Commissioner of Taxation v Rio Tinto Ltd

[2006] HCATrans 539

[2006] HCATrans 539

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M86 of 2006

B e t w e e n -

COMMISSIONER OF TAXATION

Applicant

and

RIO TINTO LIMITED

Respondent

Application for special leave to appeal

KIRBY J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 29 SEPTEMBER 2006, AT 1.23 PM

Copyright in the High Court of Australia

MR A. ROBERTSON, SC:   May it please the Court, I appear with my learned friend, MR R.S. HOLLO, for the applicant.  (instructed by Australian Government Solicitor)

MR D.H. BLOOM, QC:   May it please the Court, I appear with my learned friend, MR T.M. THAWLEY, for the respondent.  (instructed by Allens Arthur Robinson)

KIRBY J:   Yes, Mr Robertson.

MR ROBERTSON:   Thank you, your Honours.  First I need to seek your Honours’ leave to amend the application as appears on pages 60 and 61 of the application book so as to permit the applicant to file the application within time.  Page 61 refers to a date of 1 July which should be 3 July because 1 July was a Saturday.

KIRBY J:   Yes.  Is there any objection to that leave being granted?

MR BLOOM:   Your Honour, it is a matter for the Court, as we see it.  The real issue is the special leave application.

KIRBY J:   You do not want to be heard to agree to it, but you are not opposing it?

MR BLOOM:   Yes, your Honour.

KIRBY J:   I think you should proceed on an assumption that if you make out an application, you will have that extension.

MR ROBERTSON:   Thank you, your Honours.  Your Honours, there are two broad points we wish to make in support of the application for leave.  Before coming to those points, could I make three preliminary points.  The first is that this matter concerns the common law.  It does not arise under the Evidence Act, so it applies generally throughout Australia.  Secondly, as your Honours would have seen perhaps from page 3 of the application book, paragraph 2, the present respondent, Rio, concedes that the documents are subject to legal professional privilege but for the implied waiver.

CALLINAN J:   What is the special leave point?  Precisely what is the special leave point?

MR ROBERTSON:   The special leave point is this, your Honour – and this is what I was seeking to develop.

CALLINAN J:   No, I just want to know what the point is.  Surely you can state it in a couple of sentences.

MR ROBERTSON:   Yes.  Well, what we have attempted to identify, your Honour, in the summary of argument is that, in effect, when you examine what has happened here, in our submission, two things have gone wrong.  One is that the Full Court has applied – misapplied we would say, in our respectful submission – notions of issue waiver when the case, in our respectful submission, has nothing whatever to do with issue waiver.  It is not that sort of case.

CALLINAN J:   Why do you not just get on with the case?

MR ROBERTSON:   Well, the case is being got on with, your Honour.  The most recent event in the case was a judgment of Justice Sundberg of the 4th of this month dealing with a legal professional privilege claim by the present respondent.

CALLINAN J:   That is good, so it is moving.

MR ROBERTSON:   That is so, your Honour.

CALLINAN J:   You have had a judgment on the legal professional privilege point.  The respondent has had a judgment on it.

MR ROBERTSON:   Yes, but the point is, your Honour, fundamentally ‑ ‑ ‑

CALLINAN J:   What do you want to keep secret?  What does the Commissioner want to keep secret?  What is the nature of it, legal advice?

MR ROBERTSON:   It is legal advice, your Honour.  Your Honour can see there is a schedule of the eight documents in contention and they are ‑ ‑ ‑

KIRBY J:   There are eight letters now, I think, are there not?

MR ROBERTSON:   Yes.

KIRBY J:   You say they are covered by legal professional privilege.  They say you waived it by adding them to the list.  You say it is not relevant to an issue and, therefore, they cannot have it.  They say the Commissioner’s opinion is relevant to an issue and you have acknowledged that you took the privilege advice into account in reaching that opinion.

MR ROBERTSON:   Quite so, your Honours.

KIRBY J:   That is the area of contest.

MR ROBERTSON:   Quite so.

KIRBY J:   But the question Justice Callinan asked you still hangs in the air:  what is the special leave point?  This is settled authority and it is simply a matter of applying the law established by this Court in Mann, so why should we be involved?

