FEDERAL COURT OF AUSTRALIA

Fastbet Investments Pty Ltd v Deputy Commissioner of Taxation (No 4) [2018] FCA 1667

ORDERS

THE COURT ORDERS THAT:

1.    The relief sought in sub-paragraphs 1(a), (f) and (g) of the Interlocutory Application filed 16 August 2018 is refused.

2.    The Interlocutory Application is otherwise dismissed.

3.    The matter is to be set down for a Case Management Hearing and the parties are to be heard on the questions of costs on 26 November 2018 at 10.15am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    These reasons concern the relief sought in sub-paragraph 1(a) of an Interlocutory Application for discovery filed by Fastbet Investments Pty Ltd (Fastbet) on 16 August 2018. The application sought discovery of seven classes of documents which Fastbet claimed it required for the purposes of the hearing of its claim or for making certain unspecified amendments to its already amended Originating Application. Each class of document sought was identified separately in sub-paragraphs 1(a) to (g) of the application.

2    For the reasons which were identified in Fastbet Investments Pty Ltd v Deputy Commissioner of Taxation (No 3) [2018] FCA 1540 (Fastbet (No 3)), the application was heard on two separate, non-contiguous days; being 11 September and 31 October 2018. At the first hearing the argument presented concerned the entitlement to discovery of the classes of documents in sub-paragraphs 1(b), (c), (d) and (e) of the Interlocutory Application. During the course of that hearing, Fastbet abandoned the relief sought in sub-paragraphs 1(b) and (c). The relief sought in the other two sub-paragraphs was refused.

3    The hearing resumed on 31 October 2018, for argument in relation to sub-paragraphs 1(a), (f) and (g) of the application. In the course of that hearing, Fastbet abandoned reliance on sub-paragraphs 1(f) and (g).

4    The background facts relevant to this matter are set out in Fastbet (No 3) and there is no need to repeat them. It suffices to observe that these reasons ought to be read in conjunction with that earlier judgment.

Sub-paragraph 1(a) of the application

5    The only remaining category of documents in respect of which Fastbet now seeks discovery are those identified in sub-paragraph 1(a) of the Interlocutory Application being:

Origination of decision to issue Security Bond Demand

With reference to the originating of the decision to issue the Notices, all written communications (including emails, SMS messages and Microsoft Office Communicator (“MOC”) messages and logs of such messages howsoever (sic) relating to the Applicant sent or received by or at the direction of Mr Ross Burns at any time between 1 January 2017 and 30 March 2018.

6    It is to be kept in mind that the relevant decision in respect of which Fastbet seeks review is that of a delegate of the Commissioner of Taxation (the Commissioner), Mr Ross Burns (Mr Burns), made on 17 September 2017 to issue to Fastbet a Notice under s 255-100 of Schedule 1 of the Taxation Administration Act 1953 (Cth). The date on which that decision was made immediately gives rise to some concern about the temporal width of the documents sought in sub-paragraph 1(a). This is considered below.

The applicant’s submissions

7    Directions were made to file and serve written submissions prior to the hearing of the application. Although Fastbet filed a document which purported to be its written submissions in support of the application, it did not include any submissions or argument directed to the veracity of the relief sought in sub-paragraph 1(a) or to any of the other sub-paragraphs. The submissions made were somewhat more diffuse and abstract and were generally directed to the Court’s power to make an order for discovery.

8    In the course of his oral address on the topic of sub-paragraph 1(a), Mr Fickling of Counsel for Fastbet made the following submissions which are set out in full as follows (ts. pp31-32):

MR FICKLING: …Now, as to paragraph (a) – paragraph 1(a) reads:

Origination of decision to issue security bond demand.

It says:

With reference to the originating of the decision to issue the notices or in communications including emails, SMS messages and Microsoft Office communicated messages and logs of such messages howsoever relating to the applicant sent or received at the direction of Mr Ross Burns at any time between 1 January 2017 and 30 March 2018.

Now, overall, Ms Friedewald’s affidavit addresses this, but her affidavit addresses this starting at paragraph 8 through to paragraph 12, and given what’s written there, I wouldn’t propose to say anything further unless you seek specific – specifically to be addressed. Now, although paragraph 1(a) relates to paragraphs 8 to 12 of Ms Friedewald’s affidavit, paragraph 7 of Ms Friedewald’s affidavit is also noted.

