Barnes v Commissioner of Taxation

• Jurisdiction: Australia Federal only
• Judgment Date: 09 January 2007
• Neutral Citation: [2007] FCA 3
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Barnes v Commissioner of Taxation [2007] FCA 3

EVIDENCE – legal professional privilege – communications including documents placed by applicants or their servants and agents with their legal advisors for the purpose of receiving legal advice on tax and financial matters – principles applicable to claim – objections to affidavit evidence – liberty to file supplementary affidavits of servants and agents in relation to hearsay the subject of objection – opportunity not taken – no discharge of onus on applicants to establish the privilege

Evidence Act 1995 (Cth) s 135

Income Tax Assessment Act 1936 (Cth) s 263

Allen Allen and Hemsley v Commissioner of Taxation (1989) 20 FCR 576

AWB Limited v Honourable Terrence Rhoderic Hudson Cole (No 5) [2006] FCA 1234

AWB Limited v Honourable Terrence Rhoderic Hudson Cole [2006] FCA 571

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

Federal Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266

Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404

Grant v Downs (1976) 135 CLR 674

Kennedy v Wallace (2004) 142 FCR 185

Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332

Packer v District Commissioner of Taxation (Qld) [1985] 1 Qd R 275

Waugh v British Railways Board [1980] AC 521

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

WAD 26 OF 2006

NICHOLSON J

9 January 2007

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 26 OF 2006

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

JUDGE:	NICHOLSON J
DATE OF ORDER:	9 january 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The applicants claim of legal professional privilege in respect of the documents in the schedule to the within reasons for judgment be dismissed.

2. The applicants pay the respondent’s costs of the application, including any costs arising from the issue of the writ of summons in the Supreme Court of Western Australia.

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 26 OF 2006

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

JUDGE:	NICHOLSON J
DATE:	9 january 2007
PLACE:	PERTH

REASONS FOR JUDGMENT

1 The applicants seek a declaration that legal professional privilege attaches to certain communications constituted by or disclosed in documents listed in a schedule, to the details of which reference will later be made.

2 The issue arose in the following circumstances. By notice dated 6 June 2005 issued pursuant to s 263 of the Income Tax Assessment Act 1936 (Cth) (the Notice), the respondent sought and was afforded access to all buildings, places, books, documents and other papers related, either directly or indirectly, to inter alia:

(1) Barnes Development Pty Ltd;

(2) Barnes Family Trust;

(3) The first named applicant;

(4) The second named applicant;

(5) Multinational Technical Services Inc;

(6) Pantheon Trust;

(7) Phillip de Figueiredo;

(8) Philip Jepson Egglishaw;

(9) Roker Nominees Limited;

(10) Roker Trustees (Jersey) Limited;

(11) Sanderstead Limited;

(12) Sapphire Superannuation Fund; and

(13) Strachans SA.

When affording the respondent such access the applicants asserted legal professional privilege attached to certain documents.

3 On 6 July 2005, the respondent and the applicants, through their solicitors, entered into an agreement titled ‘Terms of Inspection’ to facilitate access to the documents and to enable the applicants’ claims of legal professional privilege to be asserted and tested. In accordance with that agreement and by a notice dated 22 July 2005, the applicants by their solicitors claimed legal professional privilege in respect of 79 documents identified in a schedule to the notice and set out in a schedule to the amended statement of claim. By a further notice dated 29 July 2005, the applicants by their solicitors claimed legal professional privilege in respect of a further three documents identified in a schedule to that notice and again set out in the schedule to the amended statement of claim.

4 The agreement provided inter alia:

‘…

35. The Commissioner will inspect the lists referred to in clauses 11 and 24 above. … [the Schedules] …

36. If, after doing so, the Commissioner still seeks to access any document or documents in …[the Schedules]… , the Commissioner will give 7 business days written notice to that effect to …[the Applicants] …, specifying such document or documents.