MR ROBERTSON:   Your Honour, there are two fundamental answers.  First to the point Justice Callinan raised, that is, since Baker v Campbell we know that what we are dealing with here is not a rule of evidence but an important and substantive common law immunity.  So, in our respectful submission, any party, including the Commissioner, is well entitled to ask a court ‑ ‑ ‑

KIRBY J:   We are familiar with that and you are in front at least to that extent, but you put it in your list.

MR ROBERTSON:   Well, that is so, your Honour, but then ‑ ‑ ‑

CALLINAN J:   Surely you cannot have it both ways.  It is a key factor in reaching your opinion and your opinion is relevant.  In fact, it is decisive and it is a key factor in reaching what is decisive and which leads to the litigation.

KIRBY J:   It sounds a little like Kaffka, that you have it, it is in your mind, it is a very important factor, do not try to get it because it is covered by privilege.

MR ROBERTSON:   Your Honour, the point that your Honour has put to me raises in an acute form this proposition:  is the fact in administrative law, is the fact that a privileged communication is relevant in the sense that it has been taken into account by the decision‑maker sufficient to displace legal professional privilege?  Or, as we would contend, is that not inconsistent with the very maintenance of the privilege as contemplated by Waterford v The Commonwealth in administrative decision‑making or, indeed, the decision of Justice Cooper that we have included as the third case in the bundle of materials?  So to say, as your Honour Justice Callinan puts to me, that a privileged matter was relied on by the decision‑maker is to raise, in our respectful submission, in a succinct form what precisely is the substantive and important question of general law.

CALLINAN J:   It was relied on though, was it not?  It was not just raised.  It was relied on by you.

MR ROBERTSON:   I accept, your Honour, that it was relied on and that is why I say that it raises that issue in an acute form, that is, to say legal advice was taken into consideration.

CALLINAN J:   Mr Robertson, there is one matter, I apologise, I should have mentioned.  I have a modest shareholding in Rio Tinto.

MR ROBERTSON:   That does not affect my client’s ‑ ‑ ‑

KIRBY J:   Alas, again I have not got one, modest or great, just nothing.

MR ROBERTSON:   Your Honour is the same position as me, perhaps, or I am in the same position as your Honour.  But, really, what your Honour Justice Callinan ‑ ‑ ‑

KIRBY J:   I have more excuse than you have.

MR ROBERTSON:   Possibly.  But what your Honour Justice Callinan puts to me, with respect, raises, as we would submit, in that crystallised form, what is the substantive question?  In other words, can it be said – we would submit not – that where a decision‑maker says, “I have taken into account a communication which is the subject of legal professional privilege”, does that waive legal professional privilege in circumstances, of course, where he says there are, in this case, 500 documents and, as to some of them, now eight, you can see them, as to the eight we claim legal professional privilege. 

But it does, in our respectful submission, your Honours, undercut what was established in Waterford’s Case, that is, that there was the same or, indeed, greater interest, public interest, in decision‑makers, public servants, having access to legal advice as to the scope of their powers and being able to do so without the risk, general or particular, of a litigant saying, “You took that into account, you have to show it to me”.  In our respectful submission, that is the fundamental inconsistency that we sought to identify, that is, inconsistency between what the Full Federal Court did in this case and what, in our respectful submission, is the proper and accepted principle.  So that to the extent that their Honours in the Federal Court have proceeded on a different basis, we would submit that it is not a Mann v Carnell principle, but a new and different principle that is out of step with and inconsistent with what your Honours said in Mann ‑ ‑ ‑

KIRBY J:   Scope does not sound like a new principle.  Scope sounds like application of established principle.  We just do not have the time or the number of cases to deal with the ambit of principles that are laid down.  That is just the plain fact of the matter.  That is why we have special leave procedures.

MR ROBERTSON:   Of course, your Honour, but what I am endeavouring to put is that what the Full Federal Court has done in this case is outside and inconsistent with Waterford and with Mann v Carnell.  That is, it is no more than a decision‑maker saying, “I have a discretion.  I have taken legal advice in the exercise of that discretion.  Here is a list of the documents that I took into account in exercising that discretion and I claim privilege in relation to some of them.”  In our respectful submission, there is no inconsistency of a Mann v Carnell character involved in that process and that process involves no more than what was specifically contemplated and approved in Waterford and the cases that have followed it.

