LHRC v Deputy Commissioner of Taxation (No 3)

[2015] FCA 52

FEDERAL COURT OF AUSTRALIA

LHRC v Deputy Commissioner of Taxation (No 3) [2015] FCA 52

Citation:

LHRC v Deputy Commissioner of Taxation (No 3) [2015] FCA 52

Parties:

LHRC, LHRD, LHRE, LHRF, LHRG, LHRH v DEPUTY COMMISSIONER OF TAXATION and AUSTRALIAN CRIME COMMISSION

File number:

NSD 365 of 2014

Judge:

PERRY J

Date of judgment:

6 February 2015

Addendum:

2 March 2015

Catchwords:

ADMINISTRATIVE LAW – Where special Australian Crime Commission investigation constituted under a determination made pursuant to the Australian Crime Commission Act 2002 (Cth) – Where determination provides that other government agencies including officers of the Australian Taxation Officers are participants in the special investigation – Where taxpayer summonsed for examination through exercise of compulsory powers under s 28 of the Australian Crime Commission Act 2002 (Cth) – Whether summons issued for improper purpose – Whether gathering of intelligence can form any part of the purpose of holding s 28 examination – Where purpose of summons is to ask questions about federally relevant criminal activity covered by special investigation determination – Where evidence of purpose of persons other than decision-maker irrelevant – Whether dissemination of information to other participants in the special investigation is an improper purpose - Whether decision to hold s 28 examination made under dictation

ADMINISTRATIVE LAW - Whether examination under s 28 of the Australian Crime Commission Act 2002 (Cth) held “in private” where officers from the Australian Taxation Office present – Whether requirement that taxpayer be entitled to an opportunity to comment on presence of officers from the Australian Taxation Office at the s 28 examination - Effect of failure to give an opportunity to comment on presence of persons who are not a “member of the staff of the ACC” – Whether presence of officers from the Australian Taxation Office at the Australian Crime Commission examination was not authorised because they were associated with the possible prosecution of the examinee

TAXATION – Where Commissioner in process of assessing objections by taxpayer and associated entities – Whether power to issue notice under s 264 of the Income Tax Assessment Act 1936 (Cth) after objection lodged – Whether s 14ZYA of the Taxation Administration Act 1953 (Cth) confers exclusive power to gather information after taxation objection lodged – Whether s 264 notice limited to gathering information for raising assessments before objection

TAXATION – Where Australian Taxation Office conducting special operation auditing taxpayers transferring payments to or from tax havens endorsed by special Australian Crime Commission investigation – Where transcript of Australian Crime Commission examination of taxpayer disseminated to officers of the Australian Taxation Office under s 59(7) of the Australian Crime Commission Act 2002 (Cth) - Whether requirement to afford the taxpayer an opportunity to be heard before dissemination of the examination transcript to the Australian Taxation Office - Whether use of examination transcript in deciding whether to issue notice under s 264 of the Income Tax Assessment Act 1936 (Cth) or conducting s 264 interview authorised – Whether use of examination transcript in connection with s 264 interview contravenes non-publication directions made under the Australian Crime Commission Act 2002 (Cth) - Whether non-publication direction ought to have precluded use in connection with s 264 interview in order to avoid prejudice to a fair trial if the taxpayer is charged

TAXATION  - Whether power to restrain exercise of  compulsive powers to require evidence on the subject-matter of offences applies only where the examinee has been charged – Whether decision-maker issuing s 264 notice bound to have regard to detriment suffered as a result of the exercise of the power in s 264 – Whether decision to hold s 264 interview unreasonable

Legislation:

Acts Interpretation Act 1901 (Cth) s 13(3)
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Australian Crime Commission Act 2002 (Cth) ss 4(1), 7, 7A, 7B, 7C, 7G, 12, 17(1), 24A, 25A, 28, 29, 29A, 30, 33, 34A, 34B, 36(1), 46A, 46B, 46C, 46D, 46G, 46H, 49, 51, 59, 59A, 59AA
Australian Crime Commission Regulations 2002 (Cth) reg 9 and Sch 6, Part 1, item 113
Australian Crime Commission Special Investigation Authorisation and Determination (Wickenby Matters) 2006
Crime Commission Act 1985 (NSW) s 13(9)
Criminal Code 1995 (Cth) ss 6.2, 13.3(3)
Federal Court of Australia Act 1976 (Cth) s 37N
Income Tax Assessment Act 1936 (Cth) ss 6(1), 8, 14, 17, 166, 167, 169, 170, 172, 173, 175A(1), 263, 264, 264A
Income Tax Assessment Act 1997 (Cth)
Judiciary Act 1903 (Cth) s 39B
National Crime Authority Act 1984 (Cth)
Public Service Act 1999 (Cth) s 25
Taxation Administration Act 1953 (Cth) ss 3A, 8, 8C, 14ZU, 14ZW 14ZX, 14ZY, 14ZYA, 14ZZQ, Sch 1 cls 284-75, 255-5, 355-25, 355-30 and 355-70

Explanatory Memorandum to the Australian Crime Commission Establishment Bill 2002
Revised Explanatory Memorandum for the National Crime Authority Legislation Amendment Bill 2001

Cases cited:

A v Boulton (2004) 136 FCR 420; [2004] FCAFC 101
AA Pty Ltd  v Australian Crime Commission (2005) 219 ALR 666; [2005] FCA 1178
ABC v Sage (2009) 175 FCR 319; [2009] FCA 170
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41
Anthony Hordern & Sons Ltd v The Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1
Australia and New Zealand Banking Group Lt v Konza (2012) 206 FCR 450; [2012] FCAFC 127
Australian Crime Commission v AA Pty Ltd (2006) 149 FCR 540; [2006] FCAFC 30
Barnes v Boulton (2004) 139 FCR 356; [2004] FCA 1219
Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243
Binetter v Deputy Commissioner of Taxation (2012) 206 FCR 37; [2012] FCAFC 126
Bread Manufacturers of New South Wales v Evans (1981) 180 CLR 404
Citibank Limited v Commissioner of Taxation (1988) 19 ATR 1479
Commissioner of Taxation v Citibank Limited (1989) 20 FCR 403
Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58
Deputy Commissioner of Taxation v De Vonk (1995) 61 FCR 564
Edelsten v Wilcox (1988) 83 ALR 99; [1988] FCA 204
Environment Protection Authority v Caltex The Refining Co Pty Ltd (1993) 178 CLR 477; [1993] HCA 74
Ex parte Australena Investments Pty Ltd (1983) 15 ATR 162
Federal Commissioner of Taxation v Australian and New Zealand Banking Group Ltd; Smorgon v Commissioner of Taxation (1979) 143 CLR 499
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614; [1990] HCA 3
GG v Australian Crime Commission (2010) 182 FCR 513; [2010] FCAFC 15
Hamilton v Oades (1989) 166 CLR 486; [1989] HCA 21
Hammond v Commonwealth (1982) 152 CLR 188; [1982] HCA 42
Health Insurance Commission v Freeman (1998) 88 FCR 544
Industrial Equity Ltd v Deputy Commissioner of Taxation (1990) 170 CLR 649; [1990] HCA 46
JJ v Board of the Australian Crime Commission (2011) 278 ALR 571; [2011] FCAFC 73
Johns v Australian Securities Commission (1993) 178 CLR 408; [1993] HCA 56
Kajewski v Federal Commissioner of Taxation (2003) 52 ATR 455; [2003] FCA 258
Lee v R (2014) 308 ALR 252; [2014] HCA 20
Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148
Mansfield v Australian Crime Commission (2003) 132 FCR 251; [2003] FCA 1059
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; [1986] HCA 40
Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18
Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611; [2010] HCA 16
Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323; [2001] HCA 30
Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57; [2001] HCA 22
Mulherin v Commissioner of Taxation (2013) 2013 ATC 20-423; [2013] FCAFC 115
Municipal Council of Sydney v Campbell [1925] AC 338
NSW Food Authority v Nutricia Australia Pty Ltd (2008) 72 NSWLR 456; [2008] NSWCCA 252
Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328; [1983] HCA 9
QAAB v Australian Crime Commission [2014] FCA 747
R v Meares (1997) 37 ATR 321
R v Ross Edward Seller; R v Patrick David McCarthy [2013] NSWCCA 42
Re MacTiernan; Ex parte Coogee Coastal Action Coalition Incorporated [2004] WASC 264
Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82; [2000] HCA 57
Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467
Sorbyv Commonwealth (1983) 152 CLR 281; [1983] HCA 10
Taciak v Commissioner of Australian Federal Police (1995) 59 FCR 285
Thiess v Collector of Customs (2014) 250 CLR 664; [2014] HCA 12
Thompson v CouncilofMunicipality of Randwick (1950) 81 CLR 87
Western Australia Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30; [2004] HCA 63
Wilderness Society Inc v Turnbull (2007) 166 FCR 154; [2007] FCAFC 175
Wong v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 440
X7 v Australian Crime Commission (2013) 248 CLR 92; [2013] HCA 29

Date of hearing:

July 2014

Place:

Sydney

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

317

Counsel for the Applicants:

Mr J Hyde Page

Solicitor for the Applicants:

Dormer Stanhope

Counsel for the First Respondent:

Mr D Fagan SC with Ms K Morgan

Counsel for the Second Respondent:

Ms S Maharaj QC with Mr R Prince

Solicitor for the Respondents:

Australian Government Solicitor

FEDERAL COURT OF AUSTRALIA

LHRC v Deputy Commissioner of Taxation (No 3) [2015] FCA 52

ADDENDUM

1. On 2 March 2015, with retrospective effect to 19 February 2015, order 4 of the orders made on 6 February 2015 was vacated.

I certify that the preceding one (1) numbered paragraph is a true copy of the Addendum to the Reasons for Judgment herein of the Honourable Justice Perry.

Associate:

Dated:        2 March 2015

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 365 of 2014

BETWEEN:

LHRC
First Applicant

LHRD
Second Applicant

LHRE
Third Applicant

LHRF
Fourth Applicant

LHRG
Fifth Applicant

LHRH
Sixth Applicant

AND:

DEPUTY COMMISSIONER OF TAXATION
First Respondent

AUSTRALIAN CRIME COMMISSION
Second Respondent

JUDGE:	PERRY J
DATE OF ORDER:	6 FEBRUARY 2015
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The application is refused.

2.Costs are reserved.

3.On or before 4.00 pm on Tuesday, 10 February 2015, the parties are to file and serve any submissions suggesting redactions from these reasons in order to prevent disclosure of the identity of the first applicant.

