Re Petroulias and Commissioner of Taxation - [2006] AATA 333

CATCHWORDS – Freedom of Information – exemption provisions – whether disclosure of document will disclose or allow a person to obtain a confidential source of information – whether disclosure prohibited under secrecy provision – whether disclosure would have a substantial adverse effect on the proper and efficient conduct of the operations of an agency – whether disclosure would found an action for breach of confidence – decision affirmed but for different reasons.

Freedom of Information Act 1982 ss 3, 4, 11, 22, 25, 33, 36, 37, 38, 40, 43, 45, 55, 56 and 58
Fringe Benefits Tax Assessment Act 1986 s 3
Income Tax Assessment Act 1936 ss 8, 16, 263 and 264
Social Security Act 1947
Taxation Administration Act 1953 ss 3A and 4

Accident Compensation Commission v Croom [1991] 2 VR 322
Ascic v Australian Federal Police (1986) 11 ALN N184
Attorney-General’s Department v Cockcroft (1986) 64 ALR 97
Australian Competition and Consumer Commission (2001) 187 ALR 487
Bartlett v Secretary, Department of Social Security (1997) 49 ALD 380
Commonwealth of Australia v John Fairfax & Sons Limited and Others (1981) 55 ALJR 45
Corrs Chambers Westgarth and Commissioner of Taxation [1998] AATA 756
Corrs Pavey Whiting and Byrne v Collector of Customs, Victoria (1987) 14 FCR 434; 13 ALD 254
Department of Health v Jephcott (1985) 8 FCR 85
Dunn v Department of Defence (2004) 84 ALD 419
Federal Commissioner of Taxation v Swiss Aluminium Australia Ltd (1986) 10 FCR 321; 66 ALR 159
Genkem Pty Ltd v Environment Protection Authority (1994) 85 LGERA 197
Hogarth v Miller [1891] AC 48
Kamminga and Australian National University (1992) 26 ALD 585
McKenzie v Secretary, Department of Social Security (1986) 65 ALR 645
McNeil v Commissioner of Taxation (2004) 206 ALR 44
Re Bayliss and Department of Health and Family Services (1997) 48 ALD 443
Re Collie and the Deputy Commissioner of Taxation (1997) 45 ALD 556
Re Dale and Australian Federal Police (1997) 47 ALD 417
Re Dr Ken Michael AM; ex parte Epic Energy (WA) Nominees Pty Ltd & Anor [2002] WASCA 231
Re Gold and Australian Federal Police (1994) 37 ALD 168
Re Hart and Deputy Commissioner of Taxation [2002] AATA 1190
Re Hayes and Secretary, Department of Social Security (AAT 11221, 6 September 1996)
Re James and Australian National University (1984) 2 AAR 327
Re Millis and Australian Archives (1997) 47 ALD 427
Re Nitas and Minister for Immigration and Multicultural Affairs [2001] AATA 392
Re Richardson and Commissioner of Taxation [2004] AATA 367
Re Slater and Cox (Director-General, Australian Archives) (1988) 15 ALR 20
Re The Joint Coal Board and Cameron (1989) 24 FCR 204
Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 36 FCR 111; 16 AAR 28
Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 108 ALR 163
Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73
Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1991) 28 FCR 291
The News Corporation Ltd v National Companies and Securities Commission (1984) 5 FCR 88

DECISION AND REASONS FOR DECISION [2006] AATA 333

ADMINISTRATIVE APPEALS TRIBUNAL     )
  )          V2004/1235
GENERAL ADMINISTRATIVE DIVISION     )

Re NIKYTAS PETROULIAS

DENISE ANNE CLARK
CORPORATE BUSINESS CENTRES INTERNATIONAL PTY LTD
PROFESSIONAL ADMINISTRATION CENTRES PTY LTD
Applicants

AndCOMMISSIONER OF TAXATION
Respondent

DECISION

Tribunal:                   Deputy President S A Forgie
Date:  30 March 2006
Place:  Melbourne

Decision:The Tribunal affirms the decision of the respondent to refuse access to Document 86 and those parts of Documents 98 and 106 described in the Schedule of Documents lodged in the Tribunal on 13 February 2006.

S A FORGIE
Deputy President

REASONS FOR DECISION

On 15 September 2004, Mr Nikytas Petroulias, Ms Denise Anne Clark, Corporate Business Centres International Pty Ltd (CBCI) and Professional Administration Centres Pty Ltd (PAC) made a request to the Commissioner of Taxation (Commissioner) for three categories of documents under the Freedom of Information Act 1982 (FOI Act):
documents related to the policy of the Australian Taxation Office (ATO) regarding aggressive tax planners and “the Policy of attacking Promoters generally”;
documents relating to Mr Petroulias’s affairs; and
documents relating to the issuing of notice to Mr Petroulias and Ms Denise Clark under s 264(1)(b) of the Income Tax Assessment Act 1936 (ITA Act) (264 notice).

The Commissioner was deemed to have refused Mr Petroulisas’s request[1] entitling the applicants to apply to the Tribunal for review of the deemed decision.[2] After various conferences in the Tribunal and discussions between the parties, the Commissioner gave the applicants access to 58 documents in full, 14 documents in part and claimed that a further 13 were wholly exempt from disclosure. The Commissioner then located other documents and released further documents in whole or in part. By the time of the hearing, the only documents in issue between the parties were the following documents or parts of them. The documents with the sections of the FOI Act under which exemptions are claimed are:
Document 86: 11 printouts, marked 86.1 to 86.11, of various parts of a series of correspondence over a period of time (whole document) (ss 37(1)(b), 40(1)(d) and 45);
Document 98: an Australian Taxation Office (ATO) document titled “Aggressive Tax Planning End to End Process/PASTO: Managing Intelligence and Analysis” (part of document) (ss 38 and 40(1)(d)); and
Document 106: email correspondence attaching a Minute titled “Staff alert to certain Promoters and various possible representations” (part of document) (s 38).
[1] FOI Act, s 56(1)(b)
[2] FOI Act, s 55(1)(a)
Although I have decided that the Commissioner’s decision that the documents are exempt from disclosure under the FOI Act is correct, my reasons are slightly different in relation to Document 86. I have decided that it is exempt under ss 37(1)(b) and 45 but not under s 4(1)(d).

THE WITNESS

Mr Gregory Joseph Daly gave evidence on behalf of the Commissioner. He was an auditor within the Large Business and International Business Line before becoming a Team Leader in the ATO’s Promoter Taskforce between May 2002 and November 2004. He is now the Litigation Liaison Officer in the Technical Excellence Practice within the Large Business and International Business Line of the ATO.

The ATO Promoter Taskforce is located in the ATO’s Brisbane office. As a Team Leader, Mr Daly was responsible for the audit and investigation of taxpayers who were identified as promoters of tax minimisation arrangements. With Queensland’s manager of the ATO Promoter Taskforce, Mr Colin O’Gorman, Mr Daly was responsible for investigating the taxation affairs of Mr Petroulias and any other known entity with which Mr Petroulias was associated. Mr Daly was present at interviews conducted by ATO officers with the applicants and prepared submissions seeking approval to exercise the Commissioner’s powers in respect of them.

Mr Daly’s evidence was in the form of two affidavits. On one, he was cross-examined by Mr Walker. The other, which is subject to a confidentiality order, relates to Document 86.

CONSIDERATION

I will examine each exemption provision in turn. Having established the general principles that apply to its application, I will consider each document in turn and decide whether the whole, or part, is exempt under the exemption provision, as the Commissioner has decided.

General structure of access provisions of FOI Act

The object of the FOI Act is to create:
“… a general right of access to information in documentary form in the possession of Ministers, departments and public authorities, limited only by exceptions and exemptions necessary for the protection of essential public interests and the private and business affairs of person in respect of whom information is collected and held by departments and public authorities”[3]
[3] FOI Act, s 3(1)(b)

Clearly, the right to access is not unqualified and this is underlined by the way in which Parliament has expressed a person’s right to gain access. Section 11(1) of the FOI Act provides that:
“Subject to this Act, every person has a legally enforceable right to obtain access in accordance with this Act to:
(a)a document of an agency, other than an exempt document; or
(b)an official document of a Minister, other than an exempt document.”

