Commissioner of Taxation v White (No 2)
[2024] FCA 1291
•8 November 2024
FEDERAL COURT OF AUSTRALIA
Commissioner of Taxation v White (No 2) [2024] FCA 1291
File number: NSD 884 of 2023 Judgment of: KENNETT J Date of judgment: 8 November 2024 Catchwords: PRACTICE AND PROCEDURE – application to strike out part of statement of claim – where submissions prepared in tabular form – whether pleading impermissibly cast in the alternative – whether parts of pleading embarrassing
PRACTICE AND PROCEDURE – application to amend statement of claim
PRACTICE AND PROCEDURE – where applicant claims civil penalties – application for relief from pleading rules due to privilege against exposure to a penalty
PRIVILEGE – joint privilege and joint clients –application for access to documents produced in response to subpoena – subpoena issued to partnership –where applicant a former partner of the partnership – where applicant claims legal professional privilege over documents produced by partnership – where partnership does not claim privilege – whether former partner can claim privilege to resist application for access to documents
Legislation: Federal Court of Australia Act 1976 (Cth) ss 37AF, 37N
Income Tax Assessment Act 1936 (Cth) ss 100A, 318
Income Tax Assessment Act 1997 (Cth) s 995-1
Taxation Administration Act 1953 (Cth) Sch 1 ss 284-15, 290-50, 290-55, 290-60, 290-65, 353-10
Federal Court Rules 2011 (Cth) r 16.21
Cases cited: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 2) [2020] FCA 863
Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 59 ACSR 373
Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 349
AWB Ltd v Cole [2006] FCA 571; 152 FCR 382
AWB v Cole (No 5) [2006] FCA 1234; 155 FCR 30
Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd [2010] ACTSC 20; 4 ACTLR 114
Cauvin v Philip Morris Ltd [2003] NSWSC 631
Commercial Union Assurance Co plc v Mander [1996] 2 Lloyds Rep 640
Commissioner of Taxation v White [2023] FCA 1176
Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2015] FCAFC 25; 230 FCR 298
Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; 201 CLR 49
Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) v Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed); In the Matter of Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) (No 3) [2016] FCA 738
Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601
Federal Commissioner of Taxation v Ludekens [2013] FCAFC 100; 214 FCR 149
Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486
Gunns Ltd v Marr [2005] VSC 251
Hancock v Reinhart (Freehills Subpoena) [2017] NSWSC 530
Mann v Carnell [1999] HCA 66; 201 CLR 1
Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151
McSteen v Architects Registration Board of Victoria [2018] VSCA 96
New South Wales v Betfair Pty Ltd [2009] FCAFC 160; 180 FCR 543
Rich v Harrington [2007] FCA 1987
Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109
Wheelahan v City of Casey [2013] VSC 316
White v Commissioner of Taxation [2024] FCA 185
Roderick I’Anson Banks, Lindley & Banks on Partnership (21st ed, Sweet & Maxwell, 2022)
Division: General Division Registry: New South Wales National Practice Area: Taxation Number of paragraphs: 126 Date of last submission: 28 August 2024 Date of hearing: 12 August 2024 Counsel for the applicant: A Berger KC with M Hosking Solicitor for the applicant: Australian Government Solicitor Counsel for the respondent: D McGovern SC with R Johnson and K Josifoski Solicitor for the respondent: CG Gillis and Co ORDERS
NSD 884 of 2023 BETWEEN: COMMISSIONER OF TAXATION
Applicant
AND: PETER WHITE
Respondent
ORDER MADE BY:
KENNETT J
DATE OF ORDER:
8 NOVEMBER 2024
THE COURT ORDERS THAT:
1.By 4.00 pm AEDT on 15 November 2024, the parties are to provide to the chambers of Justice Kennett short minutes of the orders they submit should be made to give effect to these reasons.
2.If competing short minutes are filed, the issues that arise will be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
KENNETT J:
This proceeding was commenced by the filing of an originating application and statement of claim on 18 August 2023. The applicant (the Commissioner) seeks declarations that the respondent (Mr White) contravened s 290-50(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (the TAA), by engaging in conduct that resulted in him being the promoter of one or more tax exploitation schemes, and a civil penalty order under s 290-50(3) of Schedule 1 to the TAA in respect of whichever contraventions are established.
During the period to which the Commissioner’s allegations relate, Mr White was an “equity partner” in the consulting firm Ernst & Young Australia (EY). Around 19 July 2022 he ceased to be a partner in that firm.
On 14 September 2023 I made interim suppression orders by consent under s 37AI of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) pending the determination of an application by Mr White for ongoing orders. The application for ongoing suppression orders under s 37AF of the FCA Act was heard on 29 September 2023 and dismissed on 3 October 2023: Commissioner of Taxation v White [2023] FCA 1176. However, the interim suppression orders were partially continued in force pending an application for leave to appeal from my decision. The application for leave was dismissed (White v Commissioner of Taxation [2024] FCA 185); however, one aspect of the disposition of the application led to a further application for leave to appeal, for the purpose of which more interim suppression orders were made. The second application for leave to appeal was dismissed on 16 September 2024. Suppression orders are now in place only in relation to some medical information concerning Mr White.
At a case management hearing on 9 October 2023 I granted leave to Mr White to file a draft defence in the form annexed to an affidavit of his solicitor. That document in effect does not plead to many of the allegations in the statement of claim on the basis of penalty privilege.
I also ordered the Commissioner to file and serve his affidavit evidence in chief, any expert reports and a list of documents to be relied upon by 26 February 2024. This deadline was extended several times by consent, ultimately requiring the filing of affidavits and any expert reports by 3 May 2024 and a list of documents by 17 May 2024 (with provision made later for one further affidavit to be filed by 8 May). Nine affidavits and a list of 25 documents have been filed.
At a case management hearing on 6 June 2024, counsel for the Commissioner foreshadowed an application to make minor amendments to the statement of claim in the light of the evidence that had been filed. Claims of legal professional privilege had also arisen in relation to some documents produced by EY in response to a subpoena. The matter was stood over to 19 June 2024 for the parties to consider and confer on these issues. At the case management hearing on 19 June, counsel for Mr White announced that his client saw “fundamental defects” in the statement of claim (which had been filed in August 2023 and a defence to which had been prepared in October 2023) and had “myriad complaints” about it. I set down these foreshadowed applications, together with some other interlocutory issues that had accumulated, for hearing on 13 August 2024.
The following interlocutory applications were subsequently filed:
(a)an application by Mr White, seeking that “part, or all” of the statement of claim be struck out; and further or alternatively that the Commissioner be ordered to provide further and better particulars of parts of the statement of claim (the strike-out application);
(b)an amended version of an application filed on 26 September 2023, for orders relieving Mr White of certain requirements in relation to pleading in the light of his reliance on the privilege against self-incrimination or self-exposure to penalties; and
(c)an application by the Commissioner for leave to file an amended statement of claim (the amendment application).
These applications, together with an objection by Mr White to the Commissioner being granted access to the documents produced by EY, were heard together.
The amendment application
In substance, the amendment application was not opposed except to the extent that the proposed amended statement of claim (ASOC) failed to remedy what Mr White submitted were the vices in the original statement of claim. Argument proceeded on the basis that the case intended to be run by the Commissioner was embodied in the ASOC. Mr White submitted, however, that leave to file the ASOC should be refused if it were found to be deficient.
