Law Institute of Victoria Limited v Deputy Commissioner of Taxation (No 2)
[2009] VSC 179
•12 May 2009
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMON LAW DIVISION
No. 10547 of 2008
| LAW INSTITUTE OF VICTORIA LIMITED | Plaintiff |
| and | |
| DEPUTY COMMISSIONER OF TAXATION | Defendant |
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JUDGE: | PAGONE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 April 2009 |
DATE OF JUDGMENT: | 12 May 2009 |
CASE MAY BE CITED AS: | Law Institute of Victoria Ltd v Deputy Commissioner of Taxation No 2 |
MEDIUM NEUTRAL CITATION: | [2009] VSC 179 |
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PRACTICE AND PROCEDURE – Public interest immunity – Whether documents held by Law Institute of Victoria attract public interest immunity – Costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Riordan SC and Mr J Tracey | Joseph Barravecchio |
| For the Defendant | Mr P J Hanks QC and Ms F McKenzie | Australian Government Solicitor |
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HIS HONOUR:
The Law Institute of Victoria Limited (“LIV”) has sought a declaration that it is not required to comply with a notice dated 15 September 2008 (“the Notice”) given by the Deputy Commissioner of Taxation (“the Commissioner”) under s 264(1)(b) of the Income Tax Assessment Act 1936 (Cth) (“the 1936 Act”). The LIV seeks the declaration on the basis that the documents sought pursuant to the Notice attract the doctrine of public interest immunity. On 27 February 2009 I declined to make the orders sought by the LIV on the case as it had been put to that date and relisted the proceeding for further hearing upon such further evidence and submissions that the parties wished to rely upon in respect of the particular documents. I had indicated to the parties that I had intended to refer the proceeding to an Associate Justice to inspect the documents in dispute and to rule upon them individually in accordance with my published decision. The parties, however, requested that I undertake the task of determining whether the documents attract the doctrine of public interest immunity rather than to refer the matter to an Associate Justice.
The proceeding was, therefore, relisted before me on 28 April 2009. At that hearing the LIV relied upon a further affidavit of Mr Barravecchio dated 13 March 2009. The Commissioner relied upon two affidavits of a Mr Cheetham, the first dated 27 March 2009 and the second dated 27 April 2009. One of the exhibits to the affidavit of Mr Barravecchio was a letter (curiously described in his affidavit as a “proposed letter”) to my associate which enclosed a copy of the documents over which public interest immunity was claimed. The copies of the documents appear to contain original markings which counsel for the LIV explained had been made by his instructor in the expectation that the markings might be of assistance. The original, and unmarked, documents in dispute ought to have been filed rather than copies of them. In any event where copies are filed rather than originals it is generally undesirable for anything other than an exact copy, wholly unmarked or interfered with, to be filed in Court when determining claims such as the present. Having the original documents will ensure that there be no doubt about what will be disclosed or withheld from disclosure. It might be, for instance, that a document in its original form is printed on both sides but has been copied as two separate pages. It is possible that the process of copying itself might be incomplete or defective. Where, however, copies of documents are tendered in lieu of the originals, it is essential that they be a faithful reproduction of the originals without notation, annotation, or alteration, however apparently insignificant or apparently unimportant. In this case I am assured that the copies available to me are a faithful and accurate reproduction of the originals in all respects except for the handwritten numbering for identification appearing on the top right hand page and, I assume, the fact that some documents may in their original form be double-sided.
I had also indicated to the parties before the final hearing that I would entertain a request by the legal practitioners for the Commissioner for them to see each document which the LIV had filed with the Court to permit meaningful submissions on behalf of the Commissioner provided that suitable confidentiality undertakings had been agreed to between the parties by which the Commissioner’s legal advisers undertook (with their client’s authority) not to reveal the documents or their content to their client. No undertaking had been filed with the Court before the hearing on 28 April 2009. At the hearing I asked about the confidentiality undertakings and was shown a signed confidentiality undertaking by which the legal advisers to the Commissioner undertook “to the plaintiff” certain matters. No undertaking of any kind was proffered to the Court. It is not necessary for me to decide whether confidentiality undertakings given to the LIV are appropriate or sufficient in circumstances such as the present. Counsel for the Commissioner did not seek to see any document for the purpose of making particular submissions. However, I should express my tentative view that the nature of public interest immunity is such that it is preferable, if not essential, that confidentiality undertakings of the kind proffered to the LIV should be proffered to the Court and not only (if at all) to the person claiming the immunity.