The fetter is immediately apparent in the words: “Subject to this Act” in s 11. The right is qualified, for example, by the fact that it is only given to every document in the possession of an agency[4] that is not an “exempt document”. In so far as an agency is concerned, an “exempt document” is a document that is exempt by virtue of a provision of Part IV of the FOI Act.[5] The Commissioner relies on four provisions in Part IV.
[4] As the Commissioner is the person holding, or performing the duties of an office established by an enactment, he is a prescribed authority and so an agency for the purposes of the FOI Act: s 4(1).
[5] FOI Act, s 4(1)

The right is also qualified by more procedural provisions found in Part III of the FOI Act. Among those is s 22, which provides generally for the deletion of material from a document if that material is exempt or irrelevant to a request. An agency may delete material on the basis of irrelevancy if “… to grant a request for access to a document would disclose information that would reasonably be regarded as irrelevant to that request …”.[6] If an agency deletes material on that basis, it must advise the person to whom access to the resulting document is given.[7]
[6] FOI Act, s 22(1)(a)(ii)
[7] FOI Act, s 22(2)

There is no question that the Tribunal has power to review the Commissioner’s decision. Equally, there is no question that the Tribunal does not have the Commissioner’s breadth of power to give the applicants access to the documents he requests without deletion. Even if the documents are exempt under one or other of the provisions of Part IV, the FOI Act does not require the Commissioner to claim exemption and refuse access. Subject to any other legislative restrictions on him, and he argues that there is one in respect of parts of Documents 98 and 106 for he has claimed exemption under s 38,[8] the Commissioner may choose to give the applicants access. The Tribunal has no such choice, for s 58(2) of the FOI Act provides that:
“where … it is established that a document is an exempt document, the Tribunal does not have power to decide that access to a document, so far as it contains exempt matter, is to be granted.”
[8] In general terms, s 38 of the FOI Act provides that a document is an exempt document if it is subject to certain secrecy provisions in another enactment.

Exemption provision: s 37(1)(b)

Section 37 is concerned with documents affecting enforcement of law and protection of public safety. More specifically, it is concerned to protect from disclosure six types of information. Those six types are grouped into two categories. In very broad terms, the second category is concerned with documents whose disclosure would prejudice the prevention, detection or investigation of breaches or evasions of the law, the fair trial of person or impartial adjudication of a particular case or the maintenance or enforcement of lawful methods for the protection of public safety. The second category is the subject of s 37(2).

I am concerned with the first category and that is found in s 37(1), which provides:
“A document is an exempt document if its disclosure under this Act would, or could reasonably be expected to:
(a)prejudice the conduct of an investigation of a breach, or possible breach, of the law, or a failure, or possible failure, to comply with a law relating to taxation or prejudice the enforcement or proper administration of the law in a particular instance;
(b)disclose, or enable a person to ascertain, the existence or identity of a confidential source of information, or the non-existence of a confidential source of information, in relation to the enforcement or administration of the law;^[[9]] or
(c)endanger the life or physical safety of any person.”

Section 37(1)(b) is expanded upon by s 37(2), which essentially provides that “… a person is taken to be a confidential source of information in relation to the enforcement or administration of the law …” if the person is part of a protection plan conducted under the auspices of the Commonwealth or of a State or Territory for the protection of witnesses or other persons.

[9] “In this section, law means law of the Commonwealth or of a State or Territory”: FOI Act, s 37(3)

If I divide the provision into its component parts where, as here, it is known that there is a source of information, they are:
there is a source of information;
that source is a confidential source of information;
the confidential source of information must be “in relation to the enforcement or administration of the law”; and
disclosure of the document under the FOI Act “would, or could reasonably be expected to” disclose the identity of that confidential source.

I have not referred to the confidentiality of the information in the document for I do not consider that s 37(1)(b) requires that it be so. That is, it does not specify that the information given by the confidential source of information is itself confidential or even that the information in the document is of a confidential nature. Instead, the focus is upon the source of the information, whether it is confidential, and if so, whether disclosure would reveal its identity.

This conclusion is consistent with that reached by Muirhead J in McKenzie v Secretary, Department of Social Security.[10] In that case, Muirhead J considered a decision of the Tribunal to affirm a decision that the signature on a letter was exempt from disclosure under s 37(1)(b). He said that:
“The essential questions which faced the tribunal were:-
(1)Was the letter in question a confidential source of information?
(2)If so was it properly classified as relating to the enforcement or administration of the law?
(3)Would its release in toto disclose the identity of the confidential sources of information or in the alternative could it reasonably be expected to do so?”[11]
[10] (1986) 65 ALR 645
[11] (1986) 65 ALR 645 at 649

His Honour’s focus was upon the letter as a confidential source of information and not as a source of confidential information. The letter alleged that Mrs McKenzie’s husband supported her financially and, with the omission of the author’s name, a typed copy was disclosed to her under the FOI Act. As the Department decided that the information in the letter had no truth or validity, Muirhead J had to consider whether it could still be regarded as containing “information” within the meaning of s 37(1)(b). He decided that it did and that this would be so even if the information were deliberately false or malicious. It remains “information”.[12] Some ten years later, Deputy President McMahon adopted a similar approach in Re Dale and Australian Federal Police:[13]
“… The paragraph applies the adjective ‘confidential’ to the source, rather than to the information. Accordingly, it has application even if the information is old, out of date, or simply wrong. The paragraph is intended to protect the basis of confidentiality, which is essential to ensure the cooperation of sources of information. On the face of the documents, the sources are clearly confidential. It is not necessary, in considering a claim made under this paragraph, to examine the truth or even the reliability of the information attributed to the confidential source. The paragraph clearly supports the public policy that information given on the basis of confidence can be valuable in administration of the criminal law and that if this attribute of confidentiality cannot be guaranteed and subsequently enforced, then the whole mechanism is endangered. The purpose of the exemption is to preserve this assurance of confidentiality. Once the nature of the relationship is established, there is no more to be said.”[14]
[12] (1986) 65 ALR 65 at 648-649. Applied in Re Hayes and Secretary, Department of Social Security AAT 11221, 6 September 1996 at [18]-[19]
[13] (1997) 47 ALD 417
[14] (1997) 47 ALD 417 at 420

What is a “confidential source of information”? Forster J answered this question in Department of Health v Jephcott[15]:
“… I am content to accept the interpretation in Luzaich v United States (1977) 435F Supp 31 at 35: ‘a source is confidential if the information was provided under an express or implied pledge of confidentiality.’”[16]

His Honour went on to describe some of the factors that might determine the question depending on whether the agency had acknowledged that the document existed:[17]

“… In the case of an existing document containing information it might be simple enough by reading the document to discover that the information was provided under an express or implied pledge of confidentiality but in the case of a document which may or may not exist the matter is more difficult. It could be that departmental practice when receiving information of certain types might be of assistance but this Court knows nothing of this. It could also be that the presumed contents of the possibly non-existing document, apprehension as to its contents and the relationship of the supposed informant to the person supposedly informed about might enable an inference to be drawn that the information provided, if any, was so provided under an implied pledge of confidentiality. …”[18]

He also made it clear that the agency carries the burden of proof to establish that there is a confidential source of information. He “presumed” that it was on the balance of probabilities and there is no reason to think otherwise.[19]

[15] (1985) 8 FCR 85

[16] (1985) 8 FCR 85 at 89

[17] Section 25 of the FOI Act permits an agency to neither confirm nor deny a document’s existence in certain circumstances.

[18] (1985) 8 FCR 85 at 89

[19] (1985) 8 FCR 85 at 89-90

It is inherent in the passage from Forster J’s judgment that the information was given to the ATO when there was already in place a pledge of confidentiality. As Mr Walker submitted, whether that is so must be gauged at the time that the information is imparted and not at some later time. As he submitted, “The parties cannot make non-confidential information confidential through a subsequent sense of regret at what might have been.”[20] This is confirmed by the passage from the joint judgment of Beaumont and Pincus JJ in Re The Joint Coal Board and Cameron:[21]
“It is, in essence, a question of fact whether, in the circumstances, it was the intention of the parties at the time of the communication of the information that the recipient should be at liberty, consistently with the confidence reposed, to divulge the information to a limited class of persons (see Attorney-General's Department and Australian Iron and Steel Pty. Ltd. v. Cockcroft (1986) 10 FCR 180 at pp 191-2). That is, it is well established that the fact that it is contemplated that disclosure will be made to a restricted class of persons will not destroy the confidential character of the material for other purposes and vis-a-vis other persons.”[22]
[20] Submissions at [7]
[21] (1989) 24 FCR 204
[22] (1989) 24 FCR 204 at 215-216 [38]

An express pledge of confidentiality may be readily identified but how is an implied pledge to be identified? In McKenzie v Secretary, Department of Social Security, regard was had to the fact that the letter bore no address and that the author had concluded with the words “I am just doing my duty to inform you”. In addition, regard was had to the Department’s policy in usually instigating an investigation when it received information from third parties militating against the payment of a pension to a particular recipient. The Department maintained a “Register of Dob Ins”, which were kept confidential and regarded as a potentially important source of information in assisting in the administration of the Social Security Act 1947. The letters were unsolicited but not discouraged. In Re Hayes and Secretary, Department of Social Security, regard was had to the circumstances in which the letter was written and the departmental practice under which it was received.[23]
[23] AAT 11221, 6 September 1996 at [19]

The authorities have made it clear that the identification of a “confidential source” is just that. A confidential source does not lose its status, and a non-confidential source does not gain that status, because there is some reason why that would be an appropriate outcome s 37(1)(b). Public interest, for example, is not mentioned and is not a relevant consideration. No consideration is given to whether others will be deterred from giving information if the person is not regarded as a confidential source. [24]
[24] Department of Health v Jephcott (1985) 8 FCR 85 at 89. I refer also to the reasons Brigadier Ermert and I gave in Dunn v Department of Defence (2004) 84 ALD 419 [69] in the context of s 33(1).

