FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Gould  FCA 1345
NSD 576 of 2015
Date of judgment:
PRACTICE AND PROCEDURE – discovery – standard discovery – validity of tax assessments – documents obtained from foreign tax authority – alleged conscious maladministration and improper purpose – whether standard discovery necessary for pleaded case – ‘fishing expedition’
Federal Court Rules 2011 (Cth) rr 16.43, 20.13, 20.21
Public Service Act 1999 (Cth) s 13
Trade Practices Commission v CC (NSW) Pty Ltd (1995) 58 FCR 426
Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537
Number of paragraphs:
Solicitor for the Applicant/Cross-Respondent:
Australian Government Solicitor
Counsel for the Respondent/Cross-Claimant:
Mr J Hyde Page with Mr T Bagley
Solicitor for the Respondent/Cross-Claimant:
Mark J Ord
VICTORIA DISTRICT REGISTRY
NSD 576 of 2015
DEPUTY COMMISSIONER OF TAXATION
VANDA RUSSELL GOULD
VANDA RUSSELL GOULD
DEPUTY COMMISSIONER OF TAXATION
1 DECEMBER 2015
REASONS FOR JUDGMENT
1 Mr Vanda Gould seeks in these proceedings an order for standard discovery against the Deputy Commissioner of Taxation. Mr Gould is the respondent in the Commissioner’s action for recovery of taxes upon assessment and is the cross-claimant against the Commissioner in the proceeding. On 2 November 2015 Mr Gould applied for an order for standard discovery pursuant to r 20.13 of the Federal Court Rules 2011 (Cth) on the grounds set out in submissions dated 2 November 2015. The Commissioner opposes the application and indicated an intention to apply to have the cross-claim struck out, but had not yet done so by the time of the hearing of Mr Gould’s application for standard discovery and, on instructions, did not seek an adjournment on the day set for its hearing. The Commissioner has since applied to strike out the cross-claim.
2 Mr Gould’s cross-claim challenges the validity of assessments against him on the grounds that the Commissioner’s officers were guilty of conscious maladministration or had failed to act in accordance with s 13 of the Public Service Act 1999 (Cth) in their use of certain documents obtained from the Cayman Islands during the process leading to the assessments raised against Mr Gould. Counsel for Mr Gould submitted that three improprieties were alleged in the cross-claim against the Commissioner about which standard discovery was sought and was necessary. The first concerned the propriety of the original request which the Commissioner had made to the relevant authorities in the Cayman Islands by which the information was obtained by the Commissioner. In that context counsel for Mr Gould submitted that there was an “inherent implausibility that the ATO was seeking to use [the] documents in respect of a tax period that had not even elapsed at the point at which they requested the information”. The second was described as the impropriety of “relatively low-level ATO employees purporting to disregard a treaty entered into by the Australian Government with the Cayman Islands Authority”. The third was described as the propriety of members of the Australian Taxation Office “committing what they may well have known was a criminal act under the law of the Cayman Islands by disclosing confidential information”. Counsel for Mr Gould submitted that to make out these three allegations it was necessary for the taxpayer “to show both the acts in question, and also that these acts were accompanied by the requisite mental state”. The Commissioner took issue with Mr Gould’s contentions, in part by submitting that the pleaded case made it unnecessary for the discovery which was sought, and in part by submitting that what was sought, as identified in the submissions for Mr Gould, was either irrelevant or fishing.