The strike-out application
Outline of the Commissioner’s case
As noted earlier, until 19 July 2022, Mr White was a partner at EY and provided tax advice to clients. Mr White was an “entity” within the meaning of s 960-100 of the Income Tax Assessment Act 1997 (Cth) (the ITAA97). EY was an “associate” of Mr White within the meaning of that term in s 995-1 of the ITAA97 (which picks up the definition in s 318 of the Income Tax Assessment Act 1936 (Cth) (the ITAA36)).
Section 290-50(1) of Schedule 1 to the TAA prohibits an entity from engaging in conduct that results in that entity (or another entity) being the “promoter” of a “tax exploitation scheme”. A civil penalty may be ordered in respect of a contravention of s 290-50(1)-(2) pursuant to s 290-50(3)-(5). Section 290-60 defines what an entity being a “promoter” entails: in short, marketing the scheme or encouraging its growth or interest in it; receiving (or an associate receiving) a benefit in respect of that marketing or encouragement; and, having regard to all relevant matters, it being reasonable to conclude that the entity has had a substantial role in respect of that marketing or encouragement. Section 290-65(1) defines a “tax exploitation scheme” as follows.
(1)A *scheme is a tax exploitation scheme if, at the time of the conduct mentioned in subsection 290-50(1):
(a) one of these conditions is satisfied:
(i)if the scheme has been implemented—it is reasonable to conclude that an entity that (alone or with others) entered into or carried out the scheme did so with the sole or dominant purpose of that entity or another entity getting a *scheme benefit from the scheme;
(ii)if the scheme has not been implemented—it is reasonable to conclude that, if an entity (alone or with others) had entered into or carried out the scheme, it would have done so with the sole or dominant purpose of that entity or another entity getting a scheme benefit from the scheme; and
(b) one of these conditions is satisfied:
(i)if the scheme has been implemented—it is not *reasonably arguable that the scheme benefit is available at law;
(ii)if the scheme has not been implemented—it is not reasonably arguable that the scheme benefit would be available at law if the scheme were implemented.
Note: The condition in paragraph (b) would not be satisfied if the implementation of the scheme for all participants were in accordance with binding advice given by or on behalf of the Commissioner of Taxation (for example, if that implementation were in accordance with a public ruling under this Act, or all participants had private rulings under this Act and that implementation were in accordance with those rulings).
The initial parts of the ASOC identify relevant persons and plead various conduct by Mr White. For present purposes it is not necessary to recite these aspects.
The ASOC alleges (at [163]) that, by reason of the paragraphs that follow, Mr White engaged in conduct that resulted in him being a promoter, within the meaning of s 290-60, of:
(a)the “Tax Loss Access Scheme”; or
(b)alternatively, each of the “Bonar Street Scheme”, the “Kings Court Scheme” and the “Menangle Park Scheme”.
It is further alleged (at [164]) that each of these schemes was a tax exploitation scheme within the meaning of s 290-65.
The elements of the Tax Loss Access Scheme are pleaded at [165]. This is said to be a scheme (within the meaning given by s 995-1 of the ITAA97), proposed by Mr White to his clients where a trust (Trust 1) was about to receive significant income or gains, with the following features:
(a)Trust 2 is established with the same trustee as Trust 1;
(b)the beneficial interest in the income- or gain-producing part of the trust fund is transferred to Trust 2 at less than its market value;
(c)a particular entity (referred to as NWOD) is made a beneficiary of Trust 1 and made presently entitled to the income of that trust;
(d)NWOD is able to apply its tax losses against the distribution of income from Trust 1;
(e)a sum is paid to NWOD to secure its involvement;
(f)the income or gains are available to be used by third parties; and
(g)income tax returns are prepared and lodged giving effect to the arrangement.
At ASOC [166] it is pleaded that the Tax Loss Access Scheme was implemented in respect of a development referred to as the “Bonar Street Development” (described earlier in ASOC Parts C.2 and C.3); partly implemented in respect of a development referred to as the “Kings Court Development” (described earlier at ASOC Parts D.2 and D.3); and fully or partially implemented in respect of the sale of a property referred to as the “Menangle Park Property” (described earlier at ASOC Parts E.2 and E.3).
It is pleaded in the alternative at ASOC [167] that:
(a)the Bonar Street Scheme was a scheme which was implemented in respect of the Bonar Street Development;
(b)the Kings Court Scheme was a scheme which was partly implemented in respect of the Kings Court Development; and
(c)the Menangle Park Scheme was a scheme which was fully or partly implemented in respect of the sale of the Menangle Park property.
In what follows I will occasionally refer generally to the Tax Loss Access Scheme and the more limited schemes pleaded in the alternative as the pleaded schemes.
Next, as to dominant purpose, it is pleaded that:
(a)each of five named entities entered into and/or carried out the Tax Loss Access Scheme (ASOC [168]);
(b)Mr White carried out the Tax Loss Access Scheme (ASOC [169]);
(c)alternatively to [168]:
(i)each of two named entities (a subset of the five identified in [168]) entered into and/or carried out the Bonar Street Scheme;
(ii)each of two named entities (also a subset of the five identified in [168]) entered into and/or carried out the Kings Court Scheme; and
(iii)each of two named entities (also a subset of the five identified in [168]) entered into and/or carried out the Menangle Park Scheme (ASOC [170]);
(d)alternatively to [169], Mr White carried out each of the Bonar Street, Kings Court and Menangle Park schemes (ASOC [171]); and
(e)Mr White intended specified tax benefits (identified as the Bonar Street Scheme Benefit, the Kings Court Scheme Benefit and the Menangle Park Scheme Benefit) to arise:
(i)from the Tax Loss Access Scheme, if it was implemented in respect of the Bonar Street Development (ASOC [172]), the Kings Court Development (ASOC [173]) and the sale of the Menangle Park Property (ASOC [174]); or
(ii)alternatively, from each of the Bonar Street Scheme (ASOC [172]), the Kings Court Scheme (ASOC [173]) and the Menangle Park Scheme (ASOC [174]);
(f)each of the tax benefits intended by Mr White to arise was a “scheme benefit” within the meaning of s 284-150 of Schedule 1 to the TAA (ASOC [175]); and
(g)it is reasonable to conclude that:
(i)Mr White (ASOC [176]) and the other individuals identified at [168] (ASOC [177]–[178]) entered into and/or carried out the Tax Loss Access Scheme with the dominant purpose of one of the relevant entities getting a scheme benefit;
(ii)alternatively, it is reasonable to conclude that Mr White (ASOC [179]) and the other individuals identified at [168] (ASOC [180]) entered into and/or carried out each of the Bonar Street Scheme, the Kings Court Scheme and the Menangle Park Scheme with the intention of the relevant entities getting a scheme benefit.
In Part G.1.3 of the ASOC ([181]-[185]) it is pleaded that, for reasons which are set out, it was not reasonably arguable that each of the Bonar Street Scheme Benefit, the Kings Court Scheme Benefit and the Menangle Park Scheme Benefit was available at law (cf s 290-65(1)(b)).
The ASOC then turns to allegations that Mr White was a “promoter” as defined in s 290-60. These proceed as follows.
(a)By engaging in conduct pleaded in 39 specified earlier paragraphs or sub-paragraphs of the ASOC, Mr White “marketed” (cf s 290-60(1)(a)) the Tax Loss Access Scheme to “at least one or more” of six named individuals and encouraged one or more of those persons to be interested in the Tax Loss Access Scheme (ASOC [186]).
