Edwards v The Commissioner of Taxation

[1998] IRCA 18

INDUSTRIAL RELATIONS COURT OF AUSTRALIA

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - review of decision of judicial registrar - applicant was employee of Australian Taxation Office - charges of misconduct brought against applicant under Public Service Act - applicant found guilty of accessing taxation records of persons without authorisation and not in the course of his duties - application of s 8XA Taxation Administration Act - s 8XA applies to employees of the Australian Taxation Office - allegations of misconduct proved - employer had a VALID REASON to terminate applicant’s employment

Workplace Relations Act 1996 (Cth), s 170DE(1)
Taxation Administration Act 1953 (Cth), s 8XA

Cosco Holdings Pty Ltd v Thu Thi Van Do (1997) 150 ALR 127, explained
Ram v Minister for Immigration and Ethnic Affairs (1995) 130 ALR 314, applied
Sherman v Peabody Coal Ltd (Moore J, FCA, 27.2.1998, unreported), followed

RODERICK ST JOHN EDWARDS v THE COMMISSIONER OF TAXATION
NI 4361 of 1995

MADGWICK J
9 JUNE 1998
SYDNEY

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NI 4361  of   1995

BETWEEN:	RODERICK ST JOHN EDWARDS APPLICANT
AND:	THE COMMISSIONER OF TAXATION RESPONDENT
JUDGE(S):		MADGWICK
DATE OF ORDER:		9 JUNE 1998
WHERE MADE:		SYDNEY

SHORT MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The application is dismissed.

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NI 4361 of 1995

BETWEEN:	RODERICK ST JOHN EDWARDS APPLICANT
AND:	THE COMMISSIONER OF TAXATION RESPONDENT
JUDGE(S):	MADGWICK
DATE:	9 JUNE 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR: This is a review of a decision of a judicial registrar, who held that the respondent had a valid reason to terminate the applicant’s employment, and dismissed the applicant’s application for relief under s 170EA of the Workplace Relations Act 1996 (Cth).

Background
The applicant, Mr Edwards, commenced employment as an Administrative Services Officer at the Australian Taxation Office (“ATO”) on 28 July 1986.  At the time of his dismissal on 8 March 1995, and at the time of his conduct which led to his dismissal, he was employed as a Grade 3 officer in the Record Keeping Small Business Income Group of the Parramatta Office.  The Group’s function was to assist small business entities to maintain proper records for taxation purposes.  Prior to his assignment to the Group, the applicant had worked in an auditing capacity, where he would search the tax records of persons he suspected of avoiding paying tax.  Staff in that audit area were encouraged to use their own initiative and to identify possible targets from their own observation.  If someone was seen to be driving “a flash car”, as one witness put it, that might be regarded as warranting enquiry, through the computer, as to the records of that person.  In practice, the approval of a supervising officer was not always obtained before such enquiry, although it should have been under the prevailing procedures.

The misconduct
The incidents which led to the applicant being dismissed occurred on 28th July, and the 1st and 2nd of September 1994. The applicant accessed the computerised tax records of several persons without authorisation. In each case, mere impertinent prying into other people’s private affairs was involved. In three instances, those pried upon were people known personally to the applicant. One of them was a woman he had known and admired some years previously. One was a former supervisor from a private enterprise job the applicant had had during a period of leave without pay from the public service. The other was a female friend of his wife’s. Two more were, as his counsel put it, “attractive female sports stars”. Another, whose case is of special significance only because it serves to illustrate the potential seriousness of the applicant’s conduct for the ATO and the revenue was a well-known programme presenter in the electronic communications media. The applicant was only discovered because, unbeknown to him, one of his targets had become a police officer and was working on tasks of a sensitivity such that, through administrative arrangements, the applicant’s accession of the records came to notice. The applicant’s computer use was then audited and his other prying was discovered. Taking action to obtain information from ATO records, otherwise than in the course of the performance of his duties, is a criminal offence under s 8XA of the Taxation Administration Act 1953 (Cth), although, as it will be seen, it was argued on behalf of the applicant that this provision did not apply to him as an “officer” of the ATO.

