Re Christie and Federal Commissioner of Taxation

[2008] AATA 320

Administrative Appeals Tribunal

DIRECTION AND REASONS FOR DIRECTION [2008] AATA 320

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/3232 and 2007/3233

TAXATION APPEALS DIVISION		)
Re		TJAI CHRISTIE

Applicant

And Commissioner of Taxation

Respondent

DIRECTION

Tribunal Senior Member Bernard J McCabe

Date18 April 2008

PlaceBrisbane

Decision The Tribunal declines to make the directions sought by the applicant.

.......................[Sgd].......................

SENIOR MEMBER

CATCHWORDS

PROCEDURE AND PROCEDURE – disclosure of documents relevant to review pursuant to s 37 Administrative Appeals Tribunal Act – s 37 modified by s 14ZZF Taxation Administration Act – whether respondent complied with earlier Tribunal direction to disclose documents – disclosure complied with direction – further disclosure not required with under s 37 as modified by s 14ZZF

PROCEDURE AND PROCEDURE – disclosure of documents relevant to review pursuant to s 37 Administrative Appeals Tribunal Act – whether applicant permitted to access deceased individual’s taxation files – prohibition on provision of information about tax affairs of a person to any other person pursuant to s 16 Income Tax Assessment Act 1936 – Tribunal has power to direct files to be produced if relevant and necessary to the review – provision of information would not assist Tribunal to determine question

Administrative Appeals Tribunal Act 1975 (Cth), s 37

Evidence Act 1995 (Cth), s 55

Income Tax Assessment Act 1936 (Cth), s 16

Income Tax Assessment Act 1997 (Cth), Pt 1.3 Div 6

Taxation Administration Act 1953 (Cth), ss 14ZQ, 14ZZF

Re Tomkins and AMT Helicopters Pty Ltd and CASA [2007] AATA 1747

Federal Commission of Taxation v Nestle [1986] FCA 368; (1986) 12 FCR 257

Javorsky v Federal Commissioner of Taxation [2005] NSWSC 167; (2005) 216 ALR 619

Mobil Oil (Australia) Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475

REASONS FOR DIRECTION

18 April 2008 Senior Member Bernard J McCabe         

1.      Ms Tjai Christie has asked the Tribunal to reconsider the Commissioner of Taxation’s objection decisions made in connection with her 2003 and 2004 income tax assessments. The Commissioner said various cash amounts Ms Christie had received should be taken into account as income. An amended assessment was issued. Ms Christie disputes the Commissioner’s characterisation of the funds. She offered explanations that were not accepted in the course of the objection process.

2. A problem has arisen: Ms Christie says the Commissioner has not disclosed all of the documents he is required to produce pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”). She says she needs access to those documents in order to prepare her case. She has also asked for access to the taxation files of a deceased individual who is not a party to the proceedings. She says the deceased individual’s evidence might assist her to prove her case.

3. The Commissioner’s s 37 documents were lodged with the Tribunal on 4 September 2007. After the applicant criticised what it described as a failure to disclose relevant documents, I directed on 29 October 2007 that a representative of the Commissioner should swear an affidavit:

·stating in general terms the categories of documents held in relation to the applicant for the period under review;

·setting out objections to the production of any of those categories of documents; and

·confirming all documents relevant to the review have been provided.

4. Ms Fung from the Australian Taxation Office prepared an affidavit pursuant to the direction. The affidavit was lodged with the Tribunal on 16 November 2007. The affidavit annexed a volume of supplementary s 37 documents. The affidavit included a list of different categories of documents that were held by the respondent. Ms Christie says the affidavit is unsatisfactory because it refers to documents held in the respondent’s audit files. The applicant said the Commissioner should have referred to other documents in his possession that might be relevant. Ms Fung lodged a further affidavit on 18 January 2008. She set out categories of documents held in the respondent’s objection files. She concluded (at [6]):

“The respondent does not hold nor seek to rely upon any additional categories of documents, apart from those described [in the affidavits lodged on 16 November 2007 and 18 January 2008], which relate to the applicant for the relevant years.”

5.      The Commissioner says he has complied with his statutory obligation to provide all of the relevant documents. The applicant disagrees. I convened a directions hearing to discuss whether the Commissioner had complied with the terms of my direction of 29 October 2007. The applicant also made submissions in relation to its request for a direction that the Commissioner provide the files relating to the deceased individual who is not a party to these proceedings.

6. I am satisfied the Commissioner has complied with his obligation to provide documents pursuant to s 37 of the AAT Act. He has also complied with the terms of my direction of 29 October 2007. I will not direct that the Commissioner provide documents from files relating to a taxpayer who is not a party to these proceedings. I explain my reasons below.

The commissioner’s obligation to provide relevant documents

7. A primary decision-maker is not necessarily obliged to produce every document relating to the applicant that is in the decision-maker’s possession. The obligation to disclose is contained in s 37(1)(b) of the AAT Act which says a decision-maker is required to file with the Tribunal:

”every … document or part of a document that is in the person's possession or under the person's control and is relevant to the review of the decision by the Tribunal.”