HIS HONOUR: So this is the affidavit of 14 August?

MR FICKLING: Correct.

HIS HONOUR: So you say you rely on paragraph 7 .....

MR FICKLING: 7, 8 – 8 to 12. So that’s ground 1(a), your Honour. May I move on to ground (f).

9    It is immediately apparent that the written and oral submissions on the issue of whether an order should be made for discovery of the documents in sub-paragraph 1(a) were inadequate. No attempt was made to relate the class of documents sought to any issue arising in the Originating Application or to any alleged ground of invalidity of the decision under review. In short, no submission was advanced to demonstrate how the documents sought were relevant, let alone why an order for discovery should be made.

10    The reference by Mr Fickling to the paragraphs of the affidavit of Ms Friedewald of 14 August 2018, was both unhelpful and uninformative. It appears that it was intended to incorporate the argument advanced in those paragraphs although the argument there made is opaque at best. The making of submissions to a Court of superior jurisdiction (or to any Court) in the manner undertaken ought not to be tolerated. If a party wishes to advance an argument and have it ruled upon they ought articulate it in a manner which is capable of comprehension. Merely identifying what is said to be relevant material and leaving it for the judge to figure out what the argument might be is inimical to the administration of justice. That is axiomatic. Moreover it is unfair to a respondent who is left to hazard a guess as to the content of the moving party’s argument.

11    In response to Fastbet’s submissions, Dr Schulte for the Commissioner submitted the lack of temporal connection between the documents sought and the issues relevant on the hearing was fatal. There was force in that submission and it should be accepted. The relevant decision was made on 19 September 2017 and it is very difficult to ascertain what relevance any communications sent to or received by or at the direction of Mr Burns after that date might be. Fastbet did not attempt to explain any connection. The grounds of invalidity of the decision alleged in the Originating Application, although somewhat obscure, nevertheless point to various aspects of the reasons given by Mr Burns for the issuing of the notice under s 255-100 and his knowledge at the time of making the decision. Particular concern is directed towards Mr Burns’ knowledge of the real property which was owned by Fastbet when the notice was issued and whether he was aware of the existence of some dealings with respect to the title of some of those parcels of land. It follows that, in a general sense, the alleged essential question raised on the Originating Application concerns Mr Burns state of knowledge at the date on which he determined to issue the notice. Mr Fickling did not articulate any reason why documents recording communications after that date, including those more than six months after that date, might be directly relevant or even “relevant” in the more general sense.

12    Dr Schulte further submitted, and correctly so, that the scope of documents sought in sub-paragraph 1(a) was wider than the Commissioner would be required to provide were an order for standard discovery to be made. Again, there is substantial force in that submission as the scope of documents sought is not limited to the issues arising in the Originating Application. The documents sought are those which are in anyway connected with the originating of the decision to issue the notice and which relate to Fastbet. On any view of the authorities, this amounts to impermissible “fishing” and for that reason also the relief sought in this sub-paragraph should be refused.

13    Additionally, the scope of the discovery sought is not confined to the actual decision to issue the notice, but includes documents within the scope of the expression “with reference to the originating of the decision”. That vague expression casts the net rather too wide. Again, in this context, Dr Schulte referred to the temporal width of the class of documents sought and rightly submitted that it extended well beyond the scope of information leading up to the making of the decision. He also submitted that the discovery sought in sub-paragraph 1(a) was more extensive than the non-standard discovery because the description of the class of documents sought does not effectively confine them to those which are “directly relevant” to the issues in question. Fastbet did not attempt to articulate why discovery which was broader than the standard discovery ought to be granted. Whilst an order for discovery on a basis more extensive than standard discovery might be made pursuant to r 20.15 of the Federal Court Rules 2011 (Cth), some reason for making it needs to be shown.

14    In his submissions in reply, Mr Fickling engaged upon a more fulsome address as to the alleged relevance of the documents his client sought. This was inappropriate and was objected to by Counsel for the Commissioner. Although the objection was rightly made, in the interests of ensuring Fastbet had every opportunity to advance its case, a more expanded address in reply was permitted. Mr Fickling thereupon sought to explain the basis on which discovery was sought by reference to Ms Friedewald’s affidavit.