So I fully accept, your Honours, that even misapplications of established principle may not attract grants of special leave.  What I am submitting to your Honours is that this is not a misapplication of one established principle.  It is a new principle emerging inconsistently with two principles established by this Court. 

Now, your Honours, the two broad submissions that I wanted to develop within that broad context, if I may, is first of all that the Full Court of the Federal Court picked up and misapplied, in our respectful submission, what has been known in the cases as issue waiver ‑ ‑ ‑

CALLINAN J: Mr Robertson, I am sorry to interrupt you, but before you get to that, there may be another place to find it, but at page 8 of the application book, paragraph 15, the quote his Honour has quoted there, the letter, the response or, rather, the result of the application under the Freedom of Information Act, that:

“The Commissioner will be relying on the following grounds which have been confirmed by Senior Tax Counsel . . . and supported by AGS . . . and opinions obtained from counsel.

That was the way the Commissioner chose to put it.  Is that right or am I ‑ ‑ ‑

MR ROBERTSON:   No, those are documents which have now been disclosed.  There were two strands to the ‑ ‑ ‑

CALLINAN J:   All right, thank you.  Can you just show me which identifies the appropriate grounds or matters which disclose the documents?

MR ROBERTSON:   Yes, I will, your Honour.

CALLINAN J:   Or disclose the grounds perhaps, the grounds that are now live.

MR ROBERTSON:   The grounds?

CALLINAN J:   Upon which the Commissioner acted, or the bases or the opinion.  Where do I find the ‑ ‑ ‑

MR ROBERTSON:   Probably most conveniently, your Honour, in – if I can just come to it in a step.  What Justice Sundberg did and what the Full Court disagreed with on the issue waiver point is at page 20, paragraph 43.  That is perhaps part of an answer to your Honour’s question.  So your Honours will see there at paragraph 43 a different approach to issue waiver, but which one was more correctly, if it had been correct, to be classified as issue waiver.

CALLINAN J:   I think what I want then is the statement that is referred to in the first dot point.

MR ROBERTSON:   What I think your Honour Justice Callinan may be looking for is at page 43 of the application book.  Perhaps I can take it back to page 41, the last three lines of page 41 where Rio said:

please provide the usual particulars of all the matters, things, circumstances or events taken into consideration –

Do your Honours see that?

KIRBY J:   Yes.

MR ROBERTSON:   The usual particulars are set out just above that at about line 35:

insofar as it was in writing, recorded in writing, or evidenced in writing, identify sufficiently each document –

and then going to page 43 your Honours can see at line 30:

(c)For the reasons given in our letter dated 27 July 2004 and above, this is not a proper request for particulars.  The matters, things, circumstances and events taken into consideration by [the decision‑maker] are to the best of his recollection those evidenced by –

and then there is a list of documents.  It was on that basis that their Honours in the Full Federal Court held Justice Sundberg was wrong to say that there was an issue waiver from the fact that the Commissioner was defending the exercise of his discretion, but there was an issue waiver by virtue of that answer.

CALLINAN J:   Being that one of the matters, things or circumstances or events taken into account was a legal opinion or were legal opinions.

MR ROBERTSON:   Was, as we would say, a privileged communication, yes, but your Honour puts it to me in that way and, as I earlier submitted, that raises this in an acute form.  Does a decision‑maker by saying, “I took into account a legal opinion in exercising my discretion”, statutory discretion or non‑statutory discretion, thereby waive legal professional privilege?  In our respectful submission, that is a new doctrine, one which has no support in the authorities and is, indeed, inconsistent with the authorities in this Court.

CALLINAN J:   I do not know, there may be a distinction between being guided by legal advice on the one hand and on the other hand actually being so materially affected in forming your opinion by legal advice.

MR ROBERTSON:   Well, there may be, your Honour.  For the purposes of argument, if I can accept that for the purposes of argument, but all that is said here is, “I took into consideration” ‑ ‑ ‑

CALLINAN J:   “I took into account”, is it?

