FEDERAL COURT OF AUSTRALIA Commissioner of Taxation v Pilnara Pty Ltd [1999] FCA 1805 INCOME TAX – appeal from decision of judge to set aside an "off-shore information notice" issued by the Commissioner of Taxation to the respondent pursuant to s 264A of the Income Tax Assessment Act 1936 (Cth) – whether the statement of reasons provided pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) disclosed any adequate basis for the belief that the information and documents requested were relevant to the assessment of the taxpayer – whether in making that finding a court is confined to the statement of reasons – whether the notice was required to recite material facts linking the information and documents sought to the assessment of the taxpayer – whether it was necessary for there to be a reasonable belief in the existence of all of the information and documents sought – respondent a trustee of a discretionary trust – respondent had resolved that all of the taxable income of the trust be distributed to a particular beneficiary – whether the Commissioner failed to take into account, as a relevant matter, whether the respondent could be a taxpayer in respect of any net income. Income Tax Assessment Act 1936 (Cth), s 264A SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 distinguished Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368 distinguished FH Faulding & Co Ltd v Commissioner of Taxation (1994) 54 FCR 75 referred to COMMISSIONER OF TAXATION v PILNARA PTY LTD N 731 OF 1999 WILCOX, HILL & CARR JJ 22 DECEMBER 1999 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 731 OF 1999 On appeal from a Judge of the Federal Court of Australia BETWEEN: COMMISSIONER OF TAXATION Appellant AND: PILNARA PTY LIMITED Respondent JUDGES: WILCOX, HILL & CARR JJ DATE: 22 DECEMBER 1999 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT: BACKGROUND 1 This is an appeal from a decision of a Judge of this Court to set aside a notice issued by the appellant, the Commissioner of Taxation, to the respondent pursuant to s 264A of the Income Tax Assessment Act 1936 (Cth) ("the Act"). Section 264A of the Act confers power upon the appellant to issue notices (referred to in the Act as "offshore information notices") to a taxpayer requiring the provision of information or documents relevant to the assessment of the taxpayer, being information or documents which are outside Australia and (in the case of information) which is within the knowledge of a person outside Australia. The question in the appeal is whether the primary judge erred in deciding that the s 264A notice issued to the respondent was invalid. By notice of contention, the respondent challenges the refusal of the primary judge to hold that s 264A is beyond the legislative power of the Commonwealth because it is inconsistent with Chapter III of the Constitution. The Facts 2 The respondent, Pilnara Pty Ltd, is the trustee of the Peabody Family Trust No. 2 ("the Trust"). On 2 March 1999 the Commissioner served an offshore information notice ("the Notice") on the respondent requesting the production of certain information and documents. The Notice contained a statement that the Commissioner believed that the information and documents were overseas and were relevant to the assessment of the respondent in its capacity as trustee of the Trust. 3 The information and documents were sought as part of a taxation audit being undertaken by the appellant's High Wealth Individuals Taskforce in relation to the tax affairs of Mr Terrence Peabody. 4 The subject matter upon which the request focussed was a company incorporated in the British Virgin Islands, Western Star International Limited ("WSIL"), in which the respondent, as trustee of the Trust, held one ordinary share. Information and documents were sought in respect of the period between 1 July 1993 and 30 June 1997. 5 Before the issue of the notice, there was an exchange of correspondence between the appellant and the respondent. 6 On 19 January 1999 the appellant wrote to the respondent as trustee for the Trust requesting information regarding the income years between 1 July 1993 and 30 June 1997. The information sought in relation to the affairs of the Trust included: · the name of the entity or entities in which the Trust held an interest and the nature of the interest held; · details of those entities including the place of incorporation (where the entity was a company), the address of its registered office, the postal address, the principal place of business, the principal assets (including investments), the principal activities, the number of shares on issue at each year end, the number of shares held by the Trust, a description of the rights attaching to each class of share, details of dividends declared and dividends received, credited or applied to the benefit of the Trust by the company; · details of loans received by the Trust from such entity, any loan funds advanced to the entity and the terms and conditions of any loans advanced or received · the amount of any debts forgiven by the Trust in relation to a debt owing by such entity; · details of any expenses met by the Trust on behalf of such entity; · the name of the representative of the Trust who either alone or together with other persons or entities was able to direct or influence the manner in which the entity acted; and · the name of the person or persons who controlled the affairs of the Trust. 7 The letter set out definitions of expressions such as "entity", "interest" and "controlled the affairs of the Trust". 8 On 29 January 1999 the respondent, by its tax agent, wrote to the appellant stating (in summary) that: · the Trust held an interest, comprising one ordinary share out of the 10,000 issued shares, in WSIL; · no dividends had been declared by WSIL; · WSIL was incorporated in, its registered office was located in, and its principal place of business was in the British Virgin Islands; · the principal assets and activities of the Trust were investment holdings and investment holding (respectively); · the Trust had received no loans from WSIL or made any loans to WSIL; · no debts of WSIL had been forgiven by the Trust; · no expenses of WSIL had been met by the Trust; · the Trust had not appointed a representative in connection with WSIL; and · the Trust was controlled by the trustee, Pilnara Pty Ltd. 9 On 11 February 1999 the appellant wrote to the respondent's tax agent seeking further information. The reply from the respondent's tax agent, dated 22 February 1999, stated that WSIL was incorporated on 28 January 1991 as Pozzolanic International Ltd. It took its present name on 17 February 1994. The directors of WSIL from 1 July 1993 to 30 June 1997 were Mr Wilfred K Timso and Mr John W Crawford. The administrative centre of the company was located in Hong Kong. The business performed by WSIL was that of an investment company. The major investment of WSIL was in a company called Western Star International Pte Ltd ("WSIPL"). The respondent's tax agent, who had been provided with the information regarding WSIL by Mr T E Peabody, was unable to provide the remainder of the information requested. That included a chart illustrating the entities with which WSIL was associated reflecting the respective ownership percentages held by each entity and the place of incorporation of each such entity, the names of the parties who held the remaining shares in WSIL, the names of representatives of WSIL with whom the Trust had had communication, and information as to what were the principal assets of WSIL. 10 The letter dated 22 February 1999 from the respondent's tax agent further stated that the Trust acquired one share in WSIL in 1991 as a minimal investment with the prospect of some future return. The Trust played no role in the affairs of WSIL and neither WSIL nor Pozzolanic International Ltd played a role in the affairs of Mr Peabody or his group. The Trust held no information as to the affairs of WSIL and the only information known by Mr Peabody was stated in the letter. 11 On 2 March 1999, Ms Darlene Dunne of the Australian Taxation Office prepared a submission to the relevant delegate of the appellant seeking the issue of the Notice. The submission identified the taxpayer as Pilnara Pty Ltd as trustee for The Peabody Family Trust No. 2. It described the information and/or documents sought as information concerning the ownership of, and business carried on by, WSIL and information as to the relationship between WSIL and other entities, in particular WSIPL "over which it appears to exercise control". The basis on which information and documents were regarded as relevant to the assessment of the respondent as trustee for the Trust was stated as being: "As it is believed that the Trust has 100% control (either direct or indirect) of the company, then profits flowing to the company which have not previously been subject to comparable tax in an overseas jurisdiction, should be attributed as income back to Australia and assessed to the Trust. However, without any clear understanding of the role played by the company in the structure, it is impossible to consider either the evidentiary or factual circumstances behind the Trusts' [sic] involvement with the company's activities offshore. Despite attempts to elicit information regarding the Trust's interest in the Western Star business in Canada, and its related interests in interposed entities in the British Virgin Islands and Singapore, only negligible information has been disclosed by the Trust or Mr Peabody.