Commissioner and his officers to invoke the assistance of the civil courts to prevent continued obstruction of the exercise of his statutory power. Whether or not a refusal to open locked doors to which a person has the key or keys amounts to obstruction is a question upon which I express no opinion without evidence that these things have happened and in what circumstances they happened. In the circumstances I would dismiss the cross-appeal. (at p543)
5. In summary, therefore, I would allow with costs the Commissioner's and his officers' appeal against the Bank; I would dismiss with costs the Smorgons' appeal against the Commissioner and his officers and the latter's cross-appeal against the Smorgons. (at p543)
MURPHY J. This appeal concerns the power of the Commissioner of Taxation to
have access to papers and to obtain information and
evidence. The Income Tax
Assessment Act 1936, as amended, provides:
"263. 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 any of the purposes of this Act, and for that
purpose may make extracts
from or copies of any such books, documents or
papers.
264. (1) The Commissioner may by notice in writing require any person,
whether a taxpayer or not, including any officer employed
in or in connexion
with any department of a Government or by any public authority -
(a) to furnish him with such information as he may require; andauthorized 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.
(b) to attend and give evidence before him or before any officer
2. The powers under s. 263 enable the Commissioner to have full and free
access. This is a very wide power. In D'Emden v. Pedder
[1904] HCA 1; (1904) 1 CLR 91, at p
110 the Full Court said:
". . . where any power or control is expressly granted, there is
included in the grant, to the full extent of the capacity
of the grantor, and
without special mention, every power and every control the denial of which
would render the grant itself ineffective.
This is, in truth, not a doctrine
of any special system of law, but a statement of a necessary rule of
construction of all grants
of power, whether by unwritten constitution, formal
written instrument, or other delegation of authority, and applied from the
necessity
of the case, to all to whom is committed the exercise of powers of
government."
This passage was referred to by O'Connor J. in Jumbunna Coal Mine, N.L. v.
Victorian Coal Miners' Association (1908)
6 CLR 309,
at
p 356 . (at p544)
3. 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.). In those cases, the expression used was "having regard . . . to the rights of persons affected". I would not confine the requirement to "rights" in any strict sense and for that reason I omit any reference to "rights". These implied limitations on the power in s. 263 serve to safeguard the extremely important social value of privacy which must be balanced against the necessities of administration of the revenue laws. They moderate what would otherwise be a power capable of oppressive use. The Commissioner of Taxation is not only expected, but bound, to observe those limitations on the power. There is not the slightest indication that he has not done so in this case. (at p544)
4. There is a long history of the granting of such wide powers to those with duties to carry out revenue laws of the Commonwealth. The Distillation Act 1901 provided that "officers shall at all times have complete access to every part of all distilleries or premises on which a still is kept" (s. 60). (See also: Excise Act 1901, s. 86; Beer Excise Act 1901, s. 50.) A number of primary industry levy collection Acts contained the full and free access provision. An example of the common form of the provision then used is found in the Cattle Slaughter Levy Collection Act 1960, s. 9. See further, Tobacco Charges Assessment Act 1955, s. 41; Wool Tax (Administration) Act 1964, s. 90; Sales Tax Assessment Act (No. 1) 1930, s. 71; Pay-roll Tax Assessment Act 1941, s. 69; Pay-roll Tax (Territories) Assessment Act 1971, s. 68; Estate Duty Assessment Act 1914, s. 44; Honey Levy Collection Act 1962, s. 11. (at p544)
5. During the 1960s, a controversy arose over the width of such powers (see Parliamentary Debates 1965, Session 32, pp. 1516- 1540 and 1969, Session 41 pp. 1989-1994). Acting on the view that the "full and free access at all times" clause was a "mischief" which gave too much authority to officers authorized under the industry Acts, Parliament declined to allow such access, and limited the power in those Acts. For example, the Meat Chicken Levy Collection Act 1969, s. 9, provides for entry and search at all reasonable times and on production of authority. A power in the same or similar terms is included in the Metal Working Machine Tools Bounty Act 1972, s. 15; Dried Fruits Levy Collection Act 1971, s. 15; Dried Vine Fruits Stabilization Act 1971, s. 26; Export Incentives Grants Act 1971, s. 33; Gold Mines Development Assistance Act 1962, s. 21; Gold Mining Industry Assistance Act 1954, s. 16; Honey Export Charge Collection Act 1973, s. 8; Insurance Act 1973, s. 53; Dairying Industry Act 1962, s. 9. (at p545)
6. The granting of such wide powers was further restricted by the adoption of a common form which provides for entry by warrant for access to papers (see Pig Slaughter Levy Collection Act 1971, s. 15; and similar powers in Meat Export Charge Collection Act 1973, s. 15; Dairying Industry Equalization Act 1970, s. 15; Dairying Industry Levy Collection Act 1970, s. 17; Dairying Research Levy Collection Act 1972, s. 10). (at p545)
7. In the Income Tax Assessment Act, Parliament has chosen to continue to grant the Commissioner "at all times . . . full and free access". (at p545)
8. Section 263 enables the Commissioner to "fish" for information. In
Southwestern Indemnities Ltd. v. Bank of New South Wales [1973]
HCA 52; (1973)
129 CLR 512,
at pp 519-520 Barwick C.J. held that:
". . . 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.
