Bonnell v Deputy Commissioner of Taxation (No 2)
[2008] FCA 578
•16 April 2008
FEDERAL COURT OF AUSTRALIA
Bonnell v Deputy Commissioner of Taxation (No 2) [2008] FCA 578
DAVID NEIL BONNELL v DEPUTY COMMISSIONER OF TAXATION
NSD 1963 OF 2006
GRAHAM J
16 APRIL 2008
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1963 OF 2006
BETWEEN:
DAVID NEIL BONNELL
ApplicantAND:
DEPUTY COMMISSIONER OF TAXATION
Respondent
JUDGE:
GRAHAM J
DATE OF ORDER:
16 APRIL 2008
WHERE MADE:
SYDNEY
THE COURT:
1.Grants leave to the respondent to file in Court an affidavit of Caroline Malcolm affirmed 16 April 2008.
2.Orders that paragraphs 1(k), 1(l), 1(q), 1(r), 1(s), 2, 3 and 4 of the Schedule to the applicant’s Notice for Discovery filed 28 February 2008 be set aside.
3.Orders that in the case of paragraph 1(q), a revised expression of the subparagraph may stand, namely:
‘(q) being a policy statement of relevant considerations to be taken into account in relation to the exercise of the discretion conferred by s227(3) of the Income Tax Assessment Act 1936 (Cth) which was operative at any time between 1 January 2004 and 29 July 2004.’
4.Orders that the time for compliance with the Notice for Discovery be extended until Monday 21 April 2008.
5.Orders that the date 18 April 2008 in orders 2, 3, 4 and 5 of 8 February 2008 be replaced by the date 26 May 2008.
6.Orders that the applicant, Mr Bonnell, pay the respondent’s (Deputy Commissioner of Taxation’s) costs of the Notice of Motion filed 28 March 2008.
7.Orders that such costs may be taxed and shall be payable forthwith.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1963 OF 2006
BETWEEN:
DAVID NEIL BONNELL
ApplicantAND:
DEPUTY COMMISSIONER OF TAXATION
Respondent
JUDGE:
GRAHAM J
DATE:
16 APRIL 2008
PLACE:
SYDNEY
REASONS FOR JUDGMENT
In this matter, orders were made on 8 February 2008 in relation to two Notices of Motion, one filed by the applicant and the other by the respondent. The applicant’s original Notice of Motion was filed on 5 March 2007. It was superseded by an Amended Notice of Motion filed on 11 April 2007, at the conclusion of the hearing on that day. The respondent’s Notice of Motion was filed on 9 March 2007.
The orders sought in the applicant’s Amended Notice of Motion were set out in paragraph 46 of my reasons for judgment of 8 February 2008 and the prayers for relief in the respondent’s Motion were set out in paragraph 48 of those reasons.
At paragraph 125 of my reasons I said:
‘125 Notwithstanding the fact that an order for preliminary discovery under Order 15A rule 6 would be inappropriate, it seems to me that leave should be granted to the applicant, at an early stage, to file and serve a notice for discovery on the respondent requiring the respondent to give discovery of documents relating to any exercise of the discretion conferred on the Commissioner by s 227(3) of the Act to remit the whole or any part of the additional tax payable by the applicant under the Notice of Amended Assessment issued on 29 July 2004 or any possible exercise by the Commissioner of that discretion.’
The substantive orders made on 8 February 2008 were as follows:
‘THE COURT:
1.Grants leave to the applicant to file and serve a Notice For Discovery on the respondent on or before 29 February 2008 requiring the respondent, within 28 days after service of the Notice, to give discovery with verification of documents relating to the exercise, or possible exercise, by the Commissioner, whether before or after 29 July 2004, of the discretion conferred upon him by s 227(3) of the Income Tax Assessment Act 1936 (Cth) (‘the Act’) to remit the whole or any part of the additional tax payable by the applicant under s 226K of the Act and referred to in the Notice of Amended Assessment issued on 29 July 2004.
2.Grants leave to the applicant to amend the Application filed 10 October 2006 by filing and serving an Amended Application on or before 18 April 2008.
3.Grants leave to the applicant to amend the Statement of Claim filed 10 October 2006 by filing and serving an Amended Statement of Claim on or before 18 April 2008.
4.Orders that, in the event that an Amended Statement of Claim is not filed on or before 18 April 2008, the Statement of Claim filed 10 October 2006 shall, without further order, be struck out.
5.Orders that, in the event that an Amended Application is not filed on or before 18 April 2008, the application filed 10 October 2006 shall, without further order, be dismissed generally.
…
8.Orders that the respondent’s Notice of Motion filed 9 March 2007 be dismissed.
…’
A Notice for Discovery was filed and served by the applicant on 28 February 2008. That Notice required the respondent to give discovery of documents identified in a Schedule to the Notice with verification within 28 days after service of the Notice for Discovery upon the respondent. The Schedule commenced with a definition of four words or expressions, being ‘document’, ‘the decision’, ‘the ruling’ and ‘withdrawal decision’. It then listed categories of documents of which discovery was required. It was divided into four numbered paragraphs. Paragraph 1 contained numerous subparagraphs (a)-(s), paragraph 2 contained numerous subparagraphs (a)-(r) and paragraph 3 contained numerous subparagraphs (a)-(s). Paragraph 4 was not broken down into subparagraphs.
