Re Kingston Thoroughbred Horse Stud and Australian Taxation Office.

Sir William Prentice SM

AP Renouf M

Administrative Appeals Tribunal

Decision date: 15 April 1986.

The Hon. Sir W. Prentice (Senior Member) and Dr A.P. Renouf (Member)

The applicant consists of a partnership of various professional people who are said to have contributed moneys in connection with a scheme of horse-breeding in Ireland. The Commissioner of Taxation has taken the view that the arrangements they entered upon in furtherance of the scheme, amount to one of tax avoidance by the 20 partners involved; he has issued assessments of tax in accordance with his conclusions. Two of the assessments involved are the subject of objections, appeals from the disallowance of which have been lodged in but

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not dealt with in the Supreme Court of N.S.W. The Tribunal was informed that particulars as to the basis of assessment have been sought and supplied, and lengthy affidavits filed in the Supreme Court on behalf of the applicants.

2. The application before this Tribunal is made under the Freedom of Information Act 1982 (``the FOI Act'') for access to certain documents held by the respondent; the decision to refuse access having been the subject of internal review in the respondent's department, after which documents additional to those originally given, were released. The documents for which the respondent has claimed exemption from disclosure include the relevant investigation report, opinions, recommendations, records of interview, personal series files, banking documents and miscellaneous documents.

The documents the subject of contention have all been made available in confidence to the Members of the Tribunal charged with hearing the matter. They are accepted as such. Thereupon a submission was made that this matter should proceed no further until the aforementioned Supreme Court matters had been determined - in order that prejudice might not occur to the latter. By the time of this hearing, discovery and inspection had not been sought in the Supreme Court matters, though the Tribunal was informed, the affidavit evidence upon which the appellants sought to rely had been filed therein.

3. It was urged that the applicant should not be allowed in the circumstances to proceed with this application which could amount to ``a fishing expedition'' such as would not be permitted under the High Court Rules as to discovery and inspection which would apply in the Supreme Court hearing. In
Murtagh v. F.C. of T. (84 ATC 4516 at p. 4526; (1984) 54 A.L.R. 313 at p. 327) a similar submission was made as to release of documents in a FOI Act application possibly working prejudice to Taxation Board of Review proceedings; it was held that as there were no discovery rules applicable to such proceedings, prejudicial effect had not been shown. His Honour the President who had also presided in Murtagh's case, stated in another such similar set of circumstances (
Re Lane and Conservator of Wildlife (1984) 5 ALN N429 at p. 430) that ``An Administrative Tribunal should not act in such a manner as to prejudice the conduct of proceedings which are on foot before a court of law''.

4. In opposing the indefinite adjournment sought, counsel for the applicant submitted that the FOI Act provided to citizens new rights which were unqualified by reference to time, circumstance or motivation, that there is no room thereunder for circumscription of application by reference to the well-established legal aversion to ``fishing expeditions''. It was urged that no discretion lay in the Tribunal to grant such an adjournment.

5. The Tribunal decided to continue with hearing the application to the point of finality of evidence, addresses and reservation of decision, and that it would then consider afresh whether the decision it then arrived at should then be handed down or reserved in gremio Tribunalis until the finality of any particular part or the whole of the court proceedings mentioned.

6. For a great number of documents exemption from release was claimed under sec. 37(1)(a) of the FOI Act - prejudice to the investigation of a breach of the law...; sec. 38 - secrecy provisions of the Tax Acts; sec. 41(1) - unreasonable disclosure of personal affairs of others; sec. 43(1)(c) - disclosures of business affairs; and sec. 45 - breach of confidence involved. For smaller numbers of documents exemption from release was claimed under sec. 36 - internal working documents and advice; and sec. 37(1)(b) - disclosure of a confidential source.

7. The evidence upon which the Tribunal is called upon to make its decision consists of the sec. 37 documents, the affidavits of 20 and 23 September 1985 and the oral evidence of Mr D. C. Toner, and the documents in question themselves.

It does not appear practicable in such a matter as this, to discuss the details of each of the hundreds of documents involved and to develop seriatim reasoning as to the many various grounds of exemption claimed as to each. We propose therefore with respect, to follow the course adopted by Deputy President Todd and Members in
Re Lander (A83/111 of 31 October 1985) [reported at 85 ATC 4674] of setting out our approaches generally to the grounds claimed and to the categories of documents involved; and to identify in Schedules, the documents which we hold to be

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exempt or not exempt under particular sections of the Act.

