San Remo Macaroni Co Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia

[1998] FCA 610

SAN REMO MACARONI COMPANY PTY LTD v THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
No. NG 27 of 1998
FED No. 610/98
Number of pages - 3
Practice & Procedure

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

HILL J

Practice & Procedure - discovery - Commissioner of Taxation - application for discovery of material before the decision maker at the time the determination was made by the Commissioner of Taxation - "fishing"

Treasurer of the Commonwealth of Australia v CanWest Global Communications Corporation (30 June 1997, unreported) - followed

Caltex Refining Co Pty Limited v The Amalgamated Metal Workers Union (6 December 1990, unreported) - cited

WA Pines Pty Limited v Bannerman (1980) 41 FLR 175 - cited

SYDNEY, 1 June 1998 (hearing and decision)

#DATE 1:6:1998

Appearances

Counsel for the Applicant: Mr B J Sullivan

Solicitor for the Applicant: Minter Ellison

Counsel for the Respondent: Miss R M Hendersen

Solicitor for the Respondent: Australian Government Solicitor

THE COURT ORDERS THAT:

1. The Respondent Commissioner on or before 13 July 1998 give discovery of all documents which were before the decision maker at the time of making the determination dated 19 December 1995, including any documents which were before the officer who prepared the report dated 27 October 1995 addressed to Mr Ian Cooper, Regional Coordinator, entitled "A report recommending that determinations under Division 13 of the Income Tax Assessment Act (1936) (sub section 136 AD(3)) be made in respect of the acquisition of pasta products by San Remo Macaroni Co Pty Limited (SRM) from a Swiss company 'Bigalle SA' " or other documents available to that officer in the course of preparing that report.

   "Documents" in this order means all documents whatsoever and, without limitation, includes correspondence, letters, memoranda, written communications, diary notes, reports, working papers, file notes, minutes, statements, invoices and also includes computer discs, computer tapes and any other form of electronic storage of information.

   2. The applicant file and serve any affidavits upon which it proposes to rely on or before 22 June 1998.

   3. The respondent file and serve any affidavits upon which it proposes to rely on or before 13 July 1998.

   4. The matter be stood over until Wednesday 5 August 1998 at 9.30 am.

   5. Any motions, which should only be filed after consultation between counsel, should be directed either at the Duty Judge or such other Judge as the Executive Assistant to the Chief Justice, Ms Carlsund, may nominate.

   6. Costs be costs of the cause.

HILL J

In these proceedings brought under s 39B of the Judiciary Act 1903 (Cth) the applicant seeks to challenge a determination made by the Commissioner of Taxation, the respondent pursuant to s 136AD of the Income Tax Assessment Act 1936 (Cth) ("the Act"). The applicant now seeks discovery of what, in essence, is the material that was before the decision maker at the time the determination was made.

The applicant was required in the course of ordinary case management proceedings to file in aid of the application a document headed "Grounds of Application and Particulars" in an endeavour to have some form of pleadings setting out the issues before the Court. The applicant alleges that the Commissioner did not make a bona fide attempt to exercise his power either in purporting to be satisfied that there was not the necessary arm's length dealing and in purporting to be satisfied that the consideration given by the applicant in acquiring stock from a Swiss company exceeded an arm's length consideration. These somewhat general grounds are elaborated upon by particulars. For example, in respect of the latter issue, it is said that the respondent disregarded all material before him other than certain material representing the course of transactions described in paragraph 8(a).

It is alleged that the Commissioner did not determine properly the arm's length consideration on the material before him but in essence adopted a particular price involving a transaction between Pastificio Gazzola of Italy and Bigalle SA of Switzerland.

The Commissioner resists giving discovery altogether. Counsel for the Commissioner used the familiar rubric of "fishing" as a ground for my refusing to order any discovery against the Commissioner. One can only assume, although no doubt it is denied, that the Commissioner wishes cases of this kind to proceed in a way where the Court is denied access to all material. I was referred to a decision of a full court of this Court in Madden v Madden (1996) 65 FCR 354, a decision of Sheppard, Einfeld and Foster JJ, largely in a case arising under the objection and appeal proceedings to the Act involving a default assessment and said to be in support of the submission that discovery should be denied.

