Darling v Commissioner of Taxation and Anor

[2014] HCATrans 178

[2014] HCATrans 178

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M34 of 2014

B e t w e e n -

DARLING

Applicant

and

COMMISSIONER OF TAXATION

First Respondent

DARLING

Second Respondent

Application for special leave to appeal

HAYNE J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 15 AUGUST 2014, AT 12.17 PM

Copyright in the High Court of Australia

MR J.W. DE WIJN, QC:   If it please the Court, I appear for the applicant with my learned friend, MR F.D. O’LOUGHLIN.  (instructed by Kenna Teasdale Lawyers)

MR P.J. HANKS, QC:   Your Honours, I appear with MR S.A. LINDEN for the respondent.  (instructed by Australian Government Solicitor)

HAYNE J:   Yes, Mr de Wijn.

MR DE WIJN:   Your Honours, this case raises for consideration by the Court the proposition as contended for by the Commissioner at paragraph 148 of the judgment, and that was the proposition that was accepted.  Can I just take your Honours to that proposition and then to where the court accepted it?  So the proposition in relation to, effectively, ground 5 is “Senior counsel for the Commissioner ‑ ‑ ‑

HAYNE J:   Page?

MR DE WIJN:   Page 56 in the application book.

HAYNE J:   Thank you.

MR DE WIJN:  

Senior counsel for the Commissioner contended that the conduct of an audit pursuant to the duty imposed by the tax laws was itself sufficient basis for releasing him from the implied obligation without any necessity to satisfy the requirements referred to in (a) to (e) of Ground 5.

I will go to those grounds in a minute.  So the proposition that was put, and the proposition that was accepted, was that by virtue of the Commissioner’s duty and powers to assess and to conduct audits, that was in itself sufficient basis for the release from the implied obligation.

KIEFEL J:   Speaking of powers, was it ever explained in the court below why the Commissioner needed an order of this kind?  If the Commissioner had audit powers with all that that encompasses why did the Commissioner need this audit?

MR DE WIJN:   Well, there was, in fact, a ground 3 that was raised, which we were successful and the Commissioner was unsuccessful.  Your Honours will see, in fact, ground 3 is set out at paragraph 114, page 49 of the application book, and that was effectively what your Honour Justice Kiefel is referring to.  There was an argument that the Commissioner did not need to be released from an implied obligation.  Ground 3 is set out at 115, it is expressed as follows:

Alternatively, the primary Judge erred in failing to find that any such implied obligation was inconsistent with, and must yield to:

(a)       the statutory duty ‑ ‑ ‑

HAYNE J:   I understand that is the way in which the case has been conducted below.  The Commissioner obtained access to the court file.  Is that right?

MR DE WIJN:   He did.

HAYNE J:   Obtained access pursuant to compulsive process?

MR DE WIJN:   He did.

HAYNE J:   That compulsive process either permitted or did not permit the Commissioner to have access to the file.  Is that right?  There is no dispute that it permitted him to have access, is there?

MR DE WIJN:   With respect, it permitted – he got the file but there was then an application brought to be released from the implied obligation.

HAYNE J:   I understand that.  That may or may not have been a cautious step to take, but either the Commissioner had power to obtain access to the file or the Commissioner did not.  If he had power to obtain access, how is any implied obligation as between parties to litigation engaged?

MR DE WIJN:   Well, with respect, the power to have access to get the file does not mean you can necessarily use it, and that was the Commissioner’s ground 3 argument that was rejected and we were successful ‑ ‑ ‑

HAYNE J:   The Commissioner, a public official, can go and look at a file but, what, cannot use it?

MR DE WIJN:   Well, that was the way in which the case was ‑ ‑ ‑

HAYNE J:   I understand that is the way the case has been argued, and I understand why you from your forensic needs would wish to keep it very firmly in that sandpit, but is there not a logically prior question about why are we in the realm of implied obligations at all?

MR DE WIJN:   Well, that might be right and that might be a matter that needs to be considered by the High Court, but the judgment of the Full Court was that the Commissioner did need to be released from his implied obligation and that was the way the case was run and, we say, correctly.

KIEFEL J:   But there is your first premise.  How does the obligation come to be implied?

MR DE WIJN:   Hearne v Street.

KIEFEL J:   As has been pointed out, the Commissioner has powers.  We have not been taken to the legislation, but the Commissioner has powers to access this information.  The powers must be for a purpose, presumably the purpose of auditing.  Where does the obligation become implied?

MR DE WIJN:   Because of, effectively, Daniels’ Case.  I mean, just because the Commissioner can get hold of documents does not override an implied obligation of law.

HAYNE J:   Well, Daniels was all about could the ACC get – ACCC, or whichever it was ‑ get hold of the documents, not having got hold of them what it could do with them, whether it had to read them and forget them.  That seems to be the premise that for your argument the Commissioner can get hold of the documents, look at them, read them, but do not use them, forget them.

MR DE WIJN:   Well, the difficulty in this case was that the documents – the Commissioner got access to the documents 18 months before either of the parties knew about it.

HAYNE J:   Yes.