4.Pending further order, no party is to disseminate the reasons given on 6 February 2015 otherwise than to the parties and their legal representatives.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 365 of 2014

BETWEEN:

LHRC
First Applicant

LHRD
Second Applicant

LHRE
Third Applicant

LHRF
Fourth Applicant

LHRG
Fifth Applicant

LHRH
Sixth Applicant

AND:

DEPUTY COMMISSIONER OF TAXATION
First Respondent

AUSTRALIAN CRIME COMMISSION
Second Respondent

JUDGE:	PERRY J
DATE:	6 FEBRUARY 2014
PLACE:	SYDNEY

1         INTRODUCTION	[1]
2         THE ISSUES	[5]
2.1      Prayers [1] & [2]:  the application for a declaration and mandatory injunction with respect to the 2011 ACC examination	[8]
2.2      Prayer [3]:  application for an injunction so that the s 264 interview does not proceed	[10]
2.3      Prayer [4]:  application for injunction to quarantine the ACC information from future use in connection with a s 264 interview	[11]
2.4      Prayer [5]:  an order requiring the non-publication directions to be re-made in accordance with law	[12]
2.5      Abandoned grounds	[14]
3         PROCEDURAL MATTERS	[17]
4         BACKGROUND	[21]
4.1      The ACC and authorisation of special operations and investigations	[21]
4.2      Project Wickenby	[49]
4.3      Operation M	[56]
4.4      Project Grindelford	[61]
4.5      The tax review and commencement of the audit of the first applicant’s tax affairs and associated entities in 2009	[62]
4.6      ATO officers and their roles in Operation M	[65]
4.7      The summons issued to the first applicant to attend and give evidence at the ACC examination on 24 February 2011	[72]
4.8      The ACC examination on 24 February 2011 and non-publication directions	[78]
4.9      Amendments to the Non-publication Direction	[86]
4.10     Dissemination of the transcript to the ATO	[91]
4.11     Results of audit and amended assessments	[95]
4.12     The decision to issue the s 264 notice	[101]
5         THE CHALLENGES TO THE ACC EXAMINATION	[123]
5.1      Relevant provisions relating to the conduct of an examination and the use to which evidence may be put	[123]
5.2      The allegation that the decision to conduct the ACC examination was made for an improper purpose (ground 2(i), statement of grounds)	[136]
5.2.1    The issue	[136]
5.2.2 What are the purposes for which the power to issue a summons under s 28(1) of the ACC Act may issue?	[139]
5.2.3    Was the power to issue the summons to appear and give evidence at the ACC examination exercised for a lawful purpose?	[145]
5.2.3.1       Relevant principles	[145]
5.2.3.2       Did the exercise of power miscarry by reason of an improper purpose?	[152]
5.3      The allegation that the decision-maker in deciding to conduct the ACC examination had regard to an irrelevant consideration (ground 2(ii), statement of grounds)	[170]
5.4      The allegation that the decision-maker decided to hold the ACC examination under dictation (ground 2(vii), statement of grounds)	[173]
5.5      Challenges to the legality of the ACC examination based on the way in which the examination was conducted	[182]
5.5.1    The mixed purposes for which the evidence was allegedly taken at the ACC examination (ground 2(iv), statement of grounds)	[182]
5.5.2    The presence of the ATO audit officers at the ACC examination and alleged failure to give the first applicant an opportunity to comment on their presence (ground 2(v), statement of grounds)	[189]
5.5.2.1       The applicants’ contentions	[189]
5.5.2.2       Relevant statutory provisions	[192]
5.5.2.3       The directions made by the examiner for ATO staff to be present	[200]
5.5.3    The failure to advise the first applicant of the presence of the ATO officers and to invite him to comment (ground 2(vi), statement of grounds)	[208]
5.5.4    The submission that the ATO officers’ presence was not authorised on the basis that they were persons associated with the possible prosecution of the first applicant	[219]
6         POWER TO ISSUE THE S 264 NOTICE	[231]
6.1      The issue	[231]
6.2      Relevant principles and statutory provisions	[233]
6.3 The first s 14ZYA contention	[243]
6.4 The second s 14ZYA contention	[247]
6.5      The applicants’ contention that their construction of s 14ZY is supported by the manner in which s 264 has been interpreted	[250]
6.6      Conclusion as to the power to issue a s 264 notice	[269]
7         THE CHALLENGE TO THE LEGALITY OF THE DECISION TO ISSUE THE S 264 INTERVIEW	[271]
7.1      Alleged lack of authority for the ATO to use the transcript for the purposes of a s 264 interview	[271]
7.1.1    Applicants’ contentions:  an overview	[271]
7.1.2    The substratum of the applicants’ arguments	[272]
7.1.3    Does the non-publication direction preclude the ATO from using the ACC transcript in deciding whether to issue a s 264 notice (ground 4(vi), statement of grounds)?	[285]
7.1.4    The challenge to the non-publication direction on the ground that the ACC examiner should have enjoined the use of the ACC transcript in connection with a s 264 interview (grounds 4(iii), 6 and 8, statement of grounds)	[287]
7.2      The alleged failure to have regard to a relevant consideration (ground 4(i), statement of grounds)	[297]
7.2.1    Relevant principles	[298]
7.2.2    No failure to consider a relevant consideration	[300]
7.3      The challenge to dissemination of the ACC transcript on the ground that the first applicant was not given the opportunity to make submissions about dissemination (ground 4(v), statement of grounds)	[305]
7.4      Wednesbury unreasonableness (ground 4(ii), statement of grounds)	[308]
8         CONCLUSION	[317]

REASONS FOR JUDGMENT

1.               INTRODUCTION

1. These proceedings were instituted in response to a notice given under s 264 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) (the s 264 Notice) requiring the first applicant to attend an interview and answer questions regarding his personal income tax affairs and those of his wife and five discretionary trusts. 

2. The applicants seek relief intended to ensure that those conducting any interview of the first applicant pursuant to s 264 do not have access to, or knowledge of, the substance of the first applicant’s evidence given in an examination on 24 February 2011 by the Australian Crime Commission (the Commission or ACC) in the exercise of compulsive powers under the Australian Crime Commission Act 2002 (Cth) (the ACC Act). The examination was purportedly carried out pursuant to Project Wickenby in furtherance of an operation which I will describe as Operation “M” which comprises part of that project. Project Wickenby is a special ACC investigation under the ACC Act in which a number of government agencies participated, including the Australian Tax Office (ATO). The ATO has completed a large number of audits of taxpayers in furtherance of Operation M in which the common theme is that the taxpayer receives payments from, or makes payments to, overseas entities, particularly in known tax havens. At the examination, while the first applicant had no privilege against self-incrimination, he answered questions on the basis that he had invoked protections under the ACC Act limiting the uses to which his evidence could be put.

3. The first applicant is a director of an investment bank.  The second to sixth applicants are the trustees of the discretionary trusts (the trustee companies), the beneficiaries of which include in each case the first applicant and his family members.  The first applicant is also the principal and a director of each of the trustee companies, together with his father.  The discretionary trusts were described in the applicants’ submissions as “effectively [the first applicant’s] private entities.”

4. At the time of the hearing, the trustee companies had each been issued with audit finalisation report papers from the ATO in which the ATO had outlined its reasons for intending to issue amended assessments. The first applicant had also been the subject of amended assessments for the financial years 2000 to 2007, increasing his personal income tax liability by a sum in excess of $10 million and substantial penalties in amounts also totalling in excess of $10 million.  The first applicant has lodged objections with the ATO against the amended assessments.

   2.               THE ISSUES

1. By the Further Further Amended Application for Relief (the Amended Application), the applicants seek relief under s 39B of the Judiciary Act 1903 (Cth) and the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) in order to ensure that information obtained at the ACC examination cannot be used in any interview of the first applicant under s 264 of the ITAA 1936 or in any decision in the future to conduct such an interview. The applicants seek to achieve that end by challenges to the decision to conduct, and to the conduct of, the ACC examination on 24 February 2011 (the ACC examination), and to the decision to issue the s 264 notice in March 2014.  They also seek achieve that end indirectly by challenging the dissemination of the transcript to the ATO and the scope of the non-publication directions made by the ACC examiner.   For the reasons set out below, none of these grounds are made out and the application must be dismissed.

2. The grounds on which the applicants seek relief in the Amended Application are stated in an amended document dated 15 July 2014 (Statement of Grounds). This was provided to the Court and the respondents in final form cross-referenced to the applicants’ written submissions only in the evening of the first day of the trial. 

3. Given the many changes in the applicants’ position before, during and even after the trial, it is helpful to summarise their final contentions and how they relate to the relief sought.

   2.1             Prayers [1] & [2]:  the application for a declaration and mandatory injunction with respect to the 2011 ACC examination

4. First, by the Amended Application, the applicants seek under s 39B of the Judiciary Act 1903 (Cth):

   1.a declaration that the ACC examination of the first applicant on 24 February 2011 was a nullity or vitiated by an error of law (prayer for relief at [1]); and

   2.a mandatory injunction requiring first respondent (the Commissioner) to return all copies of the transcript of the ACC examination to the ACC, and effectively to quarantine the ACC transcript from use in connection with any ongoing tax audit, assessment or objection tasks involving the liability of any of the six applicants and their associated trusts (prayer for relief at [2]).

5. This relief is sought on the following grounds:

   a)the decision to conduct the ACC examination was convened for an improper purpose, the decision maker had regard to an irrelevant consideration, and/or the decision was made at the behest of ATO audit officers, effectively under dictation; and

   b)by reason of the way in which the ACC examination was conducted, namely, that evidence was not taken solely for a purpose within power, the examination was not held “in private” because four ATO audit officers were present, and/or that the first applicant was not advised of the presence of the ATO officers and given an opportunity to comment, and the four ATO officers were persons associated with the possible prosecution of the first applicant.

   2.2             Prayer [3]:  application for an injunction so that the s 264 interview does not proceed

6. Secondly, pursuant to s 39B of the Judiciary Act, and the ADJR Act, the applicants seek a permanent injunction restraining the Commissioner from proceeding with the interview of the first applicant foreshadowed in the s 264 notice and accompanying letter (prayer for relief at [3]) on the following grounds:

   a)the decision to hold the interview failed to take into account a relevant consideration or was unreasonable;

   b)the non-publication directions or conditions of dissemination should have enjoined the use of the ACC transcript in connection with a s 264 interview because of the potential to prejudice a fair trial of the first applicant;

   c)if the ACC examination was a nullity, the transcript would not have been available to the ATO for the purposes of s 264;

   d)the non-publication directions did not permit the ACC transcript to be taken into account in a decision to issue a s 264 notice; and

   e)the dissemination of the transcript:

   i)was a nullity because the first applicant was not permitted to make submissions about its prospective dissemination; or

   ii)should have been accompanied by conditions preventing its use at a s 264 interview, or the purpose for which the transcript was obtained does not permit it to be used so as to defeat the protections under the ACC Act (also identified as a ground for [4] of the prayer for relief).

   (I note in this regard that no specific relief is sought in the Amended Application for the later dissemination of the audiotape of the interview.  However, no issue was raised in this regard by the respondents and I have therefore assumed in the applicants’ favour that, if they were entitled to relief with respect to the transcript, relief would also issue with respect to the audiotape.)

   2.3             Prayer [4]:  application for injunction to quarantine the ACC information from future use in connection with a s 264 interview

7. Thirdly, the applicants seek a permanent injunction restraining the staff of the Commissioner and persons retained by the Commission (prayer for relief at [4]) from, in the future:

   (i)communicating the transcript of the ACC examination or the substance of the evidence given to any person deciding whether or not to require the first applicant to attend a s 264 interview;

   (ii)exercising the s 264 power to require the first applicant to attend for an interview;

   (iii)attending a s 264 interview of the first applicant; and

   (iv)attempting to influence the questions asked at any such interview of the first applicant; 

   where those persons have read the transcript of the ACC examination or are aware of the substance of the evidence given, and the substance of that evidence has not entered the public domain. The grounds on which this relief is sought essentially repeat those at subparagraphs [10]( 0 and (0(ii) above.