15    In paragraphs 7 through to 12 of Ms Friedewald’s affidavit of 14 August 2018, the deponent identified what she asserted were “inconsistencies” between the evidence filed by Mr Burns in this matter and what is said to be other information obtained under the Freedom of Information Act 1982 (Cth). Reference was also made in that argumentative affidavit as to alleged apparent illogicality or unreasonableness in the making of the decision, although how that might arise from the alleged inconsistencies is difficult to detect.

16    In relation to those alleged inconsistencies, Ms Friedewald referred to evidence given by Mr Burns in his affidavit of 23 October 2017 where, at paragraphs 4 through to 6, he identified the “usual process” of issuing a Security Bond Demand (SBD) (being a notice under s 255-100) in respect of a future tax liability. In essence, he said the usual process was that an auditor will advise the Significant Debt Management Business Line (SDMBL) of the ATO of a taxpayer in respect of whom a future tax liability is expected and the relevant decision maker in the SDMBL may wish to consider issuing an SBD. A submission for the issuing of an SBD (referred to as an SBD submission) would then be prepared and provided to the decision maker.

17    Ms Friedewald then asserted that the evidence which had been obtained by Fastbet pursuant to the Freedom of Information Act discloses that, for the purposes of the issuing of the notice in question, Mr Burns had sent a draft of the SBD submission to an ATO officer and requested that he complete it in particular respects. It was also said that, at that time, the audit department of the ATO had not yet provided an estimate of liabilities as is alleged to be the usual process described by Mr Burns.

18    Ms Friedewald then said:

10.    Consequently, I believe that the discovery of documents relating to the originating of the decision to issue the SBD will provide relevant evidence to the Court as to why Mr Burns was on one hand deposing that he issued the Notice on the basis of a submission received on 19 September 2017 from one of his staff members, and on the other hand and not stated in his affidavit, was drafting a SBD and sending it to his staff to “populate” with estimates of future tax liability on 21 August 2017.

11.    It presently is unclear whether Mr Burns wholly issued the Notice because he had received a submission on 19 September 2018 as he deposed (and as the evidence shows, a submission received at 1:58pm in respect of a notice served shortly after 4:30pm). I believe discovery will tend to support or refute this proposition.

19    Ms Friedewald’s claimed concern about inconsistencies is misplaced. Mr Burns’ identification of what might be the “usual process” was not identified as being the only process by which an SBD would issue. A person with even the most basic understanding of administrative decision-making would recognise the manner in which the Commissioner might determine to issue a notice such as an SBD could occur in myriad ways. These circumstances are more than likely to be infinite and will vary depending upon the manner in which the relevant circumstances came to the attention of the Commissioner’s officers. It is apparent the SDMBL would be aware of persons such as Ms Bazzo who, apparently, have a long history of non-compliance with their taxation obligations, either personally or by the companies which they control. It would be passing strange if it did not regularly prepare to issue an SBD well in advance of being told by the audit team that such a taxpayer is likely to have a future taxation liability.

20    More importantly, there is nothing in the provisions of s 255-100 which required the Commissioner to follow any particular process of information gathering prior to considering whether to exercise his discretion. How the Commissioner, through his delegated officers and agents, might amass relevant information prior to exercising the power does not go to the legality of any decision. There is nothing in the legislative scheme, and none was pointed to, that suggests an ATO officer in the SDMBL must wait until they are informed about a potential future taxation liability, before they commence considering whether or not to issue a SBD. Nothing referred to by Ms Friedewald or Mr Fickling suggested that was the case.

21    Mr Fickling submitted, as did Ms Friedewald at paragraph 50 of her affidavit, that Fastbet wants to “get to the bottom” of what occurred in the decision-making process in relation to the amassing of the information which supported the issuing of the SBD. In his submissions Mr Fickling regularly submitted that the applicant did not know what went on in the process. He asserted that Mr Burns deposed of the existence of a “conveyor belt” process for the issuing of SBDs (that being Mr Fickling’s paraphrasing) and suspicion has been aroused because the process on this particular occasion did not follow that which had been identified. As has been indicated, that suspicion is misguided.