… it is considered that Mr Peabody and a number of entities over which he exercises control may not be meeting their proper tax liability. Without the relevant disclosure of these interests or activities, it is impossible to determine the extent to which tax is being avoided or control is being exercised by Mr Peabody or his family. Basis on which there is reason to believe that the information and/or documents are held outside Australia: Advice has been received that the only information that is known in relation to the company has been provided by the Trust. Apart from that information, no further information is held by the Trust (or presumably Mr Peabody). Therefore, the only possible source of information is the company itself. This information and documentation would either be retained in its registered office in the British Virgin Islands or in its administration centre in Hong Kong. … Other comments: In a letter dated 22 February 1999, the Trust (Mr Peabody appears to have in fact provided this information on behalf of the Trust) has advised that no further information can be provided in relation to the company. This is a cause of concern for this office. It is the role of the HWI Taskforce to review the income tax affairs of taxpayers where there is an apparent lack of correlation between assessable income and assets owned or controlled. In the case of Mr Peabody, he has returned a taxable income of $74,100 in his income tax return for the year ended 30 June 1997. Net assets held or controlled by Mr Peabody have been estimated at 100's of $M's." 12 Following the submission, a delegate of the appellant authorised the issue of a notice to the respondent under s 264A. A memorandum made by the delegate on 2 March 1998 read as follows: Taxpayer The Peabody Family Trust No. 2 Ms Dunne is conducting an audit of Mr Terrence Peabody and associated entities. This audit is being conducted as a part of the High Wealth Taskforce Programme. In order to ascertain information concerning the affairs of The Peabody Trust No. 2 Ms Dunne has found it necessary to issue a notice under Sec 264A of the Income Tax Assessment Act. I have been advised that other methods of obtaining the required income have proved unsatisfactory. Prior to reading the notice and submission prepared by Ms Dunne, I have read Chapter 4 of 'Guidelines Access and Information Gathering Powers', published by the ATO in September 1996. I have also read the decision in FH Faulding & Co Ltd v FC of T 94 ATC 4867. I am concerned by the role played by Western Star International Limited and am of the view that this role is significant in ascertaining the taxation liability of The Peabody Family Trust No. 2. After discussing the matter with Ms Dunne, I have formed the view that the request for information and documents is reasonable. This material is relevant to the assessment of The Peabody Family Trust No. 2. 13 The relevant parts of the Notice are reproduced below: "To: Pilnara Pty Limited as Trustee for The Peabody Family Trust No. 2 c/- Mr Alan McNaughton 64 Hillsdon Road Taringa QUEENSLAND 4068 INCOME TAX ASSESSMENT ACT 1936 – SECTION 264A OFFSHORE INFORMATION NOTICE Having reason to believe that the information and documents described in the Schedules ("the Information") and ("the Documents") – 1. are relevant to the assessment of the The Peabody Family Trust No. 2 under the Income Tax Assessment Act 1936 ("the Act") for the years of income ended 30 June 1994 to 30 June 1997 ("Your Assessment") and 2. is information which- (a) is within the knowledge (whether exclusive or otherwise) of a person outside Australia; or (b) is recorded (whether exclusively or otherwise) in a document outside Australia; or (c) is kept (whether exclusively or otherwise) by means of mechanical electronic or other device outside Australia; and 3. the documents are outside Australia (whether or not copies are in Australia or, if the Documents are copies of other documents, whether or not those other documents are in Australia). Pursuant to section 264A of the Act I request you to give the Information which is relevant to the The Peabody Family Trust No. 2's Assessment and to make copies of the Documents which are relevant to The Peabody Family Trust No. 2's Assessment and to produce those copies- 4. to either or both Ms Darlene Dunne or Mr Chris Sonter, whom I authorise for the purpose, on my behalf, 5. at the Australian Tax Office at 100 Market Street, Sydney, New South Wales, 6. not later than 90 days after the date of service of this notice. … Schedule of Information required pursuant to section 264A of the Act "the Information" In relation to Western Star International Limited (WSIL), the following information is sought in respect of the period commencing 1 July 1993 and ending 30 June 1997 (unless stated otherwise):- 1. Other than the 1 share held by The Peabody Family Trust No. 2 in WSIL advise; (a) the names and addresses of all shareholders in WSIL, (b) where shares are held on trust or on behalf of another party, the names and addresses of the beneficial owners of the shares. 2. A list of all investments held by WSIL as at 30 June 1994, 30 June 1995, 30 June 1996 and 30 June 1997 including; (a) the names of all entities in which an interest is held, (b) where the interest in (a) above is in the nature of shares, state in relation to each entity; (i) the number of shares held, (ii) the value in Australian dollars of shares held (state whether this value is at cost, market or some other value), (iii) the class (ordinary or otherwise) of shares held, (c) each loan advanced by WSIL at interest, stating (i) the name of the individual or entity receiving the loan, (ii) the address of the individual or entity receiving the loan and (iii) the value in Australian dollars of each loan, (d) each loan advanced by WSIL at no interest, stating (i) the name of the individual or entity receiving the loan, (ii) the address of the individual or entity receiving the loan and (iii) the value in Australian dollars of each loan. 3. In relation to loans that have been advanced to WSIL, state as at 30 June 1994, 30 June 1995, 30 June 1996 and 30 June 1997; (a) the name of the individual or entity advancing the loan, (b) the address of the individual or entity advancing the loan, (c) the value in Australian dollars of each loan, (d) the interest rate applicable to each advance. 4. State whether WSIL conducted any investment, business or commercial activity in its own right, other than holding shares in Western Star International Pte Limited (WSIPL). If so, state what this activity was. 5. State what activities were performed on behalf of WSIL at International Trust Building, Wickhams Cay, Road Town, Tortola, British Virgin Islands. 6. State what activities were performed on behalf of WSIL at 11/F Tower 2, The Gateway, 25-27 Canton Road, Kowloon, Hong Kong. 7. State whether any gross income was derived, whether of a revenue or capital nature, by WSIL during the period 1 July 1993 to 30 June 1997. If so, (a) list each class of income (ie dividends, interest or other), (b) the amount of each class of income in (a) using Australian dollar values, (c) the date each item of income in (a) was received or credited. 8. In relation to 7 above, state the source of such income. Here, source refers to the identity of the individual or entity from whom the income was derived. 9. Name all positions held by each of the directors of WSIL with; (a) WSIL (positions other than as director), and (b) WSIPL. 10. State whether any of the directors of WSIL, acting in that capacity, were accustomed to taking instructions from or, acting in accordance with the wishes of or, influenced and/or directed in their decision making responsibilities by other individuals or entities. If so, provide the names of those individuals or entities who impacted on the decision making in this manner and state why they were involved. 11. To what extent are administrative and secretarial functions shared by WSIL and Pozzolanic (Holdings) HK Limited. If shared, state whether (i) staff, (ii) management and (iii) directors are common to both entities. 12. Describe the investment, business and commercial activities conducted by WSIPL. 13. State the total number of shares issued by WSIPL (by class). 14. List the names and addresses of all shareholders in WSIPL. 15. Identify each asset and liability held by WSIPL, together with its value in Australian dollars (stating whether the values are at cost, market or some other value). 16. A chart illustrating the ownership structure of all entities in which WSIL holds a direct or indirect interest, including the relative percentage interest held by WSIL in each of these entities. Schedule of Copies of Documents required pursuant to section 264A of the Act "the Documents" In relation to Western Star International Limited, the following copies of documents are sought in respect to the period commencing 1 July 1993 and ending 30 June 1997:- 17. Balance sheets for each financial year which relate to the period 1 July 1993 to 30 June 1997. 18. Profit and loss accounts or profit and loss statements for each financial year which relate to the period 1 July 1993 to 30 June 1997. 