   2.4             Prayer [5]:  an order requiring the non-publication directions to be re-made in accordance with law

8. In the alternative to [4] of the prayer for relief, the applicants seek a writ of mandamus requiring the CEO of the ACC to attach conditions to the use of information obtained at the ACC examination in any future s 264 interview so as to limit its use either:

   (i)in accordance with law; or

   (ii)so that the information cannot be used to require the first applicant for a s 264 interview or to formulate questions for such an interview.

9. The grounds on which this relief is sought again essentially repeat those at subparagraphs [10]( 0 and (0(ii) above.

   2.5             Abandoned grounds

10. Finally, by amendments to the originating application, the applicants expressly abandoned grounds under the ADJR Act alleging that:

    a)procedures required by law to be observed in connection with the s 264 decision were not observed; and

    b)that the decision was an improper exercise of the power because it was for a purpose other than that for which the power was conferred or was an abuse of power. 

11. However, they maintained allegations of improper purpose insofar as the s 264 issues were raised under s 39 of the Judiciary Act.

12. In the course of the trial, the applicants also abandoned allegations that an irrelevant consideration was taken into account in the decision to conduct the ACC examination, being (allegedly) the opinion of the ATO that circumstances indicated federally relevant criminal activity.

    3.               PROCEDURAL MATTERS

13. Before considering the applicants’ contentions, it is necessary to say something about the manner in which they conducted their case. 

14. The grounds on which the applicants relied were largely not identified in the originating application filed on 15 April 2014 but in a document filed by the applicants on 17 June 2014 pursuant to orders made on 13 June 2014 (the original Statement of Grounds).  These orders were intended to ensure clarity and precision about the grounds on which relief was sought in circumstances where, shortly before the trial, leave was sought and granted to amend the application substantially and to join the second to sixth applicants.   Nonetheless, the applicants sought to further amend their application at the start of the trial and later that day provided an “updated” Statement of Grounds (the Statement of Grounds) said to reflect the proposed further amendment and the applicants’ case as developed in their written submissions.  The respondents ultimately very fairly did not oppose the amendments to the application or, with the amendments being allowed, to reliance on the “updated” Statement of Grounds, despite that document demonstrating that the grounds on which the applicants sought relief had shifted considerably in a number of respects. 

    Finally, after judgment was reserved, the applicants applied on 10 September 2014 for leave to re-open their case to argue that there was no power to issue the s 264 notice because the first applicant had earlier lodged a taxation objection against his amended assessments – a proposition that they had expressly disavowed earlier in their closing address.  The Commissioner and the ACC very fairly did not oppose the application to re-open or to amend.  Notwithstanding that I did not consider that an adequate reason had been given as to why the point was not raised earlier, I considered on balance that it was in the interests of justice to grant leave to re-open.  In reaching that view, I had regard (as I explained in my ruling at the time), among other matters, to the fact that the application was not opposed, that a determination of the further issue would not require the calling of any further evidence or fact finding but was a question of law, that the issue seemed to be fairly arguable, and that the applicants would likely be barred by an issue estoppel from raising the issue if I were to refuse leave. 

15. The end result was that there were multiple and substantial changes to the grounds relied upon by the applicants before trial, during the course of the hearing, and even after judgment was reserved.  The many changes in the applicants’ position exacerbated the difficulties posed in any event in navigating through multiple sets of written submissions filed by the applicants and working out their relationship to the Statement of Grounds provided at trial.  That complexity was increased by the many cross-references contained in the updated Statement of Grounds to disjointed paragraphs in the various sets of submissions cited in support of each ground of the applicants’ reworked case, rather than to a coherent written argument.  These difficulties were further exacerbated by the applicants’ failure not merely to cross-reference their submissions to the evidence, but indeed to identify any evidence for certain propositions.

16. In short, I am of the view that the manner in which the applicants conducted their case was inefficient and rendered their case unnecessarily complex in light of the obligations on parties and their legal representatives under s 37N of the Federal Court of Australia Act 1976 (Cth). I raise these issues particularly as they may have a bearing upon the appropriate orders as to costs which I have reserved pending further argument.

    4.               BACKGROUND

    4.1             The ACC and authorisation of special operations and investigations

17. The applicants’ submissions were underpinned by a number of misconceptions as to the nature of the investigation authorised by the Wickenby Determination and the ACC Act. Those misconceptions primarily relate to the degree and nature of collaboration permitted by the Determination and the Act between the ACC and other government agencies participating in the investigation, the permitted purposes of an investigation and of the Wickenby investigation itself, and the purposes for which information and intelligence may be shared with other government agencies. These misconceptions go to the heart of the legislative scheme pursuant to which the Determination was made. As such, it is necessary to begin with an understanding of the ACC Act and its objects.

18. The ACC is established by s 7(1) of the ACC Act. It replaced the National Crime Authority Act 1984 (Cth) (NCA), the Office of Strategic Crime Assessments and the Australian Bureau of Criminal Intelligence, the intention being to enhance the capacity for the Australian Government to counteract serious and  organised crime.  As Finkelstein J explained in AA Pty Limited v Australian Crime Commission (2005) 219 ALR 666; [2005] FCA 1178 (AA v ACC) at 670:

    The Federal Government had two major concerns. Complex criminal activity engaged in by skilled criminal syndicates was on the rise.  “The globalisation of markets had brought with it the globalisation of crime” is how the Attorney-General put it on the second reading of the Bill...  There was also the risk of terrorism.… The new body was designed to play a pivotal role in national law enforcement operations to combat such threats in conjunction with other State and Federal (including Territory) agencies, especially state and federal police forces.
    (citations omitted)

    (Note:-  an appeal against this decision was allowed on grounds not relevant to this point:  Australian Crime Commission v AA Pty Ltd (2006) 149 FCR 540; [2006] FCAFC 30.)

19. As will be apparent, the purpose of providing for a collaborative approach between government agencies in addressing serious organised crime is a fundamental plank of the legislative scheme enacted by the ACC Act.

20. The ACC consists of the CEO, the examiners and the members of the staff of the ACC (s 7(2)). Examiners are legal practitioners of at least five years standing who are appointed under s 46B of the Act by the Governor-General.

21. The functions of the ACC under s 7A of the ACC Act are essentially directed towards the gathering, investigation and dissemination of criminal information and intelligence. In particular, they include:

    (a)to collect, correlate, analyse and disseminate criminal information and intelligence and to maintain a national database of that information and intelligence;

    (b)to undertake, when authorised by the Board, intelligence operations;

    (c)to investigate when authorised by the Board, matters relating to federally relevant criminal activity;

    (d)to provide reports to the Board on the outcomes of those operations or investigation; …

22. Section 4(1) defines an “intelligence operation” to mean “an operation that is primarily directed towards the collection, correlation, analysis or dissemination of criminal information and intelligence relating to federally relevant criminal activity, but that may involve the investigation of matters relating to federally relevant criminal activity.” The phrase “federally relevant criminal activity” is defined in s 4(1) to mean:

    (a)a relevant criminal activity, where the relevant crime is an offence against a law of the Commonwealth or of a Territory; or

    (b)a relevant criminal activity, where the relevant crime:

    (i)        is an offence against a law of a State; and

    (ii)       has a federal aspect.

23. “Relevant criminal activity”, in turn, means “any circumstances implying, or any allegations, that a relevant crime may have been, may be being, or may in future be, committed against a law of the Commonwealth, of a State or of a Territory”, while “relevant crime” means, relevantly, “serious and organised crime” (s 4(1), ACC Act). “Serious and organised crime” is defined to include, among other things, tax evasion involving two or more offenders, substantial planning and organisation, the use of sophisticated methods and techniques, and is ordinarily committed in conjunction with other offences of a like kind  (s 4(1), ACC Act).

24. The Board of the ACC is established by s 7B and is constituted by the CEO and the heads of various state and federal government agencies, namely, the Commissioner of the Australian Federal Police (AFP), the Secretary of the Department, the CEO of Customs, the Chairperson of the Australian Securities and Investments Commission (ASIC), the Director-General of Security, the Commissioner or head of each of the State and Territory police forces, and the Commissioner of Taxation (s 7B(2), ACC Act). As such, the Board’s decision-making takes into account state/federal interests, the interests of particular police forces and prosecuting authorities, and certain Commonwealth agencies. Furthermore, in performing its functions under the Act, the ACC is required, so far as practicable, to work in cooperation with “law enforcement agencies” as defined in s 4(1), namely, the AFP, a State Police Force, or any other authority or person responsible for enforcing Commonwealth or State laws (s 17(1), ACC Act).

25. Pursuant to s 7C of the ACC Act, the Board’s functions include:

    (c)to authorise, in writing, the ACC to undertake intelligence operations or to  investigate matters relating to federally relevant criminal activity;

    (d)to determine, in writing, whether such an operation is a special operation or   whether such investigation is a special investigation;

    (e)to determine, in writing, the class or classes of persons to participate in such  an operation or investigation;

    (f)       to establish task forces;

    (g)to disseminate to law enforcement agencies or foreign law enforcement  agencies, or to any other agency or body of the Commonwealth, a State or a Territory prescribed by the regulations, strategic criminal intelligence assessments provided to the Board by the ACC...

26. The authorisation by the Board of a “special ACC operation/investigation” in accordance with its functions under s 7C(c)-(e) is a necessary precondition for the exercise of certain coercive powers conferred by the ACC Act, including, relevantly, the power under s 28 to summon a person to give evidence and produce documents at an examination vested in an examiner.

27. By s 4(1), a “special ACC operation/investigation” means:

    (a)an intelligence operation that the ACC is undertaking and that the Board has determined to be a special operation; or

    (b)an investigation into matters relating to federally relevant criminal activity that the ACC is conducting and that the Board has determined to be a special investigation.

28. It is apparent from the definition of “intelligence operation” (set out at [26] above) that while the primary focus of an “intelligence operation” is not investigation, nonetheless the functions are not mutually exclusive.  As Logan J held in QAAB v Australian Crime Commission [2014] FCA 747 (QAAB) at [15], “[t]he definition of ‘intelligence operation’ is such that there is no necessary statutory antipathy between such an operation and the asking of questions by the examiner that relate to a ‘federally relevant criminal activity’. That is so even though the ACC Act also contemplates (s 7A(c)) that the ACC may, after Board authorisation, directly conduct ‘an investigation into matters relating to federally relevant criminal activity’.”

29. The term “investigation” is not defined but is used in the Act in contradistinction to the “collecting” of criminal intelligence.  This suggests, in my opinion, that “investigation” bears its ordinary meaning, namely, a searching inquiry to ascertain facts (see by analogy Taciak v Commissioner of Australian Federal Police (1995) 59 FCR 285 at 294; Health Insurance Commission v Freeman (1998) 88 FCR 544. However, as I later explain (at [143]), I do not consider that this means that intelligence cannot be collected in the course of investigation. The two functions are by their nature not mutually exclusive. Rather the difference between an intelligence operation and an investigation is ultimately a difference in direction or purpose.