On 20 October the applicant was interviewed twice by Mr Baldock, an internal security investigations officer.  At the first interview the applicant indicated that he either could not remember the accessions or explained them away as “stupid curiosity” or as having been undertaken for the purpose of personal research into tax planning.  At the end of the interview, Mr Baldock indicated to the applicant, not by way of threat, that he was considering referring the matter to the Department of Public Prosecutions, as he was not convinced by the applicant’s answers.  The applicant told Mr Baldock that he was prepared to make a further statement and a second interview was conducted.  The applicant was then able to recall some of the details and confirmed that he had made the accessions for non-work related purposes, although he reiterated that he had no reason other than curiosity and that he had not recorded any of the information or attempted to receive any financial gain from it.  Mr Baldock considered that prosecution was not warranted, but recommended that disciplinary action be taken against the applicant.

The inquiry under the Public Service Act
On 6 December the applicant was charged under s 61(2) of the Public Service Act 1922 (Cth) in that he had failed to fulfil his duty as an officer within the meaning of s 56(f)(i) of that Act. Section 56(f)(i) provides that an officer shall be taken to have failed to fulfil his duty as an officer if and only if he contravenes or fails to comply with a provision of the Act or the regulations. Somewhat circuitously, the applicant was charged with failing to comply with regulation 8A(b) of the Public Service Regulations, which provides that an officer shall “comply with any enactments, regulations, determinations, awards or departmental instructions applicable to the performance of his or her duties”. The applicant’s failure so to comply, it was alleged, stemmed from a breach of s 8XA of the Taxation Administration Act 1953 , which provides:

“A person must not knowingly take action for the purpose of obtaining information about another person's affairs that:

(a)is contained in records in the possession of the Commissioner; and

(b)is held or was obtained by the Commissioner under or for the purposes of a taxation law;

unless the person takes the action:

(c) under the Freedom of Information Act 1982; or
(d)      in accordance with the processes of a court or the Tribunal; or

(e)in the course of exercising powers or performing functions under or in relation to a taxation law.

Penalty: $10,000 or imprisonment for 2 years, or both.”

Mr Foster, a senior officer, was appointed by a delegate of the Commissioner to hold an inquiry into the charges of misconduct.  His role was to examine whether the allegations were true and to recommend what action (if any) should be taken in respect of them.  The applicant provided Mr Foster with a written submission in respect of the allegations in which he stated:

“Whilst I concede that I have failed in the responsibility that I have been given, I know for a fact that the instances of this type of behaviour is widespread throughout the office,  However I am very sorry for my actions for which I can only describe as sheer stupidity and maintain that I did not intend to gain any advantage, financial or otherwise from the information.  At no time was any of the information that was accessed printed, transposed or passed on by any other means to any other individual.”

The applicant claimed that he was suffering from depression at the time of the offences which arose from severe stress caused by his involvement in a motor vehicle accident in which he was injured.  However, the applicant did not, then or since, provide any expert evidence of his condition. 

Mr Foster concluded his inquiry around 8 March 1995 and found the charge proven.  In his report, when considering the question of the appropriate penalty to be imposed, Mr Foster stated:

“I find Mr Edwards’ failure to comply with s 8XA of the Taxation Administration Act to be a serious matter, The section was introduced as part of the Tax File Numbers legislation in 1988 with the purpose of protecting information obtained by the Commissioner under law pertaining to income tax. The section is an important safeguard for a taxation system which depends heavily upon the tax file number system for its efficiency and effectiveness. Clearly a breach of section 8XA is otherwise a serious criminal offence having regard to the penalties available of a $10,000 fine or imprisonment for two years.

Section 8XA is very specific. Any breach occurs as soon as information is obtained - it does not matter why the information was sought nor how it was used.  This serves to underline how important it is that the privacy aspect of the information gathered by the Commissioner was viewed by the Parliament.  The legislation is designed to provide for a substantial penalty for those who knowingly seek to access information that has been collected from clients of the ATO unless that information is accessed in the course of their duties as an officer of the ATO.

The charge is serious, however, not just because of the nature of the statutory penalty but because of the serious consequences that breaches of section 8XA can have for the ATO as an organisation.  ATO staff are in a position of trust with regard to information gathered and stored from our clients and a breach of trust needs to be regarded as a serious offence.