The first category of documents sought by the Commissioner in the Notice are of the records showing the history of Mr Kephala’s practise in Victoria, including dates on which he held a practising certificate and the nature of the certificate such as whether he was the principal or an employee. The documents of the LIV said to fall within this description and over which it claimed public interest immunity were produced to me as “Schedule 1” of the documents provided by Mr Barravecchio and numbered 1A to 89A.
No attempt was made by the LIV to maintain public interest immunity over any one document by reference to the particular information it contained. Its submission before me was, in effect, the same as that which had been put for all of the documents at the hearing on 12 February 2009 and which I had previously rejected on 26 February 2009.[1] All that was said about this class of documents on behalf of the LIV was that the documents were created by the LIV’s officers, agents or employees, in connection with its role under the Legal Practice Act 2004 (Vic) (or its predecessor) to issue, refuse, vary, cancel or suspend solicitors’ practising certificates. The documents were submitted to be ones which “commonly deal with matters such as practising certificate conditions, Fidelity Fund contributions, professional indemnity insurance, practising certificate fees and some general compliance issues”. The submissions for the LIV went on to say that other documents in this group were related to Mr Kephala’s membership of the LIV and that all “have remained in the LIV’s custody to assist it in carrying out the relevant delegation to it made by the Legal Services Board pursuant to s 6.3.12 of the 2004 Act”. No one document was identified on behalf of the LIV as requiring specific protection in any way. No single piece of information in any of the documents in this category was identified by the LIV as in any way needing to be protected from disclosure beyond its repeated submission which I had previously rejected, namely, the submission to the effect that all documents in its possession which were acquired pursuant to its statutory function necessarily attracted the immunity.
[1]Law Institute of Victoria v Deputy Commissioner of Taxation [2009] VSC 55.
The documents held by the LIV said to be referrable to the first category sought on behalf of the Commissioner are largely of a mundane kind in respect of which I cannot see any basis to attract public interest immunity from disclosure. The very first document, indeed, is a photocopy of a certificate issued pursuant to s 7.2.5(1) of the Legal Practice Act 2004 being a copy, I presume, of the very certificate which Mr Kephala was probably required to maintain on public view at the place from which he conducted practise. The group of documents included such other mundane pieces of information as printed notifications by Mr Kephala of changes of address. It is clear from the copy of these documents that they are merely examples of a document which Mr Kephala may well have sent to a great number of people who may have been interested to know of his then change of address, and on their face contain no information of a kind that could probably not be found by the Commissioner by consulting a public telephone book for the relevant dates. Documents of this kind include a number of completed changes of address forms sent by Mr Kephala to the LIV on a form apparently attached to the Law Institute Journal. Such documents (of which there are more than one) would appear on their face to have been received by the LIV for the purpose of ensuring a redirection of mail for receipt by him of the Law Institute Journal rather than for any regulatory function of this kind described in the LIV’s submissions. However, for present purposes I will assume that I am wrong in this assumption and that even such documents were retained by the LIV for its important statutory function of regulating the legal profession in the public interest. Even so, nothing in the document, nor the document itself, nor in anything in any of Mr Barravecchio’s affidavits, nor in the LIV’s submissions, establishes that they require protection from disclosure so as to attract public interest immunity.