30. Section 7C confers power on the Board to determine special ACC operations and investigations, subject to certain conditions:

    Special operations

    (2)The Board may determine, in writing, that an intelligence operation is a special operation. Before doing so, it must consider whether methods of collecting the criminal information and intelligence that do not involve the use of powers in this Act have been effective.

    Note 1:    See also subsection 7G(4) for the voting rule that applies in relation to such a determination.
    Note 2:    See also Division 2 for the examination powers available if there is a special operation.

    Special investigations

    (3)The Board may determine, in writing, that an investigation into matters relating to federally relevant criminal activity is a special investigation. Before doing so, it must consider whether ordinary police methods of investigation into the matters are likely to be effective.

    Note 1:    See also subsection 7G(4) for the voting rule that applies in relation to such a determination.
    Note 2:    See also Division 2 for the examination powers available if there is a special investigation.

1. As I later explain, the reference to “effective” in s 7C(3) has been interpreted as meaning “effective to permit the laying of charges against offenders”:  X7 v Australian Crime Commission (2013) 248 CLR 92; [2013] HCA 29 (X7) at [146] (Hayne and Bell JJ, with whom Kiefel J agreed); see further at [283] below.

2. The Board cannot determine that an intelligence operation/investigation is a special intelligence operation/investigation unless, exceptionally, at least nine Board members (including at least two Commonwealth Board members) vote in favour of making the determination (s 7G(4)). A determination under s 7C(2) or (3) has immediate effect (s 7C(6)).

3. By s 7C(4), a determination under subsection (2) or (3) must contain certain details, namely:

   (a)describe the general nature of the circumstances or allegations constituting the federally relevant criminal activity; and

   (b)state that the relevant crime is, or the relevant crimes are or include, an offence or offences against a law of the Commonwealth, a law of a Territory or a law of a State but need not specify the particular offence or offences; and

   (c)set out the purpose of the operation or investigation.

4. The Explanatory Memorandum to the Australian Crime Commission Establishment Bill 2002 (the ACC Explanatory Memorandum 2002) highlighted the importance of these conditions on the exercise of the power in s 7C(1) at p. 9, explaining that the threshold tests contained in ss 7C(2) and (3) “provide an important safeguard on the exercise of coercive powers under the Act”, while the detail required by s 7C(4) “sets the parameters for the operation of investigation and represents another important safeguard on the exercise of coercive powers under the Act.”

5. While, however, the Board has the power to determine that an operation/investigation is a special ACC operation or investigation, and to allocate an examiner to that special operation/investigation under s 46A(3), the coercive powers then available to be exercised are not vested in the Board. Only an examiner is vested with the power under s 24A to conduct an examination for the purposes of a special ACC operation/investigation. Equally, under s 25A(1), the examiner determines how proceedings at an examination are to be conducted subject to certain statutory requirements.

6. Importantly, while the examiner is part of the ACC by reason of s 7(2), the independence of the examiner is apparent from a number of features of the ACC Act. The examiner is not a member of the Board of the ACC, and therefore has no vote, among other things, on a determination that an intelligence operation/investigation is a special intelligence operation/investigation. An examiner is appointed not by the Board but by the Governor-General, holding full time office for the period specified in the instrument of appointment, and his or her appointment can be terminated only by the Governor-General on specified grounds (s 46H). Separate provision is also made under ss 46C and 46D for remuneration and terms of employment of an examiner, and an examiner cannot engage in paid employment outside the duties of his or her office without ministerial approval (s 46G). Examiners also have the same protection and immunity in the performance of their functions and exercise of their powers as a Justice of the High Court of Australia (s 36(1)).

7. The independence of the examiner has also been described as “an important safeguard to the exercise of the coercive powers”:  ACC Explanatory Memorandum 2002 at p. 16.  In light of the legislative scheme and in particular, the provisions to ensure the independence of examiners, the power relevantly of an examiner to summon a person to appear to give evidence on oath is, in my opinion, exercisable by the examiner solely in the exercise of his or her independent discretion.  Indeed all parties proceeded on this premise. If so, it would seem to follow in my view that, in exercising those powers, he or she does not act as an employee of the ACC: see by analogy Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626. Nor can he or she act, as the applicants allege, at the dictation of another. Conversely, an examiner cannot decide to give examination material to any particular body or agency. That discretion is vested in the CEO and his or her delegates.

8. It may also follow from the fact that the examiner gathers such evidence in the exercise of an independent statutory discretion that the record of the examination and associated documents are not in the ACC’s possession until the examiner has given that record to the head of the special ACC operation/investigation on conclusion of the examination in accordance with s 25A(15) notwithstanding that he or she is part of the ACC. If so, it is only at that point that the record of the examination is thereby potentially liable to be disseminated to other agencies under s 59(7) of the ACC Act by the CEO. However, that is not a question put in issue.

9. At the relevant time, s 59(7) of the ACC Act imposed conditions on the exercise of the power to disseminate information in the ACC’s possession in the following terms:

   The CEO may give to:

   (a)any law enforcement agency; or

   (b)any foreign law enforcement agency; or

   (c)any other agency or body of the Commonwealth, a State or a territory prescribed by the regulations;

   any information that is in the ACC’s possession and that is relevant to the activities of that agency or body if:

   (d)it appears to the CEO to be appropriate to do so; and

   (e)to do so would not be contrary to a law of the Commonwealth, a State or a Territory that would otherwise apply.

10. It was not in issue that the ATO was an agency of the Commonwealth prescribed by regulations for the purposes of s 59(7) at all material times: see reg 9 and Sched 6, Part 1, item 113, Australian Crime Commission Regulations 2002 (Cth).

11. Subsequently the ACC Act was amended in 2012 and s 59(7) of the AAC Act was substituted by a new provision, s 59AA, which, with other provisions, was intended to make it express that the Commission’s power to disseminate material to law enforcement agencies and the Commission’s obligation to provide admissible material to prosecuting authorities in s 12, were subordinate to the obligation to make appropriate non-publication directions under s 25A(9).

12. These provisions of the ACC Act are complemented by s 355-70(1) of Schedule 1 to the TAA which creates an exemption in prescribed circumstances to the prohibition under s 355-25(1) on disclosure by a taxation officer of “protected information”, being information disclosed or obtained under a taxation law relating to an entity which identifies the entity (s 355-30(1)).  Relevantly, the section exempts disclosure to “a Project Wickenby officer, or a court or tribunal” where disclosure “(a) is for or in connection with a purpose of the Project Wickenby taskforce; and (b) is made before 1 July 2015, or a later prescribed day”: s 355-25(1)(b); item 3. The  “purposes of the Project Wickenby taskforce” are defined in s 355-70(9) as being to:

    (a)       detect; and
    (b)       deter; and
    (c)       investigate; and
    (d)       enforce the law relating to;
    the promotion of or participation in arrangements of an international character, or purported international character, that relate to one or more of the following:
    (e)       tax avoidance or evasion;
    (f)       breaches of laws regulating financial markets and corporations;
    (g)       criminal activity in the nature of fraud or obtaining benefits by deception (including deceiving investors or creditors);
    (h)       money laundering;

    (i)        concealing income or assets.

13. An entity is a  “Project Wickenby  officer” if the entity holds an office in, or is employed in, or is performing services for a Project Wickenby taskforce agency or supporting agency and performs duties that relates to a purpose of the Wickenby taskforce (s 355-70(6), Schedule 1, TAA). “Project Wickenby task force agency” is defined to mean the ATO, the ACC, the AFP, ASIC, the CDPP and prescribed agencies.  Item 3 of s 355-70 therefore provides a mechanism whereby information obtained by the ATO may be provided to the ACC and other Wickenby taskforce participants without breaching the general prohibition in s 355-25(1) on disclosure by a taxation officer of protected information.  

14. Finally, where the ACC obtains “admissible evidence” through an ACC operation or investigation of an offence, it is required to provide that evidence to the State or Commonwealth Attorney General (as the case may be), the relevant law enforcement agency, or any other person or authority authorised to prosecute the offence: s 12(1), ACC Act. Plainly where the immunity in s 30(5) has been invoked by a person giving evidence at an ACC examination, the examination information will not be “admissible evidence” and s 12(1) will not apply.

    4.2             Project Wickenby

15. Project Wickenby is an Australian Government multi-agency task force established by the Australian Crime Commission Special Investigation Authorisation and Determination (Wickenby Matters) 2006 (the Wickenby Determination) made by the Board of the ACC on 13 September 2006 pursuant to s 7C of the ACC Act. In broad terms, the Determination provides for the investigation into arrangements and taxpayers involved in the creation and use of offshore structures such as trusts, companies and bank accounts to minimise or avoid paying tax in Australia. By way of an overview, the ATO explains on its website that:

    Project Wickenby is an integral part of the Australian Government’s fight against tax evasion, avoidance and crime.  In particular, Project Wickenby addresses the abusive use of secrecy havens by investigating offshore schemes that involve false deductions and concealed income and gains.

    The Project Wickenby cross-agency task force, established in 2006, consists of eight federal agencies.  This cross-agency approach continues to be necessary because Australia is increasingly engaging in the global economy and the size and scale of international tax avoidance and evasion is extensive and growing.

    The key objectives of the task force are to:

    ·reduce international tax evasion in the Australian taxation system

    ·enhance strategies and capabilities of Australian and international agencies to collectively detect, deter, deal with, and disrupt international tax evasion and money laundering

    ·improve community confidence in Australia’s regulatory systems

    ·reform administrative practice, policy and legislation.

    With their combined legal and administrative efforts and the use of sophisticated technology, the task force has made significant progress in identifying a range of illegal offshore schemes.

    Three key features of the schemes already under investigation are:

    ·concealing income or gains, or creating false or fraudulent tax deductions

    ·concealing assets offshore to avoid obligations in Australia

    ·returning funds to Australian taxpayers in a deceitful manner, including as laundered money.

16. The purpose of the special investigation for the purposes of s 7C(4)(c) is set out in clause 9 of the Wickenby Determination, namely:

    (a)to collect and analyse criminal information and intelligence relating to the federally relevant criminal activities, to disseminate that information and intelligence in accordance with the Act and to report to the Board; and

    (b)to identify and apprehend persons involved in the federally relevant criminal activities, to collect evidence about these activities and to reduce the incidence and effect of those activities;

    (c)to make appropriate recommendations to the Board about reform of:

    (i)the law relating to relevant offences; and

    (ii)relevant administrative practices; and

    (iii)the administration of the courts in relation to trials of relevant offences.

17. Clause 4 authorises the ACC to investigate the matter mentioned in schedule 1 to the Determination relating to federally relevant criminal activity until 30 September 2007. That period has been extended by amendments made by the Board on 12 September 2007, 16 September 2008, 16 September 2009 and 15 September 2010. The serious and organised crime to which the Determination applies includes offences against a law of the Commonwealth, a law of a State or a law of a Territory (clause 8).

