Noting the Commissioner’s extensive and coercive powers of access and investigation, the question posed is whether the use of section 263 and/or a section 264 notice, where there are current or pending legal proceedings, can constitute a contempt of court by the Commissioner and cause a serious injustice? The law of contempt applies equally to AAT proceedings.164 Once the ATO has commenced court proceeding against a taxpayer, access and notice powers to obtain information relevant to those proceedings could amount to contempt, especially if the ATO notice referring to the penalty for non-compliance is viewed by the court as an attempt to achieve by threats an advantage in proceedings, that which could not otherwise have been obtained.165 Even when the ATO is not a party to the litigation or pending litigation, the ATO must beware of using their access or notice powers in such a way as may cause advantage or disadvantage to a party, or may create a real risk of that occurring. The issue is particularly acute when the administrative enquiries are into the same matters as criminal proceedings. The use of section 264 powers to compel the giving of evidence and/or the production of documents, which are similar to, or may even exceed the powers of a criminal court, can result in an improper interference with the administration of justices and as such could be in contempt.166
Sections 263 and 264 cannot be employed by the Commissioner to override the ‘implied undertaking principle’ established in Harman167 in 1983. The ‘implied undertaking’ is that the documents will only be used for the purpose for which they were filed or produced. The
162 Binetter v Deputy Commissioner of Taxation (2012) 206 FCR 37. 163
Ibid 47 [30] (Edmonds, Perram, and Jagot JJ) (emphasis in original).
164 Section 63(d) Administrative Appeals Tribunal Act 1975 (Cth) provides: ‘A person shall not do any other act or thing that would, if the tribunal were a court of record, constitute contempt of that Court.’ 165 See Saunders v Deputy Commissioner of Taxation (1988) 19 ATR 1289.
166
See Hammond v The Commonwealth (1983) 152 CLR 188.
Harman principle provides that information obtained for the purposes of litigation may only be used for that purpose, unless otherwise allowed by the court, or if the information or documents have been read into evidence and thus become public.
In De Vonk168 the taxpayer declined to answer questions in response to a section 264 notice on the grounds that the answers could incriminate him, and that continuing with the inquiry would amount to a contempt of court. The section 264 notice had been issued three days after the taxpayer had been charged with tax-related criminal offences. The Commissioner conceded that the facts to be inquired into during the section 264 interrogation were ‘significantly the same as and overlapped with the facts relevant to the offences charged.’169 The three essential issues before the Court were: first, had the section 264 notice been issued for an improper purpose, namely the gathering of evidence is support of the criminal charges?170 The Court accepted the affidavit evidence from the ATO officer that the section 264 notice was issued ‘for the purposes of the Act and not for the purpose of gathering evidence for use in criminal proceedings pending against the Applicant.171 The Court ruled that the notice had not been issued for an improper purpose; however, Court urged caution.
The use of these investigative powers for the collateral purpose of obtaining evidence for use in a prosecution already launched, would be an improper purpose and one which would vitiate the use of the power. It would not, in effect, be a use authorised by the Act.172
The second issue concerned the operation of the privilege against self-incrimination and section 264, in the light of the sections 8C and 8D of the TAA. The Court reviewed a number of previous judgments and concluded that the privilege had been abrogated.173 The third issue was whether a section 264 inquiry would be in contempt of court in reference to the criminal charges faced by the applicant? Counsel for the ATO put forward the argument that, just as sections 8C and 8D of the TAA abrogated the privilege against self-incrimination they likewise abrogated the operation of contempt of court, Hill and Lindgren JJ disagreed.
Unless Parliament has acted to authorise an investigation in contempt of court (an authorisation not lightly to be inferred), it must be conceded that the coercive powers of investigation conferred by s 264 could, in a particular case, be exercised in a way which would constitute a contempt. The question, would however, not ordinarily be likely to arise.174
168 Commissioner of Taxation v De Vonk (1995) 61 FCR 564. 169 Ibid 584[F] (Hill and Lindgren JJ).
170
The Court noted that sections 3C and 3D of the TAA would prohibit disclosure of the information gathered, to a prosecutor or a court in most circumstances.
171 Commissioner of Taxation v De Vonk (1995) 61 FCR 564, 579[A] (Hill and Lindgren JJ). 172 Ibid 568[E] (Hill and Lindgren JJ).
173
Ibid 583[A] (Hill and Lindgren JJ). 174 Ibid 585[C] (Hill and Lindgren JJ).