MR ROBERTSON:   “I took into consideration” is the words on page 43, the middle of the page, “I took into consideration the following matters, things, circumstances and events”, or to put it another way, “The matters, things, circumstances and events I took into account are shown by the documents in the list, eight of which now are privileged”.  In our respectful submission, that is a proper answer to a request which says, please provide, insofar as they are in writing, the usual particulars, that is, identify each document or paper and where may it be inspected.

CALLINAN J:   Where is the first claim of privilege made?

MR ROBERTSON:   Where is the claim for privilege?

CALLINAN J:   Yes.

MR ROBERTSON:   If your Honour looks at that same page, 43, which is part of the same letter, the last line:

“Subject to any claim that a document, or a part of a document, is protected from production (eg on the basis that it is subject to legal professional privilege . . . Schedules A, B, C or D may be inspected at our offices by appointment.”

CALLINAN J:   But should you not have made a specific claim of privilege in respect of each and every document, a claim of privilege that would have identified ‑ ‑ ‑

MR ROBERTSON:   That was done later.

CALLINAN J:   Yes, but there and then.  That is after you – if there is, and I am only putting this for the purpose of your argument, if that is a waiver, it might be too late.

MR ROBERTSON:   Well, no, we would not accept that, your Honour.  It is commonly ‑ ‑ ‑

CALLINAN J:   Why did you not say, for example, “We did take into account various documents, including such‑and‑such, as to which we claim legal professional privilege”?

MR ROBERTSON:   In my submission, that is what is done ‑ ‑ ‑

CALLINAN J:   That is what you say you do here, but it is very general, is it not?

MR ROBERTSON:   That is what is done.  Then, if your Honour drops down to line 10 on that page 44:

Schedules A, B, C, and D listed over 500 documents (“the scheduled documents”).  Each Schedule commenced with a “note” that read:

“The documents referred to in this schedule may be ‑ ‑ ‑

CALLINAN J:   Yes, “may be protected”.

MR ROBERTSON:   Yes.  Then certain documents were then identified as privileged and then later ‑ ‑ ‑

CALLINAN J:   In that communication?

MR ROBERTSON:   I think later.

CALLINAN J:   Later.

MR ROBERTSON:   Then in the ordinary way, in my submission.  When that claim was challenged, affidavits were produced saying these were the

circumstances.  Your Honour, as I started by saying, Rio here accepts that these were privileged documents but for the waiver.  Your Honours, I have not got far with the two broad propositions that I wanted to put, but if I may ‑ ‑ ‑

KIRBY J:   I think you will have to put them in summary form, because the red light has come on.

MR ROBERTSON:   I will.  I am sorry, your Honour.  They are, in any event, that there is a new doctrine in relation to issue waiver which does not involve what traditionally were the types of cases, undue influence and matters of that sort, and your Honours may recall having looked at that some years ago, although not having given judgment in the matter called BT Australasia, a trade practices case.  So that is the first proposition.  The second proposition here is that if one assumes, for example, a judge had ordered a decision‑maker to set out the reasons for decision and the decision‑maker had said, “Here are my reasons in 500 documents”, and that was said to be insufficient to disclose the reasons, the remedy, in our respectful submission, would not be, “You have waived privilege in the documents that are otherwise the subject of a claim for privilege”; the remedy would be, “You have got to give a better answer”.  So that what has happened here is that, as a remedy of, as it were, first resort and therefore we say inconsistent with the fundamental nature of the common law immunity, the Full Court of ‑ ‑ ‑

KIRBY J:   Yes, very well, I notice your time is up.

MR ROBERTSON:   As your Honours please.

KIRBY J:   Mr Bloom, what do you say in response to Justice Callinan’s questions towards the end of Mr Robertson’s argument, because is there not a bit of a problem in your hypothesis that if the Commissioner does take into account, as one would expect as a client he is entitled to and should, the advice of his lawyers ‑ ‑ ‑

MR BLOOM:   Yes.

KIRBY J:   ‑ ‑ and if he therefore honestly answers, “That in forming my opinion I have taken this into account”, why should he then lose forever the privilege that would ordinarily attach as between a client and the lawyer to the communication that he has taken into account from his lawyer?