18. Schedule 1 to the Determination states that the authorised investigation is an investigation to determine whether, in accordance with allegations mentioned in clauses 3 and 4 and in the circumstances mentioned in clause 2, federally relevant criminal activity was committed before or at the time the Determination commenced or may be committed in the future. The general nature of the circumstances mentioned in clause 2 includes, relevantly, such federally relevant criminal activity that may be implied from information available to Australian law enforcement agencies indicating that:

    (a)organised crime identities, networks and groups utilise off-shore associates and arrangements to establish and manage foreign accounts to conceal criminal proceeds and avoid tax obligations in Australia;

    (b)critical to the success of such activity has been the continued use of professional facilitators such as solicitors, accountants and financial advisors that possess expertise and detailed knowledge of domestic and foreign finance markets, systems and secrecy provisions;

    (c)Australian citizens and permanent residents have engaged in activities that cannot be readily explained by possibilities other than federally relevant criminal activity, as is apparent from:

    …

    (ii)A suspicious pattern of significant financial transaction reports under the [Financial Transaction Reports Act 1988] involving large sums of money:

    A.   entering or leaving the banking system in Australia;…

19. The general nature of the allegations mentioned in clauses 3 and 4 included that certain persons in concert with one another or other persons may be engaged in activities including:

    (a)conspiracy to defraud within the meaning of section 135.4 of the Criminal Code through evasion of, or making false claims in relation to, tax…;

    …

    (c) obtaining financial advantage by deception within the meaning of section 134.2 of the Criminal Code through evasion of, or making false claims in relation to, tax…;
    …
    (e) defrauding the Commonwealth within the meaning of section 29D or section 86 of the Crimes Act 1914 through evasion of, or making false claims in relation to, tax…;
    (f) dealing with money or other property contrary to sections 400.3, 400.4, 400.5, 400.6(1), 4000.6(2) or 400.7(1) of the Criminal Code;…

20. The classes of persons to participate in the investigation (the taskforce) were identified in schedule 2 pursuant to s 7C(1)(e) of the ACC Act as:

    1.The CEO [of the ACC].

    2.Each person who is:

    (a)  a member of the staff of the ACC; and

    (b)  identified in writing by the CEO, or a delegate of the CEO, as a person whose duties include providing services in relation to ACC operations and investigations.

    3.Each person who is:

    (a)  an officer or member of the staff of any of the following agencies;

    (i)an agency of which a Board member is head (other than the CEO) in his or her capacity as a Board member;

    (ii)the Australian Taxation Office;

    (iii)AUSTRAC;

    (iv)the Department of Immigration and Multicultural and Indigenous Affairs;

    (v)the New South Wales Crime Commission;

    (vi)the Queensland Crime and Misconduct Commission; and

    (b)  identified in writing by the head of that agency, or a delegate of that head, as a person whose duties include providing services in relation to ACC operations and investigations.

21. The ATO’s involvement in the project preceded the Determination, commencing in 2004. That involvement has included completion of a large number of audits of numerous taxpayers in which the common theme is taxpayer receives payments from, or makes payments to, overseas entities, particularly in jurisdictions listed by the OECD as tax havens. 

    4.3             Operation M

22. Operation M was endorsed as a project by the Project Wickenby Cases Forum in 2010. There is no suggestion by the applicants that it was not properly so endorsed by reason of falling outside the scope of the Wickenby investigation or otherwise. 

23. Operation M commenced as a multi-agency project including the ATO, ACC, ASIC, the Commonwealth Director of Public Prosecutions (CDPP) and the Australian Federal Police (AFP).  The operation forms part of the ongoing compliance activity of the Serious Non-Compliance Audit (SNC).  It is concerned with examining offshore arrangements designed to avoid tax which generally involve jurisdictions with strict secrecy provision (so-called “tax havens”).  Several of these offshore arrangements involve Australian taxpayers with links to common service providers including a particular Sydney tax agent and Sydney accounting firm (the Sydney tax agent and the Sydney accounting firm respectively).

24. The Operation M Project Outline explained that:

    ASIC has identified the following hypotheses in relation to Operation [M]:

    •[redacted] is an offshore wealth accumulation and tax evasion service provider used by Australians

    •[redacted] sets up and administers structures in tax havens controlled by Australian clients

    •The service is promoted by Australian legal and accounting professionals

    •The structures enable anonymous share trading, avoidance of reporting obligations and repatriation of accumulated assets free from ATO scrutiny

    •Participants in the service create and lodge alleged fictitious company charges and invoices to aid tax evasion on repatriated funds and other income.

    Analysis indicates that [redacted] are linked foreign entities providing loans to [redacted]. As previously stated, the ATO views the loans as sham arrangements to repatriate assets and avoid taxation with additional funds being sent overseas for alleged unsubstantiated interest payments or loan repayments. It should be noted that there are many company charges which have been lodged with ASIC in order to, it would appear, add a legitimacy to the ‘loans’. 
    (The redactions identified above were made in the exhibit on the grounds of relevance and pursuant to the Commissioner’s privacy/secrecy obligations). 

25. The Operation M Project Outline identified the potential risk as involving:

    …undeclared world-wide income for Australian residents from offshore profits earned from trading on the ASX. This involves:

    parking funds offshore and secrecy havens to evade tax and conceal ownership i.e. via the use of Life Bond products

    •implications relating to Division 7A, Section 44 and Division 6 of the Income Tax Assessment Act 1936 (ITAA) as a result of offshore profits repatriated back to Australian taxpayers and disguised as loans

    •back to back loans (‘Round Robin’) which can be proven to appear as far back as 1994

    …

    •offshore profits returned to Australian residents disguised as loans from purported unrelated third parties

    …

    •concealment of true beneficial ownership through complex structures in the UK and associated connections to secrecy havens

    •significant hiding of monies offshore by Australian resident participants and principals

26. One of the key objectives of Operation M is to identify strategic cases for ACC examination, being cases that involve complex, systemic, entrenched non-compliant Australian taxpayer users of the services of the Sydney tax agent and the Sydney accounting firm. The first applicant was identified as a significant participant in Operation M arrangements in the Operation M Project Outline.

    4.4             Project Grindelford

1. Pursuant to the Wickenby Determination, the ACC also conducted a special investigation codenamed Grindelford (Project Grindelford). That investigation is a joint ATO/AFP/ACC investigation into suspected tax fraud and money laundering by Australian residents who have used off-shore services and arrangements to conceal criminal proceeds and avoid tax obligations in Australia. The ACC’s role in the investigation is to use its coercive powers to gather strategic intelligence and to support additional criminal investigations resulting from the wider Project Wickenby.

   4.5             The tax review and commencement of the audit of the first applicant’s tax affairs and associated entities in 2009

2. The first applicant and his wife first came to the attention of the Commissioner through information obtained as a result of activities under Project Wickenby. They were also identified as part of Operation M as clients of the Sydney accounting firm.

3. On 14 July 2009, the Deputy Commissioner wrote to the first applicant advising that the ATO was conducting a review of his income tax affairs and those of the second and third applicants, as they had been identified as having conducted at least one international monetary transaction involving the sending or receiving of money to or from an offshore jurisdiction during the financial years ending 30 June 2001 to 30 June 2008. The letter contained a list of the transactions and sought information in answer to certain questions for the purpose of the income tax reviews.  On the same day, the Deputy Commissioner also wrote to the fourth applicant and the first applicant’s wife regarding the income tax review of the fifth and sixth applicants to similar effect.

4. On 10 November 2009, the Deputy Commissioner wrote to the first applicant advising that the ATO had commenced an audit as part of Project Wickenby of the first applicant’s affairs and entities associated with him, namely, the second, third and fourth applicants, commencing on the date of the letter. The letter also advised that the audit would initially cover, but not be limited to, the tax period 1 July 2000 to 30 June 2009. The schedules to the letter identified in a non-exhaustive way events on which the audit would focus, and requested information. Those events included international monetary transfers to a named Asian entity (the Asian entity). The Asian entity had headquarters in Asia offering services in various locations including the Cook Islands, Samoa, the Bahamas, the Cayman Islands and the Seychelles, and was the subject of Operation M.

   4.6             ATO officers and their roles in Operation M

5. Cathrine Jay, who gave evidence for the Commissioner, became involved in Project Wickenby in August 2004 before the Determination was made.  She has also been involved in Operation M in the role of Regional Director (Executive Level 2.1), SNC Business Line with Project Wickenby, since October 2012 and for some months prior to that during absences of her predecessor in that role. 

6. As Regional Director, Ms Jay oversees Operation M compliance activities and, among other things, decides whether to issue s 264 notices and amended assessments in tax fraud and evasion cases. Since Ms Jay’s involvement in Operation M, the ATO’s primary focus has been on compliance activities, including issuing notices to various persons under ss 264 and 264A of the ITAA 1936. Ms Jay, as delegate of the Deputy Commissioner, SNC, authorised the issue of the s 264 notice in 2014 to the first applicant: see further at [109] et seq below.

7. The day-to-day management of Operation M is undertaken by auditors who conduct the audits under the supervision of team leaders, with both the auditors and team leaders reporting to Ms Jay on Operation M cases.

8. Ms Knappick, an employee of the ATO within the SNC Business Line, was the team leader and strategic project manager of Operation M within Wickenby until 25 February 2011.   Sixteen members of staff within the ATO reported to Ms Knappick in those roles.  She also worked collaboratively with the ACC, the AFP and ASIC as partner agencies under the Wickenby Determination to achieve the objects of that investigation.

9. Matthew Evans, also a full time employee of the ATO, took over management of Operation M from Ms Knappick in late February 2011. Before assuming that role, Mr Evans was an auditor in the Audit section of the SNC.  Other auditors within the same section included Shannon Main (who was tasked with the audit of trusts associated with the first applicant and authored the submission to issue the s 264 notice), Matthew Holden (who also focused on the audit of trusts associated with the first applicant) and Stephen Ching.   Mr Ching’s role as auditor involved him looking at a person’s financial interest, assessing it under a review process and, if required, taking the case to an audit process and raising assessments.  In the period 2010 through February 2011, Mr Ching spent a high percentage of his time working on the audit of the first applicant and his entities.

10. Lenore Richards worked as a Technical Specialist in the SNC Technical section assisting the audit team with Operation M matters.  SNC Technical supports SNC Audit by providing technical and case advice, and referring matters to Legal Services Branch (now Review and Dispute Resolution (RDR)) and Tax Counsel Network (TCN).   While Ms Richards did not work directly under Ms Knappick, she had daily dealings with her.

11. George Velovski, currently Executive Director of Interpretive Assistance within the Small Business/Individual Taxpayers business line, also gave evidence for the Commissioner. He had been employed by the ATO since 1989 and involved in Project Wickenby objections since 15 August 2011.

    4.7             The summons issued to the first applicant to attend and give evidence at the ACC examination on 24 February 2011

12. Ms Knappick first considered conducting an examination of the first applicant in 2009.  She gave evidence that she considered that it was an appropriate case for an ACC examination because “[t]he use of ACC examinations is to gather further intelligence. It is to intelligence probe persons or interest who have displayed behaviours of possible criminal or civil behaviours in and around tax evasion, money laundering. It is a general purpose of what Wickenby was established for and the use of the ACC examination.”   

