FEDERAL COURT OF AUSTRALIA Stewart v The Deputy Commissioner of Taxation [2011] FCA 336 Citation: Stewart v The Deputy Commissioner of Taxation [2011] FCA 336 Parties: ANTHONY STEWART, PAUL HOGAN and JOHN SYDNEY CORNELL v THE DEPUTY COMMISSIONER OF TAXATION, PETER ZDJELAR and THE COMMISSIONER OF TAXATION File number: NSD 330 of 2009 Judge: PERRAM J Date of judgment: 8 April 2011 Catchwords: ADMINISTRATIVE LAW – Procedural fairness – departure from non-statutory guidelines – reviewability under Administrative Decisions (Judicial Review) Act 1977 (Cth) – general reviewability under Judiciary Act 1903 (Cth) INCOME TAX – Administration – Accountants' Concession – applicability to documents neither in possession of taxpayer nor taxpayer's external accountant – reviewability of decision to grant access Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) s 3 Australian Crime Commission Act 2002 (Cth) s 59(7) Constitution ss 61, 75(iii), 75(v) Income Tax Assessment Act 1936 (Cth) ss 8, 264 Income Tax Assessment Act 1997 (Cth) s 1.7 Judiciary Act 1903 (Cth) s 39B(1A)(c) Taxation Administration Act 1953 (Cth) s 3A Cases cited: Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 cited Consolidated Press Holding Ltd v Commissioner of Taxation (1995) 57 FCR 348 cited Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 cited Electrolux Home Products Pty Ltd v The Australian Workers' Union (2004) 221 CLR 309 cited One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 cited Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 cited White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 cited Date of hearing: 30 August 2010 Date of last submissions: 7 September 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 64 Counsel for the Applicants: Ms H Symon SC with Mr A Thomas Solicitor for the Applicants: Robinson Legal Counsel for the Respondents: Mr D Fagan SC with Mr G Kennett Solicitor for the Respondents: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 330 of 2009 BETWEEN: ANTHONY STEWART First Applicant PAUL HOGAN Second Applicant JOHN SYDNEY CORNELL Third Applicant AND: THE DEPUTY COMMISSIONER OF TAXATION First Respondent PETER ZDJELAR Second Respondent THE COMMISSIONER OF TAXATION Third Respondent JUDGE: PERRAM J DATE OF ORDER: 8 APRIL 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed with costs. 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 Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 330 of 2009 BETWEEN: ANTHONY STEWART First Applicant PAUL HOGAN Second Applicant JOHN SYDNEY CORNELL Third Applicant AND: THE DEPUTY COMMISSIONER OF TAXATION First Respondent PETER ZDJELAR Second Respondent THE COMMISSIONER OF TAXATION Third Respondent JUDGE: PERRAM J DATE: 8 APRIL 2011 PLACE: SYDNEY REASONS FOR JUDGMENT Introduction 1 Should audit teams at the Australian Tax Office (the "ATO") have access to confidential accounting advices prepared for Messrs Stewart, Hogan and Cornell to assist in the audit of those gentlemen's tax affairs? The ATO determined the answer to that question was "yes". The present proceeding represents the applicants' attempts to reverse that decision. In my opinion, that challenge should be dismissed with costs. 2 The question arises in the following way. Each of the applicants is presently the subject of an audit by the ATO. Mr Hogan was informed of his audit in April 2008, Mr Cornell in July 2008 and Mr Stewart in March 2009. Mr Stewart is an accountant who appears to have provided some accounting advice to Messrs Hogan and Cornell. On 9 June 2005 search warrants were executed at Mr Stewart's home and office as part of the well known, multi-agency Federal investigation Project Wickenby. Documents were taken from Mr Stewart's premises which related not only to Mr Stewart's taxation affairs but also to those of some of his clients. Those clients included Messrs Hogan and Cornell. 3 Not long afterwards, in September 2005, the Australian Crime Commission (the "ACC") also obtained documents relating to the taxation affairs of Mr Stewart and some of his clients from the offices of Ernst & Young and another accounting firm, Champion's Accounting Services. Again those clients would appear to include Messrs Hogan and Cornell. The precise species of compulsory process which caused those two firms to produce documents to the ACC is not clear; it is, however, accepted on all sides that their production was not voluntary. 4 The ACC thereafter provided those documents to the ATO at various dates between 2005 and 2008. On some occasions this was done pursuant to compulsory notices issued under s 264 of the Income Tax Assessment Act 1936 (Cth) to the ACC by the ATO; on others, pursuant to an express statutory power of the ACC to provide documents to other agencies: s 59(7) Australian Crime Commission Act 2002 (Cth). 5 Within the ATO three administrative decisions were made in relation to the documents (one for each of Messrs Stewart, Hogan and Cornell) the effect of which was to allow those documents to be accessed by the officials within the ATO who are conducting the audits. More formally, the audit teams had not seen the documents in the case of Messrs Stewart and Cornell and a decision was made to give them access. In Mr Hogan's case, the audit team had already had access to the documents and the decision in his case was, in effect, that there was no reason to change that state of affairs. The present proceedings were thereafter commenced. In the final form the claim took, each of Messrs Stewart, Hogan and Cornell sought orders setting aside the particular decision to grant access to the documents to the audit teams. The only question the present case gives rise to is whether that relief should be granted. Mr Cornell 6 It is convenient to deal first with the position of Mr Cornell. The documents provided by the ACC to the ATO included documents obtained from Ernst & Young, Champion's Business Growth Advisers Pty Ltd and the Silverstream group of entities and included advices to Mr Cornell. The documents included what the Commissioner refers to as "restricted source documents" and "non-source documents". The precise definitions of these opaque expressions are not presently material. It is enough to say that taken together the two classes represent advices prepared by external accountants about taxation matters. 7 The Commissioner has a publicly stated policy about the manner in which he will use his compulsory powers to obtain access to advices of that kind. It is entitled "Guidelines to Accessing Professional Accounting Advisors' Papers" (the "guidelines"). There is a debate in Mr Hogan's case as to whether these guidelines apply, on their own terms, to documents which are obtained from third parties such as the ACC rather than from the taxpayer himself or the taxpayer's external accounting advisors. It is not, however, necessary in the case of Mr Cornell to resolve this dispute. This is because in his case the Commissioner made it clear that he was going to proceed on the basis that the guidelines did apply. 8 To see why this is so it is necessary momentarily to digress. In his guidelines the Commissioner accepts that access by the ATO to accounting advices should not generally occur. As he puts it in those guidelines, the Commissioner accepts that "there is a class of documents which should, in all but exceptional circumstances, remain within the confidence of taxpayers and their professional accounting advisors". This concession by the Commissioner is frequently referred to as the "Accountants' Concession". The guidelines set up a rÉgime, to which it will be necessary to return, setting out how such "exceptional circumstances" will be identified. Pivotal in that rÉgime is the necessity for officials seeking access to such advices to obtain the written approval of a Deputy Commissioner of Taxation or another member of the senior executive service (an "SES officer") within the ATO who is independent of the audit team seeking access. 