The third component of s 37(1)(b) is that the confidential source is “in relation to the enforcement or administration of the law”. In interpreting this component, Deputy President McDonald in Re Gold and Australian Federal Police[25] adopted the interpretation of the phrase “administration of the law” appearing in similar Victorian legislation. Young CJ had interpreted it in Accident Compensation Commission v Croom[26] to mean “should have a connection with the criminal law or with the processes of upholding or enforcing civil law”.[27]
[25] (1994) 37 ALD 168
[26] [1991] 2 VR 322 cited with approval at (1994) 37 ALD 168 at 175
[27] [1992] 2 VR 322 at 324

A number of cases have considered the meaning of the phrase “in relation to”. One was Australian Competition and Consumer Commission[28] in which Hill J said:
“[68] It may be accepted that there will always be a question of degree involved where the issue is the relationship between two subject matters. The words “in relation to” are wide words which do no more, at least without reference to context, than signify the need for there to be some relationship or connection between two subject matters: see Smith v FCT (1987) 164 CLR 513 ; 74 ALR 411 at CLR 533 per Toohey J and PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 ; 131 ALR 377 at CLR 328 per Toohey and Gummow JJ. But the phrase is both “vague and indefinite”: see per Taylor J in Tooheys Ltd v Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602 at 620. Like the phrase “in respect of”, the phrase “in relation to” will not, at least normally, apply to any connection or relationship no matter how remote: see Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 ; 85 ALR 173 at CLR 51 per Dawson J. The extent of the relationship required will depend upon the context in which the words are used.
[69] As Beaumont and Lehane JJ said in Joye v Beach Petroleum NL (1996) 67 FCR 275 at 285 ; 137 ALR 506 in discussing a number of the cases dealing with “relates to”:
… it will depend upon context whether it is necessary that the relationship be direct or substantial, or whether an indirect or less than substantial connection will suffice. [references omitted]”[29]

A similar conclusion was reached by Conti J in McNeil v Commissioner of Taxation.[30]

[28] (2001) 187 ALR 487

[29] (2001) 187 ALR 487 at 501

[30] (2004) 206 ALR 44

In Re Gold and Australian Federal Police, Mr Gold had submitted that information could not be described as being in relation to the enforcement or administration of the law if its source was tainted. The Tribunal rejected this submission in the context of information collected by officers of the Australian Federal Police in the course of carrying out their duties and for the Costigan Royal Commission. That Royal Commission was conducted at the behest of the Executive Government and was concerned with the investigation of numerous allegations of extensive criminal activity. The Tribunal found that the Royal Commission had a connection with the criminal law and so was concerned with the administration of the law.[31]
[31] (1994) 37 ALD 168 at 175

The fourth component of s 37(1)(b) requires me to consider the meaning of the expression “would, or could reasonably be expected, to”. The meaning of the word “would” is clear. It means:
“… must as a logical or necessary consequence. … Be able to, be capable of (doing); have a (specified) ability, potential, or capacity …” (Shorter Oxford English Dictionary, 5th edition, 2002 (“SOED”))

The meaning of the words “could reasonably be expected to” has been considered in a number of cases. In The News Corporation Ltd v National Companies and Securities Commission,[32] Fox J declined to paraphrase the statutory language.[33] Bowen CJ and Beaumont J expressed a similar sentiment in Attorney-General’s Department v Cockcroft,[34] which considered s 43(1)(c)(ii) of the FOI Act. That provision exempts from disclosure that information which concerns certain business or professional matters and which “could reasonably be expected to” prejudice the future supply of information to the Commonwealth or an agency for the administration of a law or the administration of matters administered by an agency. Their Honours said:
“In our opinion, in the present context, the words ‘could reasonably be expected to prejudice the future supply of information’ were intended to receive their ordinary meaning. That is to say, they require a judgment to be made by the decision-maker as to whether it is reasonable, as distinct from something that is irrational, absurd or ridiculous, to expect that those who would otherwise supply information of the prescribed kind to the Commonwealth or any agency would decline to do so if the document in question were disclosed under the Act. It is undesirable to attempt any paraphrase of these words. In particular, it is undesirable to consider the operation of the provision in terms of probabilities or possibilities or the like. To construe s 43(1)(c)(ii) as depending in its application upon the occurrence of certain events in terms of any specific degree of likelihood or probability is, in our view, to place an unwarranted gloss upon the relatively plain words of the Act. It is preferable to confine the inquiry to whether the expectation claimed was reasonably based (see Kioa v Minister for Immigration & Ethnic Affairs (1985) 62 ALR 321 per Gibbs CJ and Mason J.”[35]

In that case, Sheppard J made it clear that:

“… stringent though that test may be, it does not go so far as to require the decision-maker to be satisfied upon a balance of probabilities that the production of the document will in fact prejudice the future supply of information.”[36]

[32] (1984) 5 FCR 88

[33] (1984) 5 FCR 88 at 95

[34] (1986) 64 ALR 97

[35] (1986) 64 ALR 97 at 106

[36] (1986) 64 ALR 97 at 112

Cockcroft’s case was considered by the Full Court of the Federal Court in Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another.[37] It said:
“In the application of s43(1)(b), there would ordinarily be material before the decision-maker which would show whether or not the commercial value of the information would be or could be expected to be destroyed or diminished if the information were disclosed. It would be for the decision-maker to determine whether, if there were an expectation that this would occur, the expectation was reasonable.”[38]
[37] (1992) 108 ALR 163
[38] (1992) 108 ALR 163 at 176

What matters may a decision-maker take into account in applying the test? In McKenzie v Secretary, Department of Social Security, Muirhead J decided that the Tribunal had not been in error in having regard to the form in which the information had been received. He decided that there was no error of law in the Tribunal’s conclusion that the letter, in its original handwritten and signed form, could reasonably be expected to enable Mrs McKenzie to identify its author. Heerey J in Bartlett v Secretary, Department of Social Security[39] did not question the Tribunal’s approach in considering whether the nature of the information itself could reasonably be expected to enable the applicant to identify the person who had denounced him.[40] The information disclosed the category of person by whom the information had been given, contained an allegation not previously known to the applicant and contained information as to when the allegations had been made.
[39] (1997) 49 ALD 380
[40] Heerey J did find that that Tribunal had made an error of law in the test it applied but did not comment adversely on the categories of information to which it had regard.

In some cases, the evidence may justify a conclusion that disclosure of information by an agency will lead to its being linked with already available information and so lead to the disclosure of yet other information. This is known as the “mosaic or jigsaw” effect and was regarded as a relevant consideration by the Tribunal in Re Slater and Cox (Director-General, Australian Archives):[41]
“… Evidence was placed before me (Ex 4 as explained in oral evidence) by way of an exercise based upon an analysis of 22 thirty-five-year-old documents. This exercise satisfied me that much can be gleaned, by application of the ‘mosaic’ technique of piecing together small and individually innocuous pieces of information, that is of present and significant relevance. The cumulative prejudice which may flow from disclosure of documents as a group has been recognised in Australia and overseas. In Re Robinson and Department of Foreign Affairs (1986) 11 ALN N48 the Tribunal said: ‘Two additional points deserve mention. First, because large parts of the documents had already been released, proceedings before the Tribunal came, at times, close to a word-by-word battle over disclosure. Not surprisingly, adopting this approach it is tempting to conclude that parts of speech which viewed in isolation are innocuous have no basis for exemption. In circumstances such as the present this temptation must be resisted, for it would be too easy, having before one a document in which only those words which, when viewed in isolation, are exempt have been deleted, to reconstruct the entire document by process of educated guesses and thereby cause damage against which s 33(1)(a) is designed to protect.’”[42]
[41] (1988) 15 ALD 20
[42] (1988) 15 ALD 20 at 27

In Re Millis and Australian Archives,[43] Deputy President McMahon described the mosaic theory as an example of the logical process of reasoning by induction although it has also been referred to as inference or deduction:[44]
“… What may be done in analysing the subject documents, and the particular facts recorded in those documents, is to estimate the weight of internal evidence or external connecting evidence in favour of a proposition which is likely to disclose the identity of a confidential source. The so-called mosaic theory is nothing more than this.”[45]

However described, the mosaic theory is not a rule of law determining an outcome. It is no more than a name given to the task of evaluating evidence in order to come to a decision when the evidence comprises that within the documents under consideration and other sources. The decision that is reached is, of course, formulated by the law or is a sub-set of that decision.