19. Copies of all minutes of the meetings of the directors. 20. Copies of the Articles of Association. 14 On 17 March 1999 the respondent requested the delegate, pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"), to furnish it with a written statement of reasons for his decision to issue the Notice. The statement provided by the delegate in response to that request was in the following terms: The Facts The material findings of fact that were taken into account in making the decision to issue the notice are set out as follows: 1. The taxation affairs of the taxpayer are subject to audit by the Australian Taxation Office. 2. The taxpayer acquired one ordinary share in Western Star International Limited (WSIL), a company which was incorporated in the British Virgin Islands, on 28 January 1991. 3. The British Virgin Islands is a non-comparable tax jurisdiction with which Australia does not have a double tax treaty. 4. The Australian Taxation Office is unable to access information or documents in relation to companies in the British Virgin Islands. 5. The taxpayer has continued to hold one share in WSIL since 1991. 6. The administration centre of WSIL is located in Hong Kong. 7. The directors of WSIL during the period 1 July 1993 to 30 June 1997 have been Mr Wilfred K Timso and Mr John W Crawford, both of whom are non residents of Australia for taxation purposes. 8. The actual business performed by WSIL is that of investment. 9. The taxpayer has not returned any income from its shareholding in WSIL. 10. The agent for the taxpayer, Mr Alan McNaughton, has advised that the trust is unaware as to the identity of the holder/holders of the remaining 9,999 shares on issue by WSIL. 11. Mr McNaughton has advised that the trust has no knowledge concerning the investment activities of WSIL. 12. The Commissioner of Taxation has enquired as to the circumstances under which WSIL was introduced to The Peabody Family Trust No. 2 as an investment vehicle. He was advised that there were 'no particular circumstances as it was a minimal investment at the date of acquisition with a prospect of some return in the future'. The Evidence The evidence or other material upon which the findings on material questions of fact are based, is set out as follows; 13. The income tax returns of the taxpayer for the years ended 30 June 1994 to 1997. 14. Letters issued to the taxpayer by the Commissioner of Taxation dated: (a) 19 January 1999, and (b) 11 February 1999. 15. Letters received from Mr McNaughton, in reply to the above correspondence, dated: (a) 29 January 1999, and (b) 22 February 1999. The Reasons for the Decision In his audit of the taxation affairs of the taxpayer, the Commissioner is concerned to determine whether all income from all sources has been returned by the taxpayer in order to assess its liability to income tax. The Commissioner has been advised that the taxpayer holds one share in WSIL, a company which is incorporated in the British Virgin Islands. The Commissioner has been further advised that the directors of WSIL are non residents of Australia and that the administration centre of the company is located in Hong Kong. In order to obtain further information concerning the activities carried on by WSIL, the Commissioner has made enquiries of the taxpayer but the taxpayer could not provide sufficient information to fully satisfy those enquiries. As WSIL, its directors and its administration centre are all situated overseas, I formed the view that information relevant to the assessment of the taxpayer is within the knowledge of the directors of WSIL, is recorded outside Australia and, that documents relevant to the assessment of the taxpayer are outside Australia. Without the information sought in the notice, the Commissioner is not in possession of full and complete knowledge that would enable him to properly consider the taxpayers liability to taxation. Accordingly, I decided to issue a notice seeking further information and documents pursuant to section 264A of the Act. Statutory Framework 15 Section 264A was introduced into the Act by s 48 of the Taxation Laws Amendment (Foreign Income) Act 1990 (Cth) ("the 1990 Act"). That Act made provision for a system of taxing foreign source income derived in low-tax countries by Australian controlled entities. 16 Section 264A(1) relevantly provides as follows: 264A(1) [Commissioner's request for information or documents] Where the Commissioner has reason to believe that: (a) information relevant to the assessment of a taxpayer is: (i) within the knowledge (whether exclusive or otherwise) of a person outside Australia; or (ii) recorded (whether exclusively or otherwise) in a document outside Australia; or (iii) kept (whether exclusively or otherwise) by means of a mechanical, electronic or other device outside Australia; or (b) documents relevant to the assessment of a taxpayer are outside Australia (whether or not copies are in Australia or, if the documents are copies of other documents, whether or not those other documents are in Australia); the Commissioner may, by notice in writing served on the taxpayer (which notice is in this section called the "offshore information notice"), request the taxpayer: (c) to give to the Commissioner, within the period and in the manner specified in the offshore notice, any such information; or (d) to produce to the Commissioner, within the period and in the manner specified in the offshore information notice, any such documents; or (e) to make copies of any such documents and to produce to the Commissioner, within the period and in the manner specified in the offshore information notice, those copies. 17 A refusal or failure to comply with a request set out in an offshore information notice is not an offence – see s 264A(22). However, ss 264A(10)-(17) provide: "(10) [Commissioner's power re admissibility in evidence] If the taxpayer refuses or fails to comply with the request or requests set out in the offshore information notice, then, except with the consent of the Commissioner: (a) if the information or documents to which the request or requests apply are only relevant to one issue concerning the assessment of taxpayer: (i) where the request, or any of the requests, apply to information – the information is not admissible in proceedings disputing the taxpayer's assessment; or (ii) where the request, or any of the requests, apply to documents – neither the documents, nor any secondary evidence of the documents, are admissible in proceedings disputing the taxpayer's assessment; or (b) if: (i) the information or documents to which the request or requests apply are relevant to 2 or more issues concerning the assessment of the taxpayer; and (ii) the refusal or failure of the taxpayer relates to information or documents that are relevant to any or all of those issues; the following provisions have effect: (iii) where the request, or any of the requests, apply to information – the information, to the extent to which it is relevant to the issue or issues mentioned in subparagraph (ii), is not admissible in proceedings disputing the taxpayer's assessment (iv) where the request, or any of the requests, apply to documents – neither: (A) the documents, to the extent to which they are relevant to the issue or issues mentioned in subparagraph (ii); nor (B) secondary evidence of the documents, to the extent to which the secondary evidence is relevant to the issue or issues mentioned in subparagraph (ii); are admissible in proceedings disputing the taxpayer's assessment. (11) [Matter to be considered by Commissioner] Without limiting the power conferred by subsection (10), where: (a) the taxpayer refuses or fails to comply with the request or requests set out in the offshore information notice; and (b) the refusal or failure of the taxpayer relates to some, but not all, of the information or documents to which the request or requests apply and that are relevant to a particular issue concerning the assessment of the taxpayer; the Commissioner, in exercising that power, must have regard to whether there is reason to believe that, because of the absence of that information or those documents, the remaining information or documents that are relevant to that issue are, or are likely to be, misleading. (12) [Foreign secrecy laws to be ignored] The Commissioner, in exercising the power conferred by subsection (10), must ignore the consequences (whether direct or indirect) of an obligation arising under a law of, or of a part of, a foreign country, in so far as that obligation relates to the secrecy of information or documents. (13) [Where Commissioner must give consent] In spite of anything in this section, the Commissioner must give a consent under subsection (10) in any case where a refusal would have the effect, for the purposes of the Constitution, of making any tax or penalty incontestable. (14) [Notice that Commissioner unlikely to give consent] Where, before the commencement of the hearing of proceedings disputing the taxpayer's assessment, the Commissioner forms both of the following views: (a) the view that the taxpayer has refused or failed to comply with the request or requests set out in the offshore information notice; (b) the view that the Commissioner is unlikely to give a consent under subsection (10) in relation to that request or those requests and in relation to those proceedings; the Commissioner must serve on the taxpayer a notice in writing setting out those views. (15) [Subsec (14) not complied with] A failure to comply with subsection (14) does not affect the validity of a decision under subsection (10). (16) [Reference to refusal or failure to comply] A reference in this section to a refusal or failure of a taxpayer to comply with a request includes a reference to a refusal or failure resulting from the taxpayer being incapable of complying with the request. (17) [Proceedings disputing assessment] A reference in this section to proceedings disputing the taxpayer's assessment is a reference to proceedings before a court or the Tribunal arising out of, or relating to, an objection against the assessment. The Decision at First Instance 18 The primary judge held that the Notice was invalid for three reasons. 