13. On 21 January 2011, the Assistant Commissioner, Investigations, SNC, as a delegate of the Commissioner, approved a request from SNC to disclose information to the ACC required for an Operation Grindelford examination of the first applicant, being in the form of a witness profile of the first applicant prepared by Mr Ching.  The witness profile provided background and set out reasons as to why it was said to be appropriate for the ACC to conduct a Grindelford examination on the first applicant, the objectives of the proposed examination, and suggested questions to be asked.  The witness profile was sent by email to the ACC later that day.

14. On 9 February 2011, Glenn Pritchard, Head of the Wickenby Determination at the ACC, applied for the issue of a summons under s 28 of the ACC Act to the first applicant pursuant to Project Grindleford. The application explained that:

    This particular aspect of Grindleford builds upon its strategic intelligence to determine the current environment with international tax planning and the use of tax havens by Australian residents to avoid or evade tax. The strategic intelligence is to be developed by the ACC and may be provided to the ATO and AFP for their further investigation of “federally relevant criminal activity.”

15. The application set out background facts based primarily on information provided by the ATO together with some ASIC searches, and made submissions as to the relevance of the witness to the Wickenby Determination by reference to the nature of the oral evidence to be sought.

16. On 11 February 2011, the examiner issued a summons to the first applicant pursuant to s 28(1) of the ACC Act stating that:

    Pursuant to subsection 28(1) of the Australian Crime Commission Act 2002 ... for the purposes of a special ACC Investigation being conducted by the Australian Crime Commission:

    1.   being satisfied that it is reasonable in all the circumstances to do so;

    2.   having recorded in writing the reasons for being so satisfied at 1.27 PM on 11th February 2011

    3.   I summon you... to appear

17. Paragraph 3 of the summons went on to state that the first applicant was to appear at a specified time on 24 February 2014 before the examiner for an examination unless excused or released from further attendance to give evidence of or about certain federally relevant criminal activity including defrauding the Commonwealth through evasion or making false claims in relation to tax. The examiner recorded his reasons for the issue of the summons at 1.27 pm on 11 February 2011 and the summons was subsequently issued at 1.30 pm on the same day. The examiner’s reasons are set out at [156] below.

    4.8             The ACC examination on 24 February 2011 and non-publication directions

18. Ms Knappick attended the ACC examination of the first applicant on 24 February 2011 and stated that she did so in her capacity as an ACC member of staff for the examinations under the Wickenby Determination and Project Grindleford.

19. Ms Knappick explained that she understood that she was a member of staff of the ACC when she was working in that environment under the Wickenby Determination and that her role on the day was to assist Counsel understand or further clarify issues that were raised at the Determination, should they require it.

20. At Ms Knappick’s request, a number of other ATO employees attended the ACC examination of the first applicant, namely, Mr Evans (in Sydney), as well as Mr Ching and Ms Richards (both by videolink from Brisbane).  Mr Evans and Ms Richards were also working within the Serious Non-Compliance Business Line of the ATO on Project Wickenby at the time of the examination.  Ms Knappick asked Mr Evans to attend as he was to become the project manager shortly after the examination. 

21. I accept Ms Knappick’s evidence that her team would have prepared guiding questions for the assistance of the ACC examiner and would normally consult with counsel and examiners before the examination.  However, the examiner would decide ultimately what questions he or she asked at the examination. As part of this process, Mr Ching completed the witness profile required for the examination of the first applicant at Ms Knappick’s direction.

22. At the start of the examination, the examiner explained to the first applicant that:

    [THE EXAMINER]:…You must answer the questions and produce documents or things that are required from you even if they may tend to incriminate you or render you liable to a penalty. Mr Johnson [the first applicant’s legal representative], I am prepared to offer the witness through you an opportunity to claim self-incrimination. But before I do that I’ll put to you that if the witness were to be unrepresented I will go into a lot more detail and explaining what self-incrimination is, what the claim is under the Act, the affect [sic] of the claim. Do I need to do any of that with this witness?

    MR JOHNSON:  No, Your Honour, no, Mr Examiner.

    [THE EXAMINER]:  And does the witness wish to make a claim of self-incrimination?

    MR JOHNSON:  Yes he does.

    [THE EXAMINER]: And I’ll make an order now that we will give him the protection from the entirety of his evidence. I’ll make the order under Subsection 5 of Section 30 of the Australian Crime Commission Act that the evidence of this witness is not admissible in evidence against him in any criminal proceedings or a proceeding for the imposition of a penalty other than in confiscation proceedings or a prospective proceeding in respect of, firstly in the case of an answer, the falsity of the answer or secondly in the case of the production of a document, the falsity of any statement contained in the document. [The first applicant], the order I’ve made gives you the protection from being prosecuted on anything that you might say in this examination subject to those two (2) exceptions. The first (1^st) exception being that your evidence is admissible in confiscation proceedings, they are proceedings under proceeds of crime type legislation and the second (2^nd) exception where your evidence here can be used against you is if you were to give false or misleading evidence in a material particular in this examination. So do you understand what I’ve, the order I’ve done and the affect [sic] of it?

    [THE FIRST APPLICANT]:  Yes, Mr Examiner.

23. It is apparent from this exchange that the first applicant, through his legal representative, made a claim before answering questions that the answers may tend to incriminate him or make him liable to a penalty for the purposes of s 30(4)(c) of the ACC Act. It was accepted that that claim was effective to cover the totality of his evidence at the examination. As a result, none of his answers at the examination are admissible against him in criminal proceedings or proceedings for the imposition of a penalty by virtue of s 30(5) of the ACC Act.

24. At the conclusion of his examination, the examiner made a non-publication direction under s 25A(9) of the ACC Act. That direction provided relevantly that:

    I am going to give a non-publication direction now [the first applicant] and I give that direction pursuant to Subsection 9 of Section 25A of the Australian Crime Commission Act. I direct that the evidence given by [the first applicant] the contents of the documents and the description of any thing produced to the Commission during this Examination, any information that might enable the witness to be identified and the fact that he has given evidence at this Examination shall not be published except to the Chief Executive Officer of this Commission, the Examiners and members of staff of this Commission. Also to the Australian Taxation Office for any matter within its jurisdiction arising from this investigation. Further as an exception to the non-publication direction, I permit the witness to inform his wife if he deems it necessary that he was summonsed to appear at the Australian Crime Commission today that he has given evidence as a witness and he has concluded that evidence. For the record, the witness’s wife’s name is [redacted]. Also as an exception to the non-publication direction, I extend the legal representatives to include Mark Douglas of Argyle Lawyers for the purpose of advice in relation to taxation matters that [the first applicant] may be facing in, having to deal with in the future. I also note that there is to be no communication between the witness and any member of staff of [the Sydney accounting firm] in particular [the Sydney tax agent and another]. The Commission’s Chief Executive Officer or his delegate may vary or revoke this direction in writing but must not do so if it might prejudice the safety or the reputation of a person or prejudice the fair trial of a person who has been or may be charged with an offence. Any breach of this direction is an offence punishable under the provisions of the Australian Crime Commission Act. This direction, [the first applicant] does not preclude you from further speaking with your legal representative Mr Johnson, Miss Nguyen and Mr Douglas to give instructions and to receive advice. The audio and video tapes of the Examination will be Exhibit two (2). And I direct that a record of the proceedings of the Examination and any other documents or things given to me at or in connection with this Examination be given to the head of the special investigation. (emphasis added)

25. The non-publication direction was in these terms at the time that the transcript of the ACC examination was disseminated to officers in the ATO on 2 June 2011, as I shortly explain.

    4.9             Amendments to the Non-publication Direction

26. The original non-publication direction was relevantly varied on a number of occasions.

27. First, on 10 August 2012, the direction was varied under s 25A(10) by a delegate of the CEO so as to read:

    Information to be published

    1.The evidence given by the witness, the contents of any documents or things produced to the Examiner and any information that might enable the witness to be identified or the fact that the witness to be identified or the fact that the witnesses have given evidence to the Examiner (the information).

    Authorised Publication

    2.Subject to paragraph 3, the information set out in paragraph 1 above may only be published:-

    (a)   to the Chief Executive Officer, Examiners and specified members of the staff of the ACC;

    (b)   to the Australian Taxation Office (ATO) and staff for:-

    (i)confidential intelligence use within the ATO; and

    (ii)use and publication in connection with the assessment of taxation liability of the witness, his wife [redacted] or any associated entities (the tax assessments);

    (c)   to any member of the AAT and any court (and staff of those bodies) and the parties and their legal representatives in any proceedings in which both the ATO and one or more of the witness, his wife or any associated entity is a party (the tax objection and appeal matters) for confidential use in connection with the tax objection and appeal matters; and

    (d)   by the witness and legal representatives to the persons listed in sub-paragraphs 2(a) to (c) for confidential use in connection with the tax assessments or the tax objection and appeal matters;

    (e)   by the witness advising his wife [redacted] that he has given evidence to the examiner and has concluded that evidence;

    (f)   to Mr Mark Douglas of Argyle Lawyers [amended on 10 August 2013 so as to add “(or any other lawyers engaged by the witness)”] for the purpose of advice in connection with taxation matters involving the witness.

    3.Publication of the information is subject to the following:

    (a)   the restrictions on use in sub-section 30(5) of the ACC Act;

    (b)   it may not be publicly released;

    (c)   it may not be considered as part of any proposed adverse administrative action against any person (other than the tax assessments or the tax objection and appeal matters) without prior approval of the ACC.

    (substantive amendments underlined; double under lining means that the underlining was in the original; footnotes omitted) (my redactions)

28. The non-publication direction was further varied on 10 October 2013 so as to exclude from those entities mentioned in paragraph 3(b)(ii) a named offshore bank (the Offshore Bank) and separately provide for confidential use of information regarding these entities in connection with a confidential application by the witness before the Federal Court. Furthermore, an additional clause was inserted (sub paragraph 3(b)), with consequential renumbering of the other subparagraphs) so as to render publication of the information and attendance information subject to the further express restriction that “the information shall not be published to the prosecutor of any criminal proceedings against the witness, or to any witness in such proceedings” (emphasis in the original). 

29. The direction was varied again on 7 April 2014 so as, among other things, to make separate provision with respect to information in relation to the witness’s dealings with the Offshore Bank, and to authorise (to the extent necessary) the use of “the general attendance information” in the present proceedings, namely:

    7.Subject to paragraph 6, the general attendance information may only be published to the following persons for confidential use in connection with any application by the witness to a court in connection with any proposed interview of the witness by ATO staff (currently scheduled for [redacted]:

    (a)the persons specified in sub paragraph 4(a) above [i.e. the CEO of the ACC,  Examiners and specified members of the staff of the ACC];

    (b)the ATO (and staff and lawyers engaged);

    (c)any Court, or presiding judicial officer (and staff); and

    (d)legal representatives engaged for the witness;

    provided that the witness must seek from the court, suppression orders and non-publication orders in respect of the general attendance information that is to be published to the court.
    (emphasis in original; footnotes omitted)

1. In the alternative, the applicants submit that the non-publication directions made by the ACC examiner should have enjoined the use of the ACC transcript in connection with a s 264 interview.   Specifically, the applicants contend that, because at the s 264 interview (or any future interview) the first applicant may be asked to elaborate on explanations given by him of certain transactions at the ACC interview, this has the potential to prejudice a fair trial relying on Seller at [101]-[104]. On the same grounds, the applicants contend that dissemination of the transcript under s 59(7) should have been accompanied by conditions preventing its use in a way said to defeat the protections under the ACC Act. An injunction is therefore said to be warranted in order to give effect to s 25A(9) of the ACC Act which requires the making of such a direction “if the failure to do so might … prejudice the fair trial of a person who has been, or may be, charged with an offence.”    Alternatively an order requiring the non-publication directions to be remade according to law is sought. 