...The public needs to be sure that those with the necessary access to information about them and their financial affairs only access that information in the context of their function.  The public’s confidence in the ATO to properly protect their rights with regard to security of information needs to be maintained.  This can only be maintained if those who fail in their duty with regard to such matters are disciplined accordingly.

Further, if the ATO is unable to demonstrate that it is capable of maintaining an environment whereby information gathered is secure then the imposition of additional constraints upon access to information will certainly hamper its ability to function efficiently.  It will also make the public reluctant to comply fully with their obligations in a number of circumstances which again will impede the effectiveness of the ATO to perform its role.

...

In his submission dated 18 January 1995 Mr Edwards states that he knows ‘for a fact that the instances of this type of behaviour is widespread throughout the office’. Ignoring for the moment the fact that all officers within the ATO have a duty in terms of the Public Service Act to report known instances of this type, Mr Edwards is right in identifying this as an area of concern. Recent press about this issue also indicates there to be an issue in this regard within the ATO. The actions of others does not, however, exclude his actions, nor reduce his obligations in terms of section 8XA. The Discipline Handbook makes it clear in fact that when considering disciplinary action the maintenance of discipline amongst APS staff must be considered and that such action should make it clear what standards of conduct are required and that these standards will be enforced.”

Mr Foster considered whether there were any mitigating factors and, finding there to be no evidence to support Mr Edwards’ claim of stress and depression, continued:

“I also considered whether Mr Edward’s actions could be considered a knowing breach of his obligations or otherwise simply carelessness.  I am satisfied that given Mr Edwards background in the audit environment of the ATO he would have had continual exposure to his obligations with regard to the security of information requirements in existence.  The ATO has run a number of awareness sessions that were compulsory for members of the compliance areas, it is an issue that received continual mention within the audit environment and I am convinced that Mr Edwards would be aware of his obligations in this regard.  Further, Mr Edwards makes no reference to any lack of knowledge regarding his obligations re his actions.”

Mr Foster directed that the applicant be dismissed from the Australian Public Service.

Appeal to the Disciplinary Appeal Committee
The applicant appealed against that direction and a hearing before a Disciplinary Appeal Committee of the Merit Protection and Review Agency was heard on 11 May 1995.  The Committee was comprised of a convenor, a nominee from the relevant union, and a nominee from the ATO. At the hearing, the applicant sought to justify his actions by claiming that he was taking the initiative in accessing those records for auditing purposes.  On 12 May the Committee unanimously agreed that the charge against the applicant should not be dismissed and, in its subsequent reasons for decision, considered that the applicant had not been truthful in his explanation.  In its conclusions the Committee stated:

“This case demonstrates the fine line between authorised and unauthorised accession of information.  From the witnesses who were responsible for the audit function in the ATO, the DAC heard evidence of a culture that encourages the development of, to use the words of one senior witness, ‘professional snoops’. These officers are empowered to access and search the ATO records of any people who to them looked likely to be avoiding paying tax.  These activities were subject to limited supervision in that while approval aught (sic) to be sought before accessing records, according to the evidence it seems that this was not always the case.

While ‘professional snooping’ may be a legitimate and essential function of the ATO, the officers at all levels in the ATO who perform the function must be above reproach in their behaviour.  The DAC heard character evidence on behalf of the Appellant from several of his supervisors who saw the Appellant as a conscientious officer of some initiative.  When pressed they were not able to provide other than 2 or 3 examples of the Appellant’s diligence and were not able to explain his apparent sudden burst of random and unapproved accession activity on the days in question.  Only when pressed did 2 of the senior officers accept the behaviour of the Appellant as being inappropriate for an officer in the area.  They did not impress the DAC with their awareness of the appropriate sense of responsibility in relation to the privacy of ATO information nor of the need to engender this sense in their staff.”