8. Claim to exemption under sec. 38 - secrecy provisions of other Acts

All the documents with which we are concerned are claimed to be exempt from disclosure under sec. 38 of the FOI Act having regard to the secrecy provisions of sec. 16 of the Income Tax Assessment Act 1936 (``the ITA Act''). In the interests of comity in the Tribunal's decision making, we consider the correct course to be taken herein (pending further resolution of the point by the Federal Court), is that adopted by the Tribunal presided over by Deputy President Todd in Re Lander (op. cit.). The claims for exemption under sec. 38 will be rejected accordingly in deference to and for the reasons set out in the Tribunal Decisions
Re Z and Australian Taxation Office (1984) 6 ALD 673,
Re Mann and Australian Taxation Office (1984-1985) 7 ALD 698, and
Re Swiss Aluminium Australia Limited & Ors 85 ATC 4566; (1985) 8 ALD 159.

9. Claims under sec. 45 - breach of confidence

Similarly all the documents concerned are the subject of a claim to exemption under sec. 45 of the FOI Act, on the basis that their disclosure under the Act would constitute a breach. We form the conclusion that the great bulk of these, which constitute banking documents of various kinds, have been supplied to the Commissioner not only in the setting of the existence of sec. 16 in the ITA Act but also by virtue of a long-existing understanding by the supplying banks, that the extent and detail of the information they contain and the co-operation extended, were being given on the implication that their supply (without recourse to the compulsion of sec. 264 of the ITA Act), was within confidence, and to be used only for the Commissioner's own purposes. Such an implication may the more readily be arrived at we believe, when one has regard to a bank's obligations at law as to preserving secrecy as to its clients' affairs (
Tournier v. National Provincial and Union Bank of England (1924) 1 K.B. 461). That a government agency may be constrained to confidence by the circumstances in which it obtains information is illustrated by
Castrol Australia Pty. Ltd. v. Emtech Associates Pty. Ltd. & Ors (1980) 33 A.L.R. 31.

We are also of the view that inasmuch as the passage of information is of the very essence of a confidential relationship, confidence should attach to those other of the documents the contents of which incorporate the information so received in confidence. In this category would be ``flow charts'' depicting and itemizing movement of funds, investigation reports, and recommendations thereon.

We regard the records of interview with a bank manager, a doctor, a solicitor, a ``person not a member of the partnership'', and ``an informant's letter'' as having been obtained on their face, in such circumstances as also to establish the bond of confidence between giver and recipient of information, and to indicate that the giver would not expect his information to be disclosed to the world at large.

In so far as a claim of confidence is concerned, it should also be kept in mind we feel, that the documents we are concerned with all antedate the coming into effect of the FOI Act (see Cockcroft and Attorney-General's Department N84/77 and N84/331 of 21 August 1985).

10. Section 43(1)(c)(i) and (ii) - documents affecting business affairs...

Exemption under this section is claimed for documents in T7 of the sec. 37 documents filed in the Tribunal, numbered 1-202 inclusive and 227-230 inclusive. These include all the investigation papers, the banking documents, the records of interview, and the head office personal series file.

It seems apparent to us that the informants involved in the creation of the letter (folios 45-48), and the records of interview - having regard to the nature of the information given therein, would not wish the contents thereof to be revealed; and we would conclude that their release containing such information as to persons' professional affairs, could reasonably be expected to ``unreasonably affect'' adversely the informants in respect of their professional affairs. In relation to the release of banking documents, it can readily be perceived we feel, that courses of action by the banks concerned could be revealed thereby to their disadvantage as regards reputation for prudence and trust. And we find ourselves persuaded that disclosure of any or all the documents for which this exemption is claimed could reasonably be expected to affect the attitude of

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the persons concerned and others who came to learn of the disclosure - so as to work prejudice to the future supply of information to the Taxation Office.

11. Section 41(1) - documents affecting personal privacy

The sec. 41(1) ground of exemption was taken in association with that under sec. 43(1)(c) but with regard to a lesser number of documents - the investigation papers, certain of the banking documents, the records of interview and a number of those classed as miscellaneous documents.

The information that could be disclosed from perusal of these documents so far as it relates to persons other than the applicants, relates to personal affairs such as their financial status and manifold transactions. It has become available in the course of investigation of what is alleged to be attempted tax evasion by the applicants and associates, and relates to what may be thought kindred associations of other persons for similar purposes. It seems highly unlikely that the persons whose affairs are touched upon would wish to have the information thereunto released without their consent. The matters appear to be of current relevance, and it appears to us that the public interest recognised by the FOI Act in making government agencies' files available generally to inspection by the public, does not in the circumstances outweigh the public interest in protecting the personal privacy of third parties (
Re Chandra and Minister for Immigration and Ethnic Affairs (1984) 6 ALN N257). As to the documents nominated hereinafter - it is considered that disclosure would be unreasonable and that the ground of exemption should be affirmed.