MR DE WIJN:   The first time they knew about it was when they came to the court to get a release from the undertaking.

HAYNE J:   That is either a lawful exercise of power by the Commissioner or it is not, but that question is not one which is raised in the litigation before us.  The assumption in this matter throughout has been the Commissioner acted lawfully in obtaining access to the court file, is it not, or is that premise false?

MR DE WIJN:   No, that premise is not false.  That was not challenged, but what was challenged was the use that could be made of those documents having got them, and that was effectively ground 3 that was – the Commissioner said we are not bound by the implied obligation, the Full Court have said yes ‑ ‑ ‑

HAYNE J:   Because the implied obligation is, as between parties, that you will use documents obtained on compulsive process only for the purposes of the litigation to which you are a party, and all of that seems distinctly inapt to the exercise of statutory power by a public official to gain access to a court file.

MR DE WIJN:   With respect, the implied obligation is not limited to the parties to the litigation, it extends quite clearly to third parties, and that was a further ground raised by the Commissioner in the appeal.

HAYNE J:   Well, that is Home Office v Harman, I think.

MR DE WIJN:   Yes.

KIEFEL J:   That is third parties who have to seek an order of the court to have access to the file.  They do not have any coercive powers of their own.

MR DE WIJN:   Well, that might be right.  There are two steps really.  The first step is they got the documents.  The next step is what they can do with them.  They got them in circumstances where neither of the parties was in a position to do anything about it because they were not told about it.  The first time we find about it is when an application is made to be released from the implied obligation.  At first instance, it was accepted that there was an implied obligation.  In the Full Court it was challenged that there was an implied obligation by the Commissioner and the Full Court decided in our favour, that there was an implied obligation and that ‑ ‑ ‑

HAYNE J:   Let it be assumed then, for the purposes of debate, that the sandpit – as I have regrettably termed it – in which we are playing is the area of implied obligation.  You then seek to come to us, do you not, on appeal against a discretionary judgment?

MR DE WIJN:   With respect, it is a point of principle.  We won on the discretionary judgment at first instance.

HAYNE J:   I understand that.

MR DE WIJN:   What happened at – well, at 148 I have set out the submission.  The submission is that the mere fact that you are conducting an audit and have powers is sufficient to release the Commissioner from any implied obligation.  At 171 the Full Court makes two points.  They say:

In our view, while her Honour correctly identified that it was “the competing public policy considerations, which [went] to the heart of the application”, she erred in accepting the submissions made on behalf of the respondents that the Commissioner was obliged to –

That is the first point, and secondly –

or had failed to, provide evidence -

So with the focus on the “was obliged to” the Full Court said the Commissioner was not obliged to provide evidence of the reasons why he should be released from his implied obligations.  Now, when they then went on to consider the mere assertions that her Honour had found – her Honour at first instance had found – and said they were satisfactory, that was said in the context of a finding that the Commissioner was not obliged to provide evidence of the matters complained about in ground 5.

So that is an acceptance of the Commissioner’s submission that merely by virtue of the Commissioner’s compulsive powers and duty he automatically establishes special circumstances. One can see that by the way the Full Court dealt with the fishing analysis. It was accepted at first instance and before the Full Court the Commissioner was fishing and the reasoning of the Full Court was simply because the Commissioner has power under sections 263 and 264 to go fishing that, in itself, demonstrates special circumstances.

It was an example of the way in which the Full Court equated the Commissioner’s public duty with special circumstances and we say, with respect, that cannot be right.  The analysis of the court cannot be right.  If there is an error of the judgment it is an error elsewhere.  We say it is not, but it cannot be right that once you get into the sandpit of implied obligation that it is sufficient to just say, “Well, I’m the Commissioner, I’m doing an audit and I don’t have to say any more”.  With respect, that is the error.  If your Honours please.

HAYNE J:   Yes.  Mr Hanks, what was the statutory power which the Commissioner would rely upon to gain access to the documents?

MR HANKS:   If your Honour has the materials, it is section 263. I am searching for where I have located them.

HAYNE J:   Tab 2 of the material.

MR HANKS:   Tab 2, thank you, your Honour.  Yes, there we are.  It is 263 of the 1936 Act, your Honour.

HAYNE J:   Yes, I see.

MR HANKS:   That was the power that was invoked with the registry of the Family Court.

HAYNE J:   Yes, I see.  We will not trouble you further, Mr Hanks.

The conclusions reached by the Full Court of the Family Court of Australia proceeded from a premise which was not disputed by the parties to the application or appeal in that court, namely that the Commissioner of Taxation required release from an implied obligation limiting the use which the Commissioner could make of documents the Commissioner had obtained from the registry of the Family Court by exercise of power under section 263 of the Income Tax Assessment Act 1936 (Cth). The application for special leave requires acceptance of that premise. The premise is to be doubted. No point suitable to a grant of special leave is identified. The application for special leave must be refused. With costs, Mr Hanks – do you seek costs?

MR HANKS:   Yes, your Honour, we do.

HAYNE J:   Do you resist, Mr De Wijn?  With costs.

AT 12.33 PM THE MATTER WAS CONCLUDED