Black CJ

Merkel J
Finkelstein J

Full Federal Court


Judgment date: 29 September 2000

Black CJ, Merkel and Finkelstein JJ

The Commissioner of Taxation has extensive powers to conduct an investigation for the purpose of the Income Tax Assessment Act 1936 (Cth) (``the Act''). These powers are a means of ensuring that every taxpayer pays the tax that is due.

2. Among the powers given to the Commissioner is to ``by notice in writing require any person, whether a taxpayer or not...: (a) to furnish [the Commissioner] with such information as he may require; and (b) to attend and give evidence before [the Commissioner] or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and [to] require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto'': s 264(1). The Commissioner may require the evidence to be given on oath or affirmation, either verbally or in writing, and for that purpose he or the officers authorised by him may administer an oath or affirmation: s 264(2).

3. The Commissioner has served written notice pursuant to s 264 of the Act on each appellant requiring him, at a specified time and place, to attend and give evidence before one or more of three nominated officers (``the ATO officers'') authorised in that behalf concerning the income or assessments of certain individuals and corporations in relation to their investment in the Australian Beach Tales Film Project. The notice also stated that the ATO officers were authorised to administer an oath or affirmation. In a letter enclosing the notices each appellant was advised that the examination will be conducted by the ATO officers and that ``[a]lso in attendance and instructed by the... officers will be [senior counsel] and [junior counsel]''. In subsequent correspondence the appellants were informed that:

4. The s 264 notice required the appellants to attend and give evidence before the ATO officers conducting the examination. The subsequent correspondence makes it clear that, in order to facilitate the conduct of the examination, the role of counsel engaged by the Commissioner will include the provision of

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advice to the ATO officers conducting the examination and the asking of questions of the appellants. It is common ground that counsel engaged by the Commissioner are not authorised officers for the purposes of s 264 and are not persons to whom the Commissioner or authorised officers may delegate their power.

5. The appellants contend that under s 264 the Commissioner cannot require them to attend and give evidence before the ATO officers by answering questions asked by counsel engaged by the Commissioner. They brought a proceeding seeking a declaration to that effect. The trial judge (Goldberg J) held that, on the proper construction of s 264, the Commissioner or his authorised officers could be assisted by counsel during the course of an examination and that such assistance might include counsel asking questions of the person required to give evidence. Accordingly, his Honour dismissed the proceeding with costs. This is an appeal from those orders.

6. The appeal raises a narrow point of construction of s 264. Before turning to consider the nature of the power conferred by s 264, and how that power is to be exercised, there are certain features of the provision that should be noticed. It is not necessary to deal with the ability of the Commissioner to compel the production of books and papers. This case raises no dispute as regards that power. Relevantly, the Commissioner has the power, first, to require any person to furnish information and, second, to require any person to attend and give evidence. If the Commissioner requires a person to furnish information then, obviously enough, the nature of the information to be provided must be specified. Often that specification will take the form of a question such as, ``Did you pay rent to X?'' or ``Was Blackacre purchased with a view to it being sold at a profit?''. There is no requirement that the Commissioner must personally draft the notice that requires the giving of information or any questions that are contained in the notice.

7. The second aspect of s 264 to which we draw attention concerns the nature of the obligation ``to attend and give evidence'' (s 264(1)(b)), which may be given ``verbally or in writing'' (s 264(2)). Implicit in the requirement is the notion that questions will be asked of the person giving evidence. If it were otherwise that person would not know the ``evidence'' that is required to be given. Accordingly, the obligation to attend and give evidence must be understood as an obligation to attend and answer questions. The questions must relate to the attendee's, or any other person's, income or assessments: s 264(1)(b) and
FC of T & Ors v The ANZ Banking Group Ltd 79 ATC 4039 at 4052; (1977-1979) 143 CLR 499 at 535 per Mason J.

8. Section 264 does not specify who may ask the questions that must be answered before the Commissioner or before an authorised officer. Quite apart from the role, if any, that counsel might play in framing those questions, there can be no doubt that the Commissioner may ask the questions. In some cases the questions may be contained in the notice to attend and give evidence. Also, if the notice requires a person ``to attend and give evidence'' before an authorised officer, it is implicit that the authorised officer conducting the examination can ask the question which the person is required to answer.