The test to be applied was whether there was a ‘real risk’ of serious injustice? Hill and Lindgren JJ cited Gibbs CJ’s judgment in Victoria v Australian Building Construction Employees’ and Builders Labourers’Federation175
There is a contempt of court of the kind relevant to the present case only when there is an actual interference with the administration of justice, or ‘a real risk, as opposed to a remote possibility’ that justice will be interfered with …The essence of this kind of contempt is a ‘real and definite tendency to prejudice or embarrass pending proceedings’…176
…putting the questions in an examination under s 264 might, in a particular case, constitute a contempt of court notwithstanding that the answers might not in any way tend to incriminate the person to whom the questions are addressed.177
The principles of contempt of court are distinct from and separate to the privilege against self-incrimination, they are concerned with the protection of the effective administration of justice and as such, they are for the courts to administer.
The decision to refuse to answer a question on the grounds of self-incrimination is a matter for the person to whom the question is put. It remains within the capability of that person to answer. Contempt of court is not a matter for the parties to litigation, or for that matter any person not a party; it is a matter under the sole control of the court itself. If it is a contempt of court to require a person under compulsion to answer a question that person could not excuse the contempt. If Parliament intends to interfere with the administration of justice it should express that intention clearly or unambiguously.178
Hill and Lindgren JJ cited Northrop J in reference to section 263 and possible contempt of court.
In the context of taxation, Northrop J in Commercial Bureau (Australia Pty Ltd v Allen (1984) 1 FCR 2002 and Saunders v Commissioner of Taxation (Cth) (1981) 33 ATC 4349 was prepared to contemplate that the exercise of powers pursuant to s 263 of the Act to gain access to premises could, in an appropriate case, constitute contempt of court.179
Their Honours suggested that a failure on the part of the Commissioner to take account of the possibility of contempt of court from the conduct of a section 264 interrogation ‘could invalidate the giving of a notice under s 264 or the exercise of power under it.’180 They concluded that, as the Commissioner’s interrogation had yet to commence, they were not willing to make an order, reasoning that the order would be hypothetical and ‘advisory’ in nature, and should not be made.181 Instead they granted a liberty to the respondent to apply to a judge of the Federal Court on a 48 hour notice should the interrogation be commenced and objection taken to specific questions.182
175 (1982) 152 CLR 25.
176 Ibid 56 cited in Commissioner of Taxation v De Vonk (1995) 61 FCR 564, 586[B]. 177
Commissioner of Taxation v De Vonk (1995) 61 FCR 564, 586[D]. 178 Ibid 589 [A] (Hill and Lindgren JJ).
179 Ibid 586 [F] (citation included). 180 Ibid 589 [C].
181
Ibid 589 [E]. 182 Ibid 589 [F].
Heery J in the 1999 case of Watson183 applied the decision of the Full Federal Court in De Vonk. Heery J cited Deane J in the 1982 case of Hammond184 to reinforce the point that in order for the court to reach a finding of ‘contempt of court’, there must be a real risk of prejudice to the pending proceedings.
The mere fact that proceedings are pending in a court does not mean that any parallel or related administrative inquiry, conducted for proper administrative purposes constitutes and interference with the due administration of justice in that court.185
It is important to note that Deane J had gone on to warn that there should not be an improper interference with the pending criminal case.
On the other hand, it is fundamental to the administration of criminal justice that a person who is the subject of pending criminal proceedings in a court of law should not be subjected to having his part in the matters involved in those criminal proceedings made the subject of a parallel inquisitorial inquiry by an administrative tribunal with powers to compel the giving of evidence and the production of documents which largely correspond [to] (and, to some extent, exceed) the powers of the criminal court. Such an extra-curial inquisitorial investigation of the involvement of a person who has been committed for trial in the matters which form the basis of the criminal proceedings against him constitutes, in my view, an improper interference with the due administration of justice in the proceeding against him in the criminal court and contempt of court.186
The Court in Watson ordered an injunction restraining the Commissioner from acting on or giving further effect to the section 264 notice until the hearing and determination of the criminal proceeding or further order.187 This was facilitated by the Commissioner agreeing not to oppose an adjournment of the section 264 proceeding, should the applicant so request. In such cases the Commissioner is best advised to adjourn the section 264 enquiry, or at the very least take into account in his questioning, whether the interrogation presents a real risk of contempt of court.188 It is important to note that the ITAA makes no provision for either direct use immunity or derivative immunity for answers given, or documents or things produced, the protection in the tax arena is provided by the secrecy provisions in the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010 (Cth).