[43] (1997) 47 ALD 427

[44] Re Nitas and Minister for Immigration and Multicultural Affairs [2001] AATA 392 at [20]

[45] (1997) 47 ALD 427 at 430

Document 86

The Commissioner has claimed that the whole of Document 86 is exempt under s 37(1)(b). I agree with his description of it as 11 printouts of various parts of a series of correspondence over a period of time. The most recent in that series is marked 86.1 and the oldest 86.11. It is correspondence between an officer of the ATO and another person. Given its description and having read it, I am satisfied that Document 86 is a source of information as required by s 37(1)(b).

The next question is whether it is a “confidential source of information”. In his affidavit, Mr Daly said that neither he nor the ATO knew the identity of the person with whom the correspondence was conducted. He is now confident that he knows the identity but is not absolutely sure of it. Mr Daly said that the existence of a confidential source of information was made known to Mr Petroulias because he was inadvertently given access to submissions referring to information supplied by such a source. As to the circumstances in which the information was given to the ATO by the confidential source, Mr Daly said:
“17. A promise of confidentiality was given by the ATO to the informant as a means of securing complete cooperation and establishing a position of trust. In this way the lines of communication were opened and the exchange of information facilitated.
”18. … If the ATO were not to give an undertaking to maintain confidentiality a potential informant would not come forward for fear of being exposed publicly. Details of an informant are usually kept to a limited number of persons in the ATO and then only to those persons who are of a senior level, whoa are involved in the particular audit and who need to know.” [46]
[46] Exhibit 2

Mr Daly described the process that is followed by the ATO when it is asked to keep confidential the identity of a source of information:
“22. The ATO’s practice is that when a request is received to keep source identities confidential this is usually agreed to as a means of securing that information. A decision is usually made following receipt of the first instalment of information as to its veracity and whether treating the source as confidential was properly warranted. It is usual that the first instalment would be subjected to in depth forensic analysis to verify the accuracy of the information. Depending on the result of that examination a decision is then made concerning the reliability of the information.
23.Anonymous information would normally be provided by a person on a once only basis without providing details of contact for follow-up purposes. Such information is usually sensational, superficial, irrational, lacking in reliability and difficult to confirm.
24.By contrast, confidential information is usually specific, highly detailed and provided with a means of making contact so that the content may be verified. This type of information normally has a high degree of reliability as the provider in most instances has had personal interaction with the person who is the subject of the information.
25.Were the name of a confidential informant to be released publicly, informants would not come forward for fear of retribution. This ‘Public Policing’ is an integral part of the way the ATO goes about its business and helps to ensure equity within the taxation system.”[47]
[47] Exhibit 2

Mr Daly also deposed as to his belief that the informant had an expectation that the ATO would not reveal that informant’s identity. He has drawn his belief from reading Document 86. While I do not for a moment doubt that it is Mr Daly’s genuinely held belief, I do not consider that I can have regard to it. I may have regard, though, to the content of Document 86 on which Mr Daly formed his belief. I can also have regard to his further evidence that, in compliance with an assurance given to the informant that information about that informant’s identity would be kept confidential, the ATO did not release details of the existence of an informant to other than those working on audits involving the applicants.

In giving evidence at the hearing, Mr Daly said that he had not thought to consult the informant regarding the disclosure of Document 86. He had not done so as he is not absolutely certain as to the informant’s identity and to approach a person in those circumstances would have been a breach of confidence. Assuming he asked a person who was in fact the informant, Mr Daly thought that the informant would have wanted Document 86 to remain confidential.

In the earliest exchanges between an officer of the ATO and the informant, the informant made it clear that anonymity was crucial if the ATO were to be given any information. It is also clear that the ATO was prepared to accept information from an informer who maintained anonymity. These exchanges occurred before any information was passed to the ATO and established the foundation on which the informant gave subsequent information. During the course of subsequent exchanges, the informant again requested confidentiality of the information supplied and the ATO officer reassured the informant of complete anonymity and confidentiality of the information provided. I do not regard that request as referring only to the information given on that occasion. Instead, I regard it as a request for reassurance that the confidentiality requested by the informant at the outset was continuing. The ATO officer’s reassurance that confidentiality and anonymity would be maintained is consistent with the ATO’s policy of maintaining confidentiality as described by Mr Daly. The fact that there is no evidence that the ATO subjected the first information to in depth forensic analysis to verify its accuracy, does not detract from my finding regarding consistency. The ATO’s policy speaks in terms of such an analysis being “usual”. It also speaks of a decision “usually” being made whether confidentiality was warranted after that analysis. “Usually” is not always and I am satisfied that, with or without an analysis, the ATO officer decided to offer to maintain confidentiality of the information and to allow the informant to give information on an anonymous basis.

In view of these exchanges and having regard to the policy and the substance of the correspondence, I am satisfied that the informant only gave information on the basis that anonymity and confidentiality were maintained. That is to say, there was a pledge of confidentiality between the ATO officer and the informant before the informant gave information in Document 86 to the ATO officer and so the ATO. That continued to be the case during the course of the informant’s giving the ATO officer information.

Having regard to the contents of Document 86, I am satisfied that it was given to an officer of the ATO for the purpose of the Commissioner’s administering a suite of Australian taxation laws. That suite includes the Income Tax Assessment Act 1936 (ITA Act),[48] the Taxation Administration Act 1953 (TA Act)[49] and the Fringe Benefits Tax Assessment Act 1986 (FBTA Act).[50]
[48] ITA Act, s 8
[49] TA Act, s 3A
[50] FBTA Act, s 3

Having regard to the content of Document 86 as well as Mr Daly’s evidence, I am satisfied that the information was received by the ATO and so by the Commissioner on the basis that it was for the purpose of the administration of various taxation laws for which he is responsible. On the basis of Mr Daly’s evidence at the hearing, I am satisfied that the Commissioner, whom I understand to be included in the concept of the “ATO”, considers that there are “outstanding matters” between him and the applicants. Those matters relate to the alleged failure to lodge taxation returns for several years and to notify the ATO of the public officer of a corporate entity. The applicants have a duty to lodge taxation returns. Taxation returns assist the Commissioner in performing his statutory responsibilities to determine whether the applicants or any of them have liabilities under any of the taxation laws he administers. Apart from the information in taxation returns, the Commissioner may also obtain information from a variety of other sources e.g. as a result of exercising his powers to gain access to books and papers from any place[51] or issuing a notice requiring a person to furnish information in relation to a taxpayer.[52]
[51] ITA Act, s 263
[52] ITA Act, s 264

On the basis of Mr Daly’s evidence, I am also satisfied that unsolicited information given to the ATO has a role to play in the Commissioner’s administration of taxation laws. During cross-examination, Mr Walker asked Mr Daly how the information in Document 86 could possibly assist, in any reliable way at all, in the ascertainment of the applicants’ statutory liabilities. Mr Daly replied that it:
“… is one part of a puzzle which we would use to conduct investigations in relation to that information to confirm whether that would show that there is a liability … I am not saying or suggesting it is the only source, I am saying, it is one of a number of sources that the Commissioner would use.”[53]

Unsolicited information is, I am satisfied, part of the information drawn from a variety of sources during the ATO’s investigations in relation to a taxpayer’s liability or otherwise under the taxation laws. Whether or not that unsolicited information proves to be accurate or whether it leads to further avenues of investigation being pursued does not detract from its being one of the sources drawn upon by the Commissioner.

[53] Transcript at 11

In light of these matters, I have concluded that the information from the confidential informant is in relation to the administration of the law as required by s 37(1)(b) of the FOI Act.

That brings me to whether disclosure of Document 86 would, or could reasonably be expected to, disclose, or enable a person to ascertain the confidential informant’s identity. Section 37(1)(b) does not refer to every person’s being able to ascertain that identity but a person’s being able to do so. Therefore, the section does not require a consideration of whether disclosure would or could reasonably be expected to disclose the identity to any person at all who were given access to Document 86 or whether any person would, or could reasonably be expected to, ascertain the confidential informant’s identity. Whether this “would” be the case is clear enough. In this case, I am not satisfied that disclosure of Document 86 under the FOI Act would disclose identity or enable it to be ascertained. Even Mr Daly, who is aware of the contents of the document, is not sure of the informant’s identity.

Given the way in which the words “could reasonably be expected to” have been interpreted, the section requires a judgment to be made as to whether it is reasonable, as distinct from irrational, absurd or ridiculous, to expect that the confidential informant’s identity could be disclosed or ascertained by a person. In making that judgment, regard needs to be had to such matters as the nature of the information, its detail, whether it discloses a relationship between the confidential informant and another, whether it discloses a knowledge of matters not widely known, whether it uses names and so on. I have read the document and have had regard to matters including some or all of the matters that I have listed. I do not wish to be more specific lest I unwittingly disclose information in Document 86. Given its contents, I am satisfied that its disclosure under the FOI Act would, or could reasonably be expected to, enable a person to ascertain the identity of the confidential informant. That person would have to be in possession of some other information but it is information that I am satisfied that persons such as the applicants would possess.

It follows that I have decided that Document 86 is exempt under s 37(1)(b) of the FOI Act.