No doubt part of the problem for the LIV is the patently broad description adopted by the Commissioner to describe the documents sought in the exercise of his statutory power. A failure by a recipient to comply with a notice under s 264 carries with it a substantial jeopardy of sanction. The law has long been established that the Commissioner may use his statutory powers of investigation to undertake what are frequently described as “fishing” enquiries. The existence of the power, and its breadth extending to fishing enquiries, does not absolve the Commissioner from an obligation to exercise the powers wisely and responsibly. The description adopted by the Commissioner for the first category of documents is broad and of its nature potentially cast upon the recipient of the Notice a burden which is disproportionate to the likely benefit to the Commissioner by the LIV’s compliance. The two affidavits filed by Mr Cheetham on behalf of the Commissioner make no attempt to indicate that the information sought by the first category could not be obtained from other sources. Mr Cheetham’s first affidavit does little to “assist” the Court in the task of having to balance competing policies beyond expressing his view that the documents sought “are likely to make a unique contribution to the audit” into Mr Kephala’s business and financial affairs; no explanation of that assertion is given. His second affidavit goes little further by saying that he had reviewed the information in the Commissioner’s audit files and on the basis of his review of the list of documents provided by the LIV had formed an opinion that it was “distinctly possible” that the information contained in the documents held by the LIV might be of some assistance in the audit. No further assistance was given to the Court by Mr Cheetham or by submissions for the Commissioner and no attempt was made to explain why it was a responsible exercise of statutory power by the Commissioner to cast upon another regulatory authority a burden to provide documents by reference to such broad descriptions in the exercise of a statutory power which carried with it potential sanction upon the other regulatory authority for failure to comply. A consequence of a broad description by the Commissioner is inevitably that he will be requiring more than is likely to be of assistance to his investigation, that he will put a burden upon independent regulators which might not be justifiable as a matter of proper administration, and which may unnecessarily expose other regulators to the risk of sanction.
In any event, whatever my misgivings about the Commissioner’s exercise of statutory power in the way in which it has occurred, no objection to the Notice was made by the LIV on the grounds of invalidity or excess of power. For present purposes, therefore, my task is to assume that all of the documents in Schedule 1 fit the description in the first category of the Commissioner’s Notice under s 264 and that all documents should be made available unless any one of them attracts the doctrine of public interest immunity. I have read carefully each of the documents and none in Schedule 1 attract the doctrine of public interest immunity. In saying that I should add that there are several documents which contain the names of other solicitors as well as that of Mr Kephala. Document 24A is one such example where Mr Kephala’s name appears in a document listing solicitors who had been audited by a particular auditor. It is conceivable that this, and other documents like it, might have qualified for the immunity if evidence had been submitted on behalf of the LIV concerning the particular information it contained. No such evidence was led and, as was explained by senior counsel from the bar table, evidence was in large part unavailable because of the length of time that had transpired between the creation of the document and the date of hearing. There was no evidence led about any steps taken by the LIV to make enquiries of those mentioned in the documents, nor of any steps undertaken by the LIV to inform third parties who might potentially be affected by disclosure of their names to the Commissioner of Taxation. I express no view about the propriety of the LIV not notifying the parties affected by the potential disclosure which receipt of the s 264 Notice, and this proceeding, exposed them.[2] I conclude only that on the basis of the material before me I see no foundation for public interest immunity applying to any of the documents in Schedule 1 in accordance with the principles I outlined in my earlier decision in this matter.
[2]The LIV’s conduct may be contrasted with that of the recipient of a Notice in Federal Commissioner of Taxation v Coombes (No 2) (1998) 160 ALR 456 who did notify the parties whose privilege might be lost by disclosure.
The second category of documents sought in the Notice are in a different position. The second category of documents sought by the Commissioner are all records of any audit conducted in respect of Mr Kephala’s trust accounts and the errors/discrepancies revealed. The LIV has identified 35 documents falling within this category which have been filed with the Court as Schedule 2 in a confidential exhibit and marked 1B to 35B. All of these documents were produced as part of the LIV discharging its statutory function of regulating the legal profession. All of these documents came into existence in the expectation that they would be kept confidential. None of the documents were prepared in contemplation that they might be made available to the Commissioner or might in some way bear upon or affect Mr Kephala’s taxable income. Many of the documents contain conclusions and opinions from source documents which may readily be available to the Commissioner directly from others. The opinions and conclusions in the documents in Schedule 2 were expressed and drawn for the statutory function exercised by the LIV and not for the quite different function to be exercised by the Commissioner.
