Australia and New Zealand Banking Group Limited v Konza
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID227 of 2012)
Date published: 4 December 2012

Summary of decision:
Outlines the ATO's response to this case which concerned whether notices requiring information under the Income Tax Assessment Act 1936 (ITAA 36) were invalid and, if valid, whether the notices were capable of being complied with.

Overview of facts:
The Australia and New Zealand Banking Group Ltd (ANZ) carries on a banking business in Australia. Its subsidiary, ANZ Bank (Vanuatu) Ltd (ANZ Vanuatu) is licensed to carry on a banking business in Vanuatu. | ANZ maintains a digital database in Australia called the 'Global Information Warehouse' (GIW), which includes certain information in respect of bank accounts in Vanuatu held by customers of ANZ Vanuatu. The GIW receives information electronically transmitted by ANZ Vanuatu in accordance with the terms and conditions under which that information was provided to ANZ Vanuatu by its customers. | On 17 December 2010, a Deputy Commissioner issued two notices to ANZ under paragraph 264(1)(a) of the ITAA 1936, requiring ANZ to produce certain information from the GIW, relating to the period 1 July 2008 to 30 November 2010, for customers who held accounts in Vanuatu with ANZ or any of its subsidiaries. | The first notice related to customers who had a specified Australian connection, and the second notice related to customers whose account addresses matched specified Vanuatu addresses. One of the details sought in the second notice was information about any 'officers' of relevant customers. The term 'officer' was defined in the notice by reference to the use of that term in specified Vanuatu legislation. | ANZ did not comply with the notices by the due date, and commenced proceedings in the Federal Court under the Administrative Decisions ( Judicial Review ) Act 1977 and section 39B of the Judiciary Act 1903 , seeking declarations that the notices were invalid, or, in the alternative, that it was not capable of complying with the notices for the purposes of subsection 8C(1B) of the Taxation Administration Act 1953 (TAA). The Commissioner cross-claimed, seeking declarations that the notices were valid, and requiring ANZ to furnish the information sought under the notices. | In the Federal Court, Lander J found that the notices were valid, and that it was not appropriate to make any declaration about the operation of subsection 8C(1B). His Honour also refused to make the declarations sought by the Commissioner in his cross-claim ([2012] FCA 196). | ANZ appealed to the Full Federal Court. The Commissioner did not appeal from the decision on his cross-claim. | Issues decided by the court | The Full Federal Court agreed with Lander J that: • Because the consequences of a failure to comply with a notice issued under section 264 are not found in the section, but in prosecution for an offence under section 8C of the TAA, and in an order to comply under section 8G if the recipient is convicted of an offence, the question whether ANZ is not 'capable of complying' with the notices for the purposes of subsection 8C(1B) only arises if, and when, ANZ is prosecuted under section 8C (paragraphs 14 and 15). • ANZ had not established that the disclosure of the information on the GIW would breach any contractual duty of confidence owed by ANZ to customers of ANZ Vanuatu (paragraph 19). • The expert evidence established that compliance by ANZ with the notices would not mean that it or its employees would commit an offence under Vanuatu law (paragraphs 23 to 26). • Even if disclosure by ANZ of the information sought in the notices might contravene the law of Vanuatu, such disclosure in Australia is governed by the law of Australia, and is authorised by paragraph 264(1)(a), which abrogates contractual duties of confidentiality that a bank owes to its customers, whether those duties arise under Australian or Vanuatu law. As such, the existence of those duties cannot affect the validity of the notices issued to ANZ. Paragraph 264(1)(a) should also not be read down by any foreign law that purports to prohibit the giving of information in Australia to the Commissioner (paragraphs 27 to 35). • The notices were issued for the proper purpose of ascertaining whether persons may have an Australian income tax liability. As there is no requirement that a notice under paragraph 264(1)(a) should identify the person in connection with whose income or assessment the request for information is sought, nor that it should be evident that information in fact relates to a particular taxpayer, the notices in this case are not required to be limited to information directly relating to the income of Australian taxpayers (paragraphs 39 to 42). • The first notice did not create any uncertainty for ANZ as to the information that it was required to furnish from the GIW (paragraphs 48 to 50). | • Because the consequences of a failure to comply with a notice issued under section 264 are not found in the section, but in prosecution for an offence under section 8C of the TAA, and in an order to comply under section 8G if the recipient is convicted of an offence, the question whether ANZ is not 'capable of complying' with the notices for the purposes of subsection 8C(1B) only arises if, and when, ANZ is prosecuted under section 8C (paragraphs 14 and 15). • ANZ had not established that the disclosure of the information on the GIW would breach any contractual duty of confidence owed by ANZ to customers of ANZ Vanuatu (paragraph 19). • The expert evidence established that compliance by ANZ with the notices would not mean that it or its employees would commit an offence under Vanuatu law (paragraphs 23 to 26). • Even if disclosure by ANZ of the information sought in the notices might contravene the law of Vanuatu, such disclosure in Australia is governed by the law of Australia, and is authorised by paragraph 264(1)(a), which abrogates contractual duties of confidentiality that a bank owes to its customers, whether those duties arise under Australian or Vanuatu law. As such, the existence of those duties cannot affect the validity of the notices issued to ANZ. Paragraph 264(1)(a) should also not be read down by any foreign law that purports to prohibit the giving of information in Australia to the Commissioner (paragraphs 27 to 35). • The notices were issued for the proper purpose of ascertaining whether persons may have an Australian income tax liability. As there is no requirement that a notice under paragraph 264(1)(a) should identify the person in connection with whose income or assessment the request for information is sought, nor that it should be evident that information in fact relates to a particular taxpayer, the notices in this case are not required to be limited to information directly relating to the income of Australian taxpayers (paragraphs 39 to 42). • The first notice did not create any uncertainty for ANZ as to the information that it was required to furnish from the GIW (paragraphs 48 to 50). | However, the Full Court found that the second notice was uncertain in relation to so much of the information sought that referred to 'officers' of the relevant customers. The definition of 'officer' in the notice required ANZ to construe foreign legislation and to then decide how that should apply to particular persons. This created uncertainty for ANZ because it did not sufficiently delineate, by criteria of ordinary words provided in the notice, and by reference to information known to ANZ, the information that it was required to produce (paragraph 63). The Full Court also held that the references to 'officers' were so central to the purpose of the notice that they could not be properly severed from it (paragraph 64). | The Full Court noted (paragraphs 31 and 35) that questions of any contravention of the law of Vanuatu may be relevant to whether a court would order the recipient of a notice issued under paragraph 264(1)(a) to furnish the information under section 8G of the TAA, if the person was convicted of an offence under section 8C. | The Full Court also found that its earlier decision in FC of T v De Vonk , that paragraph 264(1)(a) abrogated the privilege against self incrimination, should be followed as not clearly or plainly wrong, and noted that its recent decision in Binetter v DFC of T had found that nothing in the High Court's decision in Daniels Corporation International P/L v ACCC was inconsistent with the reasoning in De Vonk (paragraph 32).

