In DCT v Rennie Produce (Aust) Pty Ltd (in liq) [2018] FCAFC 38, the Federal Court considered the constraints on the Commissioner of Taxation’s (Commissioner) power in section 353-10(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to require a person to produce documents.

The First Respondent (Company) was a company in liquidation and the Second Respondent (Director) was a director of the Company. The Director was being audited by the Commissioner. The Commissioner issued a notice pursuant to section 353-10(1)(c) of the ITAA 1997 to the Company in relation to the audit.

The Commissioner’s power in section 353-10(1)(c) allows him to require a person to produce documents in their custody/control and provide them to the Commissioner for the purpose of the administration or operation of the taxation law.

The Company had the relevant documents but had obtained them by summons and thought it was constrained in providing those documents to the Commissioner on the basis of the decision in Harman v Secretary of State of the Home Department [1983] 1 AC 280 (Harman Obligation). Broadly, the Harman Obligation is where by reason of a rule or order of a court, a party to litigation is compelled to disclose documents/information, the party receiving the documents cannot use it for a purpose other than that for which it was given, without leave of the court.

Instead of providing the relevant documents to the Commissioner, the Company provided them to the Australian Government Solicitor and said they were prevented from being provided to the Commissioner without leave of the court.

The issue for the Court was whether the Harman Obligation constrains the section 353-10(1)(c) power.

The Court held that the Harman Obligation does not:

  • prevent a person from complying with a valid section 353-10(1)(c) notice or
  • prevent taxation officers from using the documents obtained under a valid section 353-10(1)(c) notice for lawfully exercising the Commissioner’s powers.

Specifically, the Court said that complying with the section 353-10(1)(c) notice was not ‘a use of the documents’ by the Company (which is prevented as part of the Harman Obligation). Rather, the Company is complying with a requirement to provide documents to the Commissioner, failure of which is an offence.