9 On 20 March 2009 such an officer, Mr Zdjelar, wrote to Mr Cornell's solicitors in terms which included the following: I refer to your letter dated 25 February 2009 in which you make claims for the Accountants' Concession on behalf of your client, John Cornell, in relation to material obtained by the Commissioner of Taxation from the Australian Crime Commission. My approval has been sought as an independent ATO SES officer under the 'Commissioner's Guidelines to Accessing Professional Accounting Advisors' Papers' (Accountants' Concession) for officers to have access to restricted source and non-source documents including those provided by the firms known as Ernst & Young, Champion's Business Growth Advisers Pty Ltd and the Silverstream group of entities to John Cornell and any or all of the following entities: … My approval under the 'Commissioner's Guidelines to Accessing Professional Accounting Advisor's Papers' to have access to restricted source and non-source documents of the taxpayers has been sought on the grounds that there are exceptional circumstances which warrant the lifting of the Accountants' Concession. The exceptional circumstances cited include: There is a scheme or arrangement for the purposes of Part IVA of the Income Tax Assessment Act 1936. That there are reasonable grounds to believe that fraud or evasion has taken place. I would like to give you the opportunity to present your view as to whether you believe the Accountants' Concession should or should not be lifted in this case. It would be appreciated if you could address any comments you wish to make to me on this issue within 14 days of the date of this letter. … 10 I do not think, in light of that letter, that it matters too much whether the guidelines in terms actually applied to advices obtained independently from third parties such as the ACC. Whether or not they did, in fact, apply, the letter of 20 March 2009 clearly suggested that the ATO was going to proceed on the basis that they did. Mr Cornell submits that, in light of that correspondence, the Commissioner subsequently denied him procedural fairness by thereafter not applying the guidelines or, perhaps more accurately, not applying them correctly. 11 How is it said that the guidelines were not correctly applied? Mr Cornell submits that the letter of 20 March 2009 conveyed to him that Mr Zdjelar was going to approach the question of whether access should be granted on the basis that there were "exceptional circumstances". This matters because it involves the language of a particular paragraph of the guidelines which was referred to by the parties as "Guideline 5". It is in the following terms: 5. Approval required Access to restricted source and non-source documents may only be sought in exceptional circumstances with the (personal) written approval of a Deputy Commissioner or another appropriate ATO SES officer. In these circumstances, ATO officers will specify, to the extent practicable, the relevant documents applicable to the issue under review. In a litigated case before the courts and the AAT, the ATO recognises the rights of the courts or the AAT to inform themselves about the issues in dispute. However, the ATO will not seek to inspect or obtain documents listed in litigation procedures except with the (personal) written approval of a Deputy Commissioner or another appropriate ATO SES officer. If written approval was given to access restricted source and non-source documents during an audit then further approval at the litigation stage is not required. There could be instances where the rules of evidence will mean that alternative avenues of demonstrating to the court known facts relating to a contested assessment are unavailable to the ATO in arguing its case. In such an event the ATO will not preclude itself from seeking the use of restricted source and non-source documents that would otherwise not be obtained. [footnotes omitted] 12 It will be noted that Guideline 5 makes no mention that "exceptional circumstances" might include the existence of a scheme or arrangement for the purposes of Part IVA of the Income Tax Assessment Act 1936 (Cth) or the existence of reasonable grounds to believe the occurrence of fraud or evasion. This is important because Mr Zdjelar's letter of 20 March 2009 shows that the "exceptional circumstances" under his consideration included those two matters. 13 Mr Cornell now submits that it was procedurally unfair for Mr Zdjelar to consider those two matters. This is said to be so because: (a) Mr Zdjelar's letter conveyed to Mr Cornell that he was proceeding under Guideline 5; (b) the existence of a Part IVA scheme or the existence of reasonable grounds to suspect fraud or evasion were not mentioned in Guideline 5; and (c) Mr Cornell made submissions based on the assumption, induced by Mr Zdjelar's letter, that Guideline 5 applied. 14 I reject each step in this argument. As to (a), Mr Zdjelar's letter simply did not refer to Guideline 5 at all. Instead it mentioned that he was considering whether to grant access on the basis of exceptional circumstances which were said to consist of a Part IVA scheme or the existence of reasonable grounds to believe the occurrence of fraud or evasion. Regardless of whether such circumstances were properly the domain of Guideline 5, the plain fact is that Mr Cornell was explicitly told that they were the circumstances Mr Zdjelar was going to consider. 15 As to (b), it is true that Guideline 5 does not mention that a Part IVA scheme or the occurrence of fraud or evasion are examples of exceptional circumstances. However, it does not seek to specify in any way at all what might constitute "exceptional circumstances". Mr Cornell's argument that such circumstances cannot be "exceptional circumstances" rests entirely on Guideline 6 which does, inter alia, mention those matters. It provides: 6. Insufficient information In the first instance and subject to these guidelines, all reasonable effort will be made to obtain sufficient information from the taxpayer. Where source documents do not provide sufficient factual information the ATO officer may request a statement by the taxpayer of both the facts and the taxpayer's understanding of the tax consequences of any transaction or arrangement. The taxpayer may ask for this request to be made in writing. If such a statement is not provided by the taxpayer within 30 days of the receipt of the request or within such period as is agreed between the taxpayer and the ATO officer (each using their best endeavours to agree to such a period) or if the statement does not contain such information as to enable the ATO officer to ascertain the facts, circumstances and purpose, then the ATO officer may seek access in accordance with these guidelines. In relation to non-source documents access in those circumstances to relevant papers in the current audit file will only be sought where access to restricted source documents does not provide the necessary information. ATO officers shall seek the approval of a Deputy Commissioner or another appropriate ATO SES officer (in person) for access to restricted source and non-source documents without following the