B D O'Callaghan (trustee for the Lionel Newton estate) v Commissioner of Taxation

[1989] FCA 856

IN THE FEDERAL COURT OF AUSTRALIA	)
VICTORIA DISTRICT REGISTRY	) No. VG2067 of 1987
GENERAL DIVISION	1

BETWEEN: B.D. O'CALLAGHAN (AS
TRUSTEE FOR THE LIONEL
NEWTON ESTATE)

RE: HOSTATES PTY. LTD.

Applicant

AND: THE COMMISSIONER OF

TAXAT I ON OF THE

COMMONWEALTH OF AUSTRALIA

Respondent

CORAM :	Jenkinson J.
PLACE:	Melbourne
DATE :	8 March, 1989

REASONS FOR JUDGMENT

The respondent has claimed that production of each of four documents discovered by him in this appeal would be contrary to the public interest. In the affidavit of discovery the four documents are numbered and described as follows:

"200. Letter from Assistant Deputy

Commissioner Melbourne to

Commissioner 06.07.83

204.    Letter Acting Deputy Commis-

sioner Melbourne to Commis-

sioner 13.03.84

208.   Letter Assistant Deputy

Commissioner Melbourne to

Commissioner 10.01.84
209.	Copy letter Acting Commissioner to Treasurer 27.07.82"

In support of his claim that production would be contrary to the public interest the respondent has tendered the following affidavit sworn by Neil Raymond Hurst.

"1. I am the Acting Assistant Deputy Commissioner, Appeals and Review Group of the Australian Taxation Ofice, Melbourne and I am duly authorized to make this affidavit on behalf of the Commissioner of Taxation.

2.    I have read the affidavit of dacuments sworn herein by John Anthony Frazzetto on the 20th day of April 1988.

3. In that affidavit Mr. Frazzetto, in accordance with instructions given to him, objected to producing certain documents on the grounds that their production would be contrary to the public interest. The Applicant now challenges that claim and seeks production of 4 of the documents which Mr. Frazzetto objected to produce. Those documents are numbered 200, 204, 208 and 209 in the Schedule to Mr. Frazzettors

affidavit.

4.    The reason that the disclosure of those documents would be contrary to public Interest are that -

(a) three of the documents comprise communications between the Deputy Commissioner of Taxation and the Commissioner of Taxation and directly concern the formulation of the policy to be adopted and the reasons for the policy to be adopted for the assessment of taxpayers involved in certain kinds of profit-stripping tax avoidance schemes and the exploitation of SS.

50A-50N of the Income Tax Assessment

Act 1936 ("the Act1') , ;

(b)	one of the documents is a
communication between the

Commissioner of Taxation and the Treasurer of the Commonwealth of Australia and contains a recommendation by the Commissioner to the Treasurer for the amendment of the Act and the reasons justifying that amendment;

(c)	three of the documents contain information concerning the private taxation affairs of persons not involved in this proceeding;
d)	disclosure of any of the documents is likely to substantially diminish the ability of the Commissioner of Taxation to recover large amounts of tax hitherto evaded by use of a number of artificially contrived income tax avoidance schemes;
(e)	disclosure of any of the documents would not in any way assist the Applicant in the advancement of its case in this proceeding or retard the ability of the Respondent to defeat the Applicant's claim.

5.    I ask accordingly that the objection be

upheld. l1

In a later affidavit, Mr. Hurst deposed that he had read the

documents.

It has been said that the affidavit in support of an
objection on behalf of the executive government should be taken by
a Minister or permanent head : Sankey v. Whitlam 142 C.L.R. 1 at

1. But in Krew v. The Federal Commissioner of Taxation (1971) 71

A.T.C. 4091 at 4092 walsh J. thought that in an income tax appeal the claim of privilege might be taken by a Second Commissioner. The present deponent is below that departmental level. Since it

is established that a Court should prevent the disclosure of a document the production of which would be contrary to the public interest "even if no claim is made by a Minister or high official that its production should be withheld" (142 C.L.R. at 44), it would be unwise to refuse to consider the evidence or opinion of any departmental officer whose position gives ground for an expectation that he would be able to assist the Court to discharge its function.

The statements in sub-paragraph 4(a) and sub-paragraph 4(d) of the affidavit may be considered. Since the provisions of s.50A of the Income Tax Assessment Act 1936 and the succeeding sections to and including s.50N rest some legal consequences upon conclusions of the respondent, as distinct from facts (to be determined in assessment by the respondent and on a reference or appeal by the Administrative Appeals Tribunal or the Court respectively) it is possible, although perhaps not easy, to understand how in a sense "policy" may be involved in assessments which turn upon the application of those sections. It is not, however, within my capacity to understand how exactly the

disclosure of any of the three documents is "likely to	substantially diminish the ability of the Commissioner of Taxation
to recover large amounts of tax hitherto evaded by use of a number of artificially contrived income tax avoidance schemes". I do not intend that observation as a criticism of the statement supporting the claim for protection from disclosure : it may be impossible to explain why disclosure is likely to have that consequence without incurring the consequence by the making of the explanation. But the contents of sub-paragraphs (a) and (d) in paragraph 4 of the
affidavit do not give ground for any confident conclusion by the Court in favour of the claim for protection from disclosure.
Sub-paragraphs (b) and (d) of paragraph 4 of the affidavit justify a more confident conclusion that the document numbered 209 should not be disclosed. It falls in a class of document which would not be disclosed except for very good reason grounded in the demands of justice in litigation.
rt was submitted that the Court would not exercise the power to examine a document concerning which a claim for
protection from disclosure on the ground of public interest was
made in a ministerial affidavit (or in an affidavit by an

F-

appropriate "high official") unless the Court had first reached a conclusion that the document should probably be produced. An observation by Gibbs A.C.J. in Sankey v. whitlam (142 C.L.R. at

46) was said to justify the submission. I did not take the

observation to be laying down that restrictive rule. The obligation of balancing and deciding between the competing public interests which are involved when matter relevant to the

disclosure of which is otherwise harmful to the public interest	determination of a legal proceeding is said to be matter the
lies on the Court, and inspection ought, in my opinion, to be had whenever the discharge of that obligation seems likely to be better achieved by inspection than by refraining from inspection. (Cf. Krew v. The Federal Commissioner of Taxation (1971) 71 A.T.C.
4091 at 4093.)
The affidavit of Mr. Hurst does not deal with the possibility that a part of the document might without prejudice to the public interest be disclosed. That is a course which Stephen
J. discussed in Sankey v. Whitlam, 142 C.L.R. at 67.
In all the circumstances, I think it right that I should examine the documents. I direct that they be produced to the Court.

I certify that this and the 5

preceding pages are a true copy of the Reasons for Judgment of Mr.

.-

Dated: 8 March, 1989