19 Although the primary judge thought that the phrase "the assessment of a taxpayer", in s 264A(1), refers to "the whole process of ascertaining the amount of taxable income, rather than the completion of the process by issuing an assessment", he considered the statement provided under s 13 of the ADJR Act did not disclose any adequate factual basis giving reason for the statutory belief. He said: "The width of the notion of relevance and the width of the process of assessment mean that the basis of the respondent's satisfaction as to the nexus between information and assessment does not require a prima facie case as was submitted by the applicant. The respondent is correct in submitting that the threshold is not high, and that the nature of the power is essentially that of inquiry … However, there must objectively be reason for the Commissioner to have the relevant belief. This requires the existence of facts which are sufficient to induce that belief in a reasonable person … There is a statutory threshold. All that the s 13 Reasons amount to is that a taxpayer holds one share out of 10,000 shares on issue in a foreign corporation from which no income has been returned and is unable to provide any meaningful information about that corporation." (Citations omitted.)" 20 Having so found, his Honour added this (at para 20): "There may well be a proper basis for having reason to believe that the application of Part X of the Act might attribute assessable income to a taxpayer, so permitting the exercise of the power granted by s 264A. If so, that basis has not been demonstrated. It is not suggested that the s 13 Reasons can be supplemented by other material to overcome any deficiency in them. In coming to this conclusion, I have taken account of the respondent's point that documents such as s 13 Reasons (as with the Notices themselves) should not be subject to an over-technical or highly critical approach to construction, citing SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 at 370." 21 Secondly, the primary judge held that there was no proper factual basis disclosed to ground a reasonable belief in the existence of all of the information and documents which had been sought. In that regard his Honour said this (at para 29): "Whilst I agree with the respondent's submission that there is no need to know the precise content of information or documents, there must be a factual basis disclosed which enables the necessary reasonable belief to be formed. As the issue of the existence of the information and documents is not expressly dealt with in the s 13 Reasons, or indeed in the Submission, the information and documents sought must so obviously exist as not to require discussion. Whilst I consider this might well be so in relation to some of the information sought, it certainly does not follow in relation to much of it. Items 15 and 16 in the Schedule are the most obvious examples, but I do not know in what form the law requires the corporations in question to keep their affairs or what books and records must be maintained. It is not clear from the s 13 Reasons that the documents called for as items 17, 18, 19 and 20 exist. I do not suggest that my knowledge is the extent of the Commissioner's knowledge. He may well have knowledge of facts which would properly found a belief in the existence of much of that which is sought. However, again, that factual basis has not been disclosed but has been left to inference alone. I cannot draw that inference." 22 Thirdly, the primary judge held that the Notice did not disclose the necessary relationship between the information and documents sought and the matter in respect of which they were sought, applying the decisions of Full Courts of this Court in SA Brewing Holdings Ltd v Baxt (1989) 23 FCR 357 at 370; and Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368. His Honour held that it was not sufficient to satisfy what was described in SA Brewing as the "entitlement disclosure condition" by simply identifying the taxation assessment of a party served with the notice. That link, so his Honour observed, was in any event inherent in the section itself. His Honour held that a sufficiently demonstrated link to Part X of the Act might be seen as an irreducible minimum. 23 The respondent, as applicant at first instance, raised a constitutional challenge to the validity of s 264A. His Honour, having stated that it was unnecessary to decide the constitutional question, indicated that he would have been disposed to follow the decision of Cooper J in FH Faulding & Co Ltd v Commissioner of Taxation (1994) 54 FCR 75, upholding the constitutional validity of s 264A. He did so on the basis that he was not convinced that Cooper J was plainly wrong; accordingly he would have been disposed to follow his decision as a matter of comity. His Honour made it clear that he had not formed any independent view about the matter of validity. THE APPEAL 24 The Commissioner's notice of appeal contained seven grounds. However, his counsel's written submissions grouped those grounds into only three points. Those three points corresponded to the three points upon which the primary judge made rulings. We will deal with the three points in a different order to the primary judge. It seems to us that the third point, which raises a question of construction of the section, logically comes first. 25 In addition to resisting the Commissioner's three points, the respondent continued to rely before us upon other grounds for the invalidity of the Notice which it had put to the primary judge, but which his Honour found it unnecessary to decide. Those included a contention that the respondent was not a "taxpayer" within the meaning of the Act, that the Commissioner had failed to take into account, as a relevant consideration, that the only taxpayer to whose assessment the information and documents could be relevant was the beneficiary under the trust who was presently entitled to its income, namely Western Star Trucks (Australasia) Pty Ltd and that the Notice was ambiguous, too wide and oppressive. We shall deal with those issues separately. 26 The respondent, by its amended notice of contention, contended that s 264A was beyond the legislative power of the Commonwealth, in that it was inconsistent with Chapter III of the Constitution. The entitlement disclosure condition (i) The appellant's point 27 The appellant challenged the primary judge's construction of s 264A as requiring a notice under the section to set out a sufficiently demonstrated link to Part X of the Act and also his Honour's finding that the Notice was invalid because it failed to set out the objective facts which linked the material sought with the assessment. We shall refer to that as "the entitlement disclosure condition". (ii) Appellant's Submissions 28 Counsel for the appellant submitted that there was neither an express nor an implied requirement in s 264A for a notice issued under that section to set out on its face the Commissioner's belief, or the underlying facts on which that belief was grounded. 29 In support of that submission, counsel referred us to the Second Reading Speech in which the Minister Assisting the Treasurer had described the bill for the 1990 Act as a major piece of anti-avoidance legislation authorising the Commissioner to issue an offshore information notice aimed at the timely provision of all the information and documents needed by him to get the full and correct picture of the transactions being examined. Given that policy, the nature of the power and the lack of penal consequences, it was argued no requirement of disclosure should be implied. It would be contrary to the policy reflected in the section to require the Commissioner to disclose what he knew before being allowed to ask for further information. Such a construction would stifle rather than facilitate the process of gathering information relevant to the assessment of a taxpayer. 30 Counsel for the appellant contended that his Honour's reliance on SA Brewing Holdings Ltd was misplaced. Cases under s 155 of the Trade Practices Act 1974 (Cth) are distinguishable because of the generality of the words in that section and the broad range of matters (contraventions) under that Act to which it applies. In contrast, the link between the material sought and the Commissioner's entitlement to request those materials was inherent in s 264A itself. The generality of the word "matter" in s 155 of the Trade Practices Act is to be contrasted with the specificity of the words "assessment of a taxpayer" in s 264A of the Income Tax Assessment Act. Moreover, in Pyneboard the Court expressly based its decision on the fact that a refusal or failure to comply with a s 155 notice was a punishable offence. 