(b)Alternatively to [186]:
(i)by engaging in the conduct pleaded in 14 specified earlier paragraphs or sub-paragraphs of the ASOC, Mr White marketed the Bonar Street Scheme to one or more of two named individuals; encouraged one or more of those persons to be interested in that Scheme, and encouraged one or more of those persons to be interested in using the same Scheme in respect of future property developments (ASOC [187.1]);
(ii)by engaging in the conduct pleaded in 10 specified earlier paragraphs or sub-paragraphs of the ASOC, Mr White marketed the Kings Court Scheme to one or more of two named individuals; encouraged one or more of those persons to be interested in that Scheme, and encouraged one or more of those persons to be interested in using the same Scheme in respect of future property developments (ASOC [187.2]); and
(iii)by engaging in the conduct pleaded in 20 specified earlier paragraphs or sub-paragraphs of the ASOC, Mr White marketed the Menangle Park Scheme to one or more of four named individuals; encouraged one or more of those persons to be interested in that Scheme, and encouraged one or more of those persons to be interested in using the same Scheme in respect of future property developments (ASOC [187.3]).
Part G.2.2 of the ASOC ([188]–[191]) pleads that Mr White or an “associate” of Mr White received consideration (cf s 290-60(1)(b)) for each of the forms of promotion pleaded at ASOC [186]-[187]. In each instance, that consideration is alleged to have been received “by reason of one or more of” several events.
Part G.2.3 of the ASOC ([192]–[195]) pleads that it is reasonable to conclude that Mr White had a “substantial role” (cf s 290-60(1)(c)) in each of the (alternative) forms of promotion pleaded earlier at [186]-[187]. In each case the conclusion is said to arise “by reason of any one or more of” several facts or circumstances.
Part G.2.4 of the ASOC ([196]–[199]) pleads that the forms of promotion pleaded at [186]–[187] were not “mere advice” (cf s 290-60(2)).
Finally, Part H of the ASOC deals with time limits. It is pleaded at ASOC [201] that the Commissioner is not prevented by s 290-55(4) of Schedule 1 to the TAA from making an application in relation to Mr White’s involvement in the schemes pleaded at [165]–[167] because, in relation to each of the pleaded schemes, Mr White last engaged in conduct as a promoter less than four years before the proceeding was commenced; or alternatively, as to the Tax Loss Access Scheme (or alternatively the Bonar Street Scheme), the relevant Scheme involved tax evasion for “one or more of” the reasons pleaded at ASOC [200] (cf s 290-55(6)).
Principles
The function of pleadings and the requirements for a proper pleading, which are given force by r 16.21 of the Federal Court Rules 2011 (Cth) (the Rules), are well understood and do not need to be expounded at any length. It is sufficient at the outset to note two points.
(a)As Mason CJ and Gaudron J observed in Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286:
The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In Liq.) [(1916) 22 CLR 490], per Isaacs and Rich JJ [at 517]. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision.
(Footnotes omitted.)
(b)The importance of the function so expressed is at its most obvious in a case where contraventions of the law, leading to the potential imposition of civil penalties, are alleged: see eg Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2015] FCAFC 25; 230 FCR 298 at [62]–[63] (Logan, Bromberg and Katzmann JJ).
It will be convenient later in these reasons to refer to some authorities relevant to the particular ways in which the ASOC is said to be deficient.
The alleged defects
Mr White provided a spreadsheet in which all of the problematic text in the ASOC was identified. An updated version (Mr White’s spreadsheet) was provided with his written reply submissions. By this means, issue was taken with 147 of the 218 paragraphs of the ASOC. This approach ultimately did not assist the efficient resolution of the issues, because Mr White’s written and oral submissions treated his spreadsheet (with its swarm of piecemeal objections to particular paragraphs or expressions) as the canonical statement of his complaints.
Most of Mr White’s criticisms are levelled at the provisions of the original statement of claim rather than the amendments sought to be made in the ASOC. As the Commissioner notes, it is somewhat surprising that this seemingly profound level of deficiency did not prompt any application by Mr White until the proceeding had been on foot for almost a year (during which time he had framed, if not actually filed, a defence), the Commissioner’s evidence in chief had been filed and consent had been sought for amendments to the pleading.
I mention this for two reasons. One is that it raises a question concerning compliance with s 37N of the FCA Act which may in due course be relevant to the question of costs. The other is that it gives rise to some doubt as to the extent to which Mr White’s legal advisers have actually been hampered, in understanding the nature of the Commissioner’s case and responding to it, by the state of the pleading.
Although the complaints about the ASOC are very numerous, they fall into the following categories and can be dealt with on this basis:
(a)objections to pleadings in the alternative;
(b)objections to what are said to be conclusory allegations;
(c)objections to the use of particular words or phrases which are said to be unclear;
(d)objections to extensive cross-referencing;
(e)objection to certain paragraphs as irrelevant; and
(f)other miscellaneous objections.
Pleadings in the alternative
I have summarised above the core of the ASOC, in which it is explained how conclusions that Mr White contravened provisions of the TAA are said to emerge from the facts and circumstances identified earlier in the ASOC. It is apparent that, at almost every stage in this articulation, alternative case theories are put.
Mr White contends that this is an illegitimate mode of pleading in a civil penalty case, and submits on this basis that various paragraphs should be struck out or that the Commissioner should elect between the alternatives posed. However, the authorities which he cites (McSteen v Architects Registration Board of Victoria [2018] VSCA 96 at [40]–[57] (McSteen); Parker v Australian Building and Construction Commissioner [2019] FCAFC 56; 270 FCR 39 at [232]–[246] and Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 59 ACSR 373 at [147]–[148] (Brereton J)) do not stand for any such general proposition. The reasons of the Court of Appeal in McSteen note that the underlying basis for the “rule against duplicity” — “fairness to the defendant and entitlement to natural justice” — is relevant in disciplinary proceedings but expressly accept that that “rule” does not apply strictly.
The important point is that the case that a respondent has to answer must be apparent from the pleading and not left to emerge during the trial. That fundamental requirement is not inconsistent with the articulation of alternative cases, so long as those cases actually are articulated (and so long as inconsistent allegations or claims are identified as alternatives: see r 16.06 of the Rules). Pleadings in the alternative have been recognised as a normal, and sometimes necessary, feature of cases of the present kind: Federal Commissioner of Taxation v Ludekens [2013] FCAFC 100; 214 FCR 149 at [20]. Here, the ASOC is explicit in its invocation of alternatives and the result, while complex, can be understood with clarity upon reasonably careful reading.
Allied with Mr White’s complaint concerning the pleading of alternative cases is the use of language such as “one or more of”, “one or both of” and “and/or”. These expressions are said to create ambiguity and confusion and to be inapt drafting devices, particularly in the context of civil penalty proceedings.
Use of the expression “and/or” in pleading has been very strongly criticised: see eg Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd [2010] ACTSC 20; 4 ACTLR 114 at [85]–[86] (Refshauge J). However, while its use is probably best avoided, I would not accept, with respect, that the phrase is necessarily either “vague or ambiguous” or “positively inaccurate”. In some circumstances, its use may indicate that the drafter has not yet settled on which of a range of potential allegations is to be pursued; and, if some of those allegations lead to different outcomes from others, the result may be genuine ambiguity (or failure to plead a cause of action). However, used in a controlled fashion, such language is no more than a method of pleading alternatives. In other words, “A and/or B”, as a matter of ordinary English, means “A and B; alternatively A; in the further alternative B” (cf Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 2) [2020] FCA 863 at [40]–[41] (Stewart J)).
The same is true of formulations such as “one or more of A, B, C and D”. The number of permutations increases as the list grows longer. However, in each instance it is tolerably clear what is being alleged: the pleaded case at its highest is all of A, B, C and D; but if any of them is not made out, reliance is placed on those that are made out.
