May v Deputy Comm of Taxation

[1999] HCATrans 285

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M63 of 1999

B e t w e e n -

ANTHONY HENRY MAY

Applicant

and

DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

Respondent

Application for special leave to appeal

McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 10 SEPTEMBER 1999, AT 11.17 AM

Copyright in the High Court of Australia

MR N.J. YOUNG:   May it please the Court, I appear with MR P.H. SOLOMON for the applicant.  (instructed by Herbert Geer & Rundle)

MR G.J. DAVIES, QC:   If the Court pleases, I appear with my learned friend, MS J. DAVIES, for the respondent.  (instructed by the Australian Government Solicitor)

McHUGH J:   Yes, Mr Young.

MR YOUNG:   If the Court pleases, the issue of general importance that arises in this matter is the proper construction and operation of section 264(1)(a) of the Income Tax Assessment Act.  The issue arises in the context of a notice relating to a period from 1 July 1994 to 30 June 1997.  That notice was directed to solicitors and sought a wide range of information relating to employee benefit schemes.  The origin of the notice, as found both by the trial judge and the Full Court, was the Commissioner’s desire to undertake a national project relating to employee share plans to determine whether legislative amendments previously made were effective in practice.

The construction of section 264(1)(a) is not the subject of any direct authority with the exception of one case which was an interlocutory decision of Justice Gibbs, as he then was, in Geosam v ANZ.  That case is indirectly in point but, aside from that, there is really no guidance to be obtained from decisions.  There is some dicta in the Commissioner of Taxation v ANZ Case to be found in the judgment of Sir Anthony Mason.

McHUGH J:   But you have some guidance now from the Full Court decision and we have said again and again that, ordinarily, income tax cases should stop with the Federal Court.

MR YOUNG:   That is so, your Honour, but the guidance is doubtful, in our submission, and there is further, in our submission, a question of general importance as to the scope that 264(1)(a) and what notices can be given in pursuance of it. 

What the Full Court held, in effect, was that that power can be exercised to give a notice directed generically to clients connected with a firm of solicitors in the sense that they may have been provided with, but not necessarily implemented, documents relating to employee benefit scheme by that firm.  That appears at the application book page 72, line 14.  So the guidance is the Full Court has said two things:  a section 264(1)(a) notice can be telescoped, so it is both a (1)(a) and (1)(b) notice, even though it purports to be given under subsection (1)(a), and secondly, that it is sufficient to describe taxpayers generically.  That appears at line 14.

Now, in both respects, it is our submission that the decision of the Full Court is doubtful.  There is no authority for the proposition that taxpayers can be described generically in the way in which this notice did.  Indeed, the only authority that exists is to the contrary. 

The generic description here, the Court will know, was broad and loose.  It was simply persons who are, or had been, clients in relation to the provision of advice or documentation concerning the employee benefit plan or similar plan, whether or not implemented.  I say “whether or not implemented” because that was the Full Court’s construction of the notice at application book page 70.  I say there is no authority to support that generic approach because of the decision of this Court in the ANZ Case 143 CLR 499. The Court may recall there were two kinds of notice in question in that case: there was what was called a long form of notice, which named ‑ ‑ ‑

McHUGH J:   This is Smorgon’s Case, is it?

MR YOUNG:   The Smorgon Case, the second Smorgon Case.  A long form of notice named all the taxpayers.  There was a short form of notice seeking the documents in the vault or the security box.  Every Judge held that the short form of notice was invalid.  They upheld the long form of notice saying that it complied with 264(1)(b) because it named the taxpayers whose income or assessment was in question.

There is a broader question that underpins those two aspects of 264(1)(a) that arises and an aspect of it is, really, the subject of Justice Gibbs’ observations in Geosam, namely that the power in 264(1)(a) must obviously be exercised for a proper purpose of the Act, even though there is no express reference to that paragraph to such a limitation.  The general principle, of course, would imply it.  There is an express limitation to the paragraph (b) power.  The power must be exercised so that the notice is directed to – I am looking at the second limb – “books, documents and other papers…..relating thereto”, that is relating to the recipients “or any other person’s income or assessment”.  That is what 264(1)(b) treats as a proper purpose of the Act.