31 Counsel pointed out that, in relation to s 264 of the Act, it is sufficient to refer to a person's income or assessment: Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499 at 528, 537, 541-542 and 547. They argued that the High Court's reasoning in that case should be applied to s 264A. (iii) Respondent's Contentions 32 Counsel for the respondent submitted that, in view of the serious evidentiary sanctions arising under s 264A(10), a notice has to be clear and unambiguous. Assuming, contrary to the respondent's submission, that the respondent or The Peabody Family Trust No. 2 could be a "taxpayer", counselsubmitted that the Notice was uncertain in that it failed to indicate any basis upon which the information and documents might be relevant to the assessment of the Trust under the Act for the years of income ended 30 June 1994 to 30 June 1997. Counsel contrasted the Notice to that issued in Faulding. They submitted that s 264A should be construed in a similar manner to the construction applied to s 155 of the Trade Practices Act in Pyneboard and SA Brewing. That approach would require that a notice identify with precision the connection between the information and documents that are sought and the assessment of the taxpayer. Counsel contended that the primary judge had correctly applied the principles in the s155 cases to s 264A. 33 Counsel for the respondent also submitted that the evidentiary sanction supported the view that the Parliament intended s 264A to be construed as imposing an entitlement disclosure condition similar to that required in respect of a notice issued under s 155 of the Trade Practices Act. They said it is important that a recipient of a notice under s 264A be informed as to the nature of the risk which it would face in failing to comply with it. The fact that s 264A did not have penal consequences was, so it was put, not to the point. The evidentiary sanction was both serious and adverse. (iv) Our Reasoning 34 The task at hand is, of course, to construe s 264A. The section does not contain an express requirement that any notice issued under it must contain an entitlement disclosure condition. The question is whether such a condition should be implied. 35 In our view, and with due respect to the primary judge, no such condition should be implied into s 264A. 36 We think that there are relevant distinctions between s 264A of the Income Tax Assessment Act and s 155 of the Trade Practices Act. 37 First, s 155 is concerned with a "matter" involving a contravention of the Trade Practices Act. There are many contraventions which might arise under that Act. That fact necessitates the implication of an entitlement disclosure condition in any notice issued under s 155. But s 264A of the Income Tax Assessment Act is only concerned with information and documents "relevant to the assessment of a taxpayer". 38 Secondly, the basis upon which the condition was implied in Pyneboard is absent in the present context. The implication in Pyneboard was expressed as being based on the circumstances that refusal or failure to comply with a notice issued under s 155 was punishable by imprisonment or fine (see p 374). 39 We acknowledge that the evidentiary exclusion in s 264A(10) may, on occasion, be a very serious matter. Accordingly we would not distinguish the s 155 cases solely on this basis. 40 There is, perhaps (as Mr A Robertson SC, senior counsel for the appellant pointed out), some irony in the fact that the Full Court in Pyneboard relied upon the decision of the High Court of Australia in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499, a case which related to notices issued under s 264 of the Income Tax Assessment Act. It is clear from the statements of Gibbs ACJ at 525 and 528 and Mason J at 537 and 535 in that case, that it is sufficient for the purposes of a notice issued under s 264 that the notice refer to a person's income or assessment to show that the notice is within the power conferred by that section. See also Jacobs J at 541-542 and Murphy J at 547. We see no relevant distinction between the provisions of s 264 and s 264A on the question of the entitlement disclosure condition. In our view, the approach taken in Australia and New Zealand Banking Group Ltd should be applied to the present matter. Accordingly we hold that it is sufficient, for the purposes of s 264A, simply to identify the taxation assessment of a party served with a notice under that section. 41 In oral submissions, senior counsel for the respondent suggested that there might be some symmetry between subsections 264A(1) and (10), whereby it is necessary in a notice under s 264A(1) to identify the issues that will arise later under subs (10). However, the two subsections deal with different stages of the process. The first stage involves a request for information or documents. It can be seen as an investigation stage. Subsection (10) applies at the later stage when an assessment has been made and proceedings have been instituted in a court or tribunal to dispute that assessment. At that later stage, the issues between the parties may be different from the issues (if any) existing at the investigation stage. The subsection then renders inadmissible information and documents relevant to issues concerning that assessment which were previously requested but not provided. Subsection (1) should not be read in such a way as to require the Commissioner, at the investigation stage, to identify issues which may or may not arise much later when an assessment is made and is under challenge. There is nothing in the section or the statutory context to justify such an approach. Adequate factual basis for the belief (i) Appellant's Contentions 42 Counsel for the appellant accepted that the words "reason to believe" required that the Commissioner have an actual belief and there must be objective circumstances which showed that belief to be based on reasonable grounds. The words "relevant to the assessment of a taxpayer" meant, so it was submitted, no more than that the information or documents had a bearing upon or were connected with the taxpayer. The Commissioner was not bound to accept information already provided to him by the taxpayer. The primary judge's approach would require the Commissioner to form a belief on reasonable grounds not only as to the existence and location of information or documents relevant to ascertaining the taxpayer's taxable income (if any), but also that such information or documents were relevant to any notice of assessment which might result from that process. It was, so it was put, contrary to the proper construction of s 264A for the Commissioner to be required to anticipate the end point of the process of inquiry and investigation upon which he was engaged. 43 Further, counsel submitted that the primary judge appeared to have assumed that Part X of the Act applied only where the relevant Australian taxpayer had 100% control of the foreign company. That was a misconstruction of s 340 which, broadly speaking, defines a controlled foreign company as one where five or fewer Australian residents owned or were entitled to acquire 50% or more of the interests in the company being both direct and indirect interests of the resident and those of the resident's associates, or if those five or fewer residents had actual control of the company, regardless of their shareholding. It was sufficient that the Trust held one share in a foreign company and that the Commissioner's investigations to the point of deciding to issue the Notice were not conclusive as to the identity of the other shareholders. 44 Counsel for the appellant contended that the primary judge erred in assuming that the material on which he should base his judgment was confined to the statement of reasons given under s 13 of the ADJR Act. Those reasons, so the appellant submitted, were merely evidentiary. (ii) Respondent's Contentions 45 Counsel for the respondent submitted that the only material taken into account by the delegate as the basis for his reason to believe the matters referred to in s 264A(1) were: · The respondent's income tax returns for the years ended 30 June 1994 to 1997; · The letters dated 19 January 1999 and 11 February 1999 from the appellant to the respondent; and · The letters dated 29 January 1999 and 22 February 1999 from the respondent to the appellant. 