In some instances, the use of such formulations simply does not matter. For example, ASOC [34.4.6] pleads that at a meeting on a certain date Mr White said that an arrangement had been “‘run by’, mentioned to, and/or reviewed by” partners at EY. There is no real difference between those phrases as ways of denoting the import of what Mr White is alleged to have said. The paragraph is perhaps therefore guilty of redundancy, but that is not a sin that merits striking out.
Depending on the legal context, each of the permutations introduced by the use of “and/or” or “one or more” in a statement of claim may need to be identified, denied and resisted at an evidentiary level by the respondent. This may be complex and logistically burdensome (particularly in a legal context where any of A, B, C and D is sufficient for the applicant to succeed); however, it does not follow that the pleading fails to perform its function. In effect, “one or more of” and cognate expressions are simply linguistic devices that allow alternative allegations to be pleaded with less prolixity than might otherwise be the case.
Formulations of this kind are used in many places in the ASOC. They give the pleading a density that is superficially intimidating. However, I was not taken to any paragraph where the alternatives being relied upon were not finite and identifiable. The position is far removed from that described in Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486 at [27] (French CJ, Gummow, Hayne and Kiefel JJ) as “planting a forest of forensic contingencies”.
I am therefore not satisfied that any part of the pleading should be struck out by reason of its use of these drafting devices.
Conclusory allegations
Mr White contends that ASOC [176] to [180] are liable to be struck out because they contain conclusory allegations.
Each of ASOC [176] to [178], and each of the sub-paragraphs in ASOC [179]–[180], takes the following form.
It is reasonable to conclude that [a named person] entered into and/or carried out [one of the pleaded schemes] with the dominant purpose of one or more of the entities referred to in [a specified paragraph] getting a Scheme Benefit.
Read in isolation, each of these paragraphs and sub-paragraphs is conclusory. The conclusion in each instance reflects the language of s 290-65(1)(a)(i) and is a proposition that the Commissioner needs to establish in order to succeed against Mr White in relation to the relevant scheme.
These paragraphs need to be read with what precedes them. Beginning with the heading “Dominant purpose of getting a scheme benefit”, Part G.1.2 of the ASOC:
(a)identifies who is alleged to have entered into and/or carried out each of the pleaded schemes (ASOC [168]–[171]);
(b)alleges an intention on the part of Mr White, in respect of each pleaded scheme, that NWOD would become liable to be assessed on certain income, but would not have to pay tax because tax losses were available to it, and other entities (which would otherwise have been assessed on the relevant income) would pay less tax (ASOC [172]–[174]); and
(c)alleges that the benefits that were intended to accrue were “scheme benefits” within the meaning of s 284-150 (ASOC [175]).
This, clearly, is the basis on which it is alleged in ASOC [176]–[180] that it is “reasonable to conclude” that each of the persons alleged to have entered into or carried out one or more of the pleaded schemes did so with the dominant purpose of one or more of the identified entities receiving a “scheme benefit”. It would probably have been preferable for the links to have been made explicit. However, it is plain that any attempt by the Commissioner to rely on matters outside the scope of Part G.1.2 of the ASOC to support one of the conclusions in [176] to [180] would be open to criticism or objection as a departure from the pleaded case.
I also note that the Commissioner has agreed to provide particulars of each of these paragraphs expressly identifying the matters relied on in support of the allegations in them.
There is therefore no reason why these paragraphs should be struck out.
Particular words and phrases
“At all relevant times”
Mr White takes issue with the use of the phrase “at all relevant times” in several paragraphs of the ASOC. The paragraphs referred to in his reply submissions (which I take to be his final word on the point) are [7], [11], [14], [15], [21], [22], [23], [26], [45], [101] and [105] although this is not an exhaustive list of the paragraphs in which the expression appears.
This phrase, when applied to a circumstance or state of affairs (eg a person holding an office or owning property), is a method of alleging that that circumstance or state of affairs existed at the time of any pleaded act or event whose significance or legal consequences are affected by whether or not the circumstance or state of affairs exists. This, clearly, is the significance of the term “relevant”.
This is a widely used drafting device which, of itself, is not embarrassing. The case relied on by Mr White (Cauvin v Philip Morris Ltd [2003] NSWSC 631 at [48]–[51] (Bell J)) concerned a particular circumstance where, as the consequence of a concession, the relevant periods of time for the purposes of the pleading were unclear. No such circumstances have been shown to exist here.
I note that, in any event, the Commissioner has agreed to provide particulars of each of the impugned paragraphs identifying the times that are being referred to.
“Friend”
Mr White took issue with ASOC [7] and [15] where it is alleged that a particular person was his “friend”. However, the written submissions in reply indicate that this point is not pressed.
“Purported tax losses”
Mr White takes issue with ASOC [14], which pleads that NWOD was part of a tax consolidated group that had “significant purported tax losses available to it”. The phrase “purported tax losses” is said to be ambiguous as to whether NWOD did or did not have tax losses.
The Commissioner has offered to amend this paragraph so as to describe NWOD as a member of a tax consolidated group “which Mr White considered had significant tax losses”. Mr White submits that this proposed change does not resolve the ambiguity as to whether, on the Commissioner’s case, NWOD did nor did not have tax losses available to it. However, what the proposed amendment does serve to confirm is that the true position as to what losses were available to NWOD is not relevant on the Commissioner’s case. The allegation only concerns Mr White’s understanding as to NWOD’s tax position at relevant times. In the form proposed by the Commissioner in his submissions, ASOC [14] is not ambiguous or embarrassing.
“Controlling mind”
Mr White takes issue with the use of the term “controlling mind” in ASOC [21], [22], [23] and [105]. Each of these paragraphs alleges that a specified person was (or two specified people together were) the “controlling mind” of a company at relevant times. “Controlling mind” is said to be an ambiguous phrase.
“Controlling mind” is a frequently used expression with a fairly well understood meaning. However, given the nature of the core allegations in the ASOC (that particular people entered into or carried out “schemes”, involving particular entities and with particular intentions), it is at least desirable that the Commissioner should give more detail as to the kind of control that he alleges the person in question was able to exercise. The Commissioner has agreed to do this by way of particulars.
“And her associated entities”
ASOC [64] alleges that on 25 July 2018 the Commissioner “commenced a review of Mrs Grujoski and her associated entities’ income tax affairs” and that this review was later “escalated to an audit”. Mr White complains that the words “associated entities” are insufficiently particular.
Nowhere in Mr White’s submissions is it explained why the precise scope of the review commenced in July 2018 needs to be understood in order to respond to the ASOC. The review is mentioned again at [67.1], [92] (referring to an expansion of its scope) and [93] describing some advice given by Mr White in connection with it. Its only role appears to be to provide context for the allegations in ASOC [65], [66] and [93] that Mr White provided certain advice and assistance to Mr and Mrs Grujoski.
Meanwhile, the Commissioner points out that the phrase “and her associated entities” in ASOC [64] was taken from the letter from the ATO communicating the commencement of the review. The letter is part of an exhibit to an affidavit affirmed in the proceeding by Mr Grujoski. This is not necessarily an answer to Mr White’s complaint: if there is significance in the identity of the specific entities that were the subject of the ATO’s review, the pleading should clearly state the Commissioner’s position as to what those entities were. However, as noted above, there is (at least on the state of the current submissions) no significance in the point. The objection to ASOC [64] serves no purpose and is without merit.
“Entitled to payment”
ASOC [188] to [195] plead that Mr White or one of his “associates” received consideration for various things. In each instance there is a pleading of “arrangements by which” Mr White’s family trust “was entitled to payment” of identified sums of money followed by a pleading of actual receipt of that money. The phrase “entitled to payment” is said by Mr White to be ambiguous and embarrassing.
