Wilhelm v McKay [2005] FCA 792

FEDERAL COURT OF AUSTRALIA

Wilhelm v McKay [2005] FCA 792

ADMINISTRATIVE LAW – judicial review – amendment – discovery – objection to competency Administrative Decisions (Judicial Review) Act 1977 (Cth) Crimes Act 1914 (Cth), s 3E Judiciary Act 1903 (Cth), s 39B Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 cited Hart v Deputy Commissioner of Taxation (2002) 49 ATR 656 applied Lego Australia Pty Ltd v Paraggio (1994) 52 FCR 542 cited Melbourne Home of Ford Pty Ltd v Trade Practices Commission & Bannerman (1979) 36 FLR 450 applied Nestle Australia Ltd v Federal Commissioner of Taxation (1986) 10 FCR 78 applied Preston, In Re [1985] AC 835 cited Salerno v National Crime Authority (1997) 75 FCR 133 cited WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 applied OTTO HEINRICH WILHELM, MICHAEL PERRY DEMPSEY, MARKIT PTY LTD and URINDA PTY LTD v WILLIAM JOSEPH MCKAY and KELLIE NADINE JILANI QUD 154 of 2004 FINKELSTEIN J 15 JUNE 2005 MELBOURNE (via video link to Brisbane)

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 154 of 2004

BETWEEN: OTTO HEINRICH WILHELM,

MICHAEL PERRY DEMPSEY,

MARKIT PTY LTD and

URINDA PTY LTD

Applicants

AND: WILLIAM JOSEPH MCKAY and KELLIE NADINE JILANI

Respondents

JUDGE: FINKELSTEIN J

DATE: 15 JUNE 2005

PLACE: MELBOURNE (via video link to Brisbane)