2. It is necessary first to place the passages relied upon by the applicants in Seller in context.

3. In Seller, the non-publication direction made by the examiner under s 25A(9) was varied so as to permit publication of the transcript of the appellants’ ACC examinations to the CDPP. A further variation was made after one of the appellants had been arraigned permitting distribution to the prosecuting authorities and their lawyers for use in any court proceedings against the appellant, subject only to the restriction on its admissibility under s 30(5) of the ACC Act (Seller at [24]-[26]).

4. The Court of Appeal (Bathurst CJ (with whose reasons McClelland CJ at CL agreed, as did Rothman J subject to additional comments) upheld the primary judge’s findings that the nature of the material supplied to the CDPP justified the conclusion that dissemination to the CDPP might prejudice a fair trial and should not have occurred having regard to the requirements of s 25A(9). However, the Court of Appeal found that the primary judge had erred in holding that the circumstances warranted the grant of a permanent stay of proceedings.

5. Secondly, turning to s 25A(9), Bathurst CJ held that the word “might” means “a real risk as distinct from one that is remote or fanciful” (at [91]).  However, what constitutes prejudice to a fair trial for the purpose of the subsection was more difficult and not capable of precise definition (at [92]). In this regard, it will be recalled that s 25A(9) expressly envisages that a non-publication direction may be required to ensure a fair trial where a person “may be” charged with an offence and not only where a person has been charged. As such, the protection afforded by s 25A(9) casts a wider net than that afforded at common law.

6. Having reviewed the authorities, including notably Environment Protection Authority v Caltex Refining Co Pty Limited  (1993) 178 CLR 477; [1993] HCA 74 (Caltex) and NSW Food Authority v Nutricia Australia Pty Ltd (2008) 72 NSWLR 456; [2008] NSWCCA 252 (Nutricia), the Chief Justice concluded that:

   …it would seem to me that if the privilege against indirect or derivative self-incrimination had not been abrogated, s 25A(9) and s 25A(11) would require a direction to be made prohibiting the dissemination of self-incriminating material to prosecuting authorities both in case of a person charged and the person who might be charged. This is because the use of such material by the Crown might prejudice a fair trial… (emphasis added)

7. However, his Honour rejected the submission that the abrogation of privilege against indirect incrimination by s 30(5) meant that a fair trial could not be compromised by the disclosure of direct or indirect incriminating material to prosecuting authorities, and that s 25A(9) has no application in such cases (at [99]-[100]). It is in this context that the critical passages at [101] – [104] on which the applicants seek to rely here are found. Specifically, Bathurst CJ found that:

   As I indicated, the legislation as originally enacted contained two safeguards, the first in the original s 30 and the second in s 25A. As was said in [Australian Crime Commission v OK [2010] FCAFC 61; (2010) 185 FCR 258] at [109], the object of s 25A was to preserve a statutory safeguard to the right to a fair trial. If it was intended that the amending legislation was to take away that right, such an intention in my opinion, would need to have been clearly expressed…

   That does not mean that s 25A would prohibit all derivative use of the material. So, for example, I do not believe a fair trial generally will be prejudiced by the use of information obtained during the course of an examination to obtain admissible evidence. Thus, answers which would tend to indicate the availability of admissible evidence could properly be used for this purpose. For example, in cases such as the present this may include the location of bank accounts. Further, it does not seem to me that the use by the prosecution of documents produced during the course of an examination which supported the Crown case, usually would compromise a fair trial. However, the question of whether derivative use of such material could have that effect will always depend on the material in question and the circumstances of its use.

   This in my opinion is consistent with what was said by Mason CJ and Toohey J in Caltex supra at 503, and by Spigelman CJ in Nutricia supra at [164] – [174]… It is also consistent with what was said by McClellan CJ at CL in CB supra at [99]. It also means that s 25A would not preclude the ACC from carrying out the investigatory functions imposed on it by s 7A and s 12 of the Act.

   The position is different in my opinion if the provision of the material in question discloses defences or explanations of transactions by the accused which he or she may raise at a trial, and possibly evidence or information which would tend to show that documents or transactions apparently regular on their face in fact tend to support the proposed charges. This would be contrary to the principles stated by Gibbs CJ in Sorby supra, and by Deane, Dawson and Gaudron JJ in Caltex that the onus is on the Crown to prove its case and that the prosecution must prove it without reliance on incriminating answers. To provide to prosecutorial authorities material compulsorily obtained relating to such matters could compromise a fair trial in accordance with these principles.  (emphasis added)

8. The applicants contend that the ACC examination and proposed s 264 interview of the first applicant are squarely within the class of derivative use identified in Seller which the Court of Appeal said should be prohibited by non-publication directions at [101]-[104]. Specifically, they submit that:

   At the ACC examination [the first applicant] gave significant evidence about his understanding of the various transactions. The purpose of the proposed s.264 interview is not to identify new transactions, bank accounts and the like. Rather it is to explore transactions that are already known to the ATO and where it is alleged these transactions of fraudulent. The goal of the s.264 examination will be to obtain evidence “that documents or transactions apparently regular on their face in face [sic] tend to support the proposed charges” [quoting from Seller at [104]], which is evidence the Court of Appeal said cannot be legitimately pursued through derivative use of an ACC examination. To the extent the… Non-Publication Directions fail to prevent the s.264 interview, they do not properly reflect the s.25A(9) obligation to prevent possible prejudice to criminal proceedings.

9. However, the decision in Seller concerned a very different circumstances from the present. Unlike Seller, this case does not concern the potential impact on a fair trial of the dissemination of information to prosecutorial authorities.  The ATO is not a prosecuting authority.  Nor have charges been laid or are pending (or “proposed”) against the first applicant.  And the purpose of exercising the s 264 power is to assess the applicants’ taxable income.  Contrary, therefore, to the applicants’ submission, it cannot be said that the goal of the s 264 examination will be to obtain evidence “that documents or transactions apparently regular on their face in fact tend to support the proposed charges”. 

10. Consistently with this, when the ACC gave a copy of the transcript to ATO officers on 2 June 2011, the operative non-publication direction which was made at the examination direction directed that the first applicant’s evidence and the fact that he had given evidence should not be published except, relevantly, to “the Australian Taxation Office for any matter within its jurisdiction arising from this investigation”.  The use to which the ATO could, therefore, use the examination information was limited to the assessment of taxation, including the resolution of the applicants’ objections and the first applicants’ wife to the amended assessments, being matters arising from the special Wickenby investigation and more particularly Operation M.   The fact that inevitably the discharge of that function involves the ATO considering whether the applicants have engaged in tax evasion and fraud particularly because the assessments cannot otherwise be re-opened does not change the nature of its inquiry.  In these circumstances, there is nothing against which to conclude that there is a “real risk” that the failure by the examiner to give a direction precluding the use of the examination material in the exercise of powers under s 264 of the ITAA 1936 might prejudice the fair trial of the first applicant as a person who may be charged with an offence. Any such risk at the time of the examination when the direction was made (and presently) is remote.

    7.2             The alleged failure to have regard to a relevant consideration (ground 4(i), statement of grounds)

11. The applicants contend that the decision-maker failed to take into account a relevant consideration in deciding to issue the s 264 notice, namely, “the detriment to [the first applicant] of being made to attend a s 264 interview” in his particular circumstances (Statement of Grounds at [4](i)). 

    7.2.1Relevant principles

12. The failure to have regard to a relevant consideration, being a consideration which the decision-maker was bound to take into account in making a decision, will sound in jurisdictional error:  Peko-Wallsend at 39 (Mason J); Craig v South Australia (1995) 184 CLR 163; [1995] HCA 58 at 179 (Brennan, Deane, Toohey, Gaudron and McHugh JJ). Those factors which the decision maker is bound to consider are determined by construction of the statute rather than the particular facts of the claim. As McHugh, Gummow and Hayne JJ explained in Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 32; [2001] HCA 30 at 347-348 [73]-[74]:

    The considerations that are, or are not, relevant to the Tribunal’s task are to be identified primarily, perhaps even entirely, by reference to the Act rather than the particular facts of the case that the Tribunal is called on to consider.…

    This does not deny that considerations advanced by the parties can have some importance in deciding what is or is not a relevant consideration. It may be, for example, that a particular statute makes the matters which are advanced in the course of a process of decision-making relevant considerations for the decision-maker. What is important, however, is that the grounds of judicial review that fasten upon the use made of relevant and irrelevant considerations are concerned essentially with whether the decision-maker has properly applied the law. They are not grounds that are centrally concerned with the process of making the particular findings of fact upon which the decision-maker acts.

13. Where the statute does not list those considerations to which regard must be had, those considerations must be ascertained as a matter of statutory construction from the subject matter, scope and purpose of the Act. However, as Mason J cautioned in the leading decision of Peko-Wallsend at 40:

    ...the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject-matter, scope and purpose of the Act.

    7.2.2No failure to consider a relevant consideration

14. First, the applicants contend that where a government agency proposes to exercise a power in a way that will infringe a common law right or privilege, the detriment to the person whose rights will be infringed must be taken into consideration.  Equally, they contend, the fact that s 264 abrogates the privilege against self-incrimination is a factor that must be taken into account by the decision-maker before deciding to exercise the power. 

15. The purpose of the power in s 264 is to require answers in circumstances where persons are unlikely voluntarily to provide the information sought precisely because it may be of an incriminating nature:  Boulton (FCAFC) at [57]. In so doing, the power gives priority to the protection of the revenue over the fundamental common law privilege against self-incrimination. From this, it can be implied that the decision-maker deciding whether or not to exercise the power in s 264 must consider the appropriateness of taking so serious a step in all of the circumstances. As for example, Lockhart J observed in Citibank Limited v Commissioner of Taxation (1988) 19 ATR 1479 (Citibank) (on which the applicants relied), “[p]lainly the revenue must be protected, but so must the rights of citizens”.   As such, I consider that there is considerable force in the submission that it is relevant for the ATO to consider whether there are other means which do not impinge upon the privilege against self-incrimination available by which such information might be obtained.  (see by analogy Citibank at [39] (appeal allowed in part but not on relevant grounds: Commissioner of Taxation v Citibank Limited (1989) 20 FCR 403)).

16. However, in the present case, the evidence discloses that the ATO had sought first to obtain information about the transactions in question from the applicants by other avenues, including through affording the first applicant the opportunity to respond to the draft audit position paper and provide further evidence before deciding to issue the amended assessment:  at [95]-[97]  above.  However, the information obtained via these alternative avenues was considered deficient as a consequence of which the proposed s 264 interview was considered by the decision-maker, to be the most direct and appropriate method to test the veracity of the documents supplied by the first applicant and his tax agent:  see part 4.12 above.  In these circumstances, I do not consider that there is any force in the contention that the decision-maker failed to have regard to the appropriateness of taking such a step in the all of the circumstances.  Rather, the applicants seek to take issue with the merits of the exercise of the power by her, as is apparent for example from their submission that any benefits to be obtained from holding the interview are “meagre”. 