12. Section 36 - internal working documents

A claim under this section was made as to the investigation papers (folios 1-48) and various reports and memoranda (folios 194, 198-202, 227-230). However, in the conduct of the hearing it was conceded that a view was open that some part of the investigation reports could be regarded as factual material only, and not susceptible to claim under sec. 36. An edited version of the reports containing only material regarded as factual and not relating to other persons' affairs was handed up and marked for identification ``1''. We consider this portion could have been released to the applicants, were this very ground of exemption claimed in regard to it.

We incline to the view that the sec. 36 claim can be justified as to the remainder, in that the documents concerned contain basically opinion, advice and recommendation for purposes of the respondent's deliberative process rather than (purely factual material) within the guidance of the Federal Court in
Harris v. Australian Broadcasting Corporation & Ors (1983-1984) 51 A.L.R. 581. But in the light of the view we take as to the applicability of other grounds of exemption of these documents we do not think it necessary to make a finding on the point.

13. Section 37(1)(a) - documents affecting enforcement of the law; sec. 40(1)(d) - documents concerning operations of agencies

The submissions as to these two sections were argued together as being related; but sec. 40(1)(d) was raised only in regard to the investigation papers (folios 1-48 and 227-230). Section 37(1)(a) exemption was claimed in relation to all the subject documents, but only on the ground that release of them would prejudice the proper administration of the law.

A study of the material in the subject documents supports the claim of counsel for the respondent that the Commissioner regards himself as charged with the investigation of what is alleged to be a tax evasion scheme of great magnitude. Investigations have been complex and wide-ranging. They result in his alleging complicity of numerous other people in similar or related schemes. Assessments of tax and disallowance of objections thereto have been made as to certain of the persons said to be involved. Litigation is in progress as to certain disallowances of objections. The rules of discovery and inspection as provided for by the High Court obtain as to such proceedings. The investigation process as to the alleged schemes is seen to be an ongoing one, and would seem likely to involve assessments of a similar nature against other individuals. The circumstances in this matter are to be distinguished from those existing in
Murtagh v. F.C. of T. 84 ATC 4516; (1984) 54 A.L.R. 313 in so far as the latter was concerned with the proceeding before the Taxation Board of Review which had no power to order discovery of documents - there were accordingly no discovery rules that could therein be subverted.

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The contention in this current matter is that the release of documentation under this application could so subvert the discovery rules which would apply in the proceedings now on foot in the Supreme Court.

Having regard to the remarks of his Honour the President in Re Lane (op. cit.) and those of Deputy President Todd in Re Lander at pp. 8 and 9; ATC pp. 4678-4679 (op. cit.) as to the effect of a similar set of circumstances which at one time obtained during the hearing of that latter application, we form the view that there could be a real chance that prejudice to the conduct of legal proceedings might result were this Administrative Tribunal to direct that disclosure should be made of documents many of which could well be refused to discovery in the Supreme Court. The additional factor that release under the FOI Act is release to the world, would also support these claims to exemption under sec. 37(1)(a) and 40(1)(d) in that release in the circumstances of this case of this information which would show the extent and nature of the Commissioner's investigations and knowledge could reasonably be expected we consider, both to have a substantial effect on the proper and efficient conduct of the agency and to prejudice the proper administration of the law in regard to those individuals other than the applicants, whose activities are still the subject of investigation, report and possible assessment of tax. For these reasons we would uphold the respondent's claim under these sections as set out hereafter.

14. Section 37(1)(b) - disclosure of a confidential source

This ground is claimed in regard to one document only, that being an informant's letter. We feel it necessary only to state that the document is on its face a source of information being given in confidence - we would infer from its contents and apparent circumstances of its making, that its maker would not desire its release. We do not think it practical to reduce the document to such a form as would protect the confidentiality of the informant's identity. We would therefore affirm this ground as well as the others in relation to it.

15. We consider that claims to exemption from disclosure should be affirmed in accordance with the attached schedules.

16. This application was heard by Sir William Prentice, Dr A.P. Renouf and Mr G.D. Grant. Since reservation of decision, the term of office of the last-named has expired. The parties having agreed in writing to the remaining Members completing the determination (sec. 23 of the Administrative Appeals Tribunal Act 1975), and no Presidential direction under sec. 20 of the Act having been given, the remaining Members have decided to proceed to determination accordingly.

[ CCH Note: Schedules 1-6 are not reproduced.]

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