Issues decided:
The Full Federal Court agreed with Lander J that: • Because the consequences of a failure to comply with a notice issued under section 264 are not found in the section, but in prosecution for an offence under section 8C of the TAA, and in an order to comply under section 8G if the recipient is convicted of an offence, the question whether ANZ is not 'capable of complying' with the notices for the purposes of subsection 8C(1B) only arises if, and when, ANZ is prosecuted under section 8C (paragraphs 14 and 15). • ANZ had not established that the disclosure of the information on the GIW would breach any contractual duty of confidence owed by ANZ to customers of ANZ Vanuatu (paragraph 19). • The expert evidence established that compliance by ANZ with the notices would not mean that it or its employees would commit an offence under Vanuatu law (paragraphs 23 to 26). • Even if disclosure by ANZ of the information sought in the notices might contravene the law of Vanuatu, such disclosure in Australia is governed by the law of Australia, and is authorised by paragraph 264(1)(a), which abrogates contractual duties of confidentiality that a bank owes to its customers, whether those duties arise under Australian or Vanuatu law. As such, the existence of those duties cannot affect the validity of the notices issued to ANZ. Paragraph 264(1)(a) should also not be read down by any foreign law that purports to prohibit the giving of information in Australia to the Commissioner (paragraphs 27 to 35). • The notices were issued for the proper purpose of ascertaining whether persons may have an Australian income tax liability. As there is no requirement that a notice under paragraph 264(1)(a) should identify the person in connection with whose income or assessment the request for information is sought, nor that it should be evident that information in fact relates to a particular taxpayer, the notices in this case are not required to be limited to information directly relating to the income of Australian taxpayers (paragraphs 39 to 42). • The first notice did not create any uncertainty for ANZ as to the information that it was required to furnish from the GIW (paragraphs 48 to 50). • Because the consequences of a failure to comply with a notice issued under section 264 are not found in the section, but in prosecution for an offence under section 8C of the TAA, and in an order to comply under section 8G if the recipient is convicted of an offence, the question whether ANZ is not 'capable of complying' with the notices for the purposes of subsection 8C(1B) only arises if, and when, ANZ is prosecuted under section 8C (paragraphs 14 and 15). • ANZ had not established that the disclosure of the information on the GIW would breach any contractual duty of confidence owed by ANZ to customers of ANZ Vanuatu (paragraph 19). • The expert evidence established that compliance by ANZ with the notices would not mean that it or its employees would commit an offence under Vanuatu law (paragraphs 23 to 26). • Even if disclosure by ANZ of the information sought in the notices might contravene the law of Vanuatu, such disclosure in Australia is governed by the law of Australia, and is authorised by paragraph 264(1)(a), which abrogates contractual duties of confidentiality that a bank owes to its customers, whether those duties arise under Australian or Vanuatu law. As such, the existence of those duties cannot affect the validity of the notices issued to ANZ. Paragraph 264(1)(a) should also not be read down by any foreign law that purports to prohibit the giving of information in Australia to the Commissioner (paragraphs 27 to 35). • The notices were issued for the proper purpose of ascertaining whether persons may have an Australian income tax liability. As there is no requirement that a notice under paragraph 264(1)(a) should identify the person in connection with whose income or assessment the request for information is sought, nor that it should be evident that information in fact relates to a particular taxpayer, the notices in this case are not required to be limited to information directly relating to the income of Australian taxpayers (paragraphs 39 to 42). • The first notice did not create any uncertainty for ANZ as to the information that it was required to furnish from the GIW (paragraphs 48 to 50). However, the Full Court found that the second notice was uncertain in relation to so much of the information sought that referred to 'officers' of the relevant customers. The definition of 'officer' in the notice required ANZ to construe foreign legislation and to then decide how that should apply to particular persons. This created uncertainty for ANZ because it did not sufficiently delineate, by criteria of ordinary words provided in the notice, and by reference to information known to ANZ, the information that it was required to produce (paragraph 63). The Full Court also held that the references to 'officers' were so central to the purpose of the notice that they could not be properly severed from it (paragraph 64). The Full Court noted (paragraphs 31 and 35) that questions of any contravention of the law of Vanuatu may be relevant to whether a court would order the recipient of a notice issued under paragraph 264(1)(a) to furnish the information under section 8G of the TAA, if the person was convicted of an offence under section 8C. The Full Court also found that its earlier decision in FC of T v De Vonk , that paragraph 264(1)(a) abrogated the privilege against self incrimination, should be followed as not clearly or plainly wrong, and noted that its recent decision in Binetter v DFC of T had found that nothing in the High Court's decision in Daniels Corporation International P/L v ACCC was inconsistent with the reasoning in De Vonk (paragraph 32).