The disclosure of the information and content of these documents does interfere with, and potentially damages, the discharge of the duties and functions by the LIV in the regulation of the legal profession. The considerations arising in the preparation of an audit for the LIV in the context of its statutory duty and function to regulate the legal profession are different from those arising in an audit to determine the taxable income of a solicitor from his or her practise. The disclosure to the Commissioner of documents prepared in the discharge of the LIV’s duties and functions carry with it the risk that the discharge of the LIV’s function needs to take into consideration the potential impact on matters otherwise, and properly, wholly extraneous to the LIV’s statutory task. There may be circumstances when it would nonetheless be proper for disclosure to the Commissioner of documents created by or for the LIV in the exercise of its statutory duty and function. However, I do not consider this to be one such case. The reports themselves are all based upon other material. The conclusions drawn by the auditors are conclusions and opinions by the auditors for the LIV’s statutory task and do not establish anything independently of the source documents beyond opinions or conclusions wholly drawn for the LIV’s statutory function. These documents contain no more information than the Commissioner could create himself by undertaking the task of having someone analyse source documents. The Commissioner has not sought to rely upon any material in support of disclosure of these documents beyond a power to require the documents, the existence of an audit and the possibility that these documents might be of assistance. He has not sought to assist the Court by indicating (either in an open affidavit or by some confidential affidavit or exhibit) what source information is currently available to the Commissioner, what steps have been taken by the Commissioner to obtain the source information, or whether the need to secure the conclusions drawn from these documents are more likely to assist the Commissioner than for the Commissioner to draw his own conclusions and himself undertake the work which the LIV’s auditors have done. In short, no material has been put before me on behalf of the Commissioner beyond an assertion of power, the existence of an audit, and the possibility that disclosure of the documents might be of assistance, from which I should conclude that the balance of competing interests favours disclosure of these documents to the Commissioner. In my opinion the balance I must strike in this case favours the preservation of them from disclosure. To disclose these documents, in the absence of anything tipping the balance in favour of the Commissioner, adversely interferes and affects the public policy evident in the acquisition of the documents by the LIV with an obligation to keep them confidentially.
Some of the documents in this category were supplied to the LIV by Mr Kephala. I assume that, for example, copies of correspondence between Mr Kephala and the LIV are available to the Commissioner from Mr Kephala. None of the affidavit material relied upon by the Commissioner has indicated any difficulty in obtaining any such information from Mr Kephala. Requiring the LIV to provide documents which the Commissioner can, I assume, readily obtain directly from Mr Kephala potentially interferes and damages the proper workings of the LIV in the discharge of its functions and duties. A different conclusion might be required if the Commissioner had been frustrated in his attempts to obtain material shown to be probative, or likely to be probative, for his statutory task and which could only be obtained from the LIV. This is not such a case. It may be that the Commissioner is entitled to undertake fishing enquiries but when such fishing expeditions are undertaken in waters attracting public interest immunity it is, in my view, not enough for the Commissioner to rely only upon power, the fact of an enquiry and the possibility that there might be fish in the pond, to tip the balance of the competing public interests in his favour.
The third category of documents sought by the Notice are all records in respect of the cessation of Mr Kephala’s registration as a practising lawyer, including documents stating Mr Kephala’s election not to renew his practising certificate, or notification of his ineligibility, or notification of the requirement for investigations to be conducted before it could be renewed. The LIV has identified 16 documents said to fit this category and Mr Barravecchio has identified them as Schedule 3 in his confidential exhibit and numbered them from 1C to 16C.