It is perhaps quite clear from cases like Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 that discovery in the case of a default assessment would be very unlikely to be ordered. However, it seems that to some extent at least the pleadings in that case were ambiguous and perhaps capable of being seen as also involving a challenge under s 39B of the Judiciary Act. In any event the Court in that case refused to grant discovery.

The basis for so refusing was that no case had been demonstrated for permitting the proceedings to go forward on the basis that they might be rendered more substantial by the use of auxiliary proceedings such as discovery and interrogatories. Of course that was a finding on the particular facts of that case and, with respect, having regard to the general course of litigation on default assessments would undoubtedly be correct.

I have in other cases had cause to lament cases being argued on a basis put as vaguely as "fishing". It is a metaphorical expression and, as such, is capable of being understood in different ways by different people. I refer to the judgment of a full court of this Court in Treasurer of the Commonwealth of Australia v CanWest Global Communications Corporation (30 June 1997, unreported) for a discussion of that issue. As the full Court pointed out in proceedings brought under s 39B of the Judiciary Act discovery orders are available in such proceedings but, more importantly, in the late 20th century, courts have been more ready to permit doubtful plaintiffs to penetrate what the judgment refers to as "the obscurities of a dark pool". Or, as another full Court said in Caltex Refining Co Pty Limited v The Amalgamated Metal Workers Union (6 December 1990, unreported), in a judgment delivered by Burchett J with the agreement of Lockhart and Gummow JJ:

"This objection [i.e. the 'fishing' objection] to applications for discovery of documents does not now have the weight it was once thought to have. Perhaps it should be seen as a metaphor with more colour than substance."

Later in the same judgment, their Honours pointed out that, while it could be controlled, discovery is nevertheless a valuable weapon in the army of justice. Brennan J in W.A. Pines Pty Limited v Bannerman (1980) 41 FLR 175 at 181 referred to discovery being granted where there was a suspicion that the plaintiff applying for discovery has a good case, proof of which is likely to be aided by discovery. That case has, of course, to be seen by reference to its own circumstances as the full Court in CanWest indicated.

Ordinarily the question of discovery and whether it is appropriate is a matter that will be determined by reference to the proceedings as pleaded or particularised. Paraphrasing what was said by the full Court in CanWest but, by reference to the present circumstances, the pleadings, that is to say the "Grounds of Application and Particulars" raise an issue for decision to which the Commissioner's documents may be relevant. There is no suggestion of abuse of process. The "Grounds of Application and Particulars" raise issues which can only be resolved if the Court has before it the material upon which the determination was ultimately based.

For the reasons given in CanWest I am of the view that discovery should be ordered, although it seems to me preferable that the order not be to grant discovery of the documents in the form shown in the document entitled "Scope of Particular Discovery by Respondent" prepared by the applicant. I direct that the respondent Commissioner on or before 13 July 1998 give discovery of all documents which were before the decision maker at the time of making the determination dated 19 December 1995, including any documents which were before the officer who prepared the report dated 27 October 1995 addressed to Mr Ian Cooper, Regional Co-ordinator, entitled "A report recommending that determinations under Division 13 of the Income Tax Assessment Act (1936) (sub section 136 AD(3)) be made in respect of the acquisition of pasta products by San Remo Macaroni Co Pty Limited (SRM) from a Swiss company 'Bigalle SA' " at or before the time of making the report and for the purposes of making it.

As part of that order I will incorporate a definition of documents in the form contained in the document "Scope of Particular Discovery by Respondents". Matters of confidentiality which may arise can be dealt with, if necessary, by motion when inspection of discovered documents arises.

I direct the applicant to file and serve any affidavits upon which it proposes to rely on or before 22 June 1998. I direct the respondent to file and serve any affidavits upon which it proposes to rely on or before 13 July 1998. I will stand the matter over until Wednesday 5 August 1998 at 9.30 am. Any motions, which should only be made after consultation between counsel, should be directed either at the duty judge or such other judge as the Executives Assistant to the Chief Justice, Ms Carlsund, may nominate. I direct that costs be costs in the cause.