ATO view of decision:
The ATO notes the Full Court's views about the extent of the ability of the Commissioner under paragraph 264(1)(a) to require persons in Australia to provide information to him that is held in Australia. | The ATO also notes the Full Court's views that its earlier decision in De Vonk , that paragraph 264(1)(a) abrogates the privilege against self incrimination, should be followed. | The ATO accepts that it was open to the Court to find that parts of the second notice were uncertain, and that those parts could not be properly severed from the rest of the notice.

Administrative treatment:
Implications for ATO Precedential documents (Public Rulings & Determinations etc) | Nil | Implications for Law Administration Practice Statements | Nil

Legislative references: Administrative Decisions (Judicial Review) Act 1977 16 Income Tax Assessment Act 1936 264(1)(a) Income Tax Assessment Act 1997 Taxation Administration Act 1953 8C(1B) 8G Companies Act [Cap 191] (Vanuatu) 1 International Companies Act [Cap 222] (Vanuatu) 125 Penal Code [Cap 135] (Vanuatu) 2(a) Trust Companies Act [Cap 69] (Vanuatu) 9
Case references: ASC v Bank Leumi Le-Israel (Switzerland) (1995) 134 ALR 101 (1996) 69 FCR 531 Bank of Valletta PLC v NCA (1999) 164 ALR 45 (1999) 90 FCR 565 [1999] FCA 1099 Binetter v DC of T (No 3) [2012] FCA 704 2012 ATC 20-331 Brannigan v Davison [1997] AC 238 FC of T v Australia & New Zealand Banking Group Limited (1979) 143 CLR 499 9 ATR 483 79 ATC 4039 FC of T v De Vonk (1995) 61 FCR 564 31 ATR 481 95 ATC 4820 Daniels Corporation International Pty Ltd v ACCC (2002) 213 CLR 543 [2002] HCA 49 Deloitte Touche Tohmatsu v DC of T (1998) 98 ATC 5192 40 ATR 435 Donovan v FC of T (1992) 34 FCR 355 23 ATR 129 92 ATC 4114 Fieldhouse v FC of T (1989) 25 FCR 187 20 ATR 1299 89 ATC 5038 Geosam Investments Pty Ltd v Australia & New Zealand Banking Group Ltd (1979) 25 ALR 445 9 ATR 836 79 ATC 4418 In re Westpac Banking Corporation [1992] VUSC 7 Lipohar v R (1999) 200 CLR 485 [1999] HCA 65 May v FC of T (1999) 92 FCR 152 42 ATR 270 99 ATC 4587 McCormack v FC of T (2001) 114 FCR 574 2001 ATC 4740 48 ATR 608 Pyneboard Pty Ltd v TPC (1983) 152 CLR 328 [1983] HCA 9 Pyneboard Pty Ltd v TPC (1982) 57 FLR 368 Smorgon v Australia & New Zealand Banking Group Ltd (1976) 134 CLR 475 76 ATC 4364 6 ATR 690 Stergis v Boucher (1989) 86 ALR 174 20 ATR 591 89 ATC 4442 SZEEU v MIMIA (2006) 150 FCR 214 Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 Transurban City Link Ltd v Allan (1999) 95 FCR 553 [1999] FCA 1723 Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581
Subject references: Notices to furnish information Digital database in Australia Bank's duty of confidence Contravention of foreign law Capable of complying Certainty of notices