Keenhilt Pty Ltd & Denburrow Pty Ltd v. Byron

[2008] QSC 70

SUPREME COURT OF QUEENSLAND

CITATION:

Keenhilt Pty Ltd & Denburrow Pty Ltd v Byron [2008] QSC 70

PARTIES:

KEENHILT PTY LTD (ACN 101 968 772)

(respondent/ plaintiff)

and

DENBURROW PTY LTD (ACN 101 850 819)

(respondent/ plaintiff)

v

LOLA ANNE BYRON

(applicant/defendant)

FILE NO/S:

BS10493 of 2007

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

15 February 2008

DELIVERED AT:

Brisbane

HEARING DATE:

15 February 2008

JUDGE:

White J

ORDER:

1. Judgment for the defendant pursuant to Rule 293 of the Uniform Civil Procedure Rules.

2. The plaintiffs pay the defendant’s costs of and incidental to the proceeding to be assessed on the standard basis. 

CATCHWORDS:

TAXES AND DUTIES – INCOME TAX AND RELATED LEGISLATION – GENERAL MATTERS – CONSTRUCTION OF INCOME TAX STATUTES – PARTICULAR WORDS AND PHRASES – where defendant published information received in her role as an officer of the Australian Tax Office in alleged contravention s 16(2) of the Income Tax Assessment Act 1935 (Cth) – whether that publication was made while the defendant was in the performance of her duties as an officer so as to activate the exception in s 16(2A) of the Income Tax Assessment Act 1935 (Cth)

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – SUMMARY JUDGMENT – where a claim was made for exemplary damages but not compensatory damages – where the disclosure of information on which the claim for damages was based was a necessary part of the defendant’s duties – whether the plaintiffs’ claim had any real prospect of success

Income Tax Assessment Act 1936 (Cth), s 16

Deputy Commissioner of Taxation and Salcedo [2005] QCA 227, cited

XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448, cited

Fatimi Pty Ltd v Bryan (2004) 59 NSWLR 678, cited

Canadian Pacific Tobacco Company v Stapleton (1952) 86 CLR 1, cited

Consolidated Press Holding Ltd v Commissioner of Taxation (1995) 57 FCR 348, cited

COUNSEL:

T.V. Bradley for the Applicant

LJ Nevison for the First and Second Respondents

SOLICITORS:

Minter Ellison for the Applicant

Cleary Hoare for the Respondents

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

WHITE J

No BS10493 of 2007

KEENHILT PTY LTD (ACN 101 968 772)	Plaintiff
and
DENBURROW PTY LTD (ACN 101 850 819)	Plaintiff
and
LOLA ANNE BYRON	Defendant

BRISBANE

..DATE 15/02/2008

JUDGMENT

HER HONOUR: The applicant has applied for summary judgment against the plaintiffs in proceedings in which she is the defendant, pursuant to Rule 293 of the Uniform Civil Procedure Rules.

The plaintiffs have claimed in their further amended statement of claim of 4 February 2008 that the defendant, who was an officer of the Australian Tax Office within the meaning of section 16(1) of the Income Tax Assessment Act 1936 Commonwealth, acted in contravention of section 16 by conveying information about the affairs of the plaintiff by publishing certain reasons for decision to Barkworth Olives Management Limited as trustee for the BOML Four Trust.

Those reasons were prepared and conveyed to Barkworth as a consequence of an audit reference conducted by the Australian Tax Office into the affairs of Barkworth.  The reasons communicated to Barkworth information concerning the affairs of certain trusts described in the plaintiffs' pleadings as the "Aggrieved Trusts".  The plaintiffs are respectively now the trustees of those trusts.

The plaintiffs contend that the defendant, by publishing the reasons for decision, acted in contravention of section 16 of the Act. They also contend that while she acquired the information as an officer when she published it, she was at least in part not acting in her official capacity.