Exemption provision: s 38

Ms Campbell submitted that parts of Documents 98 and 106 were exempt under s 38 in so far as they contain material, the disclosure of which is prohibited by s 16(2) of the ITA Act. Section 38(1) is relevant in this case and provides:
“(1)   Subject to subsection (1A), a document is an exempt document if:
(a)disclosure of the document, or information contained in the document, is prohibited under a provision of an enactment; and
(b)either:
(i)     that provision is specified in Schedule 3; or
(ii)     …”

Section 16(2) is specified in Schedule 3. It provides:
“Subject to this section, an officer shall not either directly or indirectly, either while he is, or after he ceases to be an officer, make a record of, or divulge or communicate to any person any information respecting the affairs of another person acquired by the officer as mentioned in the definition of ‘officer’ in subsection (1).”

The definition of “officer” is in these terms:

“ ‘officer’ means a person who is or has been appointed or employed by the Commonwealth or by a State, and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person, disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax.”[54]

[54] ITA Act, s 16(1)

What is meant by s 16(2)? The first criterion is that the information must have been “acquired” by the officer in the circumstances mentioned in the definition of “officer”. Given the ordinary meanings of the word “acquire” and Parliament’s intention to protect certain information from disclosure, I adopt the conclusion I reached in Re Richardson and Commissioner of Taxation[55] i.e. that it means “come into possession of”.
[55] [2004] AATA 367 at [36]

In Re Collie and the Deputy Commissioner of Taxation,[56] I considered the information encompassed within the definition of “officer”:
[56] (1997) 45 ALD 556
“… The information which an officer may not divulge except in the performance of his or her duty as an officer must meet the description in that subsection. In particular, it must be ‘information respecting the affairs of another person’ that has been acquired by the officer as mentioned in the definition of ‘officer’: s 16(2). Reference to the definition, shows that the information respecting the affairs of any other person must have been ‘disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax’: s 16(1).
43.             What are the ‘affairs’ of a person? The word ‘affairs’ was considered in Johns v Connor and Others (1992) 27 ALD 25; (1992) 107 ALR 465 in the context of a notice issued under s 19 of the Australian Securities Commission Act 1989 (Cth). That notice required Mr Johns to appear for examination in relation to an investigation into the affairs of a certain company. One of the grounds upon which the notice was attacked as to its validity was that the notice failed to comply with a statutory requirement to state the general nature of the matter that the Australian Securities Commission was investigating.
44.             In finding that the notice was drafted too broadly to meet the statutory requirement, Lockhart J said (at 476):
‘Affairs’ is a word of very wide import. In its ordinary meaning `affairs’ in relation to a corporation includes the activities, business or concerns of the corporation.
45.             A similarly wide meaning would seem to be appropriate whether the affairs of a corporation or the affairs of an individual are under consideration. The only qualification is that the information about the affairs has been obtained under ITA or of any previous law of the Commonwealth relating to income tax.
46.             I also note that, in order to come within the terms of s 16(2), the information must be ‘respecting the affairs’ of a person. Bearing in mind the ordinary meanings of the word ‘respecting’, this means that the information must be in ‘Relation, connection, reference, [or] regard’ to the person’s affairs (New Shorter Oxford Dictionary, 1993), or in similar terms, is information regarding or concerning his affairs: Macquarie Dictionary, 2nd ed, 1991.
47.      In order for information to come within the description of information “respecting any other person” must that other person be able to be identified? I note that the tribunal in Re Mann considered a document in which the names of individuals were not ascertainable. It said (at 270):
It was suggested that the documents contained information concerning the affairs of the CTHC and specialists employed by CTHC, said to number 45-50 during the fund’s existence. Unless the ‘information’ represented by these documents falls within s 16 of the ITA Act the whole question of s 38 is irrelevant. It was suggested that the documents contained information concerning the affairs of the CTHC (see para A(2)(a) of the written submission); of the trustees of the individual specialists were named in the documents no claim of exemption was made by the agency under s 41 (‘unreasonable disclosure of information relating to the personal affairs of any person’). While the wording of s 16 is of course not identical with s 41, it is hard to see how it is alleged on the one hand that a document contains information respecting the affairs of a person (s 16 ITA Act) so as to attract, on the broader view, s 38 FOI Act, but that it was apparently not regarded as an apt subject of a claim under s 41 should the s 38 claim fail. These aspects were not pursued at the hearing and we do no more than refer to them.”
48.             I have some reservation in following this approach. That reservation stems from s 32(a) of the FOI Act. That paragraph provides that a provision under Pt IV delineating an exemption:
shall not be construed as limited in its scope or operation in any way by any other provision of this Part by virtue of which documents are exempt documents.
49.             In light of this paragraph I have concluded that I should not interpret s 38, and so s 16(2), in the light of the provisions of s 41. I have had regard then to the provisions of s 16(2) on their own. They do not require that the person be able to identified from the information before an officer is under an obligation not to reveal that information. It is enough that it can be identified as information respecting the affairs of another person.
50.             What is meant by the requirement that the information in respect of which the secrecy provision operates is not only information respecting the affairs of another person but that type of information that has been ‘... disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax’: s 16(1)? The ITA is the only legislation which is relevant in this case. Under it, obligations to disclose information by way of returns or further or fuller returns are found in ss 162 and 163 of the ITA Act. Under s 263, the commissioner or any officer authorised by him, has broad powers to obtain access to documentary material. Section 264 gives the commissioner wide powers to require persons to give him information and evidence. He has power to seek information and documents outside Australia and his powers in that regard are found in s 264.
51.             Whether information comes within the description of information described in s 16(2) is a matter of fact. The burden of proving that it does meet the description falls upon the ATO: s 61.”[57]
[57] (1997) 45 ALD 556 at 563-564

In Re Richardson and Commissioner of Taxation, I re-visited the requirement in s 16(1) that the information must be information that has been “... disclosed or obtained under the provisions of this Act or of any previous law of the Commonwealth relating to income tax”. I referred to decisions in the cases of Corrs Chambers Westgarth and Commissioner of Taxation[58] and Re Hart and Deputy Commissioner of Taxation[59] and concluded that:
“What seems to be required is that there be a link of substance between what is done and the powers that are given under the enactment. In the case of a prosecution under s. 16 of the ITA Act for alleged breaches of its secrecy provisions, for example, the fact that they must be instituted either by or on behalf of the Commissioner provides the necessary link of substance between the subject matter of the decision and the power to prosecute so that the decision not to prosecute may be said to have been made under the ITA Act (Schokker & Anor v Federal Commissioner of Taxation (1996) 96 ATC 4885).”[60]
[58] [1998] AATA 756
[59] [2002] AATA 1190
[60] [2004] AATA 367 at [41]

Ms Campbell submitted that s 38(2) is not relevant in this case as personal information about one of the applicants in Document 196 is inextricably interwoven with information of persons other than the applicants. Section 38(2) qualifies the operation of s 38(1) when it provides that:
“[Where] a person requests access to a document, this section does not apply in relation to the document so far as it contains personal information about the person.”

The term “personal information” is defined in s 4(1):

“‘personal information’ means information or an opinion (including information forming part of a database), whether true or not, and whether recorded in a material form or not, about an individual whose identity is apparent, or can reasonably be ascertained, from the information or opinion.”

It follows that, if s 38 of the FOI Act is not to apply as a result of the operation of s 38(2), the information must be “information or an opinion ... about” the person requesting the document. The word “about” is defined in the New Shorter Oxford Dictionary, in so far as it is relevant as meaning:

“… In connection with; appertaining to; dealing or occupied with; touching; concerning; on the subject of; in relation to”.

It is defined in similar terms in the Macquarie Dictionary.

Document 98

In his affidavit, Mr Daly described Document 98 in greater detail:
“Document 98 is a policy document describing a process for handling intelligence analyses within the aggressive tax planning group of the ATO. The only parts remaining undisclosed are two tables setting out areas of risk in relation to the tax planning and the product manager responsible for that area of risk at the time the document was created. …”[61]

Having read Document 98, I agree with Mr Daly’s description of it.

[61] Exhibit 2 at [36]

As stated in the Schedule of Documents prepared on behalf of the Commissioner, the exemption is claimed in respect of all material in the first column of the table on page 7, except for the hearings in the first and last rows of the table. Mr Daly described the material further as:
“… the names of tax planners and promoters, …. This information was obtained by the ATO in the course of its duties under the ITAA. …”[62]
[62] Exhibit 2 at [37]. Initially, page 6 listing areas of aggressive tax planning risk were claimed to be exempt. As the claim is no longer made, I have omitted Mr Daly’s references to that. I have also omitted his references to the names of product managers responsible for the areas of risk or tax planners and promoters as the Commissioner no longer claims exemption in respect of these.