REASONS FOR JUDGMENT 1 These applications for interlocutory relief were heard by Cooper J. Following his untimely passing, the parties agreed that the case be disposed of "on the papers" and by another judge. To understand the skirmishing that gives rise to the applications (leave to amend the application for review, request for discovery and an objection to competency) it is best to begin with the facts, to the extent that they are known. Two companies, the third applicant (Markit Pty Ltd) and the fourth applicant (Urinda Pty Ltd), were indebted to the Commissioner of Taxation for tax instalments and superannuation. A Deputy Commissioner instituted two actions in the District Court of Brisbane, one against the first applicant (Wilhelm) and the other against the second applicant (Dempsey), at the relevant times directors of the two companies, claiming from them (so it seems) the unpaid tax instalments and superannuation. The basis for each claim has not been identified and the pleadings were not tendered. Before the actions came on for trial, each company went into administration and in due course its creditors approved a deed of company arrangement. It is likely (I say "likely" as the deeds have not been produced) that the effect of each deed is to compound the claims of all creditors, including those of the Commissioner. A Deputy Commissioner of Taxation then took proceedings in the Supreme Court of Queensland (one proceeding for each company) to set aside the deeds. 2 On 7 July 2004 the three proceedings were compromised on terms contained in a deed styled "Deed of Settlement". By this deed the directors agreed to pay $600,000 to the solicitors on behalf of the Commissioner (Blake Dawson Waldron) in payment of the costs incurred by the Commissioner in the proceedings, the unpaid tax instalments and superannuation, the penalties imposed upon Markit and Urinda and, finally, interest on those amounts. On receipt of this sum the Commissioner was to discontinue the proceedings and release the companies and directors from any liability in respect of the unpaid instalments, superannuation, penalties and interest. Importantly for present purposes, the deed provided that upon service of the notices of discontinuance, the applicants or their solicitors (Clayton Utz) could collect from Blake Dawson Waldron all documents (originals and copies) held by them which were the property of the applicants. 3 Immediately after the execution of the deed the directors paid $600,000 to Blake Dawson Waldron and in return received duly signed notices of discontinuance. Early the next day officers of the Australian Federal Police executed a search warrant at the offices of Blake Dawson Waldron and seized the documents that were to have been returned to the applicants. The suspected offences stated in the warrant were that on two occasions the first applicant and the second applicant by a deception dishonestly obtained a financial advantage from the Commissioner contrary to s 134.2(1) of the Criminal Code (contained in the Criminal Code Act 1995 (Cth)). The second respondent, Ms Jilani, an officer in the AFP, in a letter to the applicants' solicitors dated 14 July 2004, stated that the warrant was executed on behalf of the Australian Tax Office and that this was the "only interest" the AFP had in the applicants. She later told the applicant's solicitors that the AFP had no interest in the applicants and that there was no ongoing investigation into their conduct. 4 The application for review seeks to review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth) the decision of the first respondent (a Magistrate) to issue the search warrant under s 3E of the Crimes Act 1914 (Cth) and the decision of the second respondent "to swear on information that she had reasonable grounds for suspecting that each of the applicants had committed offences against the laws of the Commonwealth". While stated somewhat briefly, the principal grounds for the application are, in substance, these. First, that the second respondent, who the applicants believed had sworn the information, had falsely stated that she had reasonable grounds for suspecting the commission of the offences mentioned in the warrant. Second, that the decision to apply for the warrant was for an improper purpose, namely not for an investigation into offences specified in the warrant, but to provide the documents to the ATO for its purposes. Third, the second respondent had obtained the warrant at the behest of officers of the ATO. This last ground raises several issues, not articulated in the application but identified by counsel during the course of his submissions. The issues are: (a) Does the ATO have power to conduct an investigation into the stated offences? (b) If the ATO was conducting such an investigation, was it entitled to request the AFP to issue a warrant for documents that would assist the investigation? (c) Was the AFP permitted to provide to the ATO documents seized under a warrant; and, probably, (d) Should any of these matters have been disclosed to the Magistrate? 5 Following service of the application for review the second respondent filed an affidavit in which she acknowledged that "[s]hortly prior to 7 July 2004" she had received a request from an officer of the ATO to obtain and execute the search warrant, that she satisfied herself that there was sufficient grounds to make the request and that she then applied for the warrant on 7 July 2004. She also acknowledged that following the execution of the warrant the seized documents were handed to an officer of the ATO. 6 There are three interlocutory applications that must be resolved. The first is an objection to competency. The second respondent asserts that the Federal Court has no jurisdiction to try the application for review of the decision by the second respondent to swear the information. It is said that this decision is not a decision to which the Administrative Decisions (Judicial Review) Act applies, in that it is not a decision made "under an enactment". In this connection the second respondent relies upon Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 335-338. 7 There are several reasons why the objection to jurisdiction should be put to one side quite apart from the fact that it seems to ignore the Full Court decision in Salerno v National Crime Authority (1997) 75 FCR 133. First, now that the applicants know the facts they wish to amend the application for review and seek review of the second respondent's decision to apply for the warrant rather than her decision to swear the information. In addition they wish to review certain conduct of the second respondent, namely her application for and execution of the warrant, her taking possession of the documents and delivering them to the ATO. They seek an amendment to permit them to raise these matters. I suppose the same objection to jurisdiction might be taken in respect of the decision to apply for the warrant and the other conduct which has been described. But even if the decision and conduct are beyond the reach of the Administrative Decisions (Judicial Review) Act they do not fall outside s 39B of the Judiciary Act. Thus, if the amendments are allowed the decision and conduct can be reviewed. 