The plaintiffs also plead that the defendant acted in breach of her statutory duty not to divulge information acquired as an officer of the Australian Tax Office and engaged in conduct which constituted misfeasance in public office. It is common ground that if the defendant falls within the defence in section 16, namely that she was performing her duties as an officer of the Australian Tax Office when she divulged the information, those other claims will fall away.

The plaintiffs contend that as a consequence of the defendant's unlawful conduct they have suffered a loss of commercial reputation. In their prayer for relief, the plaintiffs claim a declaration that the defendant acted in contravention of section 16 of the Act and seek exemplary damages.

In her defence, the defendant denies that she was not acting in the performance of her duties as an officer of the Australian Tax Office when she published the reasons to Barkworth.  The plaintiffs join issue in their reply.

There is no contention that this application for judgment is not timely. Section 16 of the Income Tax Assessment Act provides relevantly:

"(1)  In this section, unless the contrary intention appears, officer means a person who is or has been appointed or employed by the Commonwealth or by a State and who by reason of that appointment or employment or in the course of that employment may acquire or has acquired information respecting the affairs of any other person disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax.

(2)  Subject to this section, an officer shall not either directly or indirectly, either while he is or after he ceases to be an officer, make a record of or divulge or communicate to any person any information respecting the affairs of another person acquired by the officer as mentioned in the definition of officer in subsection (1).

(2A)  Subsection (2) does not apply to the extent that the person makes the record of the information or divulges or communicates the information in the performance of the person's duties as an officer."

A "person" includes a corporation. It is also common ground that the defendant bears the evidential burden in relation to the defence of section 16(2A).

The Australian Tax Office conducted an audit into certain tax planning schemes described as New Venture Income in so far as it related to Barkworth Olives Management Limited as trustee for the BOML Four Trust. 

Mr Ian Collie, a director of each of the plaintiffs, describes the scheme in paragraphs 14 and 15 of his affidavit:

"Participation in NVI Arrangements by third party tax payers essentially involved the distribution of trust income by a third party trust to a trust, of which neither Keenhilt or Denburrow now act as trustees, followed by a series of internal steps involving four or five entities, the majority of which were trustees of trusts.  None of the internal steps were known to (or needed to be known by) the third party tax payer or any entity associated with it."  Fifteen:  "In essence, the third party tax payers' involvement in the matter was limited to the distribution of income and at some later date, the receipt by an associate of an amount of capital."

Mr Collie maintains that from October 2005 in various communications the defendant conveyed information to third party tax payers setting out the internal steps.  But the reasons for decision of 27 March 2007 most offended the plaintiffs and in particular by including, as set out in Mr Collie's affidavit at paragraph 28, that which appeared in the reasons:

"(a) The inclusion under the heading 'Background' of

specific information in relation to the original creation of NVI concept provided to the ATO in September 2001 in relation to the tax affairs of others, the inclusion of which appears to be a deliberate expansion of the original breach;

(b) On page 4, the identification of entities in

addition to the Balmoral Unit Trust and the Barkworth Capital Trust being entities not part of the third party group.  The involvement of all except Gibraltar Number Two Trust being confined to internal steps in the NVI arrangements;

(c) The details are virtually all internal steps in the

NVI arrangements for the year ended 30 June 2002 at pages 5-7; and

(d) The provision of similar information in respect of

the year ended 30 June 2003 at pages 7-8."

Of these complaints, Mr Bradley for the defendant points out that the plaintiffs were not in existence in September 2001 or the 30th June 2002 being incorporated and registered on 9 September 2001 and 9 September 2002 respectively.

As to the internal steps, information found at pages 5 to 9 of the reasons concerning the year ended 30 June 2003, this information explains the participation of the then trustees of the five trusts referred to in paragraphs 1(b) and 2(b) of the further amended statement of claim.

Mr Collie deposes in his affidavit in that financial year, Mistrice Pty Ltd (now deregistered), was the trustee of the three trusts referred to in paragraph 1(b) of the further amended statement of claim, and Canerink Pty Ltd (also now deregistered) was the trustee of the two trusts referred to in paragraph 2(b) of the further amended statement of claim.

