O'Reilly and Ors. v. Commissioner of the State Bank of Victoria and Ors.

Judges: Gibbs CJ
Mason J
Murphy J

Wilson J

Court:
High Court of Australia

Judgment date: Judgment handed down 16 December 1982.

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Wilson J.

This case seeks the opinion of the Court upon a series of questions numbered one to eight. They relate to three distinct issues touching the operation of sec. 263 and 264 of the Income Tax Assessment Act 1936 (Cth.) as amended (``the Act''), namely,

• (1) the question of ``access'' pursuant to sec. 263;
• (2) the validity of the notices issued in purported pursuance of sec. 264;
• (3) whether the obligation to respond to a sec. 264 notice is affected by legal professional privilege or the contractual duty of confidence.

The first and second questions relate solely to the question of access. Questions 3-6 inclusive are concerned with the validity of the notices and questions 7 and 8 with the issue of privilege and confidentiality.

At this stage, it is proposed to deliver judgment with respect only to the second and third issues. That part of the stated case which deals with the question of access will stand reserved.

1. The validity of the notices

Mr. Lawson and Mr. Perry each received a notice under sec. 264 of the Act. So far as is material to the questions requiring to be answered the notices are identical. The body of the notice addressed to Mr. Lawson, so far as material, read as follows:

``TAKE NOTICE that in the exercise of the powers and functions conferred upon me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953, I, ERIC JOHN UNGER, do by this notice REQUIRE YOU... TO ATTEND at... and give evidence before Edward Henry Cornell (an officer of the Australian Taxation Office, who is authorized in that behalf) concerning your income and assessments... and in connection therewith I DO FURTHER HEREBY REQUIRE YOU TO PRODUCE at the same place and time the following books, documents and papers...''

At the foot of each notice there appeared a facsimile of the signature of the Deputy Commissioner. That facsimile had been imprinted on each notice by one Kevin Holland who then occupied the position of Chief Investigation Officer in the Australian Taxation Office. At the time of the preparation and delivery of the notices the Deputy Commissioner had no personal knowledge that such action was proposed or undertaken. In executing each notice Mr. Holland was acting in accordance with a general authorization which the Deputy Commissioner had signed some months earlier. That authorization was in general terms, and purported to authorized him, for the purposes of sec. 264 of the Act, to exercise a power and function, inter alia, as follows:

``Authorize issue of notices other than notices requiring the giving of information or evidence on oath.

Imprint facsimile of my signature upon such notices.''

The same document purported also to authorize Mr. Cornell, inter alia, to ``Examine addressees and receive evidence, books, documents and papers''.

Mr. Lawson and Mr. Perry contend that these notices are ineffective. Two submissions are advanced in support of that contention. The first is that the general authorization amounted to a sub-delegation, and consequently offended the principle embodied in the maxim delegatus non potest delegare . The second is that in any event Mr. Cornell was not validly authorized to receive the evidence and documents. The proper construction of sec. 264(1)(b) requires, so it is said, that there be a specific authority conferred on the examiner on each occasion

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ATC 4685

on which the power conferred by the section is exercised; consequently the general authority of Mr. Cornell is ineffective for the purpose, and the notices themselves did not invest him with the requisite authority. This second submission may be readily disposed of. If the notices are effective in imposing a requirement on Mr. Lawson and Mr. Perry, then it seems to me that each notice was also effective in authorizing Mr. Cornell to act in the stated way, and it is therefore unnecessary for the plaintiffs to establish that the general authorization was effective. Mr. Castan, counsel for Mr. Lawson, argues that the notices do not make it clear that each notice itself constituted an authorization of Mr. Cornell, pointing to the absence therein of the word ``hereby'' in the parenthetical reference to him. It comes down to a simple question of the construction of the notices. Provided that the notices were good in themselves, I have no difficulty in finding in them a sufficient authorization of Mr. Cornell to satisfy the terms of sec. 264.

The difficult question is whether the notices were a valid exercise by the Deputy Commissioner of the power which sec. 264 vests in the Commissioner. It is common ground that the Commissioner has validly delegated the exercise of that power to the Deputy Commissioner. That delegation was made pursuant to sec. 8 of the Taxation Administration Act 1953 (Cth.) as amended. So far as relevant, that section provides as follows:

``(1) The Commissioner of Taxation may, in relation to a matter or class of matters, or in relation to a State or part of the Commonwealth, by writing under his hand, delegate to a Deputy Commissioner of Taxation or other person all or any of his powers or functions under this Act or an Act which is an Act with respect to taxation (except this power of delegation).