The Commissioner has agreed to provide particulars of these paragraphs. In his written reply submissions Mr White reserves his position on this point until such particulars are provided.
In his oral address senior counsel for Mr White referred to a difficulty with the term “associate” in ASOC [188] to [191]. This had not been raised in the written submissions or in the interlocutory application. The relevant paragraphs refer to the definition of “associate” in s 995-1 of the ITAA97 and are clearly using the term in that sense. Material facts relating to the RJB Family Trust, which is the entity said to be an “associate” in these paragraphs, are pleaded earlier at ASOC [12.2].
Cross-referencing
Mr White objects to what is described as “string pleading”, where paragraphs of the ASOC cross-reference other paragraphs (and in some instances those other paragraphs refer to further paragraphs). Reliance is placed on Wheelahan v City of Casey [2013] VSC 316 at [25(m)] (Wheelahan), where Dixon J observed (in the course of identifying applicable principles) that “extensive cross-referencing of facts in a pleading may render parts of the pleading unintelligible”. In support of that proposition his Honour cited an earlier Victorian case, Gunns Ltd v Marr [2005] VSC 251 at [20], where impugned particulars incorporated allegations in around 40 other paragraphs, creating what was described as a “labyrinth of allegations”.
It should be noted that the vice of the pleading impugned in Wheelahan appears to have been too little cross-referencing rather than too much. At [49], referring to “inadequate linkages between the allegations and the claims” that “break the pleading into isolated sections that are not amenable to a holistic reading”, Dixon J observed:
Cross-referencing, or linkages, are usually necessary in complex pleadings that allege multiple causes of action or grounds of defence. Such linkages, if they are a necessary part of a pleading, must be contained within the pleading to draw an admission, denial, or further allegation referable to the linkage or cross-referencing from the responding party. The critical function of linkage or cross-referencing is for it to enable each separate claim to stand alone, succinctly and cogently articulated while avoiding unnecessary repetition. In this pleading, that objective has not been achieved.
His Honour’s observation as to the necessity of linkages or cross-referencing in a complex pleading is, with respect, well made.
In the present case, Mr White alleges excessive cross referencing in ASOC [186]–[195]. ASOC [186]–[187] were referred to in submissions as apparently the clearest example. Each of these paragraphs alleges that Mr White marketed one of the defined schemes to certain people by engaging in certain conduct. The conduct, in each instance, is identified as the conduct pleaded in specified paragraphs earlier in the ASOC. This, in my view, is an orthodox mode of pleading. Indeed, it is not easy to imagine how it could have been done more clearly and efficiently.
So too the other paragraphs about which complaint is made. These paragraphs identify matters such as arrangements giving rise to an entitlement to receive money, the payment of fees, and conduct from which it is said a substantial role in marketing is to be inferred, by referring to the paragraphs where these matters are pleaded. This is not a case where difficulty or confusion arises from a need to trace concepts or definitions through a tangled web of cross-references.
Each of these paragraphs is within Part G of the ASOC, where the Commissioner seeks to identify how the various conduct alleged in Parts B to F contravened s 290-50(1). This approach (factual narrative followed by contentions about how the law applies to those facts) is a familiar one. It is not apparent that the alternative (interspersing factual allegations and legal characterisations) would produce greater clarity.
Relevance
Mr White contends that several paragraphs or sets of paragraphs of the ASOC are irrelevant to the Commissioner’s claims, and should be struck out so that they do not prolong the trial unnecessarily.
ASOC [13], [44], [45]
ASOC [13] alleges that Mr White did not declare monies that he received from the RJB Family Trust, or monies held in that trust for the benefit of him or his family, in his tax returns for the income years ending 30 June 2017, 30 June 2018 and 30 June 2020. ASOC [44] pleads that certain monies received in connection with one of the alleged schemes was received and/or used by Mr White in the period 2 February 2017 to 7 March 2018 but not declared as “taxable income” (which should apparently read “assessable income”) for the 2017 income year until late 2019 (and not declared in Mr White’s return for the 2017 income year). ASOC [45] alleges that two persons involved in the implementation of the scheme (Mr Leontios and Mr Grujoski) were not aware of the link between the RJB Family Trust and Mr White and not aware that the payment was in effect a payment for Mr White’s benefit.
These allegations do not appear to go to any of the issues concerning whether Mr White contravened s 290-50. However, as the Commissioner submits, they form the basis for the allegations in ASOC [200.4] and [200.5], which are integers of the allegation in ASOC [200] that the Tax Loss Access Scheme (or alternatively the Bonar Street Scheme) involved tax evasion. This, in turn, is relevant to whether the proceeding is caught by the time limitation in s 290-55. The facts in ASOC [13], [44] and [45] are therefore relevant, so long as there is an issue concerning the applicability of the limitation period.
ASOC [57A] to [57C]
These paragraphs allege that in 2017: Mr White gave advice that one of the relevant corporate entities (referred to as CW1) should be liquidated; Mr White observed that a benefit of liquidation was that all of the company’s books and records would be destroyed; and that Mr Grujoski decided to liquidate CW1.
These allegations also do not appear to bear upon any issue concerning s 290-50. However, the allegation that Mr White advocated liquidation because it would result in the destruction of books and records is also an integer of the claim that the Tax Loss Access Scheme (or alternatively the Bonar Street Scheme) involved tax evasion (ASOC [200.5A]).
ASOC [65A], [66A] and [66B]
These paragraphs allege the making of statements by Mr White. If these statements were made, they are clearly capable of supporting a conclusion that Mr White marketed one or more of the pleaded schemes within the meaning of s 290-60. They are relied on for that purpose in ASOC [186] and [187.2].
ASOC [89]
ASOC [89] makes an allegation analogous to ASOC [44] (referred to above) in connection with a different payment. It is potentially relevant to the issue of tax evasion, and thus the applicability of the limitation period. However, it is not picked up by any of the sub-paragraphs in ASOC [200].
The Commissioner submits that what is alleged in ASOC [89] is relevant to the matters pleaded in ASOC [200.4] and [200.5] because it will be relied on to demonstrate the truth of the allegations in ASOC [13], [44] and [45]. If that is its only relevance to the case, it is a point of evidence which should not be included in a pleading. The paragraph should therefore be struck out.
ASOC [145]–[157]
Mr White’s spreadsheet contains oblique references to an issue concerning the relevance of these paragraphs. Several propositions were put “subject to relevance” in relation to these paragraphs. However, his reply submissions say that he does not now seek to have these paragraphs struck out as irrelevant.
ASOC [158]–[162]
These paragraphs allege an exchange of WhatsApp messages between Mr White and Mr Locke. The messages are not said to relate to any of the schemes that are pleaded. The Commissioner argues that these messages support an inference as to the intention that Mr White had in relation to the pleaded schemes. However, on that footing, they are simply references to some of the evidence by which a fact in issue will be sought to be proved. They are not appropriate for inclusion in the pleading and should be struck out.
ASOC [172]–[174]
These paragraphs plead that Mr White intended specific results to flow from the implementation of the pleaded schemes. In each case the results included a particular entity receiving a “benefit” in the form of having to pay less tax than it otherwise would. Those benefits are alleged to be “scheme benefits” within the meaning of s 284-150 of Schedule 1 to the TAA (ASOC [175]).
The condition for the existence of a “tax exploitation scheme” in s 290-65(1)(a) requires that:
·it is reasonable to conclude that
·an entity that entered into or carried out the scheme (subpara (i)) (or would have entered into it or carried it out if it had been implemented (subpara (ii)))
·did so (or would have done so) with the sole or dominant purpose
·of that entity or another entity getting a “scheme benefit” from the scheme.
