Commissioner of Taxation & Darling & Anor

[2013] FamCA 118

FAMILY COURT OF AUSTRALIA

COMMISSIONER OF TAXATION & DARLING AND ANOR [2013] FamCA 118

FAMILY LAW – EVIDENCE – Application in a Case filed by the Commissioner of Taxation seeking to be released from the obligation not to make collateral use of documents filed in the proceedings in this Court between the husband and the wife – Application dismissed

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Taxation Administration Act 1953 (Cth)

British American Tobacco Australia Services Pty Ltd v Cowell (as representing the estate of Rolah Ann McCabe, deceased) [2003] VSCA 43 (28 April 2003)
Hearne v Street (2008) 235 CLR 125
Springfield Nominees Pty Ltd v Bridgelands (1992) 38 FCR 217
Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2009] QCA 345
Ambridge Investments Pty Ltd Baker & Ors [2010] VSC 545
Australian Securities and Investments Commission v Marshall Bell Hawkins [2003] FCA 833
Thornton & Workcover Corporation of South Australia [2009] FamCA 449

APPLICANT: Commissioner of Taxation

RESPONDENT HUSBAND: Mr Darling

RESPONDENT WIFE: Ms Darling

FILE NUMBER: MLC 6328 of 2007

DATE DELIVERED: 1 March 2013

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 31 January 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Linden

SOLICITOR FOR THE APPLICANT: Commissioner of Taxation

COUNSEL FOR THE RESPONDENT HUSBAND: Mr de Wijn, QC & Mr O'Loughlin

SOLICITOR FOR THE RESPONDENT HUSBAND: Kenna Teasdale Lawyers

COUNSEL FOR THE RESPONDENT WIFE: Mr Brown, SC

SOLICITOR FOR THE RESPONDENT WIFE: Livaditis & Co

IT IS ORDERED THAT

1. The Application in a Case filed by the Commissioner of Taxation 3 July 2012 be dismissed.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel including Senior Counsel.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Commissioner of Taxation & Darling and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 6328  of 2007

Commissioner of Taxation 

Applicant

And

Mr Darling

Respondent

And

Ms Darling

Respondent

REASONS FOR JUDGMENT  

1. The husband Mr Darling and the wife Ms Darling were parties to proceedings in this Court. On 7 December 2010 orders were made by consent by the husband and the wife discharging all previous orders made in the proceedings and dismissing all extant applications before the Court.

2. The matter before me is an Application in a Case filed by the Commissioner of Taxation on 3 July 2012 in which he seeks to be released from his obligation not to make collateral use of documents filed in the proceedings in this Court between the husband and wife in these proceedings for he says the purposes of their use for:

   a)the administration of the Income Tax Assessment Act 1936 (Cth) and or the Income Tax Assessment Act 1997 (Cth) and or the Taxation Administration Act 1953 (Cth) as they apply to the husband and his related entities in respect of the income years ending 30 June 1991 to 30 June 2010 and any other income year as required (“the relevant periods”); and

   b)The determination of any objections to assessments of tax, penalties or interest issued to or referable to the husband in respect of any of the income years in the relevant periods and any appeals or reviews thereon.

3. The Commissioner also sought permission pursuant to Rule 24.12.(1)(c) of the Family Law Rules 2004 (“the Rules”) to search and inspect the Court file and to copy and use so far as is necessary for the purposes outlined in paragraph 1 the following documents:

   a)Page 9 of the affidavit of the husband dated 29 August 2008;

   b)Page 93 of the affidavit of the wife dated 15 May 2009; and

   c)Any other documents

4. In support of the Application the Commissioner relies upon the affidavit of Mr J who is an audit officer in the Commonwealth Public Service employed in the Active Compliance Section of the Australian Taxation Office (“ATO”). Mr J deposes that he is conducting an audit of the tax affairs of the husband which commenced on 9 June 2009. The audit covers the income years ending 30 June 1991 to 30 June 2010.

5. On 16 November 2009 Mr W, the audit officer who was then conducting the audit wrote to the Registrar of this Court seeking access to documents filed by the husband and the wife. He followed up that letter with a further letter on 8 December 2009.

6. Sometime in mid December 2009 ATO officers attended the Court and were given permission to inspect the Court file by the then Registry Services Manager. They tagged a number of documents but did not take any copies. By letter dated 9 February 2010 the ATO Legal Services Branch sought permission to copy the tagged documents pursuant to Rule 24.13.(1)(c) of the Rules .

7. On 1 March 2010 the Regional Registry Manager wrote to the ATO declining the ATO’s request to copy the documents on the basis she said that “we are not persuaded of the nature of the proper interest held by the Australian Taxation Office”. On 29 April 2010 Mr E, an ATO National Access Leader, sent a letter to the Court containing what is described as a submission in support of the ATO’s request for access to documents in respect of the proceedings. Although he acknowledged that the Rules require non-parties to demonstrate a proper interest in the documents on the Court file he advised that “Tax officers are prevented by a secrecy provision in s16 of the Income Tax Assessment Act 1936 from disclosing reasons as to why copies of the documents are required from persons other than the taxpayer.” Thereafter he referred to s 263 of the Income Tax Assessment Act 1936 which he said would give authorised ATO officers “full and free access to all…documents….for any of the purposes of this Act.”