None of those dealings, Mr Bradley contends, were dealings by the plaintiffs.  None of the information accordingly contained in the reasons was information about the affairs of the plaintiffs.  This is the basis for his submission that the plaintiffs claim on this basis has no real prospect of succeeding.

A second basis for characterising the plaintiffs claim as having no real prospect of success, (see Deputy Commissioner of Taxation and Salcedo 2005 QCA 227 per Williams JA at paragraph 17), relates to the damages claim. There is no claim for compensatory damages, only exemplary damages. The latter need the former, Excel Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd 1985 155 CLR 448, and Fatimi Pty Ltd v Bryan 2004 59 NSWLR 678.

The plaintiffs complain that they have suffered a loss of commercial reputation.  Just what this consisted of is not spelled out either in the pleading or in Mr Collie's affidavit.  There is a close relationship between the directors in all the mentioned companies involved in payments under this scheme, which adds a layer of complexity not to the plaintiffs' advantage.

Mr Collie, in effect, alleges that certain officers of the Australian Tax Office were over zealous, to use my expression, and wanting in bona fides, to use his, but that is not the case pleaded.  The defendant disclosed nothing of the affairs of the plaintiffs in her communication to Barkworth.  The reasons say a great deal about the scheme in which Barkworth was a party.  It would have been virtually impossible in my view, to demonstrate to the tax payer why the officer had concluded that the scheme was a sham, that is that there was no underlying real transaction, without going in detail through what Mr Collie described as the internal steps.

It is fanciful indeed to suppose that when the reasons were prepared and sent, the defendant was not acting throughout in performance of her duties. Canadian Pacific Tobacco Company against Stapleton 1952 86 CLR 1 at 6 per Dixon CJ.

Whilst Mr Bradley regards as rather odd to plead as the plaintiffs do that the defendant was acting both privately and officially when sending the reasons containing the information to Barkworth:  by giving "unnecessary" information, the plaintiffs might hope to sustain the allegation.  But, as mentioned, a perusal of the reasons cannot sustain that bifurcation and the plaintiffs have advanced no evidence to support it.

Mr Nevison for the plaintiffs contended that the plaintiffs could cross-examine the defendant to test her denial. That, in my view, is no basis for allowing a matter to go to trial. This is not to diminish the important safeguards in section 16 of the Act (see Lockhart J's discussion in Consolidated Press Holding Ltd against Commissioner of Taxation 1995 57 FCR 348 at pages 450 to 453). This is, however, in my view, very much a case to which rule 293 applies and there should be a judgment as sought for the defendant.

...

HER HONOUR:  The defendant seeks her costs of the proceedings on the indemnity basis, because, she contends, the plaintiffs made serious allegations of criminal conduct and that those allegations of criminal conduct, because of course, that is a consequence of disclosing information wrongfully, and that it was made without proper basis at all.  And in this regard for the facts of the reasons for decision which were conveyed to Barkworth, it certainly was the case that those reasons disclosed what Mr Collie has described as the internal steps to a client of the plaintiffs, to use that expression loosely.

The course of the relations between the Tax Office and certain officers of it and those behind the scheme who are, it seems the partners of the firm of solicitors Cleary and Hoare might suggest at least to them that there was something in the disclosure.  It is sometimes difficult to stand back from relationships of this kind after they have gone on for some time, to suggest, as Mr Bradley's submissions do, that this was a wilful allegation of criminal conduct tends to emphasise too strongly in my view that aspect of the conduct of the plaintiffs.  Whilst it may not have been the best test case to test the parameters of the secrecy provisions in the Income Tax Assessment Act, nonetheless I accept Mr Nevison's submission that it was not an illegitimate claim to have been brought, which would bring it within the parameters of the broad principles that are applied in indemnity costs in cases of this kind are sought.

Accordingly the costs will be costs of and incidental to the proceedings on the standard basis.

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