The Full Court of the Family Court has, in the exercise of its discretion, granted the Commissioner access to certain documents filed in the Family Court in proceedings between a married couple, although the Commissioner was a stranger to those proceedings. The Commissioner desired access to the documents for purposes of an audit of the tax affairs of the husband and his related entities.
It is important to understand that the court exercised its discretion to grant the Commissioner access. It is clear that the Commissioner does not have an overriding legal right to access documents on court files where the Commissioner is a stranger to the proceedings, whether in the exercise of his powers under s 263 or s 264 of the Income Tax Assessment Act 1936 or otherwise. He must persuade the court in such a case that, in all the circumstances, it is appropriate to grant him access.
In this case, there were proceedings in the Family Court between the husband and wife; those proceedings were eventually dismissed by consent. The ATO had by then commenced an audit of the husband’s tax affairs. The Commissioner was given access by court staff to documents in the court file. The Commissioner then applied to the court for permission to copy certain documents on the file.
At that point in the proceedings, the Commissioner accepted that he was subject to a general law rule to the effect that: “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 otherwise, 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”: Hearne v Street  HCA 36; (2008) 235 CLR 125. This rule is sometimes known as the “implied obligation”.
At first instance in the Family Court, a judge dismissed the Commissioner’s application to be released from an implied obligation not to make use of documents he obtained from a Family Court of Australia file relating to proceedings in which he was not a party.
On appeal, the Commissioner argued that the obligation does not extend to a stranger to the litigation, or at least does not extend to him.
The Full Court accepted that the implied obligation may give way to clear statutory provisions to the contrary. But the court found nothing in tax legislation that expressed such a clear intention to relieve the Commissioner from compliance with the implied obligation. Nor did the Commissioner’s duty to assess and collect tax, and to administer tax laws, override the implied obligation.
However, the court held that it had a discretion to relieve a person from compliance with the obligation. In this case, it was appropriate to exercise that discretion in the Commissioner’s favour, for reasons including the following: the Commissioner was performing an important public duty; he was engaged in a substantial, targeted audit; at this point the ATO was conducting only an audit and the cogency of the evidence would be the subject of scrutiny in any proceedings that might be instituted after the Commissioner completed the audit and made assessments; the release of the Commissioner from the obligation would not be “inconvenient” to the husband, and would not prejudice him, unless the documents did establish he had not been meeting his taxation obligations; and there are restrictions on the way in which the Commissioner can use the information obtained from the court file which would ensure that the documents do not venture into the public arena. In the court’s view, the most important consideration was that granting the Commissioner relief from the obligation is not likely to discourage litigants from making a frank disclosure. There is already a disincentive to litigants to be frank with the Family Court about tax evasion because it is (or should be) well-known that the Court can and does refer such matters to the authorities for investigation.
FCT & Darling  FamCAFC 59 (Family Court of Australia - Full Court, Thackray, Strickland and Murphy JJ, 4 April 2014).