Mr White is alleged to have “carried out” whichever of the pleaded schemes is established to have existed (ASOC [170]-[171]). The condition in s 290-65(1)(a) can therefore potentially be met by reference to his “dominant purpose”.
Mr White submits, and the Commissioner accepts, that in this context “dominant purpose” is to be established objectively. However, it does not follow that Mr White’s subjective intentions are irrelevant. Proof of a person having had a subjective intention that a particular result would follow from implementation of a scheme is clearly capable of supporting an ultimate conclusion that it is “reasonable to conclude” that this was their “dominant purpose” (cf ASOC [176] and [179.1]–[179.3] in relation to Mr White). Indeed the conclusion could be said to follow almost inexorably unless some other, potentially more important, intention is proved or suggested by the circumstances. ASOC [172] to [174] are clearly relevant on this basis.
The paragraphs are also relevant in that they establish the meanings of defined terms that are used in ASOC [175].
Objections to ASOC [181]–[185]
ASOC [181]–[185] are the subject of a myriad of complaints in Mr White’s spreadsheet which were given somewhat more definition in oral submissions.
ASOC [181] begins with the overall proposition that (for the purposes of ss 284-15 and 290-65 of Schedule 1 to the TAA) it is not reasonably arguable that each of the “scheme benefits” identified in ASOC [172]–[174] is available in law. That proposition is alleged to be true “because” of the matters that are then articulated in [181.1] to [181.6].
(a)ASOC [181.1] pleads that s 100A(1) of the ITAA36 would deem NWOD never to have been presently entitled to certain income, by reason of the matters pleaded in ASOC [182].
(b)ASOC [181.2] pleads that it would be concluded that each of the defined “scheme benefits” would be negated by the general anti-avoidance provisions of Part IVA of the ITAA36, by reason of the matters pleaded in ASOC [183]–[185].
(c)ASOC [181.3] and [181.4] supplement [181.2] by pleading that paragraphs 1, 3 and 4 of Tax Determination TD2003/3 “explain why arrangements that share a number of features of the Tax Loss Access Scheme … are likely to attract the operation of Part IVA”.
(d)ASOC [181.5] and [181.6] supplement both [181.1] and [181.2] by pleading that Tax Determination TD2005/34 “explains why arrangements that share a number of features of the Tax Loss Access Scheme … are likely to constitute a reimbursement agreement within the meaning of s 100A” and also to attract the operation of Part IVA of the ITAA36.
These paragraphs should be re-pleaded, for the following reasons.
First, ASOC [182] (in relation to s 100A) and [183]-[185] (in relation to Part IVA) simply recite, using the relevant statutory language, the conclusions that would need to be reached in order to bring the relevant provisions into play. They do not advance understanding of the Commissioner’s case very far, if at all, beyond what would be achieved by reading ASOC [181] and studying the statutes. It is true that the universe of facts, from which the Commissioner will seek to show that the relevant statutory language is applicable, is established by the earlier parts of the ASOC. However, procedural fairness requires something more in a case such as the present. It requires an articulation of the particular features or characteristics of each of the pleaded schemes which, it is contended, lead to the statutory language being applicable.
Secondly, ASOC [181.3] to [181.6] are unclear as to their content and effect. The proposition that a particular statutory instrument “explains” something is of doubtful relevance and difficult to plead to; and the reference to “arrangements that share a number of features” immediately invites the question “which features?”. These subparagraphs in their present form are embarrassing. If the proposition is that particular conclusions “would” be reached in respect of the pleaded schemes for the purposes of s 100A or Part IVA of the ITAA36, because authoritative guidance documents point to those conclusions, this ought to be put clearly and explained.
ASOC [181] to [185] should therefore be struck out, with leave to replead them.
Other miscellaneous complaints
ASOC [12]
ASOC [12] pleads that, by reason of the matters in [9]–[11], Mr White effectively controlled the RJB Family Trust and the Trust was an “associate” of Mr White within the meaning of s 995-1 of the ITAA97 and s 318(1)(d) of the ITAA36. The matters pleaded in ASOC [9]–[11] include that Mr White was a signatory of the Trust’s bank accounts, contributed or directed the contribution of monies to those accounts, and could and did access and use the monies in those accounts for his own benefit. (As further matters of context it is pleaded that Mr White was the settlor of the RJB Family Trust and its trustee, a Mr Byrnes, was a friend of Mr White (ASOC [6], [7]).)
Mr White submits that the matters pleaded at ASOC [9]–[11] are insufficient to establish effective control or that the RJB Family Trust was an “associate” of Mr White in the relevant sense. I am not persuaded that this is correct, but the point can be developed at trial. A lack of particularity is also alleged, but I do not think this point has any merit.
ASOC [35A] and [117]
These paragraphs plead that certain statements made by Mr White were each:
(a)“false”; or
(b)“alternatively … a statement which Mr White did not have reasonable grounds for making”.
Mr White submits that the matters pleaded in the alternative are not true alternatives. This is correct: logically, both may be true. It may be preferable simply to plead both propositions if one or the other (or both) is said to be sufficient (or to use the expression “and/or” despite the criticism sometimes levelled at it). However, it does not follow that these paragraphs are obscure or otherwise flawed as a matter of pleading. It is tolerably clear that the Commissioner alleges that each statement was false and, if outright falsity cannot be proved, that it was made without a proper basis. (The insertion of “alternatively”, if anything, works to Mr White’s advantage by precluding the Commissioner from arguing that a statement was both false and made without reasonable grounds.)
Dates of invoices
Objection was taken to ASOC [54], [61], [67B], [67D], [67F], [67H], [69], [91], [95], [122], [133], [141] and [153] on the ground that the dates on which invoices were paid are not stated. The Commissioner has agreed to provide particulars identifying these dates.
ASOC [193]–[195] and [197]–[199]
Mr White also notes that ASOC [193]–[195] are not expressed to be in the alternative to [192] and that ASOC [197]–[199] are not expressed to be in the alternative to [196]. The Commissioner accepts that they should be so expressed and is content to amend the ASOC accordingly.
Conclusions on strike-out and the issue of particulars
I have concluded that ASOC [89], [158]–[162] and [181]–[185] should be struck out. The Commissioner should have leave to re-plead these paragraphs. Thus, formally, leave should be refused to file the ASOC in its current form; however, there should be provision for the filing of an amended statement of claim adopting the amendments in the ASOC and addressing the conclusions set out above.
It will also have been noted that, in relation to several paragraphs of the ASOC, the Commissioner sought to deal with Mr White’s objections by providing particulars. Counsel for Mr White objected that if facts are material they should be contained in the pleading, relying on Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 (Fisher J).
Because the effect of my conclusions above is that the ASOC in its current form will not be filed and further amendments will need to be made, paragraphs that have been accepted as requiring further particularity should be attended to as part of this process.
The application for particulars
Mr White’s interlocutory application filed on 5 July 2024 also sought, “further and in the alternative” to an order striking out some or all of the statement of claim, an order requiring the Commissioner to provide further and better particulars in respect of parts of the pleading identified in a letter to the Commissioner’s solicitors. The letter foreshadowed in that prayer for relief (sent on 11 July 2024) was 18 pages long and sought particulars on 78 different issues, many of which were cast in very broad terms. No proper explanation has been offered as to why many of these particulars are required by Mr White in order to respond to the Commissioner’s allegations against him.
The question what (if any) further or better particulars are required can await the reformulation of the statement of claim referred to above. The interlocutory application should be dismissed in so far as it seeks an order that would require a response to the letter of 11 July 2024.