procedures outlined above in the following circumstances: (i) Where there are reasonable grounds to believe that fraud or evasion, or an offence under the Taxation Administration Act, or any other illegal activity has taken place. (ii) Where the taxpayer's source documents have been lost or destroyed and the ATO officers are not able to obtain from the taxpayer or the taxpayer's professional accounting advisors sufficient information to describe, verify or determine the tax consequences of a transaction or arrangement, then access will be sought to the restricted source documents and non-source documents relevant to that transaction or arrangement. Where such information is sought the professional accounting advisor may ask for the request to be in writing. Likewise, where the source documents appear on reasonable grounds to have omissions or other material deficiencies, and an explanation or a statement of the facts and tax consequences provided by the taxpayer does not adequately explain the transaction or arrangement, then access will be sought to relevant restricted source documents and non-source documents. (iii) Where, subject to part 3.1, the taxpayer or the taxpayer's professional accounting advisors refuse to provide, or have not within 30 days provided (from the receipt of the request), source documents, and other parties' available source documents are insufficient for the ATO officer to ascertain the facts and purpose of, and such of the surrounding circumstances as are necessary to determine the tax consequences of, the transaction or arrangement, then access to restricted source documents and non-source documents may be sought. (iv) Where neither the taxpayer's records not the taxpayer can be located, then access may be sought to restricted source documents and non-source documents. (v) Where some or all of the records of a taxpayer are maintained overseas, and the taxpayer denies access to, or claims an inability to obtain those records or documents, ATO officers will first seek a statement from the taxpayer of both the facts and of the taxpayer's understanding of the tax consequences of any transaction or arrangement. If such a statement is not provided or does not enable ATO officers to ascertain the facts and purpose of, and such of the surrounding circumstances as are necessary to determine the tax consequences of, the transaction or arrangement, then the ATO officers will seek access to restricted source documents and non-source documents appropriate to the transaction or arrangement. [emphasis added] 16 Mr Cornell points to the emphasised portion above. Guideline 6, however, is concerned with quite a different topic and it is necessary to keep that in mind. Where insufficient information is available to the Commissioner he may ask the taxpayer for a statement to assist his understanding of the transaction. If the statement is not provided within the requisite period then the Commissioner may access: first, restricted source documents (that is, accounting advices about the transaction) and, secondly (and only if the restricted source documents have proved insufficient), non-source documents (that is, other accounting advices). The emphasised paragraph upon which Mr Cornell now relies has to be understood as a shortcut to the rÉgime of Guideline 6, available in the circumstances outlined in (i)-(iv). One of those circumstances is suspected fraud or evasion. I do not accept that merely because fraud and evasion are listed as potential reasons to avert the usual Guideline 6 procedure they therefore cease to be available as "exceptional circumstances" under Guideline 5. There is no reason to think that Guideline 5 is so limited. The effect of Mr Cornell's argument is that the narrower field of operation for Guideline 6 would mean that fraud was only available to the Commissioner as a basis for obtaining access to documents when sufficient information was otherwise unavailable. It is difficult to identify the redeeming features of such an interpretation of the relationship between Guidelines 5 and 6. A surer approach is to read Guidelines 5 and 6 in light of the general introduction to the guidelines which is in these terms: While recognising that the Commissioner has the legislative power to request access to most documents, it is accepted that there is a class of documents which should, in all but exceptional circumstances, remain within the confidence of taxpayers and their professional accounting advisors. In respect of such documents the ATO acknowledges that taxpayers should be able to consult with their professional accounting advisors on a confidential basis in respect of their rights and obligations under taxation laws to enable full and frank discussion to take place and for advice to be communicated on that basis. These guidelines describe how that acknowledgement applies in practice. They are an administrative concession and will be adhered to by the ATO officers provided that taxpayers and their professional accounting advisors use these guidelines in the spirit of which they were formulated. 17 The guidelines as a whole are concerned with exceptional circumstances. Once that is appreciated Mr Cornell's argument not only impermissibly ignores the fact that Guideline 6 is concerned with the narrow topic of "insufficient information" but flies in the face of the general nature of the guidelines as being about "exceptional circumstances". His interpretation of the relationship between Guidelines 5 and 6 is implausible and I reject it. 18 In any event, even if that were not so Mr Zdjelar's letter made clear that whatever else Mr Cornell might have been minded to do he should, at least, have made submissions about whether there were exceptional circumstances by reason of fraud, evasion or a Part IVA scheme or arrangement. 19 As to (c), this portion of Mr Cornell's argument fails to attend to the fact that Mr Cornell's solicitors made submissions about the question of whether there had been a Part IVA scheme or arrangement, on the one hand, or fraud or evasion, on the other. Mr Zdjelar wrote again to Mr Cornell's solicitors on 31 March 2009. That letter was quite clear about the submission being sought from Mr Cornell. It said in part: As advised in my letter of 20 March 2009 the 'exceptional circumstances' bases of the submission to lift the Accountants' Concession were that: there is a scheme or arrangement for the purposes of Part IVA of the Income Tax Assessment Act 1936, and there are reasonable grounds to believe that fraud or evasion has taken place. 