(2) A power or function so delegated may be exercised or performed by the delegate with respect to the matter or to the matters included in the class of matters, or with respect to the State or part of the Commonwealth, specified in the instrument of delegation.''

The plaintiffs do not contend that the Deputy Commissioner can validly sub-delegate his powers under sec. 264 to Mr. Holland. They submit that he has not attempted to do so. There has been no transfer to Mr. Holland of any power vested in the Deputy Commissioner. The power which Mr. Holland has been authorized to exercise remains a power delegated to the Deputy Commissioner; it can be exercised only in his name and on his behalf.

It seems to me that a clear distinction is to be drawn between the delegation of a power and the exercise of that power through servants or agents: see the informative discussion by Brennan J. in
Re Reference under Ombudsman Act sec. 11 (1979) 2 A.L.D. 86 at pp. 93-95 . In
Carltona Ltd. v. Commrs. of Works (1943) 2 All E.R. 560 Lord Greene M.R. described, in words which have become well known, the necessity in modern government for the shared performance of duties short of delegation. He said (at p. 563):

``It cannot be supposed that this regulation meant that, in each case, the minister in person should direct his mind to the matter. The duties imposed upon ministers and the powers given to ministers are normally exercised under the authority of the ministers by responsible officials of the department. Public business could not be carried on if that were not the case. Constitutionally, the decision of such an official is, of course, the decision of the minister. The minister is responsible.''

Denning L.J. (as he then was) made the same point in (
Metropolitan Borough and Town Clerk of Lewisham v. Roberts (1949) 2 K.B. 608 at p. 621 , when he said:

``Now I take it to be quite plain that when a minister is entrusted with administrative, as distinct from legislative, functions he is entitled to act by any authorized official of his department. The minister is not bound to give his mind to the matter personally. That is implicit in the modern machinery of government: see
Carltona Ltd. v. Commrs. of Works (1943) 2 All E.R. 560 , and an article by Professor Willis in 21 Canadian Bar Review, at p. 257.''

Cf. also
R.V. Skinner (1968) 2 Q.B. 700 ; In re Golden Chemical Products (1976) Ch. 300.

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ATC 4686

The defendants make two submissions in answer to the plaintiffs. They would dismiss the English authorities to which I have referred as dealing with the relationship of Ministers of the Crown to their departments. It is true that the emphasis in the cases is primarily expressed in that way. Yet I find the logic of the principle equally persuasive in its application to the head of any large Government department, and, a fortiori, to a Deputy Commissioner of Taxation responsible within a State for the implementation of the Commonwealth's laws with respect to taxation. No permanent head of a department in the Public Service is expected to discharge personally all the duties which are performed in his name and for which he is accountable to the responsible Minister. I share the view expressed by Sachs J. in
Commrs. of Customs and Excise v. Cure & Deeley Ltd. (1962) 1 Q.B. 340 , at p. 371 :

``The commissioners are in a position parallel to that of the Ministers referred to in the judgment of Lord Greene in the Carltona case, (1943) 2 All E.R. 560, 563, in that their functions are so multifarious that they could never personally attend to them all, and the powers given to them are normally exercised under their authority by responsible officials of the department.''

However, the defendants further argue that the existence of the power to delegate (sec. 8, Taxation Administration Act ) makes it unnecessary to resort to the Carltona principle, with the result that a formal delegation to Mr. Holland was necessary to empower him to issue the notices. I note that in the advisory opinion of the Administrative Appeals Tribunal on the reference under the Ombudsman Act to which I have referred, Brennan J. said, at p. 94, when discussing the possibility that a person may be both a delegate of a power and a servant exercising the like power on behalf of another:

``Is a dual character consistent with the statutory scheme for reviewing determinations under sec. 14 of the Social Services Act? I think not. The practical administrative necessity which warrants an authority's exercising his power by the acts of another disappears when the authority is empowered to delegate all of his powers and functions to that other.''

That observation is, of course, to be understood in the context of the examination which his Honour was making of the Social Services Act 1947 (Cth.) as amended. In any event, the statement which I have cited can afford no analogy to the present case, because here the Deputy Commissioner, himself a delegate, has no power to delegate his power to Mr. Holland. The question is whether the existence of the power of delegation requires that the Commissioner or his delegate must direct his mind personally to the exercise of every power or function vested in him. Stated in that way, in my opinion, the question admits only of one answer. The practical administrative necessity to allow a Deputy Commissioner to exercise the powers delegated to him by the actions of officers authorized by him is evident. The opposing argument would oblige the Commissioner himself to delegate his powers, not only to the Deputy Commissioners, but to a host of departmental officers throughout Australia, rendering each of them a Commissioner in his own right. It would be wholly destructive of any semblance of administrative order and efficiency.