The Committee then considered the question of the appropriate penalty and took the following factors into consideration:

“11.1.1the Appellant had an apparently good previous employment history and not been the subject if any disciplinary charges previously.  However in the circumstances of this case, this was a most severe breach of trust and so severe that it would not overcome (sic) even by close supervision at a lower level in the ATO

11.1.2the Appellant had not demonstrated the level of probity required of an officer of the ATO

11.1.3while the ATO had a significant responsibility to train staff in the responsibility of their duties, the DAC was satisfied that the Appellant was well aware of the breach of the ATO and the legal requirements involved in his browsing activities and chose to ignore them.  If he was unaware of the information security requirements, he had made no attempt to keep up to date with the requirements of his work in terms of the responsibilities involved

11.1.4he made a vain attempt to explain his behaviour in terms of being work related thereby demonstrating his lack of credibility and further emphasising his unfitness to remain as a member of the Australian Public Service particularly in an area which could involve him in another abuse of power.  The Appellant offered three quite different versions of some of the events the least credible of which were those given under oath at the hearing

11.1.5at no time did he indicate that he thought that his actions were wrong

11.1.6the ‘professional snoop’ culture of the area in which the Appellant had worked previously did not assist the Appellant to appreciate the significance of his actions nor did the apparent lack of information about his responsibilities.  This, however, did not exonerate the Appellant from his personal responsibility to act with probity in the performance of his duties.

11.1.7the DAC noted the effect that the penalty might have on the family circumstances of the Appellant but that the impact of this is outweighed by the other factors involved and that, in any event, he has had recent experience in endeavours other than the ATO.”

The majority of the Committee confirmed the direction to dismiss the applicant.  The union nominee considered that the penalty imposed was too harsh because, among other things, the ATO had not met its obligation to train staff about security issues, which he considered necessary if the ATO intended to dismiss staff for “browsing” tax records.

Proceedings before a judicial registrar

Following the confirmation of his dismissal by the Committee, the applicant filed an application in this Court, seeking reinstatement on the ground that the termination of his
employment was unlawful.  The applicant’s application was out of time and he also sought the Court’s leave for an extension of time, which was granted.  There was a full hearing.

In his reasons for judgment, the judicial registrar considered the terms of s 8XA and, satisfied that that provision applied to the applicant, found that there was no dispute about any of the elements of the offence, except for the applicant’s assertion that he obtained the information in accordance with subs (e), that is, “in the course of exercising powers or performing functions under or in relation to a taxation law”. This assertion was, the judicial registrar found, contrary to the applicant’s responses in the initial interview with Mr Baldock, and his submission to Mr Foster, that he had accessed the relevant records only out of curiosity or for personal research into tax planning.

The judicial registrar, like the Disciplinary Appeal Committee before him, was not impressed with the applicant as a witness and considered that, at best, the applicant’s answers to why he had accessed the records were “a sorry history of obfuscation”, or at worst, “a series of deliberate untruths”.  The judicial registrar, applying care as to the onus of proof in accordance with Briginshaw v Briginshaw (1938) 60 CLR 336, considered that the applicant had accessed the records out of “idle, unprofessional, curiosity, not related in any way whatsoever to his work as an officer of the Australian Taxation Office”. The breach of s 8XA was found proved and subsequently the judicial registrar held that the applicant’s actions amounted to misconduct sufficiently serious to warrant dismissal.

This is a review of that decision.

Construction of s 8XA Taxation Administration Act
The first issue which the applicant sought to raise on review was whether s 8XA applied to the applicant as an officer employed by the ATO. It was submitted that the use of the term “person” rather than “taxation officer” (which is defined in s 2 to mean “an officer or employee of the Australian Public Service”) implies that, as a matter of construction, the provision was not intended to apply to employees. Had officers or employees been intended to be included within the operation of the section, those specific terms would have been used, rather than the word “person”. Particularly, that was so because there was a more specific provision in the Income Tax Assessment Act1936 (Cth) (“the ITA Act”) which applied in terms to taxation officers. Section 16 of that Act makes it an offence for taxation officers to make a record of information from tax records or to divulge or communicate that information to some other person, but not merely to obtain such information from the records. The applicant submitted that this was an important distinction because, firstly, the applicant would not be guilty of an offence under s 16, and secondly, on Mr Foster’s view, if there had not been a breach of s 8XA, then there would have been no dismissal.