20 It was in response to those two requests for submissions on the two issues of a Part IVA scheme or fraud or evasion that Mr Cornell's solicitors then sent a letter dated 15 April 2009. The letter identified itself in its second paragraph as a submission "as to why there are no 'exceptional circumstances' sufficient to justify your decision to lift the Accountants' Concession". The letter then proceeded to argue that it was not fair to expect Mr Cornell to make submissions about whether there was present a Part IVA scheme or fraud or evasion. For example, one part of the letter said: In your letter you note that you have received submissions in relation to lifting the [Accountants'] Concession. Would you please provide us with a copy of these submissions as a matter of urgency so that we can respond to any specific allegations concerning whether there are Part IVA schemes or arrangements in place and what are the alleged "reasonable grounds" held by ATO officers allowing them to believe that "fraud or evasion" has taken place. We note that the provision of these submissions is necessary as a basic rule of natural justice. Later the letter said: In our view it is a [sic] impermissible exercise by you of any discretion you have as to whether the [Accountants'] Concession should apply to approach it in this blanket manner. For example and without admission, assume that the quarantined subset of the ACC provided documents contain, say, a hundred accounting advices which deal with a variety of topics in respect of which our client has sought advice. Assume further that the topics covered include in relation to five of these documents advice which could be categorised as relevant to a Part IVA scheme or fraud or evasion but that the other 95 documents relate to anodyne tax advisors' advice on topics including our client's purchase of domestic property located in Australia and GST implications associated with that purchase. Assume further that these latter documents could not on any reasonable basis be said to be connected with a Part IVA scheme or fraud evasion. On this basis any application of a blanket approach where the majority of documents are treated as connected with Part IVA or fraud or evasion merely because a minority of documents could be treated as connected would simply be wrong and result in a fundamentally incorrect conclusion. It concluded by saying: Our client denies that he has been involved in or has received advice on any Part IVA scheme or arrangement and denies that any reasonable ATO officer could have reasonable grounds to believe that he has any involvement in fraud or evasion. 21 It should be noted that the complaint in the first passage – that it was not possible to make submissions about a Part IVA scheme or fraud or evasion without access to the submission made by the auditors – was not pursued by Mr Cornell as a matter of complaint in this Court. In any event, it is clear that by 15 April 2009 Mr Zdjelar had twice called for submissions on whether there were exceptional circumstances by reason of a Part IVA scheme or the existence of reasonable grounds to suspect fraud or evasion. Further, Mr Cornell had, in fact, made submissions about those issues. 22 It was in that context that Mr Zdjelar then made the decision to allow access to the documents on 20 April 2009. He concluded that there were exceptional circumstances justifying access. I do not see how this could be procedurally unfair. Submissions were called for on whether there were exceptional circumstances and Mr Cornell's particular attention was twice drawn to the fact that Mr Zdjelar was considering whether such circumstances existed by reason of Part IVA scheme or fraud or evasion. Mr Cornell made submissions on that issue. Mr Zdjelar did not accept them. There was no procedural unfairness. 23 It is not strictly necessary, in those circumstances, to express a view about the Commissioner's argument that Mr Zdjelar was under no duty to afford Mr Cornell procedural fairness. However, out of deference to the parties' submissions I would make the following observations. Mr Zdjelar's decision was one which was made under the guidelines which were but a statement of the Commissioner's policy. The decision Mr Zdjelar made was not made under any particular provision of the tax legislation. For that reason, it appears to be accepted that it was not a decision "under an enactment" within the meaning of the definition of "decision to which this Act applies" in s 3 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and hence that no review is available under that legislation: White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 315 [75] per Lindgren J. Ultimately, Mr Cornell did not submit to the contrary. 24 It does not follow, however, that his decision is more generally unreviewable. Section 8 of the Income Tax Assessment Act 1936 (Cth) vests in the Commissioner "the general administration of this Act" and s 1.7 of the Income Tax Assessment Act 1997 (Cth) and s 3A of the Taxation Administration Act 1953 (Cth) do the same in respect of those Acts. I do not doubt that as one of the Commissioner's senior public servants Mr Zdjelar was performing a function under this general administrative power. That power is but a statutory embodiment of the executive power of the Commonwealth which ultimately vests in the Governor-General under s 61 of the Constitution and which explicitly "extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth". 25 Except where the subject matter of a power otherwise dictates (for example, the making of treaties) the executive power is judicially reviewable. So much flows from ss 75(iii) and s 75(v) of the Constitution which confer original jurisdiction on the High Court in matters in which the Commonwealth (or a party on its behalf) is joined to a proceeding or where writs of mandamus, prohibition or injunction are sought against an officer of the Commonwealth. Those two grants of jurisdiction "constitute an important component of the Constitution's guarantee of judicial process in that their effect is to ensure that there is available, to a relevantly affected citizen, a Ch III court with jurisdiction to grant relief against an invalid purported exercise of Commonwealth legislative power or an unlawful exercise of, or refusal to exercise, Commonwealth executive authority": Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 at 204-205 per Deane and Gaudron JJ. 26 No different principle applies where a statutory power of general administration is conferred. In the case of such a power it will be assumed that it is highly improbable that the Parliament would overthrow fundamental principles, infringe rights, or depart from the general system of law without expressing its intention with irresistible clearness: Electrolux Home Products Pty Ltd v The Australian Workers' Union (2004) 221 CLR 309 at 329 [21] per Gleeson CJ. As was explained by the Chief Justice in the same paragraph this presumption is an aspect of the principle of legality which is "not merely a common sense guide to what a Parliament in a liberal democracy is likely to have intended; it is a working hypothesis, the existence of which is known to Parliament and the courts, upon which statutory language will be interpreted". Consequently, legislation will be construed on the basis that Parliament intended that the rules of procedural fairness would apply absent a sufficiently clear manifestation of contrary intent. 27 For that reason, I would accept that the Commissioner's power of general administration is to be exercised in accordance with the rules of procedural fairness. What the rules of procedural fairness require on any particular occasion varies with the circumstances: Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at 16 [48] per McHugh and Gummow JJ. This will be particularly true in the case of a general power of administration. Many exercises of such a power will involve little to which a duty of procedural fairness will be seen as naturally apposite. 28 In this case, Mr Cornell plainly has an interest in maintaining the confidentiality of his accounting advices. Where the exercise of power in question is one that threatens to degrade the confidentiality of a subject's private affairs and the decision maker has indicated that that confidentiality will be left intact unless a particular procedure is followed the subject has a sufficient interest, in my opinion, to bring into play the rules of procedural fairness. A similar conclusion was reached by Lockhart J in Consolidated Press Holding Ltd v Commissioner of Taxation (1995) 57 FCR 348 at 357-358 where it was held that a taxpayer's interest in the confidentiality and secrecy of its financial information was sufficient to impose an obligation of procedural fairness upon the Commissioner when the Commissioner was proposing to show the information to a third party. This had the consequence in that case that the Commissioner could not reveal the information to an outsider without first giving the taxpayer an opportunity to argue against the taking of that course. 