Section 263, which is the companion provision about access, has an express requirement that the power is to be exercised “for any of the purposes of this Act”.  So it is express in 263(1), it is implied in paragraph (1)(a) of 264, it is express in 264(1)(b).  What is the proper purpose of the Act on analysis?  This Court has answered that question in the IEL Case at page 659.  Can I take the Court to IEL 170 CLR 649 for one moment. I want to take the Court to 659. It is a case about section 263 but it raises the question as to what were the purposes of the Act. The passage is at the second half of 659. I draw particular attention to about point 7:

The question whether a purpose is a purpose of the Act should be considered in the context of s.17.  That section provides for the levy of tax upon the taxable income of a person derived during a year of income and it is by reference to this primary purpose that all other purposes of the Act are to be determined.

GUMMOW J:   Mr Young, the point you are developing now, is this a point that is developed in the written outline?

MR YOUNG:   No, not directly, your Honour.

GUMMOW J:   I thought not.

MR YOUNG:   It is a reason why we say limits need to be read into paragraph (a), including the limit to which ‑ ‑ ‑

GUMMOW J:   But was it an argument put to the Full Court?

MR YOUNG:   Yes, it was, it was certainly put.  There are passages in the Full Court’s decision dealing with the very question about ‑ ‑ ‑

GUMMOW J:   Whereabouts?

MR YOUNG:   At page 61 of the application book, paragraph 16.

McHUGH J:   The last paragraph.

GUMMOW J:   Yes.

MR YOUNG:   And purpose is further addressed at 69 ‑ ‑ ‑

GUMMOW J:   But that was in the course of dealing with the procedural fairness submission.

McHUGH J:   Exactly.  I am having a little difficulty relating your submissions to the written summary of argument.  Are you abandoning the written summary of argument? 

MR YOUNG:   We are not pressing or pursuing the – I am not sure whether it is the first or second – but it is the procedural fairness point.  We are only pursuing the construction of section 264(1)(a).  So that that extent we are abandoning that aspect of the written outline.  But the simple point we make is that you construe 264(1)(a) as to what it permits by way of a notice in accordance with statutory purposes.  They are, in a nutshell, the purpose of the assessment and recovery of tax.

McHUGH J:   But it is almost as if this argument you are now putting was quite peripheral in the Full Court.  It is just there in passing.

MR YOUNG:   It certainly did not have the focus that we now seek to give it.

GUMMOW J:   We realise you were not in the Full Court.

MR YOUNG:   We accept that the argument did not have the focus we now give it.  We accept that.  But it is an issue that necessarily arises as soon as one runs an argument, as the application does and the argument does, about the proper scope of section 264(1)(a).  The simple point is:  is that to be limited, that is the paragraph and the exercise of power, in the manner suggested in Geosam, namely that the Commissioner cannot use paragraph (a) to obtain documents and thereby circumvent the limits that apply in paragraph (b), and we would say limits that are necessarily implied into paragraph (a) in any event; and the second point is, can he use paragraph 264(1)(a) to seek information that generically relates to past or present clients of a firm of solicitors who may have received documentation or advice but may have implemented it or not implemented it.  That is the generic point.  It is our submission that on a proper construction of the section and what the purposes of the Act are, it does not authorise a notice in these sweeping terms.

One can perhaps test it by reference to 263.  The reference to “purposes of this Act” is express.  If instead of a notice requiring the furnishing of information the Commissioner went to Herbert Geer & Rundle and sought access to every document or fee arrangement of the kind mentioned in this paragraph (1)(a) notice, would that be a proper exercise of the access power in 263 for the purposes of the Act or would it go beyond the purposes of the Act?  All of these sections raise ultimately that same issue of implied limitation.  It is our submission that those are questions of general importance.  True it is that this is only one notice but this is a coercive power of a quite intrusive kind and, as this notice demonstrates, the Commissioner, without guidance from any court, is giving it quite a wide reach in the notices he seeks to act on.

It is for those reasons that, in our submission, special leave should be granted, confined to the construction and operation of section 264(1)(a).  If the Court pleases.

McHUGH J:   We need not hear from you, Mr Davies.

This application should be dismissed.  Having regard to the course of argument in the Federal Court, we do not think this is a case that calls for the grant of special leave.  So far as the applicant relies on arguments directly raised in the Full Court, we see no reason to doubt the correctness of the decision of the Full Court.  In so far as the applicant now relies on arguments that were not the focus of argument in the Full Court, we do not think we should grant special leave without having had the benefit of a considered judgment of the Full Court on those arguments.  For those reasons, special leave is refused.

MR DAVIES:   I would seek costs, if the Court pleases.

McHUGH J:   You cannot oppose that, Mr Young?

MR YOUNG:   No, your Honour.

McHUGH J:   Special leave is refused with costs.

AT 11.38 AM THE MATTER WAS CONCLUDED