8. It was submitted on behalf of the husband and acknowledged by Mr Linden on behalf of the Commissioner that the assertion that tax officers were prevented from disclosing the reasons for the request to copy documents on the court file was incorrect and that pursuant to s 335-50 of the Taxation Administration Act taxation officers are exempted from the provisions of the Act with respect to the disclosure of information when that disclosure is made in the performance of that officer’s duty or for that matter as in this case, to a court.

9. Mr E subsequently received a letter from the Regional Registry Manager which stated that “after consultation with the Case Management Judge, we now consent to the Australian Taxation Office inspecting the file”. On 3 June 2010 following receipt of the letter from the Regional Registry Manager ATO audit officers attended at the Melbourne Registry and made copies of the documents on the Court file. The documents copied are listed in Annexure “JSS-7” to the affidavit of Mr J. It is submitted by the Commissioner that two of the documents copied were incomplete and it is the pages of those documents which are now sought by the Commissioner in his Application.

10. The Court file was again inspected on 17 December 2010 and further documents were copied. The documents copied are listed in Annexure “JSS-10” to Mr J’s affidavit.  

Permission to Inspect and Copy Documents:

1. Rule 24.13(1) of the Rules provides that a person with “a proper interest” in the case or in information obtainable from the Court record in the case may search the Court record relating to a case, and inspect and copy a document forming part of the Court record. In considering whether to give the necessary permission the Court must consider the purpose for which the access is sought, whether the access sought is reasonable for that purpose, the need for security of Court personnel, parties, children and witnesses and any limits or conditions that should be imposed on access to, or use of, the Court record (r 24.13(3)). It does not identify any matters the Court should consider in order to determine whether a party seeking access to the file has a “proper interest”.

2. It is clear from the evidence in this case that the Commissioner did seek access to documents on the Court file in the proceedings between the husband and the wife and that permission was not initially granted on the basis that it was indicated that the Court was not satisfied that the Commissioner had a proper interest in those documents. Whilst the use of the word “consultation” by the Regional Registry Manager in her letter dated 20 May 2010 may be a somewhat unusual description of the Court’s function it is clear from the correspondence passing between the ATO and the Regional Registry Manager that a decision was ultimately made by the Case Management Judge that the Commissioner should be given permission to firstly inspect the file and subsequently photocopy particular documents on that file.

3. Whilst the husband submitted that the Commissioner had not established, as required by the Rules, that he had a proper interest in the documents in question and had instead relied upon s 263 of the Income Tax Assessment Act 1936, it is submitted that the Commissioner ought return the documents in his possession. I note that the decision to allow the inspection and copying of the documents in question was not the subject of an appeal. It is fair to say that, as the last inspection of documents took place in December 2010, the information contained in the documents in question is clearly known to the Commissioner and the proverbial horse, at least in relation to that information, has well and truly bolted. The question remains however what, if any, use the Commissioner can make of those documents and the information contained in those documents. Although the Court may have determined for the purposes of r 23.13 of the Rules that the Commissioner had a proper interest in the information he obtained from the Court file, it does not follow that on that basis he will be released from his obligation in respect of the use of that information.

The Implied Obligation

1. The Commissioner having inspected and photocopied documents from the Court file has an implied obligation not to make use of the documents filed by parties or which otherwise form part of the Court record for a purpose not related to that litigation. The purpose of that obligation as explained by the Victorian Court of Appeal in British American Tobacco Australia Services Pty Ltd v Cowell (as representing the estate of Rolah Ann McCabe, deceased) [2003] VSCA 43 (28 April 2003) is to preserve the parties’ privacy and to encourage full and frank disclosure. Both concepts which are of particular importance and sensitivity in relation to proceedings in this Court.

2. The parties are in heated agreement as to the relevant principles but disagree as to the application of those principles in this case. Those principles are set out in some detail in the submissions prepared on behalf of the Commissioner. In Hearne v Street (2008) 235 CLR 125 at [96] Hayne, Heydon and Crennon JJ described the implied obligation as follows:

   Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence

3. It is also clear that the obligation would bind not only the parties to the proceedings but other persons, such as in this case the Commissioner.

4. In determining whether it should exercise its discretion whether to release a party from his or her implied obligation the Court must determine whether “special circumstances” exist for either modifying or releasing a person from that obligation. In Springfield Nominees Pty Ltd v Bridgelands (1992) 38 FCR 217 Wilcox J said that for “..special circumstances to exist, it is enough that there is some special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present.” Having said that is was not possible or desirable to propound an exhaustive list of the factors that might be relevant. He said at 225 as follows:

   ..plainly they include the nature of the document, the circumstances under which it came into existence, the attitude of the author of the document and any prejudice that the author may sustain, whether the document pre-existed the litigation or was created for that purpose and therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the documents came into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document achieving justice in the second proceeding.