The respondent has applied by Notice of Motion filed 28 March 2008 for orders that certain paragraphs in the Notice for Discovery filed 28 February 2008 be set aside. Orders are also sought extending the time for compliance with the Notice. It is common ground that in the light of the Motion, it will be necessary to make orders extending the times specified in orders 2, 3, 4 and 5 of 8 February 2008 as well.
The expression ‘the ruling’ was defined in the Schedule to the Notice for Discovery to mean ‘the private income tax ruling issued to the applicant on 29 September 1998 under the hand of Deputy Commissioner David Butler’. The expression ‘withdrawal decision’ was also defined. It was defined to mean ‘the purported withdrawal of the ruling by the letter of 23 June 1999 under the hand of Assistant Commissioner Mark O’Neil, communicated to the applicant by letter dated 6 December 1999’.
Paragraph 2 of the Notice for Discovery sought discovery of series of documents in relation to the ruling of 29 September 1998. Plainly, the documents referred to in paragraph 2 did not fall within the purview of order 1 made by me on 8 February 2008 as quoted above.
Paragraph 3 sought discovery of documents relating to the withdrawal decision of 23 June 1999. Once again, those documents did not fall within the purview of order 1 made by me on 8 February 2008.
The fourth paragraph in the Schedule to the Notice for Discovery called for the discovery of ‘documents relating to any connection presumed or suspected by officers of the respondent, between the applicant and Assistant Commissioner N. Petroulias including but not limited to’ certain specified classes of documents. Once again, it is blindingly obvious that the documents referred to in paragraph 4 were not within the purview of order 1 made by me on 8 February 2008.
In the circumstances, paragraphs 2, 3 and 4 of the Schedule to the applicant’s Notice for Discovery filed 28 February 2008 should be set aside. It is conceded by senior counsel for the applicant that if those paragraphs of the Schedule to the Notice for Discovery were set aside it would follow that paragraph 1(r) should also be set aside.
This leaves for consideration subparagraphs 1(k), (l), (q) and (s) of the Schedule to the Notice for Discovery to which exception is taken by the respondent. Paragraphs 1(k) and (l) to the Schedule were expressed as follows:
‘1. Any document:
…
(k)being any note, memorandum or correspondence relating to the decision;
(l)being any note, memorandum or correspondence relating to the reasons(s) for the decision;’
The expression ‘the decision’ had been defined to mean ‘the decision made by the respondent not to remit additional tax imposed by s 226K of the Income Tax Assessment Act 1936 (“the Act”) in connection with the amended income tax assessment of the applicant for the year of income ended 30 June 1999’.
It seems to me that, properly construed, subparagraphs (k) and (l) of paragraph 1 of the Schedule to the Notice for Discovery are directed at securing discovery of documents brought into existence after the discretion, referred to in order 1 of the orders made on 8 February 2008, had been exercised.
If the applicant was seeking to secure discovery of documents that may have contained admissions as to the considerations taken into account by the decision-maker on or before 29 July 2004, then, appropriately worded, it may have been correct to say that they fell within the purview of order 1 made on 8 February 2008. However, they are not so expressed and senior counsel for the applicant chose not to suggest revised wording, which would reduce the scope of the discovery required. In the circumstances, subparagraphs (k) and (l) of paragraph 1 of the Schedule to the Notice for Discovery should also be set aside.
This leaves for consideration paragraphs 1(q) and 1(s) of the Schedule. Paragraph 1(q) is presently expressed as follows:
‘1. Any document:
…
(q)any practice manual or memorandum, ruling, directive or policy document relating to the remission or non-remission of additional tax;’
I must say, I find the wording of the subparagraph confusing and note that it is unlimited in point of time. What might be relevant to a case which the applicant may see fit to plead would be a policy statement of relevant considerations to be taken into account, if such a policy statement existed at the time when the relevant decision not to remit additional tax was made under s 227(3) of the Act. In my opinion it would be appropriate to allow a revised form of wording of paragraph 1(q) of the Schedule to the Notice for Discovery to stand, which was confined to policy statements in respect of relevant considerations to be taken into account which was operative at any time between 1 January 2004 and 29 July 2004.
Turning to paragraph 1(s), it provided as follows:
‘1. Any document:
…
(s)provided to the decisionmaker, or made available to the decisionmaker, or obtained by the decisionmaker, which is not included in the abovementioned documents, relating to the decision.’
I have some difficulty in contemplating any document that could fall within this form of expression, which is not embraced by the earlier subparagraphs of paragraph 1 to the Schedule in relation to which no exception is taken by the respondent. The paragraph, as expressed, does not identify a class of documents with sufficient precision to allow the respondent to fairly deal with it. It calls not for a class of documents to be discovered but rather for an interrogation of the relevant decision-maker to be followed by the identification of a class of documents which might be relevant, that class being determined ultimately by the respondent, rather than by the applicant. In my opinion, paragraph 1(s) should also be set aside.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate:
Dated: 29 April 2008
Counsel for the Applicant: M Cashion SC and C W Robinson Solicitor for the Applicant: Bronwyn Helen Stead of BHS Legal Pty Limited Counsel for the Respondent: K M Connor SC and B D O'Donnell Solicitor for the Respondent: Australian Government Solicitor
Date of Hearing: 16 April 2008 Date of Judgment: 16 April 2008
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