Section 264 authorizes the giving of a notice to any person to furnish
information. It was appropriate in such a provision
to make it clear that the
notice could be given to persons who were not taxpayers as defined in the Act.
In contrast with s. 264
in this respect s. 263, in giving to the Commissioner
a right to access, gave rise to no similar need. It was quite sufficient to
use universal expressions such as 'at all times' and 'to all buildings', etc.
No further emphasis was required. No limitation could
be suggested. As I have
indicated, the sole limitation or qualification is that the access should be
sought for 'the purposes of
the Act'." (at p545)
9. It would seem that full and free access extends to the use of reasonable
force in order to gain access for the same reason that
a power of entry
extends to the use of reasonable force to gain entry (see Grove v. Eastern Gas
Board (1952) 1 KB 77, at p 82 ):
"A power of entry conferred by a statute is, prima facie, at any rate, a
power of forcible entry if necessary. There would
be no need for statutory
authorisation if all that the representatives of the gas board were allowed to
do was to enter and read
the meter if the consumer was willing to admit them
to the place where the meter was, so that they could read it."
(See also Fowler v. Taylor (1957) VR 593, at p 596 and Egg Marketing Board
(N.S.W.) v. Cassar (1978) 1 NSWLR 90 .) (at p546)
10. The Commissioner may invoke the assistance of the courts to enforce his full and free access. Apart from exceptional circumstances, this course would be preferable to any use of reasonable force. (at p546)
11. The powers in s. 264 are not qualified by s. 263 and their exercise is not conditioned upon a previous attempt to use the powers under s. 263. I agree with Stephen J.'s construction of s. 264 (1) (b) that the Commissioner may require a person to produce papers irrespective of whether he is or has been required to attend and give evidence (see Smorgon v. Australia and New Zealand Banking Group Ltd. (1976) 134 CLR, at pp 485-486 ). (at p546)
12. The power in s. 264 may be exercised without regard to whether an issue
of fact has arisen between the Commissioner and the
taxpayer. It empowers the
Commissioner to "fish" for information to enable him to ascertain the amount
of taxable income of any person
and the tax payable on it. As Stephen J. said
in Smorgon's Case (1976) 134 CLR, at p 489 :
"Just as s. 263 gives to the Commissioner full and free access to 'all
buildings, places, books, documents and other papers'
so s. 264 is expressed
in no less wide and emphatic terms; any person, whether a taxpayer or not, may
be required to furnish information,
to attend and give evidence and to produce
all books, documents and other papers." (at p546)
13. On the facts, the Bank has custody of the contents of the safe deposit
box on its premises, and also has control of its contents
within the meaning
of s. 264 (1) (b). The Bank clearly has physical control. It can produce the
contents of the box. The contractual
arrangements between it and the Smorgons
cannot prevail against s. 264 or s. 263 of the Act; it is immaterial whether
they are read
as subject to the provisions of the Act, or treated as invalid
in so far as they are inconsistent with the Act. If the box does not
contain
any documents to which the notices refer, the notices under s. 264 are not
invalid, but simply inoperative. (at p546)
14. I agree with the conclusions of Mason J. in regard to the notices to the Bank and the Smorgons which are the subject of the appeal by the Commissioner. The Commissioner's appeal should be allowed in respect of the two notices to the Bank dated 23rd February 1977. (at p547)
15. The appeal by the Smorgons in respect of the notices to attend and give evidence and to produce papers should be dismissed. The notices stated that the papers required to be produced were those "in connection with" the evidence to be given concerning the income or the ascertainment of the taxable income and the tax payable thereon by the persons named in the notice and it therefore sufficiently indicated that the papers required were those relating to those persons' income or assessment within the meaning of s. 264. The notices are valid. I agree with Mason J. in rejecting the other objections to the notices. (at p547)
16. This would seem to be enough to dispose of the matters really in dispute. I would if necessary (but it does not seem to be necessary) be prepared to make a declaration that the Commissioner is entitled to "full and free access" to the deposit box and its contents, if any, and appropriate orders for giving effect to this access. (at p547)
ORDER
(I) Allow with costs the appeal by the Commissioner of Taxation and others against the Australia and New Zealand Banking Group Ltd., order that orders numbered (1) and (2) made by Stephen J. be set aside and that in lieu thereof it be ordered as follows;
(II) Dismiss with costs the appeal by George Smorgon and others against the
Commissioner of Taxation and others, but substitute
the following declarations
for those made by Stephen J.:
(i) Declare that none of the notices given by the secondnamed plaintiff as
the delegate of the firstnamed plaintiff on 14th February
1977 to each of the
first nine named defendants and the eleventhnamed defendant and the
twelfthnamed defendant and referred to in
par. 9 of the statement of claim was
invalid by reason of its form or by any insufficiency in the delegation of
power to the secondnamed
respondent.
(ii) Declare that each of the first nine named defendants, the eleventhnamed
defendant and the twelfthnamed defendant is required
to attend before the
thirdnamed plaintiff to give evidence concerning the income or assessment of
the persons referred to respectively
in the said notices.
(III) Dismiss with costs the cross-appeal by the respondents, the Commissioner of Taxation and others.
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