22    Mr Fickling’s submissions in this respect were quite disingenuous. Mr Burns did not depose to the existence of any uniform “conveyor belt” like process. Although Mr Fickling referred the Court to paragraph 50.1 of Ms Friedewald’s affidavit where Mr Burns’ evidence is inaccurately paraphrased, when consideration is given to Mr Burns’ affidavit of 23 October 2017, it is pellucid he was referring to the “usual process” which occurred prior to the issuing of SBDs. It was acknowledged by Mr Fickling and Fastbet that, in one sense, the usual process was followed in this case. That is to say, the audit department did provide Mr Nguyen of the SDMBL with details of the expected future tax liability and Mr Nguyen prepared an SBD submission and provided it to Mr Burns who made the decision. In this respect, Mr Fickling submitted, the ATO had created the necessary “paper trail”. Although he denied it, that was obviously intended in a pejorative manner and suggestive of some impropriety even though it is apparent that none existed.

23    At its highest, the reason why the documents in sub-paragraph 1(a) are sought seems to be because they may be used to discredit Mr Burns in relation to his identification of the process whereby the SBD was issued to Fastbet and, perhaps, more generally. It is generally well established that orders for discovery concern documents relevant to the issues in the proceeding and they will not be made in relation to documents which only go to questions of credit: Expectation Pty Ltd v PRD Realty Pty Ltd [1999] FCA 1207 at [39]; Officine Meccaniche Toschi SpA v Cosco Holdings Pty Ltd [1992] 2 Qd R 418 at 422.

24    As Dr Schulte for the Commissioner also submitted, Fastbet’s submissions were suggestive of some impropriety on behalf of Mr Burns or the officers of the ATO in making the decision, but that Fastbet has avoided clearly stating the nature of that impropriety. That submission can be accepted. The underlying suggestion which emanates from the submissions is that because Mr Burns had some involvement in the amassing of information which was relevant to the SBD submission and that was contrary to the “usual practice”, something untoward in the making of the decision to issue the notices must have occurred. Mr Fickling on behalf of Fastbet denied that any suggestion of impropriety in the origination of the determination to consider issuing the SBD was being made. He said (ts. p61):

MR FICKLING: Well, I think – I think, your Honour, practically – and we’re not – impropriety, that’s not our word, and whatnot, I think this circles back to the fact that Mr Burns, in his affidavit, has described the process but, on the other hand, the evidence was he was preparing a draft SBD before he knew there was a future tax liability. Now, that on its own might not be much of a problem but the problem here is this case – the evidence is, both the evidence that has been adduced – known to the applicant and the evidence know by Mr Crawshaw as communicated to Mr Burns is here wasn’t expected to be a future tax liability on this matter. So it’s – unfortunately, ground A is likely a different way of coming to - - -

25    That was also disingenuous. If no impropriety is said to arise from the manner in which the information supporting the decision to issue the SBD was gathered, it is not possible to detect in what way documents relating to it might be relevant to the issues between the parties. As mentioned, there is no identified non-compliance with any statutorily prescribed information amassing process. That being so, the manner in which the information came together cannot be relevant unless it goes to some identifiable jurisdictional error. It might also be observed that Fastbet had already abandoned the claim that it was entitled to obtain discovery of the documents which related to the ultimate assessment by Mr Crawshaw of its future taxation liability.

26    It follows that there is a palpable absence of any connection between the documents sought in sub-paragraph 1(a) of the Interlocutory Application and any relevant issues arising in the Further Amended Originating Application. Neither Mr Fickling in his submissions nor Ms Friedewald in her affidavit were able to identify any, other than in vague and general terms. Even if some connection were established, the breadth of the class of documents sought is far too wide and any order in terms of sub-paragraph 1(a) would obviously include documents which were not relevant to the issues in dispute.

27    It follows that no ground has been established for making an order for discovery in this case. Necessarily the application for relief in sub-paragraph 1(a) must be dismissed.