There is, in my view, no substance in this submission. Section 8XA prohibits active efforts to obtain information about people’s affairs that is held by the Commissioner pursuant to law.  It is general in its terms - it proscribes the taking of such action by any person. It does not expressly exempt ATO officers from that proscription (c.f. s 8XB(5)). Neither is there any reason to imply such an exemption. There is no other legislative provision which would operate to prevent officers, on pain of a criminal penalty, from obtaining such information without lawful authority (c.f. s 8XB and s 16(2) of the ITA Act). Section 16(2) of the ITA Act and s 8XA deal with different subject matters, the former with copying and disclosure of information lawfully obtained, and the latter with obtaining such information without lawful authority. They are not dealing with the same subject matter so as to attract the maxim generalia specialibus non derogant.  Reference was made to explanatory memoranda and second reading speeches, but in my view they are not to the point.

Further, there is no readily disconcernible policy ground from which it might be deduced that all ATO officers, numbered in their thousands, might have been intended by Parliament to have been exempted from the obligations of s 8XA. It is, indeed, a diverting notion that Parliament should be thought to have had such a policy: few people are likely to attract the attention of snoops, meddlers, busybodies, priers, intruders, eavesdroppers and stickybeaks so much as parliamentarians. At least in this country, people appear to attach a high value to the privacy of their financial affairs. A civilised person may understand that there is a case for a small and rigidly ethical corps of tax inspectors able to delve at will among the financial affairs of the citizenry. There appears to be none for extending the scope for such inquisition to every tax clerk with a computer terminal on his or her desk.

Did the applicant know that he was not acting to obtain the information in the course of exercising powers or performing functions in relation to taxation laws?
Before the judicial registrar, the applicant’s evidence was that he was “trying to show initiative in trying to develop a greater understanding of how tax systems work”.  That is, he was trying to relate his activities to work-related purposes.  The judicial registrar, it would seem for good reason, rejected those claims and concluded that the applicant’s purpose was no more than “idle, unprofessional curiosity”.  The applicant chose not to give evidence before me.  It was in fact no part of his current duties to access the information in question.  It cannot have appeared to him that such was part of his duties.  Neither can any prevalence in the ATO of undetected or unpunished satisfaction by officers of their “idle, unprofessional curiosity” as to taxpayers’ affairs and personal details be prayed in aid of a contention that the applicant did not know that he was doing wrong.  It is simply not credible that an experienced tax officer could not know he had no business doing what he did.

A valid reason for termination?
Toleration by the applicant’s superiors of any such state of affairs might however be relevant to whether termination of his employment was a reasonably proportionate response to his wrongdoing.  Such could be so only if s 170DE intended that the notion of a reasonably proportionate response was inherent in the concept which it enacted that an employer must not terminate an employee’s employment “unless there is a valid reason ... connected with the employee’s ... conduct”.  (It was not argued, in this case, that by giving effect to the Public Service Act, the employer had “a valid reason ... based on the operational requirements of the ... service”, c.f. Rice v University of Queensland Federal Court of Australia, Madgwick J, 13 March 1998, unreported.)  Were it not that, on one reading, the logic of the decision in Cosco Holdings Pty Ltd v Thu Thi Van Do (1997) 150 ALR 127 would permit it to suffice for an employer to dismiss an employee that he or she be 5 minutes late for work or steal a wire paper clip (“It is a sin/To steal a pin”), it would, in my opinion, occur to nobody to doubt this.

However, a different view of Cosco seems appropriate.  This permits the view that, in a conduct case, a “valid” reason implies that termination of the employment must be a reasonably proportionate response to the conduct.  As Moore J put it in Sherman v Peabody Coal Ltd (Moore J, Federal Court of Australia, 27 February 1998, unreported):

“It may be accepted that the matters raised by s 170DE(1) do not call for consideration of notions of fairness, reasonableness or justice. However, the reason for the termination must be a valid one. As Northrop J pointed out in Cosco, in adopting observations he had earlier made in Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371, the adjective “valid” should be given the meaning of sound defensible or well founded. While it is not entirely clear whether that element was viewed by Lindgren and Lehane JJ as a necessary element in the concept of “valid reason” their Honours did note:

“Additionally, perhaps, the word ‘valid’, may serve to emphasise that the reason must be genuinely connected with the employee’s capacity or conduct or genuinely based on operational requirements”

after having referred to the need for the existence of a genuine foundation.