46 Counsel contended that the s 13 Statement did not disclose that the delegate had reason to believe that the particular information and documents referred to in the Notice satisfied the condition specified in paragraph (a) or (b) of s 264A(1). The statement of reasons revealed no information or other material before the delegate upon which he could properly have had reason to believe that those conditions were satisfied in relation to the particular information and documents sought by the Notice. (iii) Our Reasoning 47 As can be seen from the above, it is common ground between the parties that, for the Notice to be valid, it was necessary for the Commissioner (or his delegate) subjectively to hold the relevant belief and also for there to be an objective reason for that belief. In relation to the latter requirement, the primary judge referred to the submission of 2 March 1999 and the statement of reasons given under s 13 of the ADJR Act, and said (at par 19): "The contrast between the Submission … and the s 13 Reasons is instructive. The Submission gives a rational, albeit very general, argument for issue of the Notice and includes material – both of fact and opinion, not included in the s 13 Reasons. Even so, the Submission is deficient in not stating any grounds or factual basis at all for the belief that the Trust has 100% control of the company, which is the fulcrum upon which the matter turns. An unsourced belief cannot be enough to induce the 'reason to believe' required by the section." 48 In our respectful opinion, his Honour was too restrictive in his construction of s 264A. In our view there was no need for the Notice to identify an issue arising under Part X. All that the section requires is that the information and documents sought are relevant to the assessment of a taxpayer, that is to say, in the words of the primary judge, "the whole process of ascertaining the amount of taxable income". 49 Although s 264A was introduced into the Act, by the 1990 Act, simultaneously with the introduction of Part X, we can see no reason for confining its scope to requesting off-shore information which may subsequently be relevant to the application of that Part. 50 Even if the scope of the section were so limited, we consider that there was an adequate factual basis for the statutory belief. The appellant knew that the respondent held a share in a foreign company. The identity of the other shareholders and the question of who controlled the company were, in our view, clearly relevant to whether that company was a controlled foreign corporation, which in turn was relevant to the assessment of the respondent (putting to one side for the moment whether the respondent was a relevant taxpayer or whether that factor had been taken into account). 51 We do not think that the Court is confined to the appellant's statement of reasons under s 13 of the ADJR Act when assessing whether there was an adequate factual basis for the statutory belief. In our view, any information which was actually or constructively before the decision-maker may be taken into account when making that assessment. That would include the submission of 2 March 1999. Belief in the existence of all of the information and documents (i) Appellant's Contentions 52 Counsel for the appellant submitted that as a matter of construction, it was not necessary that the delegate should have reached the appropriate belief as to each item of information and each document sought. Section 264A referred generically to "information" and "documents" and then referred back to "any such" information or documents. The words "any such" limited the information and documents requested to information and documents falling within the class of documents or information that the Commissioner believed on reasonable grounds were located overseas and were relevant to the assessment of the taxpayer. Counsel contended that the approach of the primary judge was inconsistent with the purpose of the section, which was to confer a wide information-gathering power, the only sanction for non-compliance being a possible inability on the part of the taxpayer to make use of documents or information falling within the terms of the Notice in later proceedings challenging a notice of assessment. All that was necessary was a belief, and an objective basis for that belief, that information or documents relevant to the assessment of the taxpayer were outside Australia and that the information and documents requested were within that class. (ii) Respondent's Contentions 53 Counsel for the respondent submitted that the primary judge had correctly interpreted s 264A(1) by applying an ordinary grammatical reading. The references to "such information" and "such documents" in para (c), (d) and (e) of s 264A(1) related back to the "information" and "documents" identified in paras (a) and (b) of that subsection. 54 Counsel contended that it would be inappropriate for the evidentiary sanction to operate in respect of particular information and documents which have not been the subject of a properly formed statutory belief. (iii) Our Reasoning 55 The primary judge noted that the Commissioner conceded that the words "any such" in paras (c) and (d) of s 264A(1) limit the information and documents requested to information and documents falling within the class of documents or information which the Commissioner believed, on reasonable grounds, were located overseas and were relevant to the assessment of the taxpayer; although counsel for the Commissioner had submitted to him that the Commissioner need have no belief as to the form or precise content of the information or documents. However, his Honour preferred the submission of Pilnara that the Commissioner (or his delegate) must reach the appropriate belief as to each item of information and each document sought. He found that there was no disclosed factual basis of a reasonable belief in the existence of each of the items of information and documents which had been sought. 56 In our view, there is nothing expressed or implied in s 264A which requires the Commissioner to believe in the existence of each item of information and each document which he seeks. It is necessary that the Commissioner have a belief as to each of the elements specified in para (a) or (b), as the case may be; but, if so, it is sufficient for the Commissioner to request the production of such information and/or such documents as fall within the relevant paragraph or paragraphs. 57 We add that, having examined the list of information and particular documents sought, and assuming, in the absence of evidence to the contrary, that the relevant foreign law is the same as Australian law, objectively speaking the information or documents are such as would be expected to exist. IDENTIFICATION OF THE RELEVANT "TAXPAYER" (i) The respondent's point 58 Counsel for the respondent pointed out that s 264A(1) requires the Commissioner to have reason to believe that the information and documents requested are "relevant to the assessment of a taxpayer". In the Notice it was stated that the Commissioner had reason to believe that the information and documents were relevant to "the assessment of The Peabody Family Trust No. 2" for the 1994 to 1997 years of income. 59 The respondent's point was that The Peabody Family Trust No. 2 was not a "taxpayer" within the meaning of that expression as defined in s 6(1) of the Act for the purposes of s 264A(1). Only the trustee of the Trust, or a beneficiary thereunder, could be a "taxpayer". 60 Counsel for the respondent also relied upon evidence of resolutions passed by the trustee of the Trust in each of the relevant years, to the effect that any "net income" of the Trust was distributed to a company called Western Star Trucks (Australasia) Pty Limited. Counsel submitted the Commissioner should have concluded from that material that the respondent would not be the person liable to be assessed on the income of the Trust in those years. It followed, said counsel, that the decision to issue the Notice should be set aside; the Commissioner had failed to take into account a relevant matter, namely, whether the respondent, as trustee of the Peabody Family Trust No. 2 could be liable to any income tax which might become the subject of an assessment as a result of information forthcoming as a result of the notice, or to put it another way whether the respondent was a person liable to pay tax on the net income of the identified trust estate. (ii) Our Reasoning 61 At the heart of the submission lie the provisions of Division 6 of the Act, and in particular s 96, which provides that, except as stated in Division 6 a trustee of a trust estate is not liable to income tax upon the income of the trust estate. 62 The scheme of Division 6 is, for present purposes, simple to explain where the trust estate is not a non resident trust estate. It is not suggested that the Peabody Family Trust No. 2 is a non-resident trust estate. Essentially, the question whether a trustee of a trust estate will be liable to tax depends upon two factors. The first is whether in respect of any part of the income of the trust estate there is no beneficiary presently entitled. The second, where in respect of the income of the trust estate there is a beneficiary presently entitled, is the question whether that beneficiary is under a legal disability. 63 Where there is a share of the income of the trust estate to which there is a beneficiary presently entitled, that beneficiary will be assessed and liable to pay the tax in respect of "that share of the net income of the trust estate", unless that beneficiary is under a legal disability: s 97. In consequence the trustee is not liable to pay tax in respect of that share. 64 Where there is a share of the income of the trust estate to which a beneficiary is presently entitled, but that beneficiary is under a legal disability, the trustee is liable to pay tax in respect of "that share of the net income of the trust estate": s 98. 