FEDERAL COURT OF AUSTRALIA Hartnell v Commissioner of Taxation (No 1) [2009] FCA 230 ANTHONY GEOFFREY HARTNELL and JAMES KENNETH MCDONALD v COMMISSIONER OF TAXATION NSD 2527 of 2006 NSD 1088 of 2007 NSD 1089 of 2007 PERRAM J 13 MARCH 2009 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2527 of 2006 NSD 1088 of 2007 NSD 1089 of 2007 BETWEEN: ANTHONY GEOFFREY HARTNELL First Applicant JAMES KENNETH MCDONALD Second Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE OF ORDER: 2 MARCH 2009 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Upon the undertakings proffered by Fairfax Media Publications Pty Limited and Ms Vanda Carson, access be granted to all exhibits tendered to date. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2527 of 2006 NSD 1088 of 2007 NSD 1089 of 2007 BETWEEN: ANTHONY GEOFFREY HARTNELL First Applicant JAMES KENNETH MCDONALD Second Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PERRAM J DATE: 13 MARCH 2009 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The proceedings presently before the Court are taxation proceedings. They commenced before me on Wednesday 18 February 2009. On Thursday 26 February 2006, Ms Vanda Carson, a journalist with the Sydney Morning Herald newspaper, made an application for access to all of the exhibits thus far tendered. So far there have been seven exhibits tendered by the parties. Those exhibits are voluminous. It is anticipated that a large number of other documents will be tendered during the balance of the trial. 2 The subject matter of the proceedings is of considerable complexity. Included amongst the documents which have been tendered so far are tax returns of the applicants, tax returns of third parties to the litigation and a number of documents showing the tax file numbers of the applicants and others. 3 The Commissioner objects to access being granted unless the Court makes an order pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth). Section 50 permits the Court to maintain the confidentiality of evidence and documents placed before it. Counsel for the Commissioner argues that the tax file numbers should be suppressed. The basis for this argument is s 8WB of the Taxation Administration Act 1953 (Cth). 4 That section provides: Unauthorised recording etc. of tax file number (1) A person must not: (a) record another person's tax file number or maintain such a record; or (b) use another person's tax file number in a manner connecting it with the other person's identity; or (c) divulge or communicate another person's tax file number to a third person. Penalty: 100 penalty units or imprisonment for 2 years, or both. (1A) Subsection (1) does not apply: (a) to the extent required or permitted by, or reasonably necessary in order to comply with an obligation imposed by, a taxation law or a law of the Commonwealth of a kind referred to in paragraph 202(c), (d), (e), (g), (ga), (h), (ha), (hb), (hc), (i), (ia), (j), (ka), (kb), (m), (n), (o) or (q) of the Income Tax Assessment Act 1936; or (b) in connection with the first-mentioned person exercising powers or performing functions under, or in relation to, a taxation law or a law of the Commonwealth of a kind referred to in paragraph 202(c), (d), (e), (g), (ga), (h), (ha), (hb), (hc), (i), (ia), (j), (ka), (kb), (m), (n), (o) or (q) of the Income Tax Assessment Act 1936; or (c) in connection with the first-mentioned person acting on the other person's behalf in the conduct of the other person's affairs. Note: A defendant bears an evidential burden in relation to the matters in subsection (1A), see subsection 13.3(3) of the Criminal Code. (2) Without affecting any obligation imposed by or under a law of the Commonwealth other than this section, nothing in subsection (1A) shall be read as imposing on a person an obligation to do an act referred to in paragraph (1)(a), (b) or (c). 5 The argument, in essence, is that the provision makes plain a legislative intention that tax file numbers should not become publicly available. Counsel for the taxpayers submitted that no access at all should be granted to the tax returns contained in the exhibits except for the tax returns of the applicants themselves. This submission is put on the basis that tax returns are inherently confidential. Consideration 6 Order 46 r 6(3) provides: (3) Except with the leave of the Court or a Judge, a person who is not a party to a proceeding must not inspect any of the following documents in the proceedings: (a) an affidavit (other than an affidavit mentioned in subparagraph (2)(l)(i)); (b) an unsworn statement of evidence filed in accordance with a direction given by the Court or a Judge; (c) interrogatories or answers to interrogatories; (d) a list of documents given on discovery; (e) an admission; (f) evidence taken on deposition; (g) [repealed] (h) a subpoena or document lodged with the Registrar in answer to a subpoena for production of a document; (i) a judgment, order, or other document that the Court has ordered is confidential. 7 Order 46 r 6(4) provides: Except with the leave of the Court or a Judge, or with the permission of the Registrar, a person who is not a party to a proceeding must not inspect any document in the proceeding that is not referred to in subrule (2) or (3). 