12 May 1111 Assessments based on stolen information held to be lawful - Denlay
The Full Federal Court (Keane CJ, Dowsett and Reeves JJ) has dismissed the taxpayers' appeal from the decision of Logan J, who dismissed applications, made under s 39B of the Judiciary Act 1903, by two taxpayers (husband and wife), seeking to have quashed amended assessments issued by the Commissioner. The amended assessments were based on information obtained by ATO officers whilst overseas from a former employee (Mr Kieber) of the LGT Group in Liechtenstein, who had unlawfully copied the information (the LGT documents) in violation of Liechtenstein privacy laws.
The receipt, importation and possession of the LGT documents by ATO officers was said by the taxpayers to be in contravention of s 400.9 of the Criminal Code 1995 (Cth) (the Criminal Code), as scheduled to the Criminal Code Act 1995 (Cth). For an offence to be committed, s 400.9 required the ATO officers to have a reasonable suspicion that the LGT documents were the proceeds of crime, being "money or other property in relation to a foreign indictable offence" committed by Mr Kieber.
On that basis, the taxpayers submitted, the Commissioner's use of the information in the process of assessment was impermissible under ITAA 1936 and constituted conscious maladministration as described in FCT v Futuris Corporation Ltd  HCA 32; (2008) 237 CLR 146, such that each of the amended assessments should be quashed.
The Full Court held that, generally speaking, information is not property, nor was it money. Further, there was no basis apparent from the evidence available to the ATO officers or to the Court for concluding that the disks onto which Mr Kieber copied the LGT data were not owned by him. The ATO officers had no reason to suspect that disks which Mr Kieber provided to them were not his property. They were not therefore the proceeds of crime as defined in s 400.9.
In relation to Futuris, the Full Court said, at para 76: "Their Honours were concerned with actual bad faith, not with some form of 'constructive' bad faith established by unwitting involvement in an offence." They expressed their conclusion, at para 78, as follows:
"The observations of the majority in Futuris do not support the proposition that any breach of the law by officers of the Commissioner in the course of processes anterior to, or even in the course of, making an assessment, suffices to establish conscious maladministration which is apt to vitiate the assessment. Conscious maladministration, as explained in Futuris, involves actual bad faith on the part of the Commissioner or his officers. The findings of the primary judge to which we have referred at paragraphs  and  of these reasons negative bad faith on the part of the Commissioner’s officers."
The taxpayers' appeals were dismissed.
Denlay v FCT  FCAFC 63 (Full Federal Court; Keane CJ, Dowsett and Reeves JJ; 11 May 2011).