The defence
By an interlocutory application filed on 26 September 2023 (the September 2023 application), Mr White sought orders (in substance) that:
(a)he be granted leave to file a defence in accordance with the draft annexed to the affidavit of his solicitor, Mr Wong, dated 27 September 2023;
(b)he be relieved from certain requirements of the Rules in so far as compliance would interfere with his privilege against incrimination and exposure to penalties;
(c)noting his entitlement to respond to allegations in respect of which privilege is asserted by way of a denial coupled with a statement that privilege is claimed; and
(d)reserving for later consideration the question whether and to what extent Mr White should be permitted to plead additional facts after the Commissioner has closed his case.
The first of these orders was made by consent on 9 October 2023.
In his written submissions, Mr White included 24 paragraphs which substantially repeated the submissions filed in support of the September 2023 application. The Commissioner responded with bemusement, expressing the understanding that this issue had been settled.
For abundant clarity, I will make the other orders concerning the form of the defence that were sought in the September 2023 application (ie, the orders described in [102(b)] above).
Viva voce evidence
On 5 July 2024 Mr White filed an amended version of the September 2023 application. It included an additional prayer seeking an order, pursuant to r 5.04(1) of the Rules, that evidence of conversations concerning or statements made by Mr White be adduced orally in chief.
This application comes after the Commissioner’s evidence in chief has been filed in affidavit form, leaving witnesses potentially exposed to cross-examination on any variation between the accounts contained in their affidavits and their accounts given from memory (possibly some considerable time later) in the witness box. Acceding to the application thus has the potential to lengthen the trial and to alter the balance of the forensic contest.
In addition, this is not a case that depends on one or two key conversations of which there are competing versions. The conduct canvassed in the ASOC extends over a period of around five years and includes many communications, written and oral. So far as conversations are concerned, it is not clear that there are any in respect of which there will be a real contest as to the words that were said. Mr White has not filed any evidence and there is a prospect that he will not do so. Counsel for Mr White accepted that the order sought in the amended interlocutory application cast the net too wide, but nevertheless pressed for an order to be made now rather than leaving the question to the eve of the trial.
As presently advised, I do not think the overarching purpose in s 37M of the FCA Act would be served by requiring evidence in chief on any particular topics to be given orally. I will not make any order on the issue at this time. I will consider making such an order when timetabling orders leading to the final hearing are made, in respect of any conversations as to which there is or is likely to be a real evidentiary contest.
Legal professional privilege
In December 2023, the Commissioner served a subpoena on EY. The subpoena sought production, among other things, of communications by Mr White and other partners of EY in connection with the termination of Mr White’s position as a partner. After discussions, that part of the subpoena was narrowed so as to specify a time period and focus on admissions and other communications made by Mr White.
EY produced documents responsive to this aspect of the subpoena in two packets labelled S12 and S13 on 29 April May and 5 June 2024 respectively. Solicitors acting for EY advised via email that their client did not claim privilege in respect of the documents.
Mr White, however, claims privilege in respect of nine of the documents and objects to the Commissioner having access to them.
Whether the documents are privileged
The principles concerning the application of legal professional privilege are not controversial and are well understood. The privilege attaches to a document that is brought into existence for the “dominant purpose” of obtaining legal advice or to conduct or to aid in the conduct of litigation that is in reasonable prospect (see eg Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; 201 CLR 49 at [46] (Gleeson CJ, Gaudron and Gummow JJ), [61] (McHugh J)). It also attaches to documents that record confidential legal advice or legal work (eg AWB Ltd v Cole [2006] FCA 571; 152 FCR 382 at [127] (Young J)). The person giving the advice must be a legal practitioner who is competent and independent (see eg Rich v Harrington [2007] FCA 1987 at [36]–[46] (Branson J) (Rich)). The privilege belongs to the “client” (Mann v Carnell [1999] HCA 66; 201 CLR 1 at [28] (Gleeson CJ, Gaudron, Gummow and Callinan JJ)); that is, it is the person who sought the advice, or the party for whom the practitioner was acting in the litigation, who is entitled to prevent disclosure and who, correspondingly, can waive the privilege.
It is uncontroversial that the circumstances resulting in the attachment of privilege must be proved by evidence. The documents in question here are described in an affidavit affirmed by Mr White’s solicitor on 26 July 2024 (the first Wong affidavit). In so far as the basis for the asserted privilege is revealed in that evidence, the deponent does no more than describe his instructions. In the light of observations in Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) v Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed); In the Matter of Equititrust Ltd (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) (No 3) [2016] FCA 738 at [18]-[20] (Markovic J) (Equititrust), and the brief and somewhat elliptical way in which the documents are described, I have treated this evidence with caution and given it limited weight. In keeping with (eg) AWB v Cole (No 5) [2006] FCA 1234; 155 FCR 30 at [44(12)] (Young J), I obtained the documents from the registry and inspected them.
(a)S12 Document 1 is an undated and unsigned file note said to have been prepared by a Mr Craig Robson of EY. It documents discussions between the author and Mr White in September 2021 and May 2022. The earlier discussion is said to have been in a context where EY was managing “ATO investigations”. The author asked Mr White questions and Mr White answered them. The later conversation is said to have included a statement by Mr White that he was acting on a recommendation to him by senior counsel (Mr Robertson KC) who was advising him, which had the effect of disclosing to the author what that recommendation was.
(b)S12 Document 2 is an email from Mr Scott Grimley to several persons including Ms Michelle Smyth (who I understand was EY’s in-house General Counsel at the time), comprising notes of a meeting described as “PW meeting” on 24 June 2022. I assume “PW” to be a reference to Mr White. The notes of the meeting include statements by him about particular transactions. So far as one can tell, this was part of an internal investigation by EY into Mr White’s conduct. I do not accept that any statements made by Mr White in this meeting were made in the capacity of a “client” seeking legal advice, at least in any individual sense. However, I am prepared to accept that Mr Grimley was relaying the information to Ms Smyth and others for the purpose of Ms Smyth giving advice to the partners of EY on issues arising from Mr White’s conduct or alleged conduct.
(c)S12 document 3 is a detailed email from Mr White to Ms Smyth dated 1 July 2022. It appears to follow on from the meeting on 24 June 2022. The email is headed “subject to legal professional privilege”, “confidential” and “without prejudice”. Mr White discloses to Ms Smyth some of the advice given to him by Mr Robertson. He also conveys his recollections and understandings of a range of events. As with the previous document, it is clear that this is not a case of Mr White seeking legal advice in any individual sense. Ms Smyth appears to have been gathering information in order to advise EY as to what it should do about Mr White.
(d)S12 document 4 is a further email from Mr White to Ms Smyth, dated 11 July 2022 and with the same headings as S12 document 3, apparently responding to some requests for clarification in relation to what he had said in that document.
(e)S12 document 5 is an email chain including S12 document 4, some further questions by Ms Smyth as to points of detail such as dates, and Mr White’s answers.
(f)S12 document 6 is a longer email chain including the messages in S12 document 5 followed by some further exchanges between Mr White and Ms Smyth concerning questions of factual detail raised by Ms Smyth.
(g)S12 document 7 appears to be a subset of the emails comprising S12 document 6.