9. The requirement that questions be answered is imposed under s 264 by the giving of the written notice ``to attend and give evidence'', which is the act of the Commissioner. In so far as the examination is to be conducted by an authorised officer that officer will have power to take whatever steps are, in all the circumstances, reasonably necessary and appropriate to conduct the examination (cf
O'Reilly & Ors v Commrs of the State Bank of Victoria & Ors 83 ATC 4156 at 4162-4163; (1982-1983) 153 CLR 1 at 48). While the authorised officer conducts the examination by asking questions, only the Commissioner exercises the coercive power of requiring the evidence to be given. As explained above, that power is exercised by the Commissioner giving a notice under s 264.

10. The appellants' argument amounts to this - whatever means the Commissioner seeks to obtain evidence, whether it is by notice requiring the provision of written information or by notice requiring the attendance of a person at an examination, the Commissioner or, when appropriate, the authorised officer, must act personally in posing the questions. Logically, the argument must be that:

11. The appellants' counsel correctly conceded that the Commissioner, or the authorised officer, could take advice from counsel on the form of the questions to be asked. But in the end, so the argument went, before there was an obligation to answer questions the questions had to be those of the Commissioner or the authorised officer.

12. There are competing factors to be taken into account when considering the proper construction of s 264. On the one hand, it is to be remembered that the section interferes with a person's freedom to elect not to provide information, whether it is to the revenue authorities or to a law enforcement agency. Not only is s 264 an interference with personal liberty, a refusal or failure to comply with s 264 is an offence, attracting a fine or even a term of imprisonment: see ss 8C, 8D and 8E of the Taxation Administration Act 1953 (Cth). On the other hand, the principal source of revenue for the Commonwealth is income tax. It is notorious that many and varied devices are employed to avoid the incidence of that tax. Sometimes, outright fraud is involved. For this reason the Parliament found it necessary to give the Commissioner power to make wide ranging enquiries to investigate whether tax is due. In these circumstances, the Court should proceed on the footing that the intention was to give the Commissioner an effective, but not an oppressive or unfair, power of investigation.

13. Dealing with the matter in stages, it must be accepted that the Commissioner has the right to engage the assistance of counsel to advise him in connection with a prospective examination under s 264. For example, the Commissioner is at liberty to take advice as to the form of a notice to be given under s 264, including the nature of any questions that should be included in the notice, and even how best to frame those questions. So much is no more than a reasonably necessary and appropriate incident of the Commissioner's power of investigation and his obligation to administer the Income Tax Assessment Act.

14. Next, and for the same reasons, the Commissioner is able to retain counsel to give advice from time to time during the course of an examination, whether that examination is before the Commissioner or before an authorised officer. For example, it would be permissible for the Commissioner, or an authorised officer, during the course of an examination to take advice from counsel about whether or not to pursue a particular topic or to accept an evidentiary objection. We see no reason in principle why that advice should not also include advice as to the form of particular questions that the Commissioner or the authorised officer might ask. There is nothing in s 264 which prohibits the Commissioner or an authorised officer from proceeding in that manner, or which prohibits counsel engaged by the Commissioner from attending an examination conducted in private pursuant to s 264: s 16 of the Act and
Dunkel v DFC of T 91 ATC 4142 at 4145-4146 per Sheppard J.

15. Is it appropriate to take the matter one step further and permit counsel to ask questions? In our view an examination can proceed in that fashion. Our reasons are as follows. First, we see nothing in s 264 which imposes an obligation upon the Commissioner to act personally in framing the notice requiring a person to furnish information, or in formulating the questions that are to be asked of a person who attends to give evidence. Plainly, the Commissioner can take advice from, inter alia, counsel who is an ``officer'' (as defined in s 16) entitled to have access to information to which the secrecy provisions (s 16) apply. If the Commissioner can receive that advice, there is no reason why the Commissioner should be denied the right to obtain similar assistance by having counsel ask the questions. The appellants argue that if an examination proceeds along those lines, it would mean that it was counsel and not the Commissioner who was imposing the requirement upon the attendee to give evidence. But, as explained above, this contention involves a misunderstanding of the operation of s 264. Only the Commissioner can require a person ``to attend and give evidence''. This is because it is the Commissioner who can give notice under s 264, and it is the giving of that notice that imposes the obligation to attend and give evidence. So, where the notice states that evidence is to be given before an authorised officer, it is not the authorised officer who imposes the requirement to answer questions. That requirement exists because the Commissioner has served a notice requiring evidence to be given before the authorised officer.