8. That section is modified by s 14ZZF of the Taxation Administration Act 1953 (“the TAA”) where the primary decision is a “reviewable objection decision” within the meaning of s 14ZQ. Section 14ZZF(1)(a) says the Commissioner must be taken to have complied with s 37 of the AAT Act if he provides the documents referred to in subpars (i) to (vi), which include:

"every other document that is in the Commissioner's possession or under the Commissioner's control and is considered by the Commissioner to be necessary to the review of the objection decision concerned”.

9. It is interesting the provision does not use the word “relevant”, a word that lies at the heart of s 37(1)(b) of the AAT Act. It is unnecessary for present purposes that I embark on a detailed analysis of the way in which the two provisions meld and interact, since it will presumably be “necessary” in any event to disclose documents that are “relevant” to the dispute before the Tribunal. The word “relevant” does appear in s 37(2) of the AAT Act (as modified by s 14ZZF(1)(b)(iii)). Section 37(2) empowers the Tribunal to direct a person to produce relevant documents in their possession if those documents have not already been produced pursuant to s 37. Section 14ZZF(1)(b)(iii) modifies that obligation so that it becomes an obligation to produce a list of the documents. Since the applicant is effectively asking for a direction that additional documents be provided, I accept it is appropriate to have regard to the concept of relevance.

10.     The applicant referred me to the provision of the Evidence Act 1995 that defines the concept of relevant evidence. Section 55 refers to “evidence ... that could rationally affect … the assessment of the probability of the existence of a fact in issue in the proceedings.” Mr Watts, for the applicant, acknowledged the bulk of the Evidence Act does not apply in the Tribunal, but suggested the definition was helpful in any event.

11.     Using the definition in the Evidence Act as a test presupposes the decision-maker has a clear view of what is “in issue” between the parties. The question of what is “in issue” must ultimately be resolved by referring to the applicable statutory provision.

12.     The objection decision in this case deals with a dispute over whether or not certain cash amounts received by the applicant should be characterised as “assessable income”. The reasons accompanying the objection decision do not refer to the applicable legislative provision. I assume the provisions in question are found in Pt 1.3 Div 6 of the Income Tax Assessment Act 1997 which deal with the concept of “assessable income”.

13.     The niceties of the process by which receipts are characterised as “assessable income” has dazzled students of income tax law for generations. Suffice to say that, while the Commissioner is responsible for undertaking the characterisation process at first instance, there is nothing in the definition of “assessable income” that suggests his attitudes or behaviour are relevant to the characterisation process. The inquiry focuses on the affairs of the taxpayer, not the Commissioner. But the inquiry does not end when the Commissioner identifies a document that relates to the affairs of the taxpayer. The document must relate to an aspect of the taxpayer’s affairs that sheds light on the precise question before the Tribunal. The Commissioner is not necessarily required to produce documents that relate to the taxpayer’s wider affairs.

14.     It follows that evidence of the Commissioner’s processes, strategies, suspicions or even misconduct (which is not alleged here) will ordinarily be irrelevant in the course of a de novo merits review. The principal exception to that proposition is where a question arises in relation to the integrity of the evidence offered by the decision-maker; for example, where the decision-maker relies on a report by an investigator whose objectivity is called into question: see, for example, Re Tomkins and AMT Helicopters Pty Ltd and CASA [2007] AATA 1747 at [32]. But I do not understand that is the situation here.

15. I have reviewed the tables of documents identified in Ms Fung’s affidavits. I am satisfied the Commissioner has turned his mind to the question he was required to consider for the purposes of s 37 of the AAT Act as modified by s 14ZZF of the TAA. An assurance has been offered that all of the files in the Commissioner’s possession have been searched, and the tables do not disclose the existence of documents that have not been produced that would assist in the resolution of these proceedings. I have no reason to doubt that assurance. I accept the direction has been complied with and I decline to make any further direction in this regard. In any event, I think the Commissioner is right in his assertion that the Tribunal will decide whether the objection decision was wrong on the strength of the primary documents like bank accounts and the testimony of witnesses, including the applicant. That is the nature of a merits review conducted de novo.

The production of the taxation files of a deceased individual who is not a party to these proceedings

16. The applicant wants access to the files relating to her late father-in-law that are held by the Commissioner. She contends the files may disclose information about his capacity to make the payments she says he made to her. As I understand the argument, the Commissioner’s obligation to produce relevant documents under s 37 of the AAT Act (as modified by s 14ZZF of the TAA) extends to documents resting in the tax files of another taxpayer. She effectively asks for a direction under s 37(2) of the AAT Act (as modified by s 14ZZF(1)(b)(iii)) that the Commissioner file additional documents that the Tribunal considers are relevant.