17. Secondly, the first applicant contends that his answers in a s 264 examination would deny him the protections granted under the AAC Act in respect of his ACC examination as any s 264 transcript could be disclosed under s 355-70 of the TAA to the DPP, the AFP and other Commonwealth agencies for the purpose of enforcing the criminal law. This was said to constitute part of the detriment which the decision-maker was required to consider. This submission depends upon the substratum identified by the applicants as underlying their s 264 submissions and therefore suffers from the difficulties which I have already identified.

18. Thirdly, the applicants rely upon the fact that substantial amended assessments had been raised against the first applicant and were in the process of being raised against his five trusts. In that context, it was said that a s.264 examination in which it was proposed that Senior Counsel would test the first applicant’s evidence on the very matters likely to be at issue in any Part IVC appeal, in the absence of a judge, would impose a significant forensic disadvantage on the first applicant. This submission is based upon the misconception which I identify at [314]-[315] below.

    7.3             The challenge to dissemination of the ACC transcript on the ground that the first applicant was not given the opportunity to make submissions about dissemination (ground 4(v), statement of grounds)

19. In the further alternative, the applicants submit that the dissemination of the ACC transcript was a nullity because the first applicant was not permitted to make submissions about its prospective dissemination to the Commission and in the ordinary course the transcript would not been available to the ATO for s 264 purposes (Statement of Grounds at [4](v)).  The applicants rely upon the decision in Johns v Australian Securities Commission (1993) 178 CLR 408; [1993] HCA 56 (Johns).  No relief is sought declaring the dissemination a nullity but it is presumably submitted that in some way this invalidated the s 264 decision.

20. Contrary to the applicants’ submissions, the decision in Johns is distinguishable.  In that case, the High Court held that the decision to release a transcript of evidence given before the Australian Securities Commission in private in the exercise of coercive powers for use in public hearings at a State Royal Commission was invalid on the ground that the delegate ought to have given the witness the opportunity to oppose that course.  However, in so holding, the majority distinguished between a decision to disseminate examination information to a government agency for authorised purposes reflected in conditions on that agency’s use or disclosure of the information, on the one hand, and a decision in effect to lift any conditions on the agency’s use or disclosure of the examination information, on the other hand.   It was only in the latter case that the Court held that an opportunity to be heard must first be afforded to the witness:  429-431 (Brennan J), 435-436 (Dawson J) and 458 (Gaudron J).  As for example, Gaudron J explained at 458, in agreeing with Brennan J:

    … The Australian Securities Commission came under a statutory duty of confidence with respect to the information it obtained from examination of Mr Johns, by use its coercive power under Pt 3, Div. 2 of the Australian Securities Commission Act 1989 (Cth). I agree also that the statutory duty involved is not absolute, it being qualified by the right of the ASC to use and disclose information for the purposes of performing or exercising any of its functions and by the provisions of the Act authorizing disclosure for particular purposes and by particular means. I also agree with his Honour that, in the circumstances of this case, the ASC was obliged to afford the appellant an opportunity to oppose permission for the use of the transcripts of his examination in the public hearings of The Royal Commission Into The Tricontinental Group of Companies. (acronyms omitted)

21. The circumstances of the present case are very different from those in Johns. There is no question of public disclosure with its consequential prejudice to the applicants’ rights and interests attracting a right to be heard. Rather, the non-publication directions made by the examiner at the conclusion of the hearing here authorised disclosure to the ATO “for any matter within its jurisdiction arising from” the Wickenby investigation. For the reasons already given, release to the ATO for such purposes was authorised under the ACC Act and was limited to the purposes for which the power to disseminate information may be exercised. These conditions circumscribed the use which might be made by the ATO at the time that the transcript was released to it (Johns at 428). Subsequent variations to the non-publications directions have sought only to define the conditions more strictly, and expressly to exclude the public release of the information and its disclosure to prosecutorial authorities. As such, the circumstances of this case fall outside those which attract an opportunity to be heard as explained in Johns.  Moreover the first applicant was legally represented at the ACC examination when the non-publication direction, authorising conditional release of the transcript to the ATO was first made.  No objection was then made to the terms of the direction or subsequently until now.

    7.4             Wednesbury unreasonableness (ground 4(ii), statement of grounds)

1. The applicants submit that the proposed s 264 interview is vitiated by Wednesbury unreasonableness in the sense outlined by Edelsten v Wilcox (1988) 83 ALR 99; [1988] FCA 204 at [36] and [41], namely, that “‘reasonable’ administrative conduct is not simply a matter of rational behaviour, but also the use of government powers in a measured and proportionate fashion.” (Statement of Grounds at [4](ii))

2. In oral submissions, counsel for the first applicant explained the manner in which the proportionality issue was said to arise in the following terms:

   The submission is that on the one hand, we have [the first applicant] who’s being summoned specifically so that it can be put to him that his arrangements are a sham in the circumstances with which we’re familiar where there was an ACC examination and so forth and he will have no privilege against self-incrimination. So it’s from the point of view of the interviewee, a very, very onerous imposition. From the point of the ATO, the respondent – as I said, the advantage related to the determination of assessable income is meagre, I would submit, and the main advantage is – is one that barely falls within the proper ambit of the exercise of the power.

3. In expanding upon the alleged detriment, counsel for the first applicant submitted that: 

   …it appears from the documents that not only will [the first applicant] be interviewed pursuant to a statute that abridges his privilege against self-incrimination, but in a very real sense the point is to incriminate him. If I could just unpack that a bit: there’s a suggestion that a series of loans from offshore to [the first applicant] and his entities are shams and the proposal is to sit down with him and interrogate him about those very matters. So, in that sense, it’s not just use of a power with certain common low [sic] protections that might be purely academic under the circumstances being swept to one side, it’s the exercise of a power in a way that – in which that will cause, potentially, a huge amount of detriment to [the first applicant]. 

4. I reject the submission that the decision to issue the s 264 Notice is unreasonable.

5. First, the applicants’ submissions take no account of the principle that, in its application to a statutory discretion, the legal standard of unreasonableness must be determined by reference to the true construction of the statute.  This is so “because the question to which the standard of reasonableness is to be addressed is whether the statutory power has been abused”:  Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 at [67] (Hayne, Kiefel and Bell JJ). It is, therefore, only when by reference to the scope and purpose of the statute, that a decision-maker has, for example, given disproportionate weight to some factor or reasoned illogically or irrationally, that the final conclusion will be that the decision-maker has been unreasonable in a legal sense: ibid at [72]; see also at [76].

6. Secondly, the evidence establishes that the Commissioner decided to issue the notice in order to obtain information necessary for the investigation of certain transactions, his suspicions having been aroused.  While the assessments had been made, the assessments were the subject of an objection by the first applicant on the basis that the income declared in the original tax returns was accurate. In other words it was based on an assertion that there was no intention to evade tax, and all of the transactions were exactly what they seem to be.  The issue of the s 264 notice sought to achieve no more than to enable the Commissioner to determine the objection and, thereby, discharge his obligation to make a true and accurate assessment of the taxpayer’s taxable income.

7. Thirdly, the applicants sought to rely upon an internal email within the ATO to Ms Edwina McLachlan from Effie Mavratzakis, objections office, Project Wickenby Objections, SBIT business line.  Ms Mavratzakis is the SBIT Objections officer responsible for responding to the objections filed by the first applicant and his wife to the amended assessment issued by the ATO in November 2012.  In the email Ms Mavratzakis stated “Hi Edwina, the objection is drafted completely to uphold the order decision, just awaiting the outcome of the interview to strengthen the position.”  In particular, the applicant submitted that it should be inferred from the email that the objection decision was already drafted and the intention in holding the examination was simply to strengthen that decision against likely Part IVC proceedings to challenge the objection decision by obtaining further information and to give counsel who may ultimately appear for the Commissioner in Part IVC proceedings the opportunity to ask the first applicant questions about relevant  transactions. In those circumstances, the applicants contended that the forensic advantage which the Commissioner might gain by holding the interview was “meagre” and outweighed by the significant detriment to the first applicant.

8. However, this is not a case where the Commissioner could be seeking the information in order to make a decision on whether or not to institute legal proceedings as the function which the Commissioner was seeking to exercise was to determine the applicant’s objections.  Nor, while Part IVC proceedings may be foreseeable, are Part IVC proceedings imminent or pending. The decision in Binetter is apposite. In that case the appellant also claimed that the primary judge ought to have held that the guiding or dominant purpose in issuing a s 264 notice was to affect the outcome of anticipated court or tribunal proceedings under Part IVC of the TAA. In rejecting that submission, the Full Court agreed at 48 [36] with the primary judge’s reasons at [2012] ATC 20-331 at [91] in terms equally apt to address the applicants’ contention here:

   … the first element of the submission pays insufficient regard to the function the Commissioner was in fact seeking to exercise; that is, to make a decision on the applicant’s objections. This is not a case where the question can be approached by asking whether the decision maker had or had not decided to commence legal proceedings: compare Korean Airlines Co Ltd v Australian Competition and Consumer Commission (No 3) [2008] FCA 701; (2008) 247 ALR 781 at [70]. This is because the administrative process of assessment, which includes making a decision on the objections, precedes the commencement of either tribunal proceedings or court proceedings by the taxpayer. Further, in the present case there are no proceedings in the Tribunal or in the Court. The Commissioner was not deciding whether proceedings should be instituted by him. Such proceedings were neither imminent nor pending although they were foreseeable if the objections were disallowed. But there was no intrusion on judicial power nor any exercise of power for an improper purpose. Thus at that level of abstraction the ground fails.(emphasis in the original)

9. Insofar as the applicants submit that any benefits from the proposed s 264 interview would be “meagre”, the submission takes issue impermissibly with the merits of the decision and fails to grapple with the fact that s 264 is intended to facilitate the proper and informed discharge of the Commissioner of his duty accurately to assess the person’s taxable income in the face of objections from the applicant and the first applicant’s wife.  The submissions, as Robertson J held in Binetter at [108], fail to recognise that “the better the information before the Commissioner at the objection stage the better the decision on the objection.”  Provided that the notice is issued for the purpose of making an assessment taxpayer’s taxable income, it is not for the court to pre-empt the outcome of the exercise of that discretion and weigh up the potential benefits to the Commissioner of proceeding with the proposed s 264 interview. As Robertson J also held in Binetter at [108] (in a passage with which the Full Court agreed at 48 [37]), “To contend that the [objections] decisions could have been made without the material sought or had been held up to obtain that material is to invert the inquiry.”  It may well be that the information ultimately gleaned from the holding of the interview proves to be of value to the Commissioner.  At the present time, that is unknown but it is a matter which the Commissioner is entitled to investigate through the exercise of these powers. 

   8.               CONCLUSION

10. For these reasons, the application should be dismissed.  I will hear the parties as to costs.

I certify that the preceding three hundred and seventeen (317) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.

Associate:

Dated:        6 February 2015