Other matters

Failure to address on relevant authorities

28    When the application came on for further hearing on the morning of 31 October 2018, Fastbet applied to adjourn it but that was refused. However, in the course of argument, Mr Fickling submitted that he was aware of other authorities relating to the manner in which a Court might exercise its discretion to make an order for discovery in judicial review actions. In particular, he referred to the decision in O’Sullivan v Parkin (2008) 169 FCR 283. Despite that, in the course of submissions on the discovery application Mr Fickling chose not to attempt to identify how that decision might affect the determination of the matter before the Court in relation to the class of documents in sub-paragraph 1(a). Further, in the course of the adjournment application Mr Fickling claimed that he had located a number of other cases dealing with the issue of “fishing”. He said these cases narrowed the scope of what was commonly thought to be within that concept. Again, he did not identify those cases and neither did he refer to them in the course of address on the question of the veracity of sub-paragraph 1(a).

29    It ought be mentioned that at the hearing on 31 October 2018, Mr Fickling, on behalf of Fastbet, made extensive submissions in relation to sub-paragraphs 1(f) and (g) of the Interlocutory Application. The documents referred to in those sub-paragraphs were said to relate to the decisions of the Commissioner made in February and March 2018 as to the amount of money he would be prepared to accept for the release of the securities he held over Fastbet’s land. Mr Fickling acknowledged that in relation to the collection of money by the Commissioner for the period ending 30 June 2018, his client was possessed of all relevant information. In particular, it was possessed of the information as to the amount of money received by the Commissioner on each occasion a mortgage was released.

30    During the course of argument it became apparent the documents referred to in paragraphs 1(f) and (g) of which Fastbet sought discovery related, in some manner, to the amounts collected by or to be collected by the Commissioner in the period subsequent to 30 June 2018. Fastbet sought discovery of any deed of priority between the Commissioner and any secured lender which might disclose how or why, in the period after June 2018, the Commissioner received more than the GST component of any purchase price paid. It can immediately be seen that such documents have no temporal connection to the grounds of invalidity of the decisions made in February and March 2018.

31    Moreover, Mr Fickling identified the gravamen of the Commissioner’s conduct was to receive more than the GST component in respect of the sale of any parcel of Fastbet’s land. It was said he had no power to do so because he was not entitled to take money in respect of any anticipated future income tax liability because Fastbet will not have any such liability. In this respect, it is impossible to see how any agreement between the Commissioner and any secured creditor as to the manner in which money is disbursed on settlement of the sale of properties could be relevant to the matters in issue. Mr Fickling was not able to explain any connection. How the Commissioner was able to cajole a secured financier to release more than the GST component is not relevant to the legality of the Commissioner’s power to receive that amount. Equally, Mr Fickling was not able to indicate or advance any argument as to the contrary.

32    Mr Fickling’s submissions in this respect, no doubt advanced on the urging of his instructing solicitors and his client, were disingenuous. Had any thought whatsoever been given to the potential relevance of the documents no argument would have been advanced. After the deficiencies in the argument were pointed out, Fastbet abandoned reliance upon sub-paragraphs 1(f) and (g). The arguments in this respect ought never to have been advanced in the first place.

33    The relief sought in sub-paragraphs 1(f) and (g) of the Interlocutory Application must be dismissed.

34    It is concerning that a similar approach was taken by Fastbet in relation to sub-paragraphs 1(b) and (c) of the Interlocutory Application. The relief sought there was irrelevant to the issues arising in the Originating Application and its pursuit was also inconsistent with the obvious facts of the case. As was the case in respect of sub-paragraphs 1(f) and (g), when the deficiencies were pointed out, Fastbet abandoned the relief claimed in those sub-paragraphs. Again, the submissions advanced rose no higher than humbug.

35    It is, unfortunately, necessary to mention these matters and, particularly, because the Commissioner has regularly made complaints in the course of this matter to the effect that Fastbet is engaged in obfuscation, obstruction and delay. As mentioned in Fastbet (No 3) there is force in that submission and the bringing of this application and the manner in which it was run gives support for it. Were the making of this misguided application an isolated incident it might have passed without comment, however, it is now apparent that it fits within a pattern of behaviour which points towards a strategy of delay being pursued by Fastbet. Whether Fastbet and its legal representatives are, in fact, engaged in such a strategy is a question which should await determination on an occasion when the issue is directly raised.

Conclusion

36    From the above, the orders which now ought be made on the application are that the relief sought in sub-paragraphs 1(a), (f) and (g) is refused. The application is otherwise dismissed.

37    The parties will be given an opportunity to make submissions as to costs.

Associate:

Dated:    6 November 2018