Barnes v Commissioner of Taxation

• Jurisdiction: Australia Federal only
• Judgment Date: 22 August 2007
• Neutral Citation: [2007] FCAFC 88
• Court: Full Federal Court (Australia)

FEDERAL COURT OF AUSTRALIA

Barnes v Commissioner of Taxation [2007] FCAFC 88

LEGAL PROFESSIONAL PRIVILEGE – dominant purpose at time of creation, not communication – copies of documents – insufficiency of evidence of creation – need for focused and specific evidence to ground privilege claim

Evidence Act 1995 (Cth)

Income Tax Assessment Act 1936 (Cth) s 263

AWB Ltd v Cole (2006) 152 FCR 382 cited

Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 considered

Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 considered

DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151 cited

Grant v Downs (1976) 135 CLR 674 considered

Kennedy v Wallace (2004) 142 FCR 185 considered

National Crime Authority v S (1991) 29 FCR 203 cited

National Employers’ Mutual General Insurance Association Ltd v Waind (1979) 141 CLR 648 considered

Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610 cited

JOHN ERIC BARNES AND JUDITH ANGELA BARNES v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

WAD 25 OF 2007

TAMBERLIN, STONE AND SIOPIS JJ

22 AUGUST 2007

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 25 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	JOHN ERIC BARNES AND JUDITH ANGELA BARNES Appellants
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent

JUDGES:	TAMBERLIN, STONE AND SIOPIS JJ
DATE OF ORDER:	22 AUGUST 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The appeal is allowed in part.

2. The orders of Nicholson J of 9 January 2007 are set aside and varied in relation to documents 30-31, 35-43, 47, 51, 53, 56, 58-61, 63-68, 79 and 81 in the schedule, all of which are the subject of legal professional privilege.

3. Otherwise, the appeal is dismissed.

4. The appellants pay 75% of the respondent’s costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 25 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	JOHN ERIC BARNES AND JUDITH ANGELA BARNES Appellants
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent

JUDGES:	TAMBERLIN, STONE AND SIOPIS JJ
DATE:	22 AUGUST 2007
PLACE:	PERTH

REASONS FOR JUDGMENT

THE COURT:

1 This is an appeal from a Judge of the Court dismissing the appellants’ claim for legal professional privilege in respect of documents to which the respondent, the Commissioner of Taxation of the Commonwealth of Australia, sought access pursuant to s 263 of the Income Tax Assessment Act 1936 (Cth). The appellants claim that communications recorded in the documents are privileged because they are documents or copies of documents communicated by the appellants, their servants or agents to their legal advisers for the dominant purpose of seeking and receiving legal advice. The documents in question are the communications set out in the schedule attached to these reasons. Since the filing of the Notice of Appeal in this matter, counsel for the appellants noted that some of the documents are not pressed as being privileged, namely, all of documents 2, 48 and 90, and part of documents 54 and 78.

2 After noting that there was an absence of any analysis of, or specific evidence pertaining to, individual documents over which privilege was being asserted, the primary judge examined each of the documents and ruled against the privilege claim in respect of all of them on the ground that each document provided to him was a copy of another document (the original of which remained in the possession of Mr Calder, the Australian solicitor for the appellants) and thus there was no evidence of the dominant purpose for which these copies were brought into existence: Barnes v Commissioner of Taxation [2007] FCA 3 at [28]-[40].

3 The Notice of Appeal identifies three grounds of appeal. The first contends that the primary judge erred because he addressed the question whether the dominant purpose existed at the time of creation of the relevant document rather than whether the purpose existed at the time each document was communicated. The second ground submits that his Honour erred in finding there was no evidence that any agency arrangement existed between the appellants and various persons and entities with whom they had previous dealings. The final ground of appeal contends the primary judge erred in not finding that the evidence was sufficient to establish that legal professional privilege attached to the documents.

TIME OF CREATION OR COMMUNICATION

4 It is uncontentious that the claims for privilege are to be determined by common law principles and not pursuant to the provisions of the Evidence Act 1995 (Cth) because this case is concerned with an application in the nature of discovery before hearing: see Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 at 59-63 (per Gleeson CJ, Gaudron and Gummow JJ) (“Esso Australia”).

5 As to the first ground of appeal, it is settled legal principle that the relevant time at which a claim for privilege is to be determined is the time when the document came into existence. The relevant question is whether the document came into existence for the dominant purpose of seeking legal advice or assistance. If the document satisfies that description, then it is privileged from production. The same question also applies in relation to copies of documents where the test is whether the copy itself came into existence for the dominant purpose of obtaining legal advice or assistance. These principles are spelt out in a number of decisions, including National Employers’ Mutual General Insurance Association Ltd v Waind (1979) 141 CLR 648 at 654 (per Mason J); Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 508-509 (per Brennan CJ), 543-544 (per Gaudron J); 552-553 (per McHugh J) and 569 (per Gummow J) (“Propend”); and Esso Australia at 65-66 (per Gleeson CJ, Gaudron and Gummow JJ). A recent and helpful resume of the principles of legal professional privilege relevant to the obtaining and recording of legal advice was conducted by Young J in AWB Ltd v Cole (2006) 152 FCR 382 at 405-420.

6 There may be exceptional circumstances where there has been a change of purpose after the creation of the document but prior to its communication which could affect the question of privilege, given that it is the communication between lawyer and client which is protected and not the particular document itself. However, in the present case there is no evidence of such circumstances.

7 The decision in Esso Australia is important because in that case the High Court expressed the test at common law for legal professional privilege as being whether a communication is made or a document is prepared for the dominant purpose of a lawyer providing legal advice or legal services. This altered the earlier prevailing test in Grant v Downs (1976) 135 CLR 674, which required a claimant for privilege to show that the sole purpose of the relevant document was to seek legal advice or services.

8 The courts have recognised that legal advisers, in addition to providing legal advice, may also advise on more general and broader issues concerning the financial and commercial dealings of their clients. Although the courts have taken a pragmatic or realistic approach in circumstances where there is mixed advice given by or sought from a legal adviser, the test for privilege remains whether the dominant purpose of the creation of a document was for the provision of legal advice: see DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151; Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610. If the advice given by a legal adviser is predominately for a financial, personal or commercial purpose, as opposed to a purpose of seeking legal services or assistance, it will not be protected: Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610.

9 In relation to copy documents, Gaudron J in Propend at 543-544 concluded that legal professional privilege attaches to a copy document provided to a lawyer if the copy was made for the purpose of obtaining legal advice or for use in legal proceedings. A similar view was expressed by Gummow J at 571-572, where his Honour directed attention to the circumstances in which the document was brought into existence.

10 Gaudron J, when referring to copy documents and after pointing out that legal professional privilege is not designed to protect documents themselves but rather to protect the communication which takes place between the lawyer and the client, said at 543-544:

‘… a document which is brought into existence solely for the purpose of obtaining legal advice or solely for use in litigation and which is then provided to a lawyer for that purpose is, itself, a communication with the lawyer and … a privileged communication. Equally, a copy of a document made solely for the purpose of obtaining legal advice or solely for use in legal proceedings is, when provided to a lawyer for that purpose, a communication to the lawyer. … The consideration that the provision to a lawyer of a copy document is, itself, a communication different only in form from the oral communication of the contents of the original documents leads me to conclude that privilege attaches to a copy document which is provided to a lawyer if the copy was made solely for the purpose of obtaining legal advice or solely for use in legal proceedings.’ (Emphasis added.)

11 Although the current test is ‘dominant purpose’ rather than ‘sole purpose’, the principles articulated by Gaudron J are applicable to the...