MR BLOOM:   Your Honour, the Full Court found as a matter of fact that if that was all the Commissioner had done in this case privilege would not have been waived, but they found much more than that had been done in this case.  If I might just take your Honours back to page 42, 43 and, very shortly, your Honours, we have been trying for two and a half years to have the Commissioner make a statement, as he agrees he is bound to do, of the considerations taken into account by the decision‑maker ‑ ‑ ‑

KIRBY J:   There is no need to put poison in the well.  We know he has delayed and that the trial has been delayed, but we are concentrating on whether he can claim and persist with his claim to his privilege which this Court in Daniels has said is a very important substantive common law right.

MR BLOOM:   Of course, it is important.  It is fundamental, but it can be waived, and the question here was simply the application of the principle in Mann v Carnell to the facts as found by the Full Court, and the Full Court did rely upon the history, and I went to that history not to just complain about the time, your Honour, but to tell your Honour that we started off asking by reference to the statement of fact, issues and contentions first filed by the Commissioner for a statement of the considerations taken into account by the decision‑maker in relation to each of the three exercises of discretion and issue and, finally, after this long period of time, at pages 42 to 43 there is set out the Commissioner’s statement of the considerations taken into account by him.

He said, “I don’t like your request for usual particulars.  What I am bound to do, as I understand it, is to give you a statement of those factors that would be relevant to the application of the judgment of Sir Owen Dixon in Avon Downs, and so I there upon go about giving you a statement of those factors”, and he did it.  If one looks at page ‑ ‑ ‑

CALLINAN J:   Mr Bloom, is this a distinction, that it is one thing to seek legal advice, for example – these are your instructions to your legal advisers – “I have taken into consideration X, Y and Z.  Should I have taken into account anything else or was I wrong to take into account those?”  Now, it seems to me that the legal advice given in response to those questions would not be a consideration taken into account in reaching the opinion.

MR BLOOM:   Of course, your Honour.

CALLINAN J:   But it is an entirely different matter if the Commissioner says, “I have taken into consideration, for the purposes of forming my opinion, legal advice”.  That seems to me to be quite different.

MR BLOOM:   Well, he went further.  He never told us in terms what were the considerations he took into account.  If one looks at page 43, paragraphs 20 and 21 of the application book, particularly 20, he says, the decision‑maker, and he identifies him.  He says:

The matters, things, circumstances and events taken into consideration by [the decision‑maker] are . . . those evidenced by the documents ‑ ‑ ‑

CALLINAN J:   Yes, I notice the word “evidenced”.

MR BLOOM:   And here are the documents.  He says, “You go through the documents, please, and work out for yourself what I took into account”.

CALLINAN J:   Exactly.

MR BLOOM:   Then he says, “I accept that the way that you are to find out what the factors are is to look at those documents, but eight of them I am not going to show you”, and that was the inconsistency that the Full Court found.

CALLINAN J:   Well, using the word “evidencing” and saying that the matters were directly taken into consideration seems to me to be entirely different from seeking legal advice, which would be advice as to the sorts of matters that I mentioned.

MR BLOOM:   And so the Full Court held, your Honour.

CALLINAN J:   And you would not be taking that legal advice into consideration.  That is an entirely different matter.

MR BLOOM:   The Full Court did not do anything about issue waiver here.  It quite clearly dealt with the question of inconsistency.  It recognised this Court’s judgment in Mann v Carnell.

KIRBY J:   Yes, we do not need any further assistance, Mr Bloom.

MR BLOOM:   Thank you, your Honours.

KIRBY J:   Anything in reply?

MR ROBERTSON:   Yes, your Honours.  I would just like to say two things in reply.  In our respectful submission, the point that as I understood it your Honour Justice Callinan put, which is to say that a decision‑maker could not claim legal professional privilege where he or she said, “I’ve made a decision and in the course of making that decision I have taken into account legal advice”, which is what I understood your Honour to say, is contrary to, we would respectfully say, what this Court ‑ ‑ ‑

CALLINAN J:   That is not quite what I put.

MR ROBERTSON:   I am sorry, your Honour, I may have misunderstood.

CALLINAN J:   The Commissioner is under a statutory obligation to reach a state of satisfaction; is that not correct?

MR ROBERTSON:   Well, he may reach a state of satisfaction, yes.

CALLINAN J:   Yes, and he reaches that on facts; is that not correct?  He does not reach it on the basis of legal advice.  He has to reach it on the basis of the facts.