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16. Second, it would be incongruous if counsel were permitted to frame written or oral questions for the Commissioner to ask, but could not, in the presence of the Commissioner or his authorised officer, ask questions the answers to which are to be given to the Commissioner or to the authorised officer.

17. Third, the requirement to give evidence by answering questions falling within the purview of the s 264 notice arises by reason of the giving of the notice. Counsel does not conduct the examination by asking questions (
Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156 at 168 per Spender J and
Australian Securities and Investments Commission v Loiterton [2000] FCA 973 at [ 24] per Mathews J). In asking questions counsel is not exercising any power under s 264.

18. Fourth, enabling an authorised officer to rely on counsel to ask questions produces a practical result (Dunkel at 4146 and Re McKee at 168) that is consistent with, and in furtherance of, the legislative purpose of an effective investigative power (The ANZ Banking Group Ltd at ATC 4052; CLR 536 per Mason J). A construction which requires that only the Commissioner or authorised officers can ask questions would limit the effectiveness of the section and, without reason, undermine its purpose.

19. The appellants rely on
Maxwell v Department of Trade and Industry [1974] 1 QB 523 as an authority in their favour. But a proper understanding of that case shows that it provides them with insufficient support. The Board of Trade had power to appoint ``one or more competent inspectors to investigate the affairs of a company and to report thereon'': Companies Act 1948 (UK), s 165. An inspector was given certain powers to facilitate this investigation. The inspector could investigate the affairs of related companies (s 166) and all officers and agents of a company under investigation were required to give to the inspector all assistance which they were reasonably able to give (s 167(1)). In addition, s 167(2) provided that ``an inspector may examine on oath the officers and agents of the company''. In pursuance of its powers, the Board of Trade appointed inspectors to investigate the affairs of Permagon Press Ltd. The inspectors made an interim report. The plaintiff, a director of Permagon Press, alleged that the interim report was made in breach of the inspector's obligation to conduct the investigation and to make the report in conformity with the requirements of natural justice. In the course of a general discussion about the nature of an investigation conducted by inspectors, Lord Denning MR (at 533), with whom Orr LJ (at 537) agreed, said:

``[T]here is no one to present a case to the inspector. There is no `counsel for the commission'. The inspector has to do it all himself. He has himself to seek out the relevant documents and to gather the witnesses. He has himself to study the documents, to examine the witnesses and to have the evidence recorded. He has himself to direct the witnesses to the relevant matters. He has himself to cross-examine them to test the accuracy or their veracity. No one else is there to cross-examine them. Even if a witness says things that are prejudicial to someone else, that other does not hear it and is not there to cross-examine him.''

20. There are two observations that can be made about the appellants' reliance upon Maxwell. The first is that the provisions that were there under consideration are very different from s 264. The English statute contemplated the appointment of ``competent inspectors'' who would personally undertake the task of examining the affairs of a particular company and report the result to the Board. Thus, it is not surprising that the Court of Appeal regarded the investigative powers and functions conferred upon inspectors as powers and functions that were to be exercised personally. There is nothing in the language or context of s 264 which suggests that it should be given a similar construction to that given to s 165 of the Companies Act 1948.

21. The second observation is that Lord Denning (at 533) made his observations in respect of ``the very special kind of inquiry'' under the Companies Act 1948 and, in the course of doing so, outlined the special features, including those set out above, of such an inquiry. In that context, the passage relied upon formed part of Lord Denning's analysis of the nature of the investigation authorised by the Companies Act 1948.

22. We should add that it was not suggested that counsel would act oppressively, or otherwise improperly in asking questions or that

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he or she would act otherwise than for the legitimate purposes of the Commissioner under s 264.

23. For these reasons we are satisfied that Goldberg J was correct in dismissing the appellants' application for declaratory relief. Accordingly, the appeal should be dismissed with costs.


1. The appeal be dismissed.

2. The appellant pay the respondent's taxed costs of and incidental to the appeal.


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