Legal updates REGULATORY LITIGATION
Regulators' investigatory powers and the Harman obligation not to disclose
Michael Legg is Professor, UNSW Law and
Of Counsel, Jones Day.
Stephen Speirs is Associate at Jones Day.
BY MICHAEL LEGG AND STEPHEN SPEIRS
T he Full Federal Court of Aus- tralia (Kenny, Robertson and Thawley JJ) in Deputy Commis- sioner of Taxation v Rennie Pro- duce (Aust) Pty Ltd (in liq)  FCAFC 38 (‘ DCT v Rennie Produce ’ ) were re- quired to address the interaction between the Commissioner of Taxation’s power to require the production of documents and the common law obligation that where a party obtains documents during litiga- tion those documents cannot be used for any other purpose, the so-called Harman obligation or implied undertaking. Coercive investigatory powers Section 353-10(1)(c) of Sch 1 to the Taxation Administration Act 1953 (Cth) (‘ TAA ’) provides the Commissioner with power to require a person to ‘produce to the Commissioner any documents in your custody or under your control for the pur-
The issue A s 353-10(1)(c) notice was issued to Rennie Produce (Aust) Pty Ltd, a compa- ny in liquidation, as part of an audit in relation to the income tax return lodged by Mr Rennie for the year ended 30 June 2013. Mr Rennie was a shareholder and sole director of Rennie Produce until its sale. The taxation office was investigating whether Mr Rennie’s self-assessment of the taxable capital gain arising from the sale of Rennie Produce was too low. The liquidators of Rennie Produce obtained documents from various persons through the issue of summons pursuant to ss 596A and 596B of the Corporations Act 2001 (Cth). The s 353-10(1)(c) notice applied to a significant number of documents, obtained through the summonses. The liquidators advised that, while wishing to comply with the notice, they were unable
• In Deputy Commissioner of Taxation v Rennie Produce (Aust) Pty Ltd (in liq) the Full Federal Court found that the Harman obligation does not prevent compliance with a notice from the Commissioner of Taxation, issued in reliance on the power to require a person to produce documents. • The content of the Harman obligation is such that it recognises and is shaped by inconsistent legal obligations, such as regulatory powers mandating production of documents. • The reasoning applied in relation to the Commissioner of Taxation’s power is equally applicable to other regulators’ powers to require the production of documents.
pose of the administration or operation of a taxation law’. It is the successor of the former s 264 of the Income Tax Assessment Act 1936 (Cth) (‘ ITAA 1936 ’ ). Section 353-10(1) also provides the power to require a person to give information and to attend and give evidence. Section 353-15 furnishes a power, inter alia, to access land, premis- es or a place, and to full and free access to documents, goods or property and to inspect, examine, make copies of, or take extracts from, any documents. It corresponds to the former s 263 of the ITAA 1936 . Other regulators have analogous powers. For example, the Aus- tralian Competition and Consumer Commission has s 155 of the Competition and Consumer Act 2011 (Cth); the Australian Securities and Investments Commission has ss 19, 30 and 33 of the Australian Securities and Investments Commission Act 2001 (Cth); the Australian Prudential Regulation Authority has ss 13, 61 and 62 of the Banking Act 1959 (Cth); and the Aus- tralian Transaction Reports and Analysis Centre has s 167 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
to do so because of the operation of the principle in Harman v Secretary of State of the Home Department  1 AC 280 (‘ the Harman obligation ’). The Harman obligation was described by the plurality of the High Court in Hearne v Street (2008) 235 CLR 125;  HCA 36 at , as follows: ‘Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or oth- erwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence.’ At  the plurality said that ‘it is common to speak of the relevant obligation as flowing from an “implied undertaking”’. Put another way, a party who obtains documents or information for ‘a particular purpose cannot use the documents or informa- tion for a “collateral or ulterior purpose”’ ( Esso Australia Resourc- es Limited v Plowman (1995) 183 CLR 10;  HCA 19 (‘ Esso ’) per Brennan J at ).
82 LSJ I ISSUE 48 I SEPTEMBER 2018
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