MR ROBERTSON:   But legal advice may contribute to the decision that he makes.  That is the point that I am making.

CALLINAN J:   Yes, but he may even progressively be getting legal advice:  “Am I on the right track?  Am I taking into account the right things?”  But that is an entirely different matter from actually using the legal advice as evidence of the matters that he is taking into consideration, and that is the word that was used, “evidencing”.

MR ROBERTSON:   What he said was, “The matters that I took into account are evidenced”, that is, shown by, “You will find them in 500 documents, eight of which are privileged”.

CALLINAN J:   But it is facts and circumstances which are determinative, not the legal advice about them, ordinarily.

MR ROBERTSON:   But, your Honour, if that is so, in our respectful submission, then so much the more ‑ ‑ ‑

CALLINAN J:   Legal advice is a conclusion reached about or in relation to facts.  It is not ordinarily a relevant fact itself unless you want to make it one, and you make it one when you say it was a consideration that you took into account and the legal advice evidences those facts.

MR ROBERTSON:   But, your Honour, that is precisely the point.  To say that it was relevant, in our respectful submission, is no more than to say is relevance ‑ ‑ ‑

CALLINAN J:   It is not relevance; it is reliance.  It is more than relevance.  You say it is reliance.

MR ROBERTSON:   Is relevant legal advice relied on by a decision‑maker a displacement of the privilege?

CALLINAN J:   When you say it is a fact or circumstance or event that formed part of the facts and circumstances that you took into consideration in reaching a state of satisfaction, it seems to me the answer is yes.

MR ROBERTSON:   Well, your Honour, in our respectful submission, that is ‑ ‑ ‑

CALLINAN J:   And three judges have said so.

MR ROBERTSON:   Well, your Honour, three judges ‑ ‑ ‑

KIRBY J:   Three judges, one of them – four judges, one of them slightly differently.

MR ROBERTSON:   One of them entirely differently, with respect, your Honour.  The last point I wish to make is this.  My learned friend said that nothing in this case has anything to do with issue waiver.  The whole decision of the Full Court of the Federal Court is cast under the rubric of issue waiver, quite wrongly, we would respectfully submit, but the entirety of the exercise is said to be one which involves issue waiver and there is a discussion about issue waiver that, for example, begins at paragraph 46 on page 49:

In the present case, ‘issue waiver’ is said to have arisen in the course of preparing the relevant tax appeals for trial.

And the whole decision is about issue waiver and, in our respectful submission, it has nothing to do with issue waiver.  The other point which I will not repeat at length is that near relevance and near reliance does not displace privilege.  If it did, then Esso, for example, the dicta in Esso saying that there is a balancing exercise already and relevant material is withheld from the courts where it is the subject of legal professional privilege, that principle would be, in our respectful submission, stood on its head.  If the Court pleases.

KIRBY J:   There are no substantial disputes as to the facts in these proceedings.  Nor is it disputed that, but for the application of any implied waiver, the documents in issue are covered by the legal professional privilege of the Commissioner which is an important and substantive common law right:  see Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543. Nor is it contested that legal professional privilege may be waived by a party and that in certain circumstances such waiver can be imputed from the conduct of the party entitled to the privilege: see Mann v Carnell (1999) 201 CLR 1 at 13 [29].

The Commissioner accepts that he relied on the relevant documents and took them into account in reaching the requisite state of satisfaction.  In this sense the facts in the record of this particular case and the applicable legal principles are relevantly undisputed.  The case therefore appears to us to involve the application of established principles to the facts.  This is an unpromising foundation for a grant of special leave to appeal to this Court.

We are not convinced that an error has occurred in the Full Court of the Federal Court of Australia warranting the intervention of this Court.  Nor do we believe that the Commissioner has demonstrated reasonable prospects of success were special leave granted.  Absent some issue of law or principle or injustice, interlocutory disputes of the present kind turning on the procedural history of the litigation must normally conclude in the Federal Court.  Time for the bringing of the application is extended, but special leave is refused with costs.

I express my thanks to counsel and to the Court staff for sitting extended hours today and the Court will now adjourn to be reconstituted for the following applications.

AT 1.59 PM THE MATTER WAS CONCLUDED