29 The decision of Burchett J in One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at 567-568 [42]-[43] is consistent with that conclusion although I accept, as Lindgren J pointed out in White Industries at 317 [89], that it is a little difficult to identify the basis of the decision. Both One.Tel and Consolidated Press Holding are expressed in the language of legitimate expectations which may be of a diminished significance after Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam. Ordinarily, such an interest in confidentiality would not require the Commissioner to hear from a taxpayer before examining material in his possession. But if the Commissioner puts in place decision-making procedures which give the impression that such confidences will be observed then it will generally be procedurally unfair for him to proceed on some other basis without first hearing from the affected person. In such a case, the decision maker's breach of the requirements of procedural fairness will take the exercise of power outside the statutory grant in s 8 of the Income Tax Assessment Act 1936 (or s 1.7 of the Income Tax Assessment Act 1997 or s 3A of the Taxation Administration Act 1953). In each of those cases there will be an excess of jurisdiction which this Court can remedy under s 39B(1A)(c) of the Judiciary Act 1903 (Cth). In this case, however, for reasons already given, even if such a duty of procedural fairness existed it was not breached in Mr Cornell's case. 30 Mr Cornell also pursued an argument that Mr Zdjelar's decision to allow access to the documents was so unreasonable that no decision maker could have arrived at it: cf. Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223 at 229. There were said to be two aspects of the decision which defied rationality in the requisite sense. The first was the proposition that Mr Zdjelar could not have reached the view that there were exceptional circumstances without first having viewed the documents for himself. I do not accept this. Mr Zdjelar had before him a submission by the auditors. In summary, that submission suggested that Mr Cornell was the anonymous "Client Number 1" identified in records seized under warrant by the ACC from Mr Philip Egglishaw, one of the principals of a European firm of tax advisors, Strachans. The submission suggested that Strachans provided services which included setting up structures to avoid paying Australian tax. More particularly, the submission claimed that Mr Cornell participated in various arrangements with Mr Hogan which were devised and implemented by Mr Stewart and Strachans. Four particular arrangements were identified in relation to Mr Cornell. For present purposes attention may be confined to two. The first was said to involve the non-disclosure of royalties from the Crocodile Dundee films. Of that arrangement the auditors submitted: 49. Following advice obtained from their former accountant and United States Lawyers, Cornell and Hogan established offshore structures which held the rights to and received income from the exploitation of the rights to Crocodile Dundee and Crocodile Dundee II. 50. In December 1997, Trelene Investments Ltd, an entity administered by Strachans, purportedly acquired the worldwide rights (excluding Australia and the United States) to Crocodile Dundee and the worldwide video and television rights (excluding Australia) to Crocodile Dundee II. The United States rights to Crocodile Dundee were held by an entity owned 100% by Trelene Investments Ltd. 51. Strachans file notes indicate that Trelene Investments Ltd purportedly acquired these rights through round robin arrangements involving the Quatre Saison and Chatlon Trusts. 52. Documents obtained from the ACC identify that the High Wealth Individuals Questionnaires for Paul Hogan and John Cornell completed by Champion's Accounting Services with the assistance of Tony Stewart failed to disclose their interests in any of the Strachans companies or trusts administered for the benefit of Cornell and Hogan. 53. No dividend, interest or royalty income or licence fees (with the possible exception of one payment made by Trelene Investments Ltd to Rimfire Films Pty Ltd) received by Trelene Investments Ltd during the period April 1998 to the present has been returned as income in Australia nor has any such income been attributed to Australian taxpayers during this period. 54. The Commissioner is presently of the view that the arrangement was carried out, through the use of tax haven entities and blind structures administered by Strachans, to avoid the incidence of Australian income tax upon a share of the foreign source income for the Crocodile Dundee films. The Commissioner is also of the view that the arrangement enables the beneficial owners of the film rights, namely Hogan and Cornell, to access the funds for their personal benefit. 31 The auditors also pointed to certain debit and credit card arrangements. Of these the auditors said: 65. Documents obtained form the Egglishaw laptop identified that John Cornell, Delvene Cornell (his wife), Denis Cornell (his brother), Melissa Cornell (his daughter) and Allira Cornell (his daughter) were all issued with Strachans debit and/or credit cards through Standard Chartered Grindlays Bank (Jersey) and/or the Corner Bank (Switzerland). 66. Documents obtained form the Egglishaw laptop also identified that these cards were used during a period that John Cornell was lodging income tax returns as a resident of Australia for income tax purposes. 67. Credit card statements obtained from the Egglishaw laptop of various dates in December 2003 are all addressed to Strachans SA at 'PO Box 3641, 6-8 Rue De la Croix D'Or, 1211 Geneve 3'. They have partially obscured entries at the 'Nom:' (name) fields of: a. "JO CO " b. "DENI COR " c. "MEL COR " d. "AL CO " 68. The statement for 'JO CO ' dated 12 December 2003 records three withdrawals of $2,000.00 each from the 'CBA ATM/Brunswick Htl'. It is noted that John Cornell's company, Hizan Holdings Pty Ltd, owns the Brunswick Hotel. 69. The Commissioner is presently of the view that the arrangement enabled Cornell and his family members to access and repatriate funds from his Strachans structure without the incidence of taxation or alerting Australian authorities to the transactions or the existence of the offshore structure and his association with the structure. 32 In those circumstances, it is not realistic to suggest that Mr Zdjelar's decision to grant access to the documents was unreasonable in the Wednesbury sense because he did not sight the documents. There was before him an extensive submission of a detailed nature which set forth what, at least on its face, appeared to be suspected conduct of Mr Cornell (and Messrs Hogan and Stewart) which, if accepted, might constitute grave tax fraud. In light of what the auditors put before him it was not necessary for him to see the documents himself to conclude that there were exceptional circumstances; a fortiori, it was most certainly not unreasonable in the Wednesbury sense for him not to do so. 33 The second argument was that it was unreasonable in the same sense for Mr Zdjelar to have proceeded to make a decision to grant access to the documents under Guideline 6. This was said to be because he proceeded by reference to "exceptional circumstances" which was a criterion found only in Guideline 5. I reject this argument too. Mr Zdjelar concluded that the fraud and evasion which appeared possibly to be present in Mr Cornell's case was an "exceptional circumstance". For reasons I have already given I do not accept that that "exceptional circumstance" was confined in the way Mr Cornell submitted. 