37. At the expiration of those 7 business days …[referred to in clause 36]… the Commissioner will access the documents taken to the premises as described in clause 6 under clauses 6, 10 and 28 but limited to those documents listed in the notice given by the Commissioner under …[clause]… 36 above, and the …[Applicants]… expressly agrees to him doing so and shall be taken to have waived any claim that the documents listed in the notice attract LPP, in whole or part, unless, and save to the extent that, within those 7 business days, the …[Applicants have] … commenced legal proceedings in a competent Court seeking to maintain LPP and serving the originating process on the Commonwealth …’

5 By a letter dated 2 December 2005 the respondent gave written notice to the applicants that he still sought access to all of the documents listed in the schedules to the applicants’ notice. By letter dated 22 December 2005 the applicants claimed legal professional privilege in respect of a further 29 documents identified in the letter and set out as items in the schedule to the amended statement of claim. In January 2006, the respondent agreed to the further 29 documents being included among the documents over which legal professional privilege was claimed in the proceedings, subject to the respondent reserving his right to assert that the privilege in those documents had been waived.

6 The precise claim of privilege made by the applicants was in the following terms:

‘10. All of the communications recorded in, constituted by, or disclosed in, the documents in Schedule 1 are privileged because each of the documents is either:

10.1 a document created by the [applicants] and or their servants, or agents and provided to their solicitors for the sole, and therefore dominant, purpose of seeking and receiving legal advice; or

10.2 a copy document copied and provided by the [applicants] and or their servants or agents to their solicitors for the sole, and therefore dominant, purpose of seeking and receiving legal advice.’

7 When the matter first came on for hearing there were three issues before the Court:

(a) whether any of those documents or the communications they evidence are subject to legal professional privilege;

(b) whether the applicants have waived privilege in relation to the 29 documents or the communications they evidence;

(c) whether the privilege does not attach to those documents or the communications they evidence because they were made in furtherance of a purpose that is contrary to public interest.

The respondent no longer presses issues (b) or (c).

8 The claim of privilege in relation to the access to documents by the Notice under s 263 is to be determined according to the common law, and not Pt 3.10, Div 1 of the Evidence Act 1995 (Cth) since no evidence is, relevantly, sought to be adduced.

Evidentiary issues

9 The only evidence before the Court was brought by the applicants. The documents in question are in evidence. In addition there is an affidavit of the first named applicant made with the authority of the second named applicant.

10 There are objections to the following three paragraphs of the affidavit of the first named applicant:

‘9. All of the documents that came into the possession of Mr Calder and Butcher Paull and Calder were for the purpose of advising my wife and I as to our tax and our legal position respect to tax, and financial matters.

10. I have seen the list of documents referred to in my Statement of Claim. The documents listed in the Statement of Claim are documents of the type referred to in paragraph 8. I claim privilege for those documents.

11. I refer to the Amended Statement of Claim and the Further and Better Particulars of Statement of Claim filed in these proceedings and say that the contents are true and correct to the best of my knowledge, information and belief.’

11 The respondent’s objection to [9] is that it is conclusionary and devoid of any primary facts. His objection to [10] is the second sentence which he claims is also conclusionary. The reference which it makes to [8] is a reference to the following paragraph:

‘8. My wife and I wish to claim legal professional privilege in respect to the documents that we supplied to Mr Calder, his legal notes, and the correspondence passing between Mr Calder, my wife and I, and our other advisers.’

The respondent’s objection to [11] so far as it refers to the amended statement of claim is that it is putting into evidence the conclusion which the claim pleads. So far as that paragraph refers to further and better particulars, the applicants accept that it contains hearsay. In this aspect, it is objectionable as it stands. With reference to its application to the further and better particulars, these identify which of the documents in issue were created by the servants and agents of the applicants and provided to the applicants’ solicitors by their servants or agents. Given that this hearsay objection was capable of remedy by further evidence and given that the hearing of the proceeding was adjourned...