Many of the remarks and reservations I expressed concerning the description and circumstances of the first category of documents sought by the Commissioner are applicable to this category as well. The LIV sought only to rely upon the information in two of the documents as justifying a claim of public interest immunity beyond its general contention that all of the documents in its possession attracted the doctrine by reason of the circumstances by which the LIV came to hold them. The two documents in question were those numbered 1C and 2C and the particular information said to attract the immunity was the record of complaints against Mr Kephala. In particular the documents identified the name of the complainants. In that regard it was said on behalf of the LIV that the names of complainants attracted the privilege in the same way as the courts in other cases have sometimes protected from disclosure the identity of “whistleblowers”. I am unable to accept that submission in respect of these documents. It may be that the LIV received the complaints pursuant to its obligation not to reveal the fact of complaints other than in pursuance to its statutory duties. However, there is nothing in any of the materials to indicate that the complainant was relevantly a “whistleblower” in the sense that the complainant was making a complaint on the basis of the identity being kept confidential. The cases protecting the identity of whistleblowers focus upon the risk to the whistleblower in determining whether the identity needs to be kept confidential. Nothing in the material on its face indicates that either of the two complainants identified in documents 1C and 2C respectively had made the complaint on the basis that their identity be kept confidential. Nothing in any of the other material filed in the proceeding indicated that the LIV had undertaken at any stage between the receipt of the Notice by the LIV and the hearing before me even the simple task of ringing (or even attempting to ring) the people concerned to inform them of the possibility that their identity might be revealed to the Commissioner. One would have thought it a relatively simple step for the LIV to ring the two complainants and ask whether they had any objection to their identity being revealed to the Commissioner, or to have asked whether either had only made the complaints upon the basis of their identity being kept confidential, and then to have put that response (if any) in an affidavit in the proceeding before me. Indeed, I find it surprising that the LIV had apparently undertaken no steps to ascertain the attitude of the persons whose identity were in these proceedings sought to be protected.[3]
[3]Federal Commissioner of Taxation v Coombes (No 2) (1998) 160 ALR 456.
Some of the documents which the LIV has identified as falling within the third category of documents sought by the Commissioner seem to me not to fall within the third class sought by the Notice but, rather, to fall within the second category. Documents numbered 4C, 8C and 10C appear to be of that character. For present purposes, however, I will assume that the LIV is correct in its inclusion of all documents in Schedule 3 as falling within the third category sought by the Commissioner in the Notice. None contain information of a kind which in my view can attract the doctrine of public interest immunity.
Accordingly, I will declare that the documents in Schedule B annexed to the letter from Mr Barravecchio forming part of the confidential exhibit filed in the Court are covered by public interest immunity but that otherwise none of the other documents attract the doctrine.
The next matter to consider is what order I should make about the costs of the proceeding. Each party filed detailed written submissions concerning the costs orders I should make. The ordinary rule is that costs follow “the event”.[4] In this proceeding there is, however, some difficulty about determining what “the event” is by reference to which costs might be awarded. Both parties failed in the primary submissions they were maintaining prior to commencement of the proceeding. I rejected the LIV’s claim that it was entitled to prevent disclosure by reason merely of the circumstances by which it came to hold the documents. Similarly I rejected the Commissioner’s contention that the issue between the parties was to be determined by reference to the operation of s 109 of the Constitution. I put to one side my misgivings about the conduct of the parties in a dispute that some might consider an indefensible waste of public resources. The fact is that neither party succeeded in the contention they put nor did either wholly fail. In those circumstances it seems to me that the appropriate order for costs is that each party pays their own.
[4]Ritter v Godfrey [1920] 2KB 47; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 809, 811 (Viscount Cave L.C.).
Accordingly, I make the following orders:
(1)That the documents in Schedules 1 and 3 in the confidential exhibit of Mr Barravecchio do not attract the doctrine of public interest immunity for the purposes of any disclosure by the LIV to the Commissioner.
(2)That the documents in Schedule 2 of the affidavit of Mr Barravecchio in the confidential exhibit are immune from disclosure by reason of public interest immunity.
(3)Each party pays their own costs of and incidental to this proceeding.
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