34 Mr Cornell also submitted that Mr Zdjelar misstated to him the basis upon which he was going to make his decision. This submission should be rejected: Mr Zdjelar informed Mr Cornell more than once that he was contemplating granting access to the documents on the basis that there was or might be a Part IVA scheme or other fraud or evasion. Mr Cornell was twice invited to make submissions on that basis and did so. Access was granted. Mr Zdjelar did not do anything which he had not called for submissions on. 35 During the course of argument Ms Symon SC, who with Mr Thomas of counsel appeared for Mr Cornell, developed three further concise reasons why there had been a breach of the rules of procedural fairness. Each was premised upon the proposition, which for reasons already given I accept, that the guidelines were applicable in Mr Cornell's case. Shortly, Ms Symon SC submitted that Mr Zdjelar had failed adequately to identify the documents, access to which was sought, thereby depriving Mr Cornell of the opportunity to make submissions as to why access should not be granted. This argument stands or falls with the requirements of the guidelines as implemented by Mr Zdjelar's letter of 20 March 2009. 36 For reasons given below at [56] – [62] the guidelines, in their own terms, contemplate that the documents in question will be in the possession of the taxpayer or the taxpayer's external accountant, that a request for a set of files has been made by the ATO and that the taxpayer has decided to claim the benefit of the Accountants' Concession in the case of specifically enumerated documents. When the guidelines operate on their own terms the present difficulty identified by Ms Symon SC cannot arise, for it will be the taxpayer (or the taxpayer's external accountant) that will both have the documents and make the claim under the guidelines. The usual operation of the guidelines cannot give rise to a situation where the taxpayer is in ignorance of the documents involved. 37 That rÉgime, however, was modified by Mr Zdjelar's letter. Under the new rÉgime the guidelines would be applied to documents which as a matter of definition were not in the possession of the taxpayer. How the machinery of making claims was to operate was not articulated. What was clear was that if Mr Cornell wished to make a claim for the Accountants' Concession he would be permitted to do so and that any such claim would be processed in accordance with the guidelines. How was he to make such a claim? It was a minor matter for Mr Cornell to ascertain from Ernst & Young, Champion's Business Growth Advisers and Mr Stewart which of his documents they had supplied to the ACC. I do not accept that Mr Cornell was under any real disability in ascertaining which of his documents the ACC and the ATO had come to possess. When this is weighed, as I think it must be, against the fact that Mr Zdjelar did not have the documents himself it is difficult to identify, in anything which occurred, unfairness. If there were particular aspects of the documents which had been seized from Ernst & Young, Champion's Business Growth Advisers and Mr Stewart which Mr Cornell believed would assist him in persuading Mr Zdjelar not to grant access it was well within his ability to identify them himself. No unfairness arose from Mr Zdjelar's failure to tell Mr Cornell what documents had been provided to the ATO by the ACC. Mr Cornell could work that out for himself. 38 Ms Symon SC's second point was that Mr Zdjelar had granted access to all of Mr Cornell's advices without identifying them and that blanket access could not be given to an entire class of documents in that manner. The guidelines did not permit, so Ms Symon SC submitted, of the concept of a blanket claim. If it were merely the guidelines which applied then this question could never arise. The concession could only be claimed by the taxpayer in respect of identified documents and the notion of a blanket claim would make no sense. However, the guidelines became applicable only by reason of Mr Zdjelar's letter of 20 March 2009 and what Mr Cornell was told was that the ATO was contemplating access to the entire class of documents provided by the ACC. Taken together, as they must be, the procedure created by the guidelines and Mr Zdjelar's letter of 20 March 2009 was necessarily one which adverted to the possibility of a blanket lifting. There was nothing procedurally unfair about a process under which Mr Cornell was told that consideration was being given to granting the auditors access to an entire class of documents (those provided by the ACC) and then doing so. Whatever the guidelines said, the letter of 20 March 2009 operated to make quite plain the process which was in train. To the extent that Mr Cornell wished to submit that a blanket lifting should not occur he was provided with an opportunity to do so by the receipt of that letter (one of the responses to which could have been a submission that there should be no such blanket lifting). 39 Ms Symon SC's final point was that Mr Zdjelar did not address the question posed by the guidelines – whether there were reasonable grounds to believe there was fraud or evasion. For reasons already given I do not accept this. Mr Zdjelar's reasonable grounds for that belief came from the submission made to him by the auditors. It is true that he does not advert to that in his decision. However, I infer that it was the reason he reached that decision. I draw that inference because the auditors' submission was the only material before him apart from Mr Cornell's submissions. There is simply no rational reason to conclude that he reached his decision on the basis of any other material. 40 In those circumstances, Mr Cornell's application should be dismissed with costs. Mr Stewart 41 I turn then to the position of Mr Stewart. In argument it was not suggested that he stood in a different position to Mr Cornell and I think, with respect, that position was sensibly taken. Mr Zdjelar told Mr Stewart he was contemplating granting access to documents under the guidelines on 20 March 2009 on the grounds that there were exceptional circumstances consisting of a Part IVA scheme or the existence of reasonable grounds to believe that fraud or evasion had taken place. Mr Stewart initially replied on 3 April 2009 by letter and subsequently also replied on 7 April 2009 by facsimile. 