65 Where there is a share of the income of the trust estate to which no beneficiary is presently entitled, then, and in respect of "that share of the net income of the trust estate" it will be the trustee who is assessed and liable to pay the tax. 66 It follows from the above principles that, before it is possible to conclude that any information or document the subject of a s 264A notice may be relevant to the assessment for tax of a trustee, it is necessary for the Commissioner to consider whether there is any part of the income of the trust estate to which no beneficiary is presently entitled, or, if there is any beneficiary who is presently entitled to the income of the trust estate, whether that beneficiary is under a legal disability. There is no suggestion in the statement of reasons provided by Mr Sonter that he gave any consideration to this matter. Yet, unless he did so he could not properly form the opinion that any information or document might be relevant to an assessment of Pilnara as trustee of the trust estate. 67 Reliance was placed upon resolutions of the directors of Pilnara made in each of the four income years in question. These resolutions were forwarded to the Commissioner in response to a request to supply them dated 27 October 1998. The resolutions were in identical form, other than the date they bore. Relevantly they read as follows: "DISTRIBUTION OF INCOME FOR THE YEAR It was resolved that the net income of the trust, if any, for the year ended 30 June 1997 be distributed as follows:- To Western Star Trucks (Australasia) Pty Ltd – 100% DEFINITION OF INCOME Income is calculated on the basis of taxable income in accordance with the provisions of the Income Tax Assessment Act 1936, as amended." 68 The tax returns lodged for the trust disclosed no income derived in any of the years of income ending 30 June 1995-7. It is possible that there was some foreign income derived in the year ending 30 June 1994. None of the tax returns suggested that there had been any distribution to any beneficiary. The trust deed itself is not in evidence in the proceeding. The evidence does not indicate whether a copy was in the possession of the Commissioner, although it is common practice for a copy to be provided with the first tax return of a trust. 69 The resolutions are curious, referring, as they do, to a distribution of "taxable income". Taxable income is the result of a calculation which requires the ascertainment of assessable income and the deduction therefrom of allowable deductions. While income capable of being sued for (or, as Kitto J described it in Union-Fidelity Trustee Co of Australia Ltd v Federal Commissioner of Taxation (1969) 119 CLR 177 at 188 "present title in possession to a share of the income of a trust estate") and thus capable of being the subject of present entitlement is included within assessable income, there are many examples of amounts which are made assessable income by virtue of the Act which are not capable of being the subject of present entitlement. Attributable income arising from the controlled foreign company provisions is one example. Such income is attributed to a shareholder (who may be a trustee) for taxation purposes precisely because it has not been the subject of a dividend to that shareholder but has been retained by the corporation. It could never be sued for in the year of income or be capable of present entitlement in any beneficiary of a trust who was a shareholder in the foreign controlled corporation. 70 Should the result of an inquiry reveal that there is attributable income which is to be included in the computation of "net income" under s 95 of the Act in a year of income, there would arise a discrepancy between the result of the computation of "net income" and the calculation of the income to which a beneficiary could be presently entitled pursuant to the provisions of the trust deed. That problem has been the subject of a number of decisions in this Court, the most recent of which is the decision of Sundberg J in Zeta Force Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 70. 71 The view which has attained most support is the so called "proportionate view". Under this approach it is first necessary to determine whether any of the trust law income is the subject of present entitlement in a beneficiary or beneficiaries and then to include in the assessable income of that beneficiary or those beneficiaries the whole or the same share of the net income for tax purposes. On this view if, for example, Western Star Trucks (Australasia) Pty Ltd was presently entitled to the whole of the trust law income, then the whole of the net income would be included in that company's assessable income pursuant to s 97 and there would be no liability to tax capable of arising in the trustee. If Western Star Trucks (Australasia) Pty Ltd was presently entitled to half the trust law income, then half the net income would be included in that company's assessable income pursuant to s 97. Liability in respect of the other half would depend on whether or not some other beneficiary was entitled to it. 72 The alternative view would include only so much of the net income for tax purposes in the assessable income of a beneficiary as that beneficiary was actually presently entitled to and assess for tax any other part of the net income to the trustee as being income to which no beneficiary is presently entitled. 73 As has been pointed out on more than one occasion, neither construction of Division 6 is satisfactory from a policy perspective. The problem is made even more difficult where there is no income at all derived by a trust in a year of income which is capable of being distributed to a beneficiary but there is an amount included in the net income of the trust estate which is incapable of distribution, such as attributed income of a foreign corporation. That is a problem that has never been addressed by the cases. It may be that in such a case the proportionate view can not operate, for despite a resolution of the kind here, there being no trust law income there can never be a beneficiary of whom it can be said that that beneficiary is presently entitled to the income of the trust estate. So, it may be, that in such a case it is the trustee and the trustee alone who would be liable to tax, whichever view is taken of the two alternative approaches. 74 We do not think it appropriate in the present case to express a view as to the correctness of the proportionate approach as adopted by Sundberg J in Zeta Force for the matter was not fully argued before us. Nor would it be possible to resolve the question without reference to the trust deed. In so saying we would not wish it to be thought that we cast doubt on the correctness of Zeta Force. We also do not think it appropriate in the present case to seek to decide the difficult question of how Division 6 would operate where there was no trust law income in a year, but there was some amount included in the net income of the trust estate, for that is a question which has not yet arisen for decision. 75 Although we do not decide the matters just mentioned, we mention them to make the point that, where a s 264A notice is to be issued to the trustee of a resident trust estate, it is imperative that consideration be given to the question whether it is possible that the trustee will be the person liable for any tax that may be assessed on any income which may be revealed by responses to that notice. If the case is one where the trustee is incapable of being assessed for tax the notice would necessarily be invalid; it would not relate to the assessment, as a taxpayer, of the trustee. In the present case, it seems to be clear that this matter was not considered by the delegate. 76 Counsel for the Commissioner submitted this issue was not raised by Pilnara in its application, or its response to the Commissioner's request for particulars, nor was it a matter argued before the primary judge. There is some substance in the submission. The application refers in general terms to the delegate's failure to take into account relevant matters. However the particulars given in the application and in response to a request from the Commissioner's solicitor, hardly made clear that this question was to be argued. The matter was obliquely raised before the primary judge, as is clear from a perusal of the written submissions put before his Honour and the transcript of argument; although it seems the argument was rather put on the basis that, as a result of the resolutions, Western Star Trucks (Australasia) Pty Ltd was the only person who could be assessed to tax on any amount which might ultimately be found to be included in the net income of the trust estate in any relevant year as a result of the inquiries which the Commissioner wished to make. That submission is not necessarily correct as the above discussion makes clear. The true issue is the failure of the delegate to direct any attention to the question whether Pilnara could have any liability to tax under Division 6 of the Act in the light of the trust deed and the resolutions which purported to be made pursuant to it. 77 We think, in this case, the Commissioner might well have been able, and still be able, to establish whether the respondent could be the relevant taxpayer by giving consideration to documents already in Australia i.e. without issuing an offshore information notice. Given the potential effort and expense in complying with an offshore information notice (and the evidentiary exclusion for even involuntary non-compliance), it is not asking too much to expect the Commissioner to resolve that question before issuing a s 264A notice, perhaps by calling for documents within Australia, if not already to hand, or perhaps by obtaining them pursuant to a notice issued under s 264. 