Spassked Pty Ltd v Commissioner of Taxation (No 1)

[2002] FCA 451

FEDERAL COURT OF AUSTRALIA

Spassked Pty Ltd v Commissioner of Taxation (No 1) [2002] FCA 451

PRACTICE AND PROCEDURE – lawyer-client privilege – waiver – whether waiver established – Commissioner produces, in response to notice to produce, a document recording decision to make a determination under s 177F of Income Tax Assessment Act 1936 (Cth), in which signatory officer referred to his reliance on other documents which had been prepared for purpose of obtaining legal advice – whether privilege waived – whether maintenance of privilege unfair because Commissioner was “relying on” the other documents – whether Commissioner was “relying on” those documents at non-evidentiary stage of responding to notice to produce – held not unfair at this stage for privilege to be maintained.

SPASSKED PTY LIMITED (ACN 003 255 847)

v COMMISSIONER OF TAXATION – N 1362 of 1999

STANLEY PARK PTY LIMITED (ACN 008 432 997)
v COMMISSIONER OF TAXATION – N 1363 of 1999

INDUSTRIAL EQUITY LIMITED (ACN 004 617 164)
v COMMISSIONER OF TAXATION – N 1364 of 1999

LINDGREN J
9 APRIL 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY		N 1362 OF 1999
BETWEEN:	SPASSKED PTY LIMITED (ACN 003 255 847) APPLICANT
AND:	COMMISSIONER OF TAXATION RESPONDENT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY		N 1363 OF 1999
BETWEEN:	STANLEY PARK PTY LIMITED (ACN 008 432 997) APPLICANT
AND:	COMMISSIONER OF TAXATION RESPONDENT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY		N 1364 OF 1999
BETWEEN:	INDUSTRIAL EQUITY LIMITED (ACN 004 617 164) APPLICANT
AND:	COMMISSIONER OF TAXATION RESPONDENT

JUDGE:	LINDGREN J
DATE:	9 APRIL 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT (No 1)

1. In each of these three proceedings the applicant gave the respondent Commissioner (“the Commissioner”) a notice to produce documents.  In each notice the documents were described in the same terms as follows:

   “1.All reports, submissions, position papers, diary notes or other documents recommending or recording the making of, or a decision to make, a determination pursuant to section 177F of the Income Tax Assessment Act 1936 (‘Assessment Act’) relied upon by the Respondent in disallowing any deductions claimed by the Applicant in the year of income ended 30 June 1992.

   2.All reports, submissions, position papers, diary notes, directions or other documents taken into account by any officer of the Respondent in the course of any decision to make a determination pursuant to section 177F of the Assessment Act relied upon by the Respondent in disallowing any deductions claimed by the Applicant in the year of income ended 30 June 1992.

   3.All reports, submissions, position papers, diary notes or other documents recommending or recording the decision of the Respondent, to disallow the objection of the Applicant, which is the subject of these proceedings.”

2. In response to the notice to produce in each case the Commissioner produced a document consisting of a single sheet of paper reading as follows:

   “On 20 February 1997 Mr Peter O’Connell prepared a paper for the purpose of obtaining legal opinion to confirm the ATO view on the application of Part IVA of the ITAA to the facts of this matter.

   Having considered the matters discussed in that paper and the attachments thereto it is now proposed to make a determination pursuant to s 177F to cancel the tax benefit arising from the interest deduction of $888,165,526 claimed by Spassked [$44,392,525 claimed by Industrial Equity Limited; $109,360 claimed by Stanley Park] for the year ended 30 June 1992.

   (signed)
   Frank Breen
   Case Manager
   [Date]”

3. In the Spassked matter (N 1362 of 1999) the date on the document was 10 March 1997 and in the Industrial Equity Limited (N 1363 of 1999) and Stanley Park Limited (N 1364 of 1999) matters it was 12 March 1997.

4. The Commissioner relied on affidavits sworn on 8 April 2002 of Peter O’Connell, Janette Farrell and Jillian Saint to establish that the other documents referred to in the notices to produce were the subject of legal professional privilege. 

5. On the hearing, the applicants conceded that the affidavits established that those other documents were privileged, but submitted that the privilege had been waived by the Commissioner.  In support of this submission the applicants referred to Attorney-General v Maurice (1986) 161 CLR 475 at 481 per Gibbs CJ, 487-488 per Mason and Brennan JJ, 492 per Deane J, 497 per Dawson J and Mann v Carnell (1999) 201 CLR 1 at 13 (par [28]).

6. In summary, the submission was that a waiver should be implied in the circumstances, in particular, from the fact that the Commissioner had conducted himself in such a way as to make it unfair that the documents should continue to be shielded from disclosure.  The circumstances are, according to the submission, that the Commissioner is relying on the paper prepared by Peter O’Connell for the purpose of obtaining a legal opinion to confirm the Australian Tax Office’s view on the application of Part IVA of the Income Tax Assessment Act 1936 (Cth) to the facts of the matter (referred to in the document produced) as supporting Mr Breen’s decision to make the determination pursuant to s 177F of that Act. In effect, the submission is that it is unfair that the Commissioner should both rely on Peter O’Connell’s paper and its attachments to support his decision under s 177F and refuse to produce those documents for inspection.

7. I do not think that this submission should be accepted, because, at this stage, the Commissioner is not “relying on” Mr O’Connell’s paper and its attachments.  All that has happened is that a notice to produce has been given and in response a single document (in each proceeding) has been produced.  By producing only that document, the Commissioner was making it clear that his subjective intention was to preserve privilege in respect of Mr O’Connell’s paper for any purpose.  At this stage no unfairness has been shown in the Commissioner’s being allowed to give effect to that intention.  The proceeding is yet to be heard.  The Commissioner has not yet tendered evidence, of which he seeks to take advantage as against the applicants, of his reliance on the contents of Mr O’Connell’s paper and its attachments.  It has not been submitted or conceded that the Commissioner will inevitably be relying on those documents.  The only relevant conduct of the Commissioner at present is (in each proceeding) production of the single document mentioned in response to a coercive notice (O 33 r 12(1) of the Federal Court Rules).  Whether the Commissioner waives the privilege in the future remains to be seen.

8. For the above reasons, the Commissioner’s claim of privilege in respect of the subject documents referred to in the notices to produce is upheld.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated:  16 April 2002

Counsel for the Applicants:	Mr A H Slater QC, Mr P M Fraser, Mr J Hmelnitsky
Solicitor for the Applicants:	Blake Dawson Waldron
Counsel for the Respondents:	Mr D J Fagan SC, Ms M A C Painter
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	9 April 2002
Date of Judgment:	9 April 2002