17. The Commissioner says he is not permitted to produce the files of a third party in response to such a direction. He points out that s 16(2) of the Income Tax Assessment Act 1936 (“the ITAA36”) says an officer shall not provide information about the affairs of a person to any other person. Section 16(2A) creates an exception the general rule where disclosure occurs in the course of the officer’s duty. Section 16(3) says an officer is not required to provide information about a person to a court if that information is collected pursuant to the income tax assessment acts except where it is “necessary” to do so in order to give effect to the income tax laws.

18. The applicant says s 16(2) is not a barrier to the production of the file in question. She relies on the decision of the Full Federal Court in Federal Commissioner of Taxation v Nestle Australia Ltd [1986] FCA 368; (1986) 12 FCR 257. The Court held that an officer’s duty extended to the production of documents to a court under a summons or pursuant to an order for discovery in the course of judicial review proceedings: at [17]. The Court added (at [19]) that the production of documents to a Court was not the production of documents to a “person” within the meaning of s 16(2). The applicant in this case says there is no reason to take a different approach where the proceedings in question are Tribunal proceedings because the Tribunal is not a “person” either.

19. I note s 16(4)(c) says s 16 does not prevent an officer from communicating information to the Tribunal in connection with proceedings under legislation administered by the Commissioner.

20.     The respondent referred me to a number of authorities including Javorsky v Federal Commissioner of Taxation [2005] NSWSC 167; (2005) 216 ALR 619. Javorsky was a decision of the Supreme Court of New South Wales. In that case, the Commissioner entered into a scheme of arrangement with several debtors under which amounts were paid by instalment. As it happened, the instalments were paid by a company that was not a party to the deed. That company subsequently went into liquidation and the liquidator attempted to recover the payments from the Commissioner on the basis that they were voidable transactions. The liquidator sought discovery of documents from the Commissioner regarding the dealings with the debtors under the deed. The Commissioner argued he was unable to release the documents by reason of s 16 ITAA36. After discussing s 16(2) and the decision in Nestle, White J considered the operation of s 16(3). That subsection says a relatively narrow class of documents may not be disclosed to a Court unless it is necessary to do so in order to give effect to the income tax laws. His Honour concluded the Commissioner was not required to disclose the company’s tax returns or assessment notices since the proceedings were brought under the Corporations Act 2001 rather than the income tax legislation, although his Honour went on to say that other information and documents collected by the Commissioner might have to be disclosed.

21. These proceedings relate to the administration and enforcement of the income tax laws. I do not think the Commissioner is in a position to resist a direction to produce the documents if required to do so. I note in any event that s 16(3) applies on its face to a Court, not the Tribunal. I also note that s 16(4)(c) provides that nothing in s 16 shall be taken to prevent the Commissioner from disclosing information to the Tribunal. The High Court held in Mobil Oil (Australia) Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475 that s 16(4)(b) (which dealt with Boards of Review, but which is functionally identical to s 16(4)(c)) that the Commissioner is permitted to communicate otherwise confidential information without breaching the general prohibition in s 16: per Dixon CJ at 489. The Court decided by a majority that there would be no breach of s 16 if the information about the third party was communicated in the presence of the applicant and his or her representatives: per Dixon CJ at 489; McTiernan and Taylor JJ at 494 – 495. Section 16(5) goes on to say that a person who receives information under s 16(4) is subject to the same duties as an “officer” with respect to the information.

22.     I am satisfied the Tribunal has the power to make a direction to the Commissioner to produce the file of the deceased taxpayer if its contents are necessary and relevant to the review. I turn now to the question of whether I should make such a direction.

23.     The applicant does not know what information is in the file in question, and the Commissioner – at this point at least – is not saying. However, the Commissioner does say that information about the amount of the deceased taxpayer’s assessable income would be of little use in these proceedings because it does not say anything useful about the circumstances in which that individual made any payments to the applicant. The applicant says establishing the level of the deceased person’s income might help her to prove her claim that the deceased person could have afforded to make the payments as alleged.

24.     I do not think evidence of the deceased taxpayer’s assessable income drawn from the files will assist me to determine whether he made payments to the applicant, particularly where the Commissioner is precluded from relying on those files to put the proposition that no such payments could have been made. I will leave for another day the question of whether a summons directed to the deceased taxpayer’s estate would yield any useful information.

Conclusion

25.     I am satisfied the Commissioner has complied with his obligations under the Tribunal’s direction of 29 October 2007. I am not satisfied it is appropriate to vary that direction so that the Commissioner is required to provide additional documents. I also decline to make a direction requiring the Commissioner to produce documents in his files relating to the taxation affairs of another taxpayer.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

Signed: ...........................[Sgd]..........................................................
  Michael Buckingham, Associate

Date of Hearing  26 March 2008
Date of Direction  18 April 2008
Counsel for the applicant          Mr J Watts
Solicitor for the applicant          A D Buckland
Counsel for the respondent     Mr S Cole
Solicitors for the respondent     Australian Government Solicitor