(h)S13 document 1 is an exchange of emails between Mr White and Mr Craig Jackson, which were copied to several other persons. The email addresses indicate that all were partners or employees of EY. The emails appear to be a discussion of proposed answers to some questions concerning events or transactions connected with these proceedings. There is nothing on the face of the messages to suggest any connection with the obtaining of legal advice, other than the fact that Ms Smyth was copied in to the later messages in the chain. (Some of the other recipients are identified by the first Wong affidavit as tax or tax controversy partners of EY. It is not recorded whether they were legal practitioners. I am not persuaded that these persons were playing any role in the provision of legal advice to EY or to Mr White or assisting in the conduct of litigation.) Further, the substance of the messages is not in the nature of instructions to a legal adviser. Rather, the exchange constitutes workshopping of the responses that might be made by EY to an external interrogator.
(i)S13 document 2 is a chain of emails between 9 June and 22 June 2021. It includes a long memorandum provided by Christina Maatouk of EY, apparently at Mr White’s request, to Mr Robertson. That email and the chain of which it forms part are then forwarded by Mr White to Mr Ian Burgess (who according to the first Wong affidavit was an EY tax partner).
A further affidavit by Mr White’s solicitor affirmed on 12 August 2024 (the second Wong affidavit) deposes, on instructions, that Mr Robertson was retained by EY in June 2021 to advise on matters relating to a notice that was issued by the Commissioner to EY under s 353-10 of Schedule 1 to the TAA in August 2021. I would be inclined to assume, in any event, that a memorandum describing a set of transactions that was sent to a barrister (ie, S13 document 2) was being sent for the purpose of obtaining legal advice about something to do with those transactions. The evidence that Mr Robertson was retained by EY at this point indicates, however, that his client was the partnership rather than Mr White (to the extent that this makes a difference, as to which see below).
The second Wong affidavit also records that Mr Robertson was retained to advise Mr White (apparently in an individual capacity) in April 2022. A document which supports this proposition is annexed. This indicates that the advice that is hinted at in S12 document 1, and to some extent disclosed to Ms Smyth in S12 document 3, was advice obtained by Mr White individually and with a view to protecting his own interests.
My conclusions in the light of this evidence as to whether (leaving aside questions of waiver) the documents are subject to privilege are as follows.
(a)The advice provided by Mr Robertson to Mr White can, putting to one side the effect of Mr White having disclosed it to colleagues at EY (which is considered below), be taken to be privileged.
(b)Otherwise, it has not been shown that S12 document 1 is privileged.
(c)S12 documents 2 to 7 (leaving aside for the moment Mr White’s disclosure of advice received from Mr Robertson) have not been shown to be privileged. There is no evidence going to Ms Smyth’s competence or independence apart from her job title. While advice from an in-house lawyer is not necessarily excluded from the scope of privilege, something needs to be known about their duties and position in the organisation before it can be accepted that their advice comes within the scope of the privilege (see Rich, above). Nor is there any indication that Ms Smyth (or others involved in the investigations) were collating this material for the purpose of briefing an external legal adviser. If these documents were privileged, the privilege would belong to EY (the significance of which is also addressed briefly below).
(d)It has not been shown that S13 document 1 is privileged. Its connection with any advice provided or to be provided by Ms Smyth is indistinct; and in any event there is insufficient evidence to establish that advice received from her would attract privilege.
(e)S13 document 2 is privileged. The privilege belongs to EY.
I note that the first Wong affidavit refers to instructions to the effect that the disclosures by Mr White recorded in S12 documents 2 to 7 were made on the strength of an email from Ms Smyth dated 13 May 2022 asserting that any such disclosures would be confidential and subject to legal professional privilege. This is consistent with the headings placed by Mr White on his emails. While it is possible that Mr White relied on such an assurance, it was not within Ms Smyth’s power to determine whether legal professional privilege would apply. No other ground of privilege is now relied on by Mr White.
Waiver
S12 documents 1 and 3 relate some of the contents of what can safely be assumed to be confidential legal advice that Mr White received from Mr Robertson. However, these are not records of the actual provision of the advice. Rather, they are documents that record a selective disclosure of aspects of the advice, by the client, to third parties. By making that disclosure Mr White waived privilege in respect of at least these aspects of the advice. He cannot now rely on the privilege in order to prevent EY from disclosing the documents.
Consequently, as to the documents that are privileged (S13 document 2), or that would be privileged if Ms Smyth’s competence and independence were adequately proved (S12 documents 2 to 7), the only “client” for relevant purposes was EY. No evidence has been tendered concerning the structure of that firm; however, the parties proceeded on the understanding that it is a partnership. Ordinarily at least, a partnership is not itself a legal person and the assets of a partnership are assets of the partners. Prima facie, therefore, the privilege that these documents attracted upon their creation belonged to all of the partners of EY (including, at that time, Mr White).
Where two or more persons join together in seeking legal advice, or where one member of a group of persons in a formal legal relationship seeks advice on a matter in which the whole group has an interest, the privilege that protects those communications from disclosure belongs to all members of the group. The consequence is that all members of the group must join in waiving the privilege, if waiver is to be effective: Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608 (Sheller JA, Waddell JA agreeing); Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151 at [40]-[42] (Mason P); Equititrust at [12]. Hence, Mr White submits, because EY is (and was) a partnership rather than a corporate entity, the statement by EY that it does not claim privilege (which would in other circumstances constitute a waiver) is ineffective because he, as one of the persons entitled to rely on the privilege, has not agreed to waive it.
The position in relation to legal professional privilege where a partner, being a joint privilege holder, resigns or is removed from the partnership does not seem to have been squarely considered in the case law. I was not referred to any directly relevant authority by the parties. There are more general statements to the effect that, where the holders of a joint privilege fall out with each other, the ability of each to rely on that privilege as against persons outside the relationship is not affected (eg Commercial Union Assurance Co plc v Mander [1996] 2 Lloyds Rep 640 at 645-646 (Moore-Bick J); Hancock v Reinhart (Freehills Subpoena) [2017] NSWSC 530 at [38] (Brereton J)), which seem to be correct in principle. On that basis, it would seem, absent some express agreement between the partners, somebody who is a member of a partnership at the time of a legally privileged communication continues to be entitled to rely on the privilege (and must join in waiving it, if waiver is to be effective).
It is true that members of a partnership ordinarily owe fiduciary obligations to each other, and in some circumstances these obligations may persist (or even intensify) after leaving the partnership (eg in the case of a former partner who holds the legal interest in an asset of the partnership: Roderick I’Anson Banks, Lindley & Banks on Partnership (21st ed, Sweet & Maxwell, 2022) at [18-40]). However, it is not clear why fiduciary duties should be thought to attach to the exercise by a former partner of their rights in relation to a matter such as taking the benefit of legal professional privilege. If such duties do attach to those rights then, prima facie, they inure for the benefit of the partners and are enforceable by them. Here, the correspondence on behalf of EY confirms that the firm does not claim privilege but does not take any position as to a potential claim of privilege by Mr White.
The Commissioner bears the onus of showing that privilege has been waived (New South Wales v Betfair Pty Ltd [2009] FCAFC 160; 180 FCR 543 at [54] (Kenny, Stone and Middleton JJ); Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 349 at [96] (Shariff J)). The material before the Court does not provide a basis to infer that the waiver of privilege by EY binds Mr White. Even taking into account the principle in Blatch v Archer (1774) 1 Cowp 63; 98 ER 969, therefore, I do not think it is possible to find that that onus has been discharged.
Conclusions
Apart from S13 document 2, my conclusion is that the documents produced by EY are not privileged and access to the documents should be allowed. S13 document 2 is privileged and the privilege has not been waived.
Disposition
I will order the parties to bring in short minutes of order giving effect to these reasons. I will invite submissions on costs when orders have been made.
I certify that the preceding one hundred and twenty-six (126) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett. Associate:
Dated: 8 November 2024
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