Nor does the plaintiffs' argument have the result that sec. 8 of the Taxation Administration Act is otiose, in that there is no need for a power of delegation. There is every need for such a power, in the interests of administrative efficiency and a sensible devolution of power and responsibility throughout Australia. Without the power of delegation, every act performed by departmental officers throughout Australia would be in law the act of the Commissioner, for which he would be responsible. By delegating substantially all of his powers and functions to Deputy Commissioners he transfers the power base to the geographic regions of the country, allowing the Department to operate in each of the States more or less as a separate administrative unit, with the Deputy Commissioner as its head. Without a power of delegation, this decentralisation would be impossible.

Each of the notices which are under challenge is expressed to be an exercise by the Deputy Commissioner of the power under sec. 264 which was duly delegated to him. Each notice bears his signature. In my opinion each notice is what it purports to be.

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ATC 4687

In resolving to issue the notice, Mr. Holland was acting for the Deputy Commissioner, in exercise of an authority duly vested in him. His action was the action of the Deputy Commissioner, notwithstanding that the latter had no personal knowledge of it.

2. Legal professional privilege and the duty of confidence

Mr. Perry is a solicitor, and acts in that capacity for Mr. Lawson and the other persons named in his notice. The sec. 264 notice which was served on him referred to evidence and documents received or created by him in confidence whilst acting for the persons named solely for the purpose of tendering professional legal advice and assistance to them. Some of the material related to existing or contemplated litigation to which the Commissioner is not and will not be a party, while other material did not relate to any litigation at all. The substantial question to be determined in this part of the case is whether the obligation imposed on Mr. Perry by sec. 264 overrides (a) the contractual duty of confidence and (b) the clients' privilege in respect of professional legal communications with Mr. Perry.

Notwithstanding the importance of the question, I believe that it can be answered quite shortly. The first task is to identify the context in which the issue of privilege becomes relevant. Is that context supplied solely by judicial or quasi-judicial proceedings? The notice now under consideration obliges Mr. Perry to attend and give evidence and to produce documents. He is not obliged to give the evidence upon oath, but the characterisation of the proceeding is not affected by that circumstance. It is properly described, not as a judicial or quasi-judicial proceeding but as an administrative inquiry. If legal professional privilege is relevant only to the former type of proceeding, then Mr. Perry cannot raise the privilege in answer to the sec. 264 notice, and he is left only with such protection, if any, as his duty of confidence to his client will provide. It will not become necessary to consider whether sec. 264 overrides the privilege, a question involving the application of the established principle that ``where an affirmative statute is open to two constructions, that construction ought to be preferred which is consonant with the common law'':
R. v. Salisbury (Bishop of) (1901) 1 K.B. 573 , per Wills J. at p. 577.

In my opinion, the law was stated correctly by Diplock L.J. (as he then was) in the Court of Appeal in
Parry-Jones v. Law Society (1969) 1 Ch. 1 at p. 9 , when he said:

``So far as Mr. Parry-Jones' point as to privilege is concerned, privilege, of course, is irrelevant when one is not concerned with judicial or quasi-judicial proceedings because, strictly speaking, privilege refers to a right to withhold from a Court, or a tribunal exercising judicial functions, material which would otherwise be admissible in evidence.''

Cf. also
Minter v. Priest (1930) A.C. 558 at p. 579 ; Halsbury's Laws of England (4th ed.) vol. 13, para. 71. The decision in Parry-Jones was followed in the Supreme Court of New South Wales by Bowen C.J. in Eq. (as he then was) in
Brayley v. Wilton (1976) 2 N.S.W.L.R. 495 , and by the Full Court of the Federal Court in
Crowley v. Murphy (1981) 34 A.L.R. 496 . However, in
C. of I.R. v. West Walker (1954) N.Z.L.R. 191 , a strong majority of the New Zealand Court of Appeal came to a different conclusion.