5. It is that last factor, in this case the competing public policy considerations, which go to the heart of the application before me. McMurdo J said in Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2009] QCA 345 at[16]:

   The important public policy consideration behind implied undertakings of this kind are about securing justice between the parties and maintaining public confidence in the justice system. It follows then that courts will usually relieve a party from its implied undertaking where, after giving proper consideration to the public policy reasons behind it, the circumstances of the case demonstrate this is plainly in the interests of justice.

6. The Commissioner’s statutory duty to make an assessment of taxable income is contained in s 166 of the Income Tax Assessment Act 1936 which provides:

   From the returns, and from any other information in his possession, or from one or more of these sources, the Commissioner shall make an assessment of the amount of any taxable income (or that there is no taxable income) of any taxpayer, and of the tax payable thereon (or that no tax is payable). 

7. It is submitted on behalf of the Commissioner that he is entitled to make such enquiries and to seek such information, as he considers appropriate in discharging his duty such as the information contained on the Court file in this case. In this case the audit covers the income years ending 30 June 1991 to 30 June 2010 and Mr J deposed that he believed that the documents for which the Commissioner sought to be released from his implied obligation are relevant to the following matters:

   d)The nature, value and sources of [the Husband’s] and his related entities assets, income and expenditure during such relevant periods; and

   e)The nature, value and sources of the Applicant Wife’s, children’s and related entities assets, income and expenditure during the relevant periods, as they interrelated with [the Husband] and his related entities’ financial affairs.  

8. I do not accept, as submitted by Mr de Wijn QC and Mr O’Loughlin on behalf of the husband, that the Commissioner’s right to obtain information is in any way limited by the fact that the Commissioner having made an assessment does not bear the burden of proving that that assessment is correct nor must that assessment be supported by evidence or that this should militate against my determining that I should release the Commissioner from his implied obligation not to make collateral use of the documents on the Court file.

9. However as was submitted and ultimately accepted by Vickery J in Ambridge Investments Pty Ltd Baker & Ors [2010] VSC 545 the modification of or release from the implied obligation “..should be no greater than is necessary or appropriate to meet the interests of the due administration of justice or the public interest.”

10. Merkel J said in Australian Securities and Investments Commission v Marshall Bell Hawkins [2003] FCA 833 [10] summarised the requirements with respect to an application such as this one as follows:

    Generally, a party applying for the modification or release of the undertaking should:

    ·Specify the documents in respect of which the modification or release is sought;

    ·Specify the purpose for which the modification or release is sought; and

    ·Satisfy the court that the special circumstances relied upon by the party warrant or justify the modification or release sought.

    The requirements of specificity in respect of the documents to be used and the purpose for which they are to be used is appropriate because the implied undertaking should only be modified or released to the extent that it is in the interests of the administration of justice or in the public interest to do so. [12 & 13]

11. In Marshall Bell Hawkins Merkel J said that it was not only incumbent upon ASIC, the party in that case seeking to be released from its implied obligation, to specify the documents sought and the precise purpose for the release of each of those documents, it was also incumbent upon ASIC to adduce some evidence as to its purpose, rather than make assertions as to that purpose.

12. Although the Commissioner in this case has provided a list of the documents for which he seeks the release, all I have before me in support of the release of that obligation is the general assertion in paragraph 18 of Mr J’s affidavit as to the relevance of those documents to the audit. What are said to be the reasons for the release of the documents identified in the list annexed to that affidavit as to why each of those documents is said to be necessary and relevant to the conduct of the audit are similarly imprecise, general in nature and not supported by any evidence.  

13. There is, in my view, very real force in the submission made on behalf of the husband that the Commissioner has not specified the purpose for which the documents are required and on that basis I could not be satisfied that they’re “special circumstances” nor whether the release from that obligation is necessary and in the public interest to enable the Commissioner to fulfil his statutory function. Mr de Wijn relied upon the following matters:

    ·     There is no evidence as to the nature of the audit of the husband’s affairs or what information may be required to complete that audit;

    ·     There is no evidence as to what information has been obtained and why that information may be insufficient to complete the audit. This being of particular significance given the wide powers the Commissioner has to obtain information;

    ·     There is no evidence adduced as to the basis of the belief that the documents would be relevant either generally or in relation to specific documents.

14. I accept, as Dawe J said at 92 in Thornton & Workcover Corporation of South Australia [2009] FamCA 449that this Court should be seen to “support the application of the laws in Australia” and that as submitted by Mr Linden, it is in the public’s interest for the Commissioner to have all relevant information available to him in order to discharge his duties. However, in this case there is a countervailing public interest and I cannot be satisfied on the basis of the evidence before me that there are “special circumstances” which would justify the Commissioner’s release from his implied obligation or that his release from that obligation is necessary or in the public interest or should override the public interest in maintaining the privacy of the parties to proceedings in this Court and to encourage their full and frank disclosure in those proceedings.

15. On that basis I propose to dismiss the Application in a Case filed 3 July 2012. 

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 1 March 2013.

Associate: 

Date:  1 March 2013