42 Mr Stewart's letter of 3 April 2009 contained, inter alia, a submission that it was procedurally unfair not to provide him with the auditors' submission. In his facsimile of 7 April 2009, apart from colourfully asserting some novel propositions, such as the non-existence, as a matter of law, of the ATO, Mr Stewart also sought access to the auditors' submission to Mr Zdjelar which, apparently, was denied him (again, it is to be noted this argument was not pursued before me.) However, despite that complaint Mr Stewart did, in fact, submit in his letter of 3 April 2009 that he had not participated in a Part IVA scheme or other fraud or evasion. Having received that submission, on 20 April 2009 Mr Zdjelar resolved to grant access to the documents. The arguments mounted by Mr Stewart were in substance the same as those mounted by Mr Cornell and I reject them for the same reasons. It follows that Mr Stewart's claim should be dismissed with costs. Mr Hogan 43 I turn then to Mr Hogan. The case put on his behalf was somewhat different. During the course of an examination of Mr Hogan conducted pursuant to s 264 of the Income Tax Assessment Act 1936 (Cth) Mr Hogan's solicitor noticed that many of the documents which were being shown to Mr Hogan during the course of the examination appeared to be accounting advices to which the guidelines might reasonably be thought to apply. On 20 January 2009, he wrote to the ATO indicating that Mr Hogan reserved his rights in relation to the guidelines. The ATO replied on 12 February 2009. The important part of the letter was as follows: We note that your client reserves his rights in respect of a possible denial of the Accountant's [sic] Concession to your client and will address any specific claims he may wish to make. Should you have concerns or claims about specific documents which you believe have been, or may in the future be, provided to the ATO we invite you to raise them with us. For our part, if we consider that the Accountant's [sic] Concession applies we will apply the Commissioner's stated policy in this regard and give your client an opportunity to make a claim as appropriate. 44 One thing which is plain about this letter which marks out Mr Hogan's case as different to Mr Cornell's or Mr Stewart's is that it did not say that the guidelines had been applied. It did, however, invite Mr Hogan to raise any concerns or claims about particular documents with the ATO. 45 Mr Hogan's solicitors responded to this letter shortly afterwards on 25 February 2009. In that letter they claimed the protection of the guidelines by claiming generally the Accountants' Concession. The course adopted in Mr Hogan's case thereafter markedly diverged from Mr Cornell's and Mr Stewart's. Instead of determining that exceptional circumstances existed under the guidelines, an officer of the ATO, a Mr McPherson, determined on 23 March 2009 that the guidelines did not apply to the documents at all. His reason for this was that Mr Hogan's solicitors had asked the ATO to obtain all documentation relating to Mr Hogan from the ACC and had, therefore, waived the guidelines. He concluded: Consequently we consider, in the context and the conduct referred to above, the confidentiality afforded by the Accountants' Concession has been lost with respect to the documents obtained by the Commissioner form the ACC. Accordingly the Accountants' Concession cannot apply to restrict access to these documents. 46 Mr Hogan now claims that he was denied the opportunity "to make submissions as to why access ought not to be granted to the documents in relation to the Hogan audit". 47 Ms Symon SC who, with Mr Thomas, appeared for Mr Hogan, put the argument that Mr McPherson's letter of 12 February 2009 invited a submission to be made under the guidelines and that, having invited such a submission, it was procedurally unfair thereafter for Mr McPherson to proceed on the basis that the guidelines did not apply. 48 If the guidelines did, in fact, apply to the documents the subject of Mr Hogan's claim I would be disposed to see the force in Ms Symon SC's argument. But that force would emerge from the fact that, by hypothesis, the ATO had departed from the guidelines without first hearing from Mr Hogan. The terms of the letter of 12 February 2009 do not, I think, add much to that contention. 49 If, on the other hand, the guidelines did not apply to the documents in question I cannot accept the correctness of Ms Symon SC's argument. On this hypothesis, there was nothing procedurally unfair about departing from the guidelines because there was nothing within them from which it was possible to depart (their having no application). Any procedural unfairness must, therefore, be traced to the letter of 12 February 2009 itself. The only sentence which might bear the load which Mr Hogan seeks to saddle it with is: Should you have concerns or claims about specific documents which you believe have been, or may in the future be, provided to the ATO we invite you to raise them with us. 50 On Ms Symon SC's argument it is necessary to construe this as containing within it an implicit invitation to claim the protection of the guidelines and, allied with that, an implicit holding out by Mr McPherson that if such a claim were made the guidelines would be applied. Minds might reasonably differ on the question of whether those two implications could reasonably be extracted from this sentence viewed in isolation. But the sentence did not exist in isolation. Rather, it was immediately followed by this sentence: For our part, if we consider that the Accountant's [sic] Concession applies we will apply the Commissioner's stated policy in this regard and give your client an opportunity to make a claim as appropriate. 51 To my mind, that sentence makes it impossible to accept that the immediately preceding sentence should be seen as carrying the implication that the guidelines would be applied if a claim were made. Its express terms showed that that was precisely what the Commissioner was not saying. 52 Consequently, I do not accept that there has been any procedural unfairness to Mr Hogan if, in fact, the guidelines do not apply to the documents in question. Correspondingly, however, I do accept that if the guidelines do apply there would have been procedural unfairness. 53 This makes it necessary, therefore, to determine whether, in fact, the guidelines applied to the documents supplied by the ACC to the ATO. Mr McPherson thought that the guidelines did not apply to the documents because Mr Hogan had asked the ATO to obtain them from the ACC. For myself, I do not think that if the guidelines were capable of governing access to documents held by third parties, that is, persons other than the taxpayer or the taxpayer's external accounting advisor, such a request by the taxpayer would make any difference to their application. If the guidelines were capable of governing access to documents so held, the guidelines would be applicable, from the ATO's viewpoint, whether held by one such third party (the ACC) or another (the ATO). Provision by one to the other would not, on that hypothesis, be inconsistent with the guidelines' application. It follows that a request by a taxpayer to have the ATO obtain documents from a third party would not be inconsistent with the continued application of the guidelines. It should be plainly understood that that last statement is made on the assumption – the correctness of which I will shortly reject – that the guidelines can apply where the documents are held by persons other than the taxpayer or the taxpayer's external accountant. 54 The Commissioner contended at the hearing that the guidelines did not apply because the documents had been provided on a non-confidential basis by Ernst & Young, Champion's Business Growth Advisers and Mr Stewart to the ACC. I accept that if they had been supplied on a non-confidential basis the guidelines would not have been applicable. Guideline 4 provides (in part): 4. Records disclosed to third parties …Where documents are disclosed to independent third parties, other than on an agreed confidential basis as between the taxpayer and the professional accounting advisors, then such documents are considered to be source documents for the purposes of these guidelines. The reason being that the confidential nature of such documents has been lost. 55 I do not, however, accept that confidentiality is lost when documents are produced to a third party, as they were here, under compulsory process and without any choice. 