Any notion of genuine connection must, in my view, involve notions of proportionality.  I say that because it is unlikely that Parliament intended any aspect of the conduct of an employee established on the evidence, that was perceived by the employer as warranting termination, would demonstrate or establish a valid reason.  Such an approach would denude the expression “valid reason” of any meaning.  “ (emphasis added)

See also my decision (judgment in an appeal therefrom is pending) in Mainsbridge v Murdoch University (Madgwick J, Industrial Relations Court of Australia, 13 February 1998).

I am prepared to assume, from the somewhat unsatisfactory materials available, that mere prying for their private purposes was fairly common among more junior tax officers.  I do not believe, however, that by 1994 there was in fact any toleration of this at senior levels in the ATO.  In the nature of things, the resources available to police official discouragement of such prying were no doubt limited.  There was, in 1994, little likelihood of the applicant being caught in his unauthorised prying.  That is very likely one of the reasons he permitted himself to do it.  But, one way or the other, the applicant must have known that it was expected of him that there would be no such indulgence of his impertinence.

This was not stealing a pin.  The applicant, like every other adult officer of any experience, must have realised what a serious thing it is, how destructive of people’s confidence in the confidentiality of their tax records, if any tax officer they know or have known or, simply, who knows of them, is suffered to ferret, for no good reason, through their files.  All of those pried upon are entitled to feel outrage.  One of them, as it happens, would be in a position to bring intense public condemnation down on the ATO.  Any of them, by alerting the press to the invasion of their privacy, might achieve not so much less.  Those directing the ATO would have been well able to foresee this.  They would, as I have indicated, not have actually condoned what may have been going on. 

Neither could any tax officer, and I include the applicant, reasonably imagine that it was condoned, as distinct from undetected and therefore unpursued.  In some areas of employment it was and perhaps still is common for employers’ money to be obtained by the false pretence that an employee was sick for a day or two.  So common was the practice that the expression “taking a sickie” is an everyday Australian euphemism.  Yet no employee caught in the lie could complain of dismissal.  No employer condoned the practice, but few could detect it and act to stamp it out.  On the same analogy, any failure of the ATO expressly to indicate that dismissal might attend prying, is hardly to the point.  Some misconduct does not require an express warning about its consequences, if detected.  So it is here.  In any case, I infer that it had been made clear to ATO officers, including the applicant, that the indulgence of private curiosity at the expense of taxpayers’ confidentiality was viewed as a serious breach of trust.

This was repeated conduct that involved a serious breach of trust and was apt to bring the ATO into serious disrepute.  The applicant, was in the end, unrepentant.  An expert tribunal, the Disciplinary Appeal Committee, and an experienced judicial registrar thought the applicant’s conduct warranted the termination of his employment.  Each was aware that there were other serious disciplinary responses, stopping short of dismissal, that might have been made.  I ought not decide this case as if those judgments had not been made.  Equally, I would not permit effect to be given to them if I thought that a modern, reasonable employer, exhibiting a sensible tolerance of human weakness, would not have come to the same view.  But I do not think so.

The application will be dismissed.

To preserve the privacy of those pried upon, publication of their names has been suppressed.  But, as presently advised, I see no reason why they should not be fully informed of what has occurred.  Subject to hearing the parties on the matter, it would seem appropriate to give effect to this proposed modification of the suppression orders by requiring the respondent so to advise the people concerned and to have this verified to the Court.  I will stand this aspect of the matter over for seven days to enable any submissions to be put before me as to the appropriateness of any variation of such orders and the form of any such variation.

I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick

Associate:

Dated:            9 June 1998

Counsel for the Applicant:	J Phillips
Solicitor for the Applicant:	Joe Weller
Counsel for the Respondent:	B Skinner
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	31 July, 2 September 1997
Date of Judgment:	9 June 1998