The prohibition in s 16(2) is directed to individual officers. Its application in the context of s 37(1)(b) becomes a little artificial because there comes the question: who is the officer to whom the prohibition is directed? As the request under the FOI Act is made to the Commissioner, I have taken the officer, who is prohibited from divulging information by s 16(2), to be the Commissioner. He, or his delegate, will be the person releasing any information under the FOI Act and so the person subject to the strictures of s 16(2). He is a person who has been appointed by the Commonwealth within the meaning of the definition of “officer” in s 16(1).[63]
[63] TA Act, s 4

As the names are shown in Document 98, I am satisfied that they are “information” within the meaning of the definition of “officer” in s 16(1) of the ITA Act. For the reasons I have given in relation to s 37(1)(b), it remains information whether there is any truth to the suggestion that the persons or entities behind the names are in fact tax planners and promoters or not. The Commissioner and his office have “acquired” it in the sense that it is in the possession of the ATO.

Is it information in respect of the affairs of “any other person”? Given that the words appear in the definition of “officer”, the “any other person” referred to must be a reference to a person other than the officer concerned i.e. the Commissioner. Whether it is also a reference to the person to whom the Commissioner might be thinking of giving the document is a matter of some debate but not relevant in this case.[64] It is not relevant because, even if “any other person” extends to the person requesting the document, s 38(2) of the FOI Act effectively means that, in most cases,[65] the prohibition against disclosure provided in s 16(2) of the ITA Act does not apply if the document contains personal information about the person making the request.
[64] See Federal Commissioner of Taxation v Swiss Aluminium Australia Ltd (1986 ) 10 FCR 321; 66 ALR 159 at 162-163; 325 per Bowen CJ
[65] The exception is s 38(3) does not apply in this case.

From the face of the document, I am satisfied that it is information in respect of persons other than the Commissioner but is it “respecting the affairs” of those persons? In Federal Commissioner of Taxation v Swiss Aluminium Australia Ltd, [66] Given that the table names persons or entities under the heading of tax planners or promoters, I am satisfied that it is in respect of their affairs. It is in respect of the affairs of the persons or entities listed as it draws a conclusion, rightly or wrongly, that they have, or at least may have, some role to play as tax planners or promoters in conducting their affairs.
[66] (1986) 10 FCR 321; 66 ALR 159 at 163; 325

Was the information disclosed or obtained under the provisions of the ITA Act? There is no evidence as to the manner in which the information came into the possession of the Commissioner. It appears in a table attached to a policy document regarding the management of intelligence and analysis in relation to aggressive taxation planning. Taxation planning and its implications for the recovery of income tax properly payable under the ITA Act are matters within the Commissioner’s functions in administering the legislation. The Commissioner has wide powers to gather information relating to them quite apart from being the recipient of information that is given to him voluntarily or gratuitously. Given that the substance of the information relates to a matter within his functions and he has power to obtain it, I am satisfied that there is a link between the substance of what is done and the powers given under the enactment. There is a link of substance between the two, leading to my concluding that the information was disclosed or obtained under the provisions of the ITA Act.

It follows that the information comes within the terms of s 16(1) of the ITA Act and so is information that an officer is forbidden from divulging by s 16(2). Therefore, it is exempt under s 38(1). I am satisfied that the exception specified in s 38(2) is not applicable as it is not personal information about the applicants who are individuals, Mr Petroulias or Ms Clark, or either of them.

Document 106

As described in the Schedule of Documents, Document 106 is an email from Mr Michael Ingersoll to Ms Stephanie Martin and dated 31 August 2004. It was copied to others and attached a Minute entitled “Staff alert to certain Promoters and various possible representations”. The Commissioner claims that three passages of text on page 1, one on page 3 and three on page 4 are exempt under s 38.

For the reasons I have given in relation to Document 98, I am satisfied that the information in these passages is “information” within the meaning of the definition of “officer” in s 16(1) of the ITA Act. The Commissioner and his office have “acquired” it in the sense that it is in the possession of the ATO. The information in the particular passages in Document 98 is in relation to persons other than the Commissioner.

From the face of the document, I am satisfied that it is information in respect of persons other than the Commissioner but is it “respect of the affairs” of those persons? Taking first the two passages on page 1 of Document 106, I am satisfied from its substance that it contains information in respect of the affairs of a person or persons other than the Commissioner. I feel unable to express my reasons more fully without revealing the information for which exemption is claimed.

It is clear from the Minute that has been given to the applicants that the passages for which exemption is claimed on pages three and four contain lists of names of entities and individuals and lists of addresses and e-mail addresses. Given that the table names persons or entities in a Minute alerting ATO officers to those identified by the ATO as promoters and to addresses that had been used in applications for Rulings and representations, I am satisfied that the information can be said to be in respect of the affairs of those persons shown on those pages. It is in respect of their affairs as it names them, rightly or wrongly, in the context of persons who are of some interest to the Commissioner and the ATO in the context of aggressive tax planning.

Although there is no evidence as to the manner in which any of the information in the passages came into the possession of the Commissioner, I am satisfied that he or his officers obtained it under the provisions of the ITA Act. The material on pages 3 and 4 appears in a Minute regarding the way in which contact with certain persons should be managed and the course that should be followed if certain information were provided to the ATO. This is a matter that is closely connected with his functions in administering the ITA Act. There is, therefore, a link between the substance of what is done and the powers given under the ITA Act. For the reasons I gave in relation to part of the material in Document 98, there is a link of substance between the two leading to my concluding that the information was disclosed or obtained under the provisions of the ITA Act.

It follows that the information comes within the terms of s 16(1) of the ITA Act and so is information that an officer is forbidden from divulging by s 16(2). Therefore, it is exempt under s 38(1). In relation to the first passage on page 1 of Document 106 and the passages on pages 3 and 4, I am satisfied that the exception specified in s 38(2) is not applicable as they do not contain personal information about either of the applicants who is an individual,[67] Mr Petroulias or Ms Clark, or either of them.
[67] The definition of “personal information” requires that the information be about an individual: FOI Act, s 4(1).

The material in the first two sentences of the second paragraph on page 1 causes me more difficulty. There is a reference to one of the applicants who is an individual. It is “personal information” in the sense in which that term is defined in s 4(1) of the FOI Act. At the same time, disclosure of personal information in relation to one of the individuals will lead to disclosure, contrary to s 16(2) of the ITA Act, of information in relation to others who are not those individuals. This issue arose in both Re Collie and Deputy Commissioner of Taxation and Re Richardson and Commissioner of Taxation. The approach that I adopted in those cases was to examine each document to determine whether the information relating to the individual concerned could be separated from that relating to other persons. Where it could be separated without disclosing personal information about other persons, I relied on s 38(2) to exclude it from exemption under s 38. Where it cannot be so separated, I decided that it was exempt even though it might still relate to the individual’s personal affairs. [68]
[68] Re Collie and Deputy Commissioner of Taxation (1997) 45 ALD 556 at 565; Re Richardson and Commissioner of Taxation [2004] AATA 367 at [44]

It seems to me that this continues to be the correct approach. On its face, the qualification in s 38(2) is limited to personal information about the person requesting the document. Section 38(1) expressly exempts from disclosure information in a document if disclosure of that information is prohibited by another enactment. The prohibition imposed by the ITA Act has been imposed in the particular context of the administration of taxation laws. It, and other like prohibitions in other enactments, have been expressly preserved in the FOI Act, which is legislation particularly directed to the occasions on which persons should, and should not, be given access to information. In those circumstances, the only way to reconcile ss 38(1) and (2) is to interpret s 38(2) according to its plain meaning and not beyond it.

Returning to the first two sentences of the second paragraph on page 1 of Document 106, I find that the information that is the personal information of one of the applicants who is an individual is inextricably interwoven with information respecting the affairs of other persons. It is not possible to separate the information and so the first two sentences of the second paragraph on page 1 of Document 106 are exempt under s 38. Further, I have decided that it is not possible to make a copy of that part of Document 106 with deletions so that it would not be exempt.

Exemption provisions: s 40(1)(d)

In so far as it is relevant in this case, s 40(1)(d), provides that:

“Subject to subsection (2), a document is an exempt document if its disclosure under this Act would, or could reasonably be expected to:
(a)…
(b)…
(c)…
(d)have a substantial adverse effect on the proper and efficient conduct of the operations of an agency;
(e)…”

Section 40(2) adds a rider to the exemption created by s 40(1). Its effect is that a document that would otherwise be exempt under s 40(1) is not exempt if its disclosure would, on balance, be in the public interest. I have not addressed questions raised by the rider as I do not consider that s 40(1) is applicable in this case.