8 Exhibits which have been tendered are not mentioned in either subrule 2 or subrule 3. It follows that access to exhibits which have been tendered is governed by subrule 4. There are no indications on the face of subrule 4 as to the matters which govern the exercise of the discretion thereby conferred. In Seven Network Ltd v News Ltd (No 9) (2005) 148 FCR 1 at 9 [27] Sackville J said: Nonetheless, it seems to me that unless the interests of justice require otherwise, this Court would ordinarily take the view that a non-party should have access to all non-confidential documents and other material admitted into evidence. I say "ordinarily" because the circumstances of each case will vary and the exercise of the discretion under O 46, r 6 of the Rules will have to take into account the particular circumstances of the case. 9 This statement of principle has been applied in a number of first instance decisions of this Court: see Nicholls v Australian Federal Police (No 2) [2009] FCA 123 at [4] per Mansfield J; Re Universal Music (Australia) Pty Ltd v Sharman Licence Holdings Ltd; Ex parte Merlin BV [2008] FCA 783 at [31]-[33] per Jacobson J; Rich v Harrington [2007] FCA 1979 at [23] per Branson J; Y v University of Western Australia (No 2) (2006) 151 FCR 322 at 332 [46] per Siopis J; Re Richstar Enterprises Pty Ltd; Australian Securities and Investments Commission v Carey (No 2) (2006) 232 ALR 398 at 403 [18] per French J. The earlier decision of Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 3) [2002] FCA 609 was to a similar effect except that the reasoning was in terms at [7] confined to: … cases where a non-party seeks access to material which has been relied upon by the judge. 10 I, of course, have not yet relied upon any of the exhibits. Be that as it may, the decision in Seven Network Ltd and the subsequent cases to which I have referred seem to have expanded the principle to documents which have not yet been examined by the judge. It follows that access to the exhibits so far tendered should be granted, save to the extent that the administration of justice requires otherwise. Conclusions 11 The effect of s 8WB of the Taxation Administration Act 1953 (Cth) will be that if Ms Carson or her employer records, uses, divulges or communicates any of the tax file numbers in the exhibits she (or her employer) will commit an offence carrying the potential for two years imprisonment. The existence of that provision makes unnecessary, in my opinion, the making of any confidentiality order under s 50. However, Fairfax Media Publications Pty Ltd (Ms Carson's employer) and Ms Carson tendered an undertaking in each of the proceedings in the following terms: Fairfax Media Publications Pty Limited and Ms Vanda Carson hereby undertake not to publish any tax file numbers contained in exhibits from the above proceedings access to which has been granted by this Honourable Court. 12 That undertaking is not as broad as the terms of s 8WB. However, I propose to accept it since it has been proffered. Be that as it may, s 8WB will continue to apply and, in particular, will continue to make criminal even the recording by Ms Carson or Fairfax Media Publications Pty Ltd of any tax file numbers contained in the exhibits. The operation of s 8WB, therefore, makes unnecessary the making of any further order under s 50. Support for that view may be gleaned from Williams v Deputy President Forgie of the Administrative Appeals Tribunal [2003] FCA 991 at [12] per Heerey J. 13 I do not think it is appropriate to place any limitation upon the tax returns of the third parties which have been tendered. Tax returns are merely reflections of other transactions and accounting activities. Since none of those matters could properly be the subject of an order under s 50 it is difficult to see why a summary document, such as a tax return, should be in a superior position. An argument that tax returns attracted public interest immunity (on the basis that taxpayers might be less frank in their returns if they knew the returns might be released) was rejected in Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd (1989) 52 SASR 148 at 155, 157 where King CJ, with whom Jacobs, White, Matheson and Prior JJ agreed, said: If it were intended to attach immunity from disclosure to the contents of income tax returns as distinct from imposing obligations and conferring protection on government officers, that intention would surely have manifested itself in the language of the statute. … Copies of tax returns differ little from the financial records upon which they are based and which are clearly not the subject of privilege. There are no grounds for supposing that, under modern conditions, taxpayers would be discouraged from making full disclosure in their tax returns by the knowledge that the contents of their returns are subject to inspection in legal proceedings, in sufficient numbers or on a sufficient scale to constitute a threat to the revenue of sufficient magnitude to justify withholding relevant information from courts. 14 Heerey J declined to refuse access to tax returns on a similar basis in Williams (supra). 15 It was for these reasons that I granted access to all tendered exhibits to date and accepted the undertakings proffered in each proceeding on 2 March 2009. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 13 March 2009 Counsel for the Applicants: Mr M Richmond with Ms C Burnett Solicitors for the Applicants: Duncan Cotterill Counsel for the Respondent: Mr DB McGovern SC with Mr AJ O'Brien Solicitor for the Respondent: Australian Government Solicitor Solicitor for Fairfax Media Publications Pty Limited: Mr P Svilans of Johnson Winter & Slattery Lawyers Date of Hearing: 18-20, 23-27 February 2009 Date of Judgment: 2 March 2009 Date of Publication of Reasons: 13 March 2009