56 Despite that, I accept the Commissioner's argument that the guidelines, as a matter of their text, cannot apply to documents which have come into possession of persons other than the taxpayer or the taxpayer's external accountant. When recourse is had to their terms it is clear that they only deal with the situation where the documents in question are actually in the possession of the taxpayer or the taxpayer's external accountants. It might be thought by some to be desirable that the guidelines be more widely expressed to cover situations such as in this case but that is not presently material. The short fact is that they are not so expressed. To see why this is so, it is necessary to turn to the terms of the guidelines. 57 The guidelines are arranged into nine sections with the following headings: 1. Introduction 2. Types of documents 3. Access to documents 4. Records disclosed to third parties 5. Approval required 6. Insufficient Information 7. Papers prepared for the purpose of appeal to the AAT or Courts 8. Procedures for resolving disagreements 9. Review 58 There are textual indicators under a number of these headings which do not make any sense if the guidelines can apply outside the situation obtaining where access is sought from the taxpayer or the taxpayer's external accountant. I have set out portions of the introduction to the guidelines at [8] and [16] above and will not repeat them. It suffices to say they show clearly a process under which the taxpayer or the taxpayer's external accountant make the claim over documents in their presence. 59 In the same vein, in section two, this passage appears: Documents comprising the permanent audit file held by an [sic] professional accounting advisor performing a statutory audit are source documents, as they either explain or lead to an understanding of the taxpayer's organisation and operations. However, in the first instance, such information will be sought from the taxpayer. Where such information is sought from a professional accounting advisor, the advisor may ask for the request to be in writing. The permanent audit file contains papers of a continuing interest to an independent auditor over many years of audit of the same client. [emphasis added] 60 Section three is even plainer: Access to restricted source and non-source documents prepared by external professional accounting advisors, whether in the possession of taxpayers or their professional accounting advisors, will not be sought except in accordance with the following paragraphs. The opinions expressed by professional accounting advisors in such documents are considered to be within the class of documents referred to in part 1 above. Where access to documents is sought, a mutually agreed time will be allowed to enable the taxpayer and professional accounting advisor to consult and ascertain whether the taxpayer wishes to claim client confidentiality in relation to those documents. The professional accounting advisor and/or client will be allowed a mutually agreed time to obtain legal advice in relation to those documents. In the circumstances where the ATO officer has attended upon the professional accounting advisor or taxpayer in person, the ATO officer may wish to remain on the premises while the consultation takes place, at the same time respecting the privacy of the consultations. Where a request for files or groups of documents is made by ATO officers and the taxpayer and/or the advisor consider that the documents, or some of the documents, are properly categorised as restricted source and/or non-source documents, the taxpayer or the advisor shall provide a list of the documents in question. The list will contain the following details: (i) the nature of the document(s), eg letter, opinion, statement of account, advice file note or other form of document, in relation to, for instance: a takeover, lease, financial arrangement, etc. The more specific a description of the nature of the document is, the better placed the ATO officer will be to determine whether or not to concede the claim (ii) the exact number of documents and pages contained in that document withheld (iii) the date each document was prepared or executed, if not available this should be indicated (iv) the identity of the person who prepared and/or signed each document, to whom directed and all entities party to the transaction/advice, if known (v) a physical description of each document, eg typed or handwritten (vi) whether the document is an original, a photocopy, facsimile or a carbon copy, and (vii) the reason why a document is categorised as restricted source and/or non-source document, in respect of each document. However, the details provided pursuant to paragraph (i) to (vii) above should not result in the disclosure of restricted source and/or non-source information. The document should also be designated by number or letter on the document to enable accurate identification. The disclosure of the above information in no way waives the restricted source and/or non-source claim. While it will not always be necessary to do so, section 264 may be used at any time during an audit to obtain such a list. Requests for documents by ATO officers will usually be made on the basis of 'files' or some other description for a group of documents. Any claims for classification of entire groups of documents as restricted source or non-source documents will not be accepted. Categorisation must be substantiated on a document by document basis. It is the responsibility of the professional accounting advisor and/or the taxpayer to identify any individual documents which are claimed to be in the restricted source or non-source categories. [emphasis added] 61 Each of the emphasised sections above proceeds upon an assumption that the ATO officers in question will seek access from the taxpayer or the taxpayer's external accountant. Indeed the guidelines assume that it will be possible for a taxpayer to make a claim with respect to documents which are in the taxpayer's or accountant's possession. I cannot read such provisions as being capable of applying in situations where the documents are in the possession of a third party, even where that third party has taken possession by some compulsory process. The machinery specified in the guidelines simply makes no sense where third parties possess the documents. 62 I might add for completeness that Guideline 6 (set out above) exhibits the same difficulty. The necessary consequence is that the guidelines did not apply to the documents provided by the ACC to the ATO. There could be, in that circumstance, nothing procedurally unfair in accessing the documents. Fairly construed, the guidelines and the ATO's correspondence with Mr Hogan could not reasonably have engendered any view on his part that access would not be had to the documents without first giving him an opportunity to argue to the contrary. 63 In that circumstance, I conclude that Mr Hogan was not denied procedural fairness. The guidelines did not apply and he was not told they did. Disposition 64 The application should be dismissed with costs. I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 8 April 2011