I have already discussed above the meaning to be given to the words “would, or could reasonably be expected to”. The other words in s 40(1)(d) that require consideration are “substantial adverse effect”. I considered them in Re Bayliss and Department of Health and Family Services.[69] After reviewing various authorities including Ascic v Australian Federal Police,[70] I concluded:
“47. … It seems to me that the ordinary meaning of the words ‘substantial adverse effect’ leads to a conclusion that something more than ‘concern’ is required before the adverse effect can be said to be a substantial adverse effect. Concern may be generated by matters of many differing degrees of gravity. What is required by the exemption in paragraph 40(1)(d) is made out is an adverse effect that is real or of substance and not that which is insubstantial or nominal. That is consistent with the judgements of Federal Court in Ascic [v Australian Federal Police[71]] and in Tillmans Butcheries [v Australasian Meat Employees Union & Ors[72]]by both of which I am bound.”
[69] (1997) 48 ALD 443
[70] (1986) 11 ALN N184
[71] (1986) 11 ALN N184
[72] (1979) 27 ALR 367

The substantial adverse effect must be on the “proper and efficient operations of the agency”. The ordinary meaning of the word “operations”:

“…4a An act of a practical or technical nature, esp. one forming a step in a process. … b …Also, a business concern or enterprise…”[73]

In Re James and Australian National University,[74] the Tribunal considered s 40(1)(d) in the context of a request for documents recording lecturers’ comments in student record sheets together with the names of examiners of honours theses and their tentative grades. Deputy President Hall said that:

“As a matter of ordinary English I think that the expression ‘the conduct of the operations of an agency’ is capable of extending to the way in which an agency discharges or performs any of its functions. So construed, I agree with Mr Toper that it is capable of extending to the discharge by the University of its academic functions in relation to the awarding and conferring of degrees and diplomas (see s. 6 of the Australian University Act 1946 (Cth)).”[75]

The manner in which an agency discharges its functions is not limited to matters related to the internal administration of an agency.[76]

[73] The New Shorter Oxford English Dictionary, 3rd edition, 1993

[74] (1984) 2 AAR 327

[75] (1984) 2 AAR 327 at 340-341. This passage was expressly approved by the Full Court of the Federal Court in Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 36 FCR 111; 16 AAR 28 at 116; 32.

[76] Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 36 FCR 111; 16 AAR 28 at 115-116; 32

What is meant by “proper and efficient”? It has received little consideration and perhaps that is because:
“... ‘proper and efficient …’ may, when standing alone, be of uncertain content, [but] are capable of taking colour from the context in which they are used …”[77]

In the same way, what is “efficient”:

“‘… may easily have, at varying times, varying applications; it generally means that the ship shall be efficient to do what she is required to do when she is called upon to do it.’ (per Halsbury C., Hogarth v Miller [1891] AC 48). …”[78]

[77] Genkem Pty Ltd v Environment Protection Authority (1994) 85 LGERA 197 at 212 per Powell JA

[78] Stroud’s Judicial Dictionary of Words and Phrases, 6^th edition, 2000

The context in this case is that of the FOI Act, of course, but also the operations of the ATO. In the end, what is “proper and efficient” must be a matter of fact but it is useful to consider the meaning of the words for a moment. The word “efficient” was considered in Re Dr Ken Michael AM; ex parte Epic Energy (WA) Nominees Pty Ltd & Anor:[79]
“The word ‘efficient’ has well established meanings in ordinary English usage. It involves producing a desired result with the minimum wasted effort; being effective (New Shorter Oxford Dictionary); or not wasteful of time, effort, resources (Collins Dictionary). ‘Efficiency’ is a directly related concept, it being the quality of being efficient.”[80]

The operations under consideration are those that are both “proper” and “efficient”. The word “proper” imports a sense of what is “adapted or appropriate to the purpose or circumstances” but also that which is “conforming to established standards of behaviour or manners; correct or decorous”.[81] On one view, there may be occasions when one or other of “proper” and “efficient” must qualify the other as that which conforms to established standards of behaviour may not be that which produces the desired result with the minimum of wasted effort. On another view, doing what is proper initially produces the desired result with the minimum of wasted effort in the long term even if not in the short term.

[79] [2002] WASCA 231

[80] [2002] WASCA 231 at [110] per Parker J with whom Malcolm CJ and Anderson J concurred

[81] Macquarie Dictionary, Revised 3^rd edition, 2001

Document 86

Mr Daly said in his open affidavit that:
“26. The most adverse effect on the ATO that would flow from the disclosure of the documents would be that any potential informant would have to be advised that a guarantee of maintaining confidentiality could not be given thus leading to informants not coming forward. With the withdrawal of informants the intelligence gathering of the ATO would be severely restricted.
27.All compliance operations of the ATO would be harmed and this would lead to a lack of confidence by the community at large in the operations of the ATO. The main harm that would flow from disclosure of the documents would be the fall off in intelligence provided to the ATO in the short term, and a complete ‘drying up’ of all intelligence within a short time thereafter.
28.… Time frames in respect of investigations would ‘blow out’, fewer investigations would be initiated and community confidence would plummet.
29.It is reasonably foreseeable that members of the community would be reticent in coming forward for fear of retaliation.”[82]
[82] Exhibit 2

Apart from information provided by informants, the ATO has only two means of acquiring information, Mr Daly said. The first is by using its formal powers to compel the production of information but that can only be used if the ATO has some reasonably based suspicion to issue a notice under the ITA Act. The second is by the taxpayers’ making voluntary disclosures. If the ATO has to use its formal powers, the average time in which an audit is completed would increase as taxpayers could:
“… attempt to delay matters by manipulating the legislative provisions of the Administrative Decisions (Judicial Review) Act. Such actions would result in other sections of the office becoming involved in the audit such as the Legal Services Branch.”[83]

If an audit were unnecessarily protracted in this way, there could be an amount of the General Interest Charge imposed at its conclusion. That means that a cost is passed on to the taxpayer. In cross-examination, Mr Daly added that resort to the ATO’s formal powers can lead to a breakdown in the relationship that might have existed between it and the taxpayer.[84]

[83] Exhibit 2 at [31]

[84] Transcript at 23

Mr Daly described the main disadvantage that would flow to the ATO were Document 86 to be disclosed under the FOI Act as:
“… the lack of information available to the ATO in preparing assessments. Greater reliability would need to be placed on information provided by third parties such as banks and solicitors or legal firms and much wider enquiries would need to be made by the ATO. Efficiency levels would drop, greater numbers of auditors would be required and operational costs would blow out. Audits could be surrendered as they would be considered not economical to complete and lead to the community losing confidence in the taxation system as a whole.”[85]
[85] Exhibit 2 at [33]

In cross-examination, Mr Walker questioned Mr Daly regarding the basis on which he had formed his view. Mr Daly said that he had experience of an informant’s name being released but acknowledged that he did not witness a loss of community confidence in the taxation system as a whole.[86] On that occasion, the informant’s name was not published to the whole community and the community was unaware of its publication.[87]
[86] Transcript at 14
[87] Transcript at 15

The question I must decide is whether disclosure of the confidential informant’s name would, or could reasonably be expected to, have a substantial adverse effect on the proper and efficient conduct of the operations of an agency. Matters that are relevant in considering that question would begin with matters directed to what is necessary for the proper and efficient conduct of the operations of the Commissioner. Those matters would begin with the Commissioner’s functions and what he needs to carry them out. His functions are clearly the administration of the ITA Act and other legislation imposing similar functions upon him. The next question might be the tools that he needs to fulfil his functions. Apart from expertise that he needs in the form of officers to gather and analyse it and to apply the law, the Commissioner requires information. On the evidence that I have, that information comes from information voluntarily given to the ATO, information given under compulsion as a result of the Commissioner’s use of his powers under the ITA Act and information that is given by informants to the ATO.

With regard to information given by informants, the question then becomes whether information is given to the ATO without or without an assurance that it will be kept confidential and how often it is given on either basis. Another question relates to the extent to which information is given only on the basis that its confidentiality will be maintained. That is followed by questioning the extent to which information, and particularly confidential information, is used by the Commissioner and his officers in the ATO in performing the statutory functions. Once that question is answered, it then becomes easier to analyse the effect on the ATO’s operations if such information were to be withdrawn entirely or in part. A further relevant question concerns the identity of a confidential informant and whether it has ever been released in the past and, if so, the consequences of that disclosure on the ATO’s operations, both immediate and long-term.

Questions such as these do not need to be answered with scientific exactitude on each and every occasion but they are relevant matters to address. In his evidence, Mr Daly certainly addressed questions such as these but could only do so from a matter of his belief. He did not point, for example, to the extent to which information is relied upon and so the extent to which the Commissioner’s functions would be hampered if the information were not available. The extent to which people will be deterred from giving information to the ATO if they are not assured of confidentiality is no doubt difficult to gauge. Examples or where it has not happened and the outcome would be useful in trying to ascertain what could reasonably be expected to be the outcome. I do not think that it can be assumed that a failure to assure people of confidentiality will necessarily lead to their not providing any information. People have many reasons for providing information and an assurance of confidentiality may or may not rate highly with them.