8 This brings me then to the first substantive dispute. The second respondent says that the proposed amendments should not be allowed because they amount to no more than "un-particularised assertions of misconduct" suggesting "that the whole action is speculation and of a 'fishing' nature." 9 What I am about to say in dealing with this submission is not to be taken as a view about the merits of the case: I have no view about the merits. On the other hand, I have formed a very clear view that this is a case that should be allowed to go forward. The starting point is the fact that the ATO had agreed to give back all the documents held by its solicitors (both original and copies). From this it may be inferred that at least as at 7 July 2004 the ATO no longer had any need for the applicants' documents. If it needed the documents it would not have agreed for them to be returned. This is not to say that the ATO had never conducted an investigation into whether any of the applicants had committed the offences mentioned in the warrant. It is to suggest that the investigation (if there was one) had come to an end by 7 July with the settlement of the three actions. If this be so the warrant should not have issued because the investigation was over. 10 There is, I suppose, another possibility. It is that the ATO only agreed to give back the documents to achieve a settlement of the actions but it always intended to arrange for the search warrant to avoid handing over the documents. What effect this would have on the terms of settlement is not a matter that will arise on this application. But, if this is what really happened, it may be the basis of a challenge to the decisions to obtain and issue the warrant on the ground of bad faith or unfairness as suggested in In Re Preston [1985] AC 835. See also Lego Australia Pty Ltd v Paraggio (1994) 52 FCR 542. 11 As regards the allegation that the AFP did not have power to assist an investigation conducted by the ATO by issuing a search warrant and handing over the seized documents, it will be necessary to examine closely the legislation that established and regulates the conduct of the AFP and that which empowers the ATO. The parties have not undertaken that task. They have not even referred to the relevant legislation which would include, so far as I can tell, the Australian Federal Police Act 1979 (Cth) and the Taxation Administration Act 1974 (Cth). Be that as it may, in the absence of some attempt by the second respondent to demonstrate that it was proper for the AFP to exercise its powers in furtherance of an investigation being conducted by another Commonwealth agency, I am not prepared to infer that this part of the application is "fishing". 12 It follows from what I have said that the proposed amendments should be allowed. 13 This then brings me to the request for discovery. The applicants seek documents relating to the request for and the issuing and execution of the warrant and the swearing of the information, as well as the record of seizure and the receipt given by the ATO in relation to the seized documents. 14 For a long time discovery was not available in applications for judicial review. It was not until the 1970s that it came to be accepted that this restriction was calculated to cause injustice to persons who had no means of ascertaining whether an administrative decision-maker had made a decision adversely affecting them for reasons which were wrong in law and rendered their decision liable to review. With the intervention of parliament and the adoption of new rules of court, the restrictions have been removed. It is now commonplace for discovery to be allowed in applications of this kind. The result has been most beneficial. Bad decisions can now be set aside because the judge can get to the truth. 15 I do not mean to imply that an order for discovery will be made in every application for judicial review. Sometimes discovery is simply unnecessary. Sometimes the application for review will be essentially speculative in nature in which case it would be wrong for the court to assist the applicant in a "fishing" exercise: Melbourne Home of Ford Pty Ltd v Trade Practices Commission & Bannerman (1979) 36 FLR 450, 460; WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175, 182, 190-191. On the other hand, discovery will usually be allowed if the applicant adduces evidence which grounds a suspicion that he or she has a good case (Nestle Australia Ltd v Federal Commissioner of Taxation (1986) 10 FCR 78, 82-83) or if it is necessary for the fair disposition of a case (Hart v Deputy Commissioner of Taxation (2002) 49 ATR 656, [10]). 16 In this case the applicants are not "fishing" in the sense that their claims are not wholly speculative. The facts, at least those which appear to be common ground, do suggest that by the time the warrant was issued the documents were no longer required by ATO. An alternative is that the ATO embarked upon a course of trickery to settle the proceedings and keep their hands on the documents. This is the stuff of judicial review applications. So also are the questions of power: Does the ATO have power to conduct an investigation into the alleged offences? Is the AFP entitled to assist in that investigation by obtaining a search warrant and then handing over the documents obtained from its execution? These matters will be addressed at trial. To get the matter ready for trial the applicants are entitled to an order for discovery of the documents they seek. If there is to be any claim for immunity from production that can be taken in the usual way. 17 In indicating that an order for discovery should be made, I am mindful of the possibility that the second respondent may not have all (or any) of the documents in question in her possession or power. At present I am acting on the assumption that she can make discovery of the documents because if she were not able to do so her senior counsel would have informed the court that any order against his client would be futile. If, contrary to my assumption, the second respondent does not have the documents, the applicants will need to issue a subpoena to obtain them. For that purpose I would, if it is sought, grant the leave necessary under O 27A. 18 The applicants should within three days bring in short minutes of orders to give effect to these reasons. Provision should be made for the applicants' costs to be paid by the second respondent.