78 We are of the opinion that for this reason the decision to issue the notice was infected by error and in consequence the notice should be set aside. OTHER MATTERS RAISED BY THE RESPONDENT 79 The respondent raised five further matters. We shall summarise each of them and then deal with them en bloc. (i) The use of the word "require" 80 Counsel for the respondent submitted that the Schedules to the Notice purport to "require" the provision of information and documents and, for that reason, the Notice was beyond power, because the section only authorised the Commissioner to "request" the provision of information and documents. (ii) Uncertainty 81 Furthermore, the Notice, so it was submitted, was ambiguous and void for uncertainty in respect of the following matters: (a) it required a conversion into Australian dollars of the value of various assets and liabilities, but failed to indicate dates for that conversion; (b) it required conclusions of law as to whether activities were conducted "on behalf of" a company, whether shares in that company were "held on trust or on behalf of another party" and the ascertainment of the "beneficial owners of the shares"; (c) it required the classification of various kinds of income; (d) it required the identification of "gross income" and "whether of a revenue or capital nature"; (e) it required the identification of the "source" or "such income" in the sense of the identity of the person "from whom the income was derived"; and (f) it required the identification of interest both "direct or indirect" held by WSIL in other entities. (iii) The Width of the Notice 82 Counsel for the respondent submitted that in so far as the Notice requested or required the provision of "information", it did not seek information which resided in the minds of persons outside Australia or which was recorded or kept outside Australia. Instead it sought different information, namely the formulation by the respondent, in answer to the questions, of conclusions (whether of fact or law or mixed fact and law) to be drawn from the information identified by the section. The Notice was drawn in terms which requested or required the respondent to bring new information or documents into existence. For example, the Notice purported to require a valuation in Australian dollars and a chart. Section 264A did not authorise such a requirement: Fieldhouse v Deputy Commissioner of Taxation (1989) 25 FCR 187 at 194-5. (iv) Oppression 83 Counsel for the respondent submitted that the Notice was oppressive in requesting the provision of a substantial range and scope of information and documents, having regard to: · the fact that the respondent held only one out of 10,000 shares on issue in WSIL; · the appellant's acknowledgment that the information was all in the minds of persons overseas or was there recorded or kept; · the evidentiary sanction. 84 Counsel said the Commissioner had accepted that the respondent did not have the information or documents, but, had given no consideration as to how the respondent could obtain the information and documents from the persons who may have had them and who may have not been the same person in every case. There was nothing in the s 13 statement which indicated that the delegate gave any consideration to the impact of the request on the respondent and the respondent's ability to comply with it. (v) The place at which the information and documents were to be provided 85 The respondent submitted that the Notice was invalid because it was addressed to the respondent in Queensland and purported to require it to furnish the information and documents in Sydney. Section 264A was to be construed as containing an implication that the taxpayer should be in a position to comply with the Notice on the day on which he receives it. Our Reasoning 86 We do not think that there is substance in any of these points. We note that the word "request" was used in the main part of the Notice although the word "require" appeared in the Schedules. It seems to us to be clear that the word "require" was used in the sense of being needed rather than as a command. 87 Nor do we see ambiguity in the various matters such as conversion into Australian dollars and the like, set out above. The relevant dates are sufficiently identified in the Notice. There is no ambiguity in asking whether activities were conducted "on behalf of" a company, whether shares in that company were "held on trust or on behalf of another party" and seeking to ascertain the "beneficial owners of the shares". Similarly, in relation to the rest of the particularised complaints, we consider that what the Commissioner asked for is sufficiently clear. 88 We reject the submission that the Notice was too wide in the manner contended for by the respondent. It is not a ground of invalidity that the Notice requested valuations in Australian dollars, given that the relevance of that information was not, for the purposes of the argument, in issue. 89 The notice does seek information in the form of a chart illustrating the ownership structure of all entities in which WSIL holds a direct interest, including the relative percentage interest held by WSIL in each of those entities. In our opinion, when s 264A confers a power on the Commissioner to request the taxpayer to give information "… in the manner specified in the offshore information notice" it authorises a request that the information referred to above be given in the form of a chart. 90 As to oppression, it may well be that compliance with the Notice would involve considerable effort. But, in our view, so long as the Notice otherwise complies with the requirements of s 264A, oppression would not be a basis for invalidating it. The respondent has the choice of either complying with the statutory request or facing the consequences envisaged by subsection (10). This submission does not raise a ground of review. 91 As to invalidity said to arise out of the requirement that the information and documents be furnished in Sydney, we see no basis for the implication that the taxpayer should be in position to comply with a notice on the day on which he receives it. 92 In these days of instantaneous communication by fax and e-mail, and the availability of other means of rapidly conveying information and documents from one part of Australia to another, we do not think that it was impermissible for the appellant to address the Notice to the respondent in Queensland and require compliance with it by the furnishing of information and documents in Sydney. THE CONSTITUTIONAL ISSUE 93 In summary, the respondent contended that s 264A(10) was constitutionally beyond power for two reasons. First, because it was said to vest judicial power in the appellant. Secondly because, so it was put, the subsection perverted the exercise of judicial power by the Courts in two respects (requiring matters to be determined on false factual premises and by denying procedural fairness). The respondent submitted that s 264A(10) could not be read down to apply only to proceedings in the Administrative Appeals Tribunal. It was completely invalid. Furthermore, the subsection could not be severed from the remainder of s 264A with the result that the whole section was invalid. 94 As we have decided that the Notice should be set aside because the Commissioner failed to take into account a relevant consideration (whether the respondent was a person liable to pay tax on the net income of the identified trust estate), there is no need for us to resolve the constitutional issue. It would be undesirable for us to give an opinion by way of obiter dicta on such a matter. We shall not do so. Conclusion 95 For the foregoing reasons, the appeal should be dismissed, at least substantially. However, having regard to the fact that the only established ground of invalidity is one that was not squarely raised below, there is a question whether the Commissioner ought to be ordered to pay the whole of Pilnara's costs. For that reason, we will not make any formal order at this stage. If Pilnara seeks a costs order, in respect of either the proceedings before the primary judge or in respect of the appeal, it should notify the Court of the desired order, and lodge a submission in support, by 17 January 2000. The Commissioner should respond by 31 January 2000. The Court will consider any material lodged and then make formal orders. I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Dated: 22 December 1999 Counsel for the Appellant: Mr A Robertson SC with Mr S Gageler Solicitor for the Appellant: Australian Government Solicitor Counsel for the Respondent: Mr D H Bloom QC with Mr B J Sullivan SC and Mr G R Kennett Solicitor for the Respondent: Messrs Baker and Mackenzie Date of Hearing: 22 and 23 November 1999 Date of Judgment: 22 December 1999