Whether or not disclosure of a confidential informant’s identity would have any effect would presumably depend on the extent to which it becomes known in the community. In this regard, the effect of disclosure of a confidential informant’s identity has similarities with the effect of sentencing in deterring others from offending against the criminal law. When she was a Judge of the Supreme Court of South Australia, Dame Roma Mitchell reflected upon the relevance of knowledge in deterrence:
“Whatever the judge may say, his remarks may or may not reach that section of the community to which they are directed, depending upon whether those who publish reports of court proceedings regard the remarks as being worthy of reporting, and whether the criminally-minded persons for whom they are intended read or listen to any report which may be made. It is useless to suggest that one of the purposes of a sentence is to deter others from committing a similar crime, if the knowledge of such sentence does not come to those who are likely to commit the crime.” (Mitchell J, The Web of Criminal Law, 1975 Boyer Lectures, ABC, Sydney at 49)

Although access under the FOI Act is treated as access to the world at large, it is relevant to consider the extent to which people will actually come to know about the breach. Mr Daly knew of one instance in which confidentiality had not been maintained but it was a case in which the informant had himself made known his identity. He knew of no effect on the ATO’s rate of receipt of information as a result of the disclosure. Again, people have many reasons for providing information and whether or not maintenance of confidentiality is important to them will depend on factors peculiar to them.

I have no doubt that Mr Daly firmly believes that release of Document 86 would have a substantial adverse effect on the proper and efficient conduct of the operations of the ATO. He has given evidence to the best of his ability and his knowledge. I do not want in any way to be thought critical of him or of the evidence that he was asked to give. In all likelihood, the evidence needs to be drawn from sources other than Mr Daly. Having regard to the evidence that I do have, I am not satisfied that disclosure of this confidential informant’s name would, or could reasonably be expected to, have a substantial adverse effect on the proper and efficient conduct of the operation of the Commissioner or of the ATO. Therefore, Document 86 is not exempt from disclosure under s 40(1)(d) of the FOI Act.

Exemption provisions: s 45

Section 45 of the FOI Act is concerned with documents containing material obtained in confidence. It provides that:
“(1) A document is an exempt document if its disclosure under this Act would found an action, by a person other than the Commonwealth, for a breach of confidence.
(2)Subsection (1) does not apply to any document to the disclosure of which paragraph 36(1)(a) applies or would apply, but for the operation of subsection 36(2), (5) or (6), being a document prepared by a Minister, a member of the staff of a Minister, or an officer or employee of an agency, in the course of his or her duties, or by a prescribed authority in the performance of its functions, for purposes relating to the affairs of an agency or a Department of State unless the disclosure would constitute a breach of confidence owed to a person or body other than:
(a)a person in the capacity of Minister, member of the staff of a Minister or officer of an agency; or
(b)an agency or the Commonwealth.”

Section 45(1) in its present form adopted the reasoning of the dissenting judgement of Gummow J in Corrs Pavey Whiting and Byrne v Collector of Customs, Victoria.[88] He considered that s 45, as it was originally drafted, used the expression “breach of confidence” in the sense known to law. Consequently, he continued:
“… the case is to be approached in terms of the general law, not as a case of confidence protected by contract, but as one, if anything, of confidence protected in equity. It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge), (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information. Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; Commonwealth v John Fairfax and Sons Ltd (1980) 147 CLR 39 at 50-1; 32 ALR 485 at 491-2; O’Brien v Komesaroff (1982) 150 CLR 310 at 326-8; 41 ALR 255 at 266-8. It may be necessary, as Megarry J thought probably was the case (Coco v Clark (AN) (Engineers) Ltd [1969] RPC 41 at 48), and as Mason J (as he then was) accepted in the Fairfax decision was the case (at least for confidences reposed within government), that unauthorised use would be to the detriment of the plaintiff.”[89]
[88] (1987) 14 FCR 434; 13 ALD 254
[89] (1987) 14 FCR 434 at 443; 13 ALD 254 at 262-263

His Honour’s formulation has been adopted as the correct interpretation to be applied to s 45 in its current formulation in cases such as Kamminga and Australian National University.[90] In relation to the report of the consultants, the information said to be confidential has been identified with specificity. It is all that identified in the Commission’s Schedule prepared pursuant to the FOI Practice Direction.
[90] (1992) 26 ALD 585 at 592

Whether detriment to the confidential informant is a necessary element in this case is difficult to decide. Gummow J himself had reservations when he again considered breach of confidence in Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health when he said:[91]
“…The basis of the equitable jurisdiction to protect obligations of confidence lies, as the present case illustrates, in an obligation of conscience arising from the circumstances in or through which the information, the subject of the obligation, was communicated or obtained: Moorgate Tobacco Co Limited v Philip Morris Ltd (No. 2) at 438. The obligation of conscience is to respect the confidence, not merely to refrain from causing detriment to the plaintiff. The plaintiff comes to equity to vindicate his right to observance of the obligation, not necessarily to recover loss or to restrain infliction of apprehended loss. To look into a related field, when has equity said that the only breaches of trust to be restrained are those which would prove detrimental to the beneficiaries?”[92]

On appeal, the Full Court adopted a similar approach.[93]

[91] (1990) 22 FCR 73

[92] (1990) 22 FCR 73 at 112

[93] Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1991) 28 FCR 291 at 304

Some years earlier, in Commonwealth of Australia v John Fairfax & Sons Limited and Others,[94] Mason J said:
“However, the plaintiff must show, not only that the information is confidential in quality and that it was imparted so as to import an obligation of confidence, but also that there will be an ‘unauthorised use of that information to the detriment of the party communicating it’. (Coco v AN Clark (Engineers) Ltd [1969] RPC 41, at p.47). The question then, when the executive Government seeks the protection given by Equity, is: What detriment does it need to show?
…
It may be a sufficient detriment to the citizen that disclosure of information relating to his affairs will expose his actions to public discussion and criticism.”[95]
[94] (1981) 55 ALJR 45
[95] (1981) 55 ALJR 45 at 49

Document 86

I am satisfied that the information in relation to which confidentiality is claimed has been identified with specificity. It is all of the information in Document 86. Does that information have the necessary quality of confidentiality? In this regard, I have only the information in the document itself on which to make that assessment. Assuming that it is true, it would be information that is likely to be known to more than one person but those persons would be very few. If it is not true then, as with all untruths, it must be known to the person imparting the information and to those to whom it is imparted but would not otherwise be known. In either case, I am satisfied that it is not information that is known at all widely and is certainly not information that is common or public knowledge.

Document 86 is not marked with words such as “confidential” or “in confidence”. The document itself, however, makes it clear that the information in it was imparted in confidence and received in confidence. The information would not have been given had the ATO not given an assurance that confidentiality would be maintained. It was information confined to a small group within the ATO and was not circulated more widely within the ATO or to other agencies. I am satisfied that the circumstances in which the information was received by the ATO were circumstances in which it knew that the maintenance of confidentiality was paramount to the informant and in which it offered to maintain that confidentiality. It was received in circumstances importing an obligation of confidence. I am satisfied that revelation of the information would be a misuse of the information given the basis on which the confidential informant gave it to the ATO. I acknowledge that:
“ To avoid taking unfair advantage of information does not necessarily mean that the confide must not use it except for the confider’s limited purpose. …”[96]

At the same time, having regard to the concerns expressed by the confidential informant and the care the confidential informant took to establish the confidential basis of the relationship before imparting information, I am satisfied that, to disclose the information in Document 86 would be, to adapt the words of the Court in Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health, to abuse the confidence and to make unconscientious use of the information. That is so even having regard to any assumption that the confidential informant gave the information to the ATO for its use in carrying out its regulatory functions. It does not follow from that fact that the ATO will necessarily communicate that information to a court or tribunal in carrying out its functions. If it does so, that will be a separate issue from the question of whether it should be disclosed under the FOI Act. The FOI Act does not compel its disclosure but expressly preserves confidentiality where that confidentiality would be preserved by the general law.

[96] Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1991) 28 FCR 291 at 304

I am satisfied that disclosure of the information in Document 86 would cause the confidential informant detriment at least in the sense of exposure to possible public comment and public discussion of the actions that confidential informant chose to take and personal castigation by any who are the subject of that information.

Having regard to all of these matters, I am satisfied that the disclosure of the information in Document 86 would found an action for breach of confidence by a person other than the Commonwealth. Apart from the matters to which I have referred, I am satisfied that the provision of s 45(2) do not apply. As the document does not meet the description of a document in s 36(1)(a)[97] of the FOI Act.

Therefore, I am satisfied that Document 86 is an exempt pursuant to s 45 of the FOI Act.

[97] Commonly referred to an “internal working document”.

For the reasons I have given, which differ slightly from those given by the Commissioner, I:
1.affirm the decision of the respondent to refuse access to Document 86 and those parts of Documents 98 and 106 described in the Schedule of Documents lodged in the Tribunal on 13 February 2006.

I certify that the ninety-one preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,

Signed: ...............................................................

Jayne Rathjen Associate

Date of Hearing  13 February 2006
Date of Decision  30 March 2006
Counsel for the Applicant             Mr B W Walker SC with Mr N. Perram
Solicitor for the Applicant            Jackson Smith, Sydney
Solicitor for the Respondent         Ms M. Campbell, Senior Executive Lawyer
Australian Government Solicitor, Canberra