3 The foundation of Mr Gould’s cross-claim lies in his contention that documents obtained from the Cayman Islands were improperly acquired and improperly used by the tax office. Paragraph 17 of Mr Gould’s cross-claim, for example, alleges that a written request of 23 February 2011 was not transmitted for a valid purpose to the Cayman Islands Tax Information Authority (“the Cayman Islands Authority”) under the Agreement between the Government of Australia and the Government of the Cayman Islands on the Exchange of Information with respect to Taxes (“the information exchange agreement”). The particulars in support of the allegation, however, depend wholly upon the construction of the information exchange agreement and the terms of the request. Paragraph 18 of the cross-claim alleges an awareness on the part of persons described as the “officers and employees” of the Commissioner that the respondent did not seek information for a valid purpose. The pleading is not of bad faith nor is it a pleading of an awareness of wrongfulness. The difference between consciousness of a fact which turns out to be wrong and consciousness of doing something known to be wrong is significant and pleadings about such matters must be clear and specific. The particulars which are provided about the allegation of any awareness of any person falling within the description used are (a) of a judgment having been delivered by the Grand Court of the Cayman Islands in which an express finding was made that the request was not received for a valid purpose under the information exchange agreement, which, presumably, may be intended to carry a particular to the effect that one of the group of people said to be aware of the request which had been transmitted had knowledge of the fact of the judgment (a fact which is unlikely to be in controversy) and (b) part of the text of the information request. The particulars to the allegations in paragraph 18 otherwise rely upon the general statement that “further particulars are to be provided by way of evidence, upon completion of discovery”. Paragraph 19 contains another generalised allegation that persons described as “officers and employees” of the Commissioner knew that the request transmitted to the Cayman Islands Authority did not relate to the tax periods covered by the information exchange agreement. Elsewhere in the pleading there are to be found unparticularlised allegations of the use of the documents which the Commissioner had obtained. Thus, for example, paragraph 32 pleaded that the “officers and employees” of the Commissioner “used the Cayman Islands documents to raise amended assessments” against Mr Gould. None of the pleadings, or any of the particulars, are of consciousness of wrongdoing in the sense relied upon in the submissions for Mr Gould. Indeed, the cross-claim would need to have provided particulars of the state of mind had it been pleaded in terms. Allegations concerning a condition of mind must be particularised (see r 16.43; Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537, -) and discovery of such issues should not be ordered where it would amount to inappropriate fishing.
4 Many of the allegations in Mr Gould’s cross-claim were admitted by the Commissioner’s defence to the cross-claim and there is no serious contest between the parties about most of the facts alleged in the cross-claim. The facts and dates of the information request which had been made on behalf of the Commissioner to the Cayman Islands Authority are not in dispute between the parties nor is the fact of differing judgments made by Quin J in the Grand Court of the Cayman Islands on 13 September 2013 and Perram J on 8 October 2013. The cross-claim does not plead bad faith against the Commissioner, but the submissions accompanying the application for discovery, in contrast to the pleading, seem directed to obtaining discovery about “the consciousness or advertence” of wrongdoing. An order for standard discovery is, therefore, not likely to result in discovery of the documents which Mr Gould’s submissions presuppose as a pleaded issue.
5 Practice Note CM5, on which both parties relied, identifies the general practice of this Court in relation to discovery as “necessary to facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible”. That, in this case, requires not standard discovery but, if shown to be appropriate, particular discovery. The submissions for Mr Gould attempted to identify specific matters where, arguably, discovery might be appropriate but they do not establish a sufficient basis for standard discovery at this stage of the proceeding. An order for standard discovery is not apt to focus with sufficient precision upon the issues about which discovery is to be given and whether those issues have been properly engaged. Furthermore, the cross-claim (assuming that it sufficiently contains an allegation of consciousness of wrongdoing) does not give particulars revealing the existence of a case justifying discovery that would not be fishing. In Trade Practices Commission v CC (NSW) Pty Ltd (1995) 58 FCR 426 Lindgren J said at 438:
What does the reference to a “fishing expedition” mean? After all, ex hypothesi, the giving of discovery will often, if not always, reveal documents of which the other party was not previously aware (similarly, the administering of interrogatories will often, if not always, reveal information of which the other party was not previously aware). What is meant is that discovery must not be used for the purpose of ascertaining whether a case exists, as distinct from the purpose of compelling the production of documents where there is already some evidence that a case exists: see, for example, Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575; Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd; WA Pines Pty Ltd v Bannerman; Barbarian Motor Cycle Club Inc v Koithan (1984) 35 SASR 481 at 486; Nestle Australia Ltd v Commissioner of Taxation (1986) 10 FCR 78 at 82-83; Mobex Pty Ltd v Comptroller-General of Customs (unreported, Federal Court, Foster J, 18 May 1994), at p 18. In WA Pines Pty Ltd v Bannerman at 181, Brennan J said that what is required is that “sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery”. On the facts of particular cases, the application of the distinction between “fishing” and “nonfishing” may well be difficult.
Any order for particular discovery should be sought within the discipline required by r 20.21 and not in an application for standard discovery. It would then be possible to identify with more precision the documents, or categories of documents, sought and to see how the need for those documents arises specifically from the pleadings. Even then it might be desirable for any such application to be determined after the parties have filed their evidence from which a more informed decision can be made about the class of documents and the necessity for discovery to be ordered.