22 December 2021
Federal Court confirms that Harman obligation does not constrain the use of subpoenaed documents in the exercise of statutory powers and duties
La Mancha Africa S.A.R.L. v Commissioner of Taxation  FCA 1564
The ‘Harman obligation’ is the common law doctrine established in Harman v Secretary of State for Home Department  1 AC 280, summarised by the High Court in Hearne v Street (2008) 235 CLR 125,  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 otherwise, to disclose documents or information, the party obtaining disclosure cannot, without leave of the court, use it for any other purpose other than that for which it was given unless it is received into evidence.
In this matter, Ernest Henry Mining Pty Ltd produced documents pursuant to a subpoena issued by the applicant, La Mancha Africa S.A.R.L in its proceedings against the Commissioner of Taxation. Ernest Henry Mining argued that the Harman obligation applied to prevent the Commissioner from using the subpoenaed documents in the administration of the taxation laws. On this basis it sought orders and undertakings to limit the Commissioner’s use of the subpoenaed documents for the purposes of these proceedings only.
Ernest Henry Mining accepted that the Full Court’s decision in Deputy Commissioner of Taxation v Rennie Produce (Aust) Pty Ltd (in liq) (2018) 260 FCR 272 (Rennie Produce) meant that the Commissioner, as a non-party to proceedings, could give a statutory notice to compel the production of Harman information from a party. However, it contended that the position was different here because the documents had come into the Commissioner’s possession as a litigant in proceedings, as opposed to having been produced to the Commissioner when acting as a regulator to compel production. Accordingly, it argued that the Commissioner was in the same position as any other party, and so bound by the Harman obligation, with respect to the subpoenaed documents.
The Commissioner submitted that the Harman obligation does not operate, and so cannot be breached, in circumstances where the use is undertaken pursuant to statutory provisions which are inconsistent with the obligation. The Commissioner argued that it made no difference whether he obtained the information as a party to the proceedings or as a non-party regulator. The Commissioner argued further that the Harman obligation yielded to any statutory provision which was inconsistent with the obligation. This was not limited to compulsory powers but extended to other statutory duties and functions.
Federal Court’s reasoning
The Federal Court found in favour of the Commissioner, deciding that the Harman obligation does not preclude the Commissioner from using the subpoenaed documents in the lawful exercise of his powers and functions, such that he is not restricted to using the documents in the proceedings only.
Davies J applied a line of authority explaining that the content of the Harman obligation is such that it recognises and is shaped by inconsistent legal obligations. In doing so, her Honour explained that the Full Court decision in Rennie Produce was not to be read down in the way contended by Ernest Henry Mining, and her Honour refused to read limits into the principle that the Harman obligation ‘yields’ to an inconsistent statutory provision.
Davies J explained this principle by reference to statutory duties, powers and functions generally. However, her Honour also considered the specific example of s 166 of the Income Tax Assessment Act 1936 (Cth) which imposes a duty on the Commissioner to make taxation assessments from the information in his possession. To apply the Harman obligation would require the Commissioner not to use the subpoenaed information in making assessments and so would fetter the breadth of that statutory duty. Davies J held that as the duty under s 166 was inconsistent with the Harman obligation, the obligation therefore yielded to the statutory provision and did not constrain the Commissioner in using the subpoenaed documents for the purpose of making assessments.
Accordingly, the Court held that the Harman obligation did not constrain the Commissioner from using the subpoenaed documents from Ernest Henry Mining in the lawful exercise of his powers and functions.
The decision is likely to have widespread application for Commonwealth litigants, regulators and law enforcement agencies.
The Harman obligation is an important one and its breach can be a contempt of Court. Accordingly, care must always be taken to identify and comply with it, where it applies. However, by its very nature the Harman obligation yields to statutory provisions which are inconsistent with the constraints which the obligation would otherwise impose.
This case assists in understanding the limits of the Harman obligation. In particular, it builds on and explains the decision in Rennie Produce, underscoring that statutory provisions can override the Harman obligation whenever they are inconsistent with it. This is so regardless of whether the government agency is a party to the proceedings and regardless of whether it is exercising a compulsory power to obtain the information.
When considering the use of information which might otherwise attract the Harman obligation, Commonwealth regulators and agencies should always consider whether the use would be pursuant to a statutory provision which is inconsistent with, and so overrides, the obligation. A failure to do this may result in information being wrongly treated as subject to constraints which, as a matter of law, do not arise. The result may be to ignore and avoid information which was important to the exercise of a statutory power or function. Depending upon the provision in question, it may even be that information is ignored which the statutory provisions required be taken into account, potentially calling the fulfilment of that statutory obligation into question.
The decision is also important because it illustrates that these legal questions do not depend upon applying to the court for a release from the Harman obligation. The Commissioner did not seek any release here, and simply argued for the legal position under statute. That approach avoids what can be a more burdensome and time consuming process of applying for a precautionary ‘release’ from an obligation that does not, as a matter of law, exist.
If there is doubt about whether a statutory provision overrides the obligation, agencies should act with appropriate caution and on legal advice so as to avoid conduct which may involve a contempt of court. In such cases, it may be prudent to seek a declaration from the court, as was done in Rennie Produce. While a release can also be sought, agencies should bear in mind that the grant of a release is simply a discretionary dispensation from the obligation and so will not itself clarify the legal position. Indeed, simply seeking a release may serve to create the impression that a release is positively required when, as a matter of law, it may not be. For this reason, it will generally be preferable to seek to have the court resolve the legal issue by way of declaration or orders, with a release sought only by way of ‘back up’ in the event the declaration or orders are not made.
Read AGS’s previous Express Law summary of the Federal Court’s decision in Rennie Produce.
Important: The material in Express law is provided to clients as an early, interim view for general information only, and further analysis on the matter may be prepared by AGS. The material should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in this message.