Counsel for Mr. Perry naturally relies heavily on the New Zealand decision. He argues that to restrict the operation of the privilege to legal proceedings would erode the principle, which is one of high public policy. I venture to think that it is not a question of eroding the principle but of defining consistently with authority the circumstances of its application. The principle of public policy was declared by the Earl of Halsbury L.C. in
Bullivant v. A.G. (Vic.) (1901) A.C. 196 at pp. 200-201 in the following terms:

``... for the perfect administration of justice, and for the protection of the confidence which exists between a solicitor and his client, it has been established as a principle of public policy that those confidential communications shall not be subject to production.''

It will be noted that there the principle was enunciated in the context of its application to legal proceedings, as also was the case in the leading authority of
Greenough v. Gaskell (1833) 1 My. & K. 98 ; 39 E.R. 618 , and all

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ATC 4688

the subsequent cases until West-Walker . In Greenough v. Gaskell, Lord Brougham L.C., speaking of the nature of the privilege, said (at pp. 103; 621):

``But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which from the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case.''

In
Grant v. Downs (1976) 135 C.L.R. 674 at p. 685 , Stephen, Mason and Murphy JJ. in a joint judgments stated the rationale of the privilege in these terms:

``The rationale of this head of privilege, according to traditional doctrine, is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor. The existence of the privilege reflects, to the extent to which it is accorded, the paramountcy of this public interest, over a more general public interest, that which requires that in the requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available. As a head of privilege legal professional privilege is so firmly entrenched in the law that it is not to be exorcised by judicial decision. None the less there are powerful considerations which suggest that the privilege should be confined within strict limits.''

With great respect to their Honours who formed the majority in West-Walker, I have concluded that it would be an unwarranted extension of the privilege to hold it capable of protecting the documents in question from disclosure to the Commissioner pursuant to a sec. 264 notice to Mr. Perry. In my opinion the privilege is available to be claimed only in judicial or quasi-judicial proceedings. It cannot therefore be claimed by Mr. Perry on behalf of his clients in the circumstances of this case. Before leaving the case of West-Walker, I would say that I agree, with respect, with the detailed discussion of the decision by Lockhart J. in Crowley v. Murphy (at pp. 518-520); I acknowledge my indebtedness to that passage of his Honour's judgment.

I emphasise that I have been concerned with the question of whether the privilege is available in the circumstances of this case. I have not found it necessary to direct my attention to the question of the range of documents to which the privilege would extend if it was found to apply.

There remains the contractual duty of confidence which Mr. Perry undoubtedly owes to Mr. Lawson. There can be no doubt that such a duty must yield to an inconsistent duty imposed by statute: Parry-Jones at p. 9. In the present case, sec. 264 and 224 of the Act impose such a duty, and there is already the authority of a decision of this Court for the proposition that any contractual duty owed by Mr. Perry to Mr. Lawson and the other persons mentioned in the notice is subject to and overridden by, this statutory duty:
F.C. of T. v. ANZ Banking Group Ltd. & Ors. 79 ATC 4039 ; (1979) 143 C.L.R. 499 ; see also
Smorgon & Ors. v. F.C. of T. & Ors. 76 ATC 4364 ; (1976) 134 C.L.R. 475 .

Counsel for Mr. Perry expressed concern over the possible implications of a conclusion that sec. 264 arms the Commissioner with investigatory powers which override both the contractual duty of confidence and legal professional privilege. As I have said, no such privilege exists other than in the context of disclosure in the course of judicial and quasi-judicial proceedings, and in my opinion it would be an unwarranted extension of the privilege to find otherwise. In any event, it seems to me that any reading down of the powers which sec. 264 vest in the Commissioner could seriously inhibit the investigatory process which is essential to a proper administration of the Act. The provisions of sec. 16 with respect to secrecy must be relied upon to provide some

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ATC 4689

protection, if not consolation, to persons who may be affected by that process.

Conclusion

I would answer the questions set out in the case as follows:

• 3. Yes, in each case.
• 4. Yes.
• 5. Yes, in each case.
• 6. Yes.
• 7. No, in each case.
• 8. Unnecessary to answer.

ORDER

Order that questions three to eight, inclusive, asked by the case stated be answered as follows:

Question 3:

• " Was Schedule D:
  • (a) a notice which was validly and effectively made or brought into existence for the purposes of sec. 264 of the Act?
  • (b) a notice falling within the provisions of sec. 264 of the Act with which Lawson was obliged to comply? "

Answer: Yes, in each case.

Question 4:

• " Was Cornell an officer authorized within the meaning of sec. 264(1)(b) of the Act to receive evidence and books, documents and other papers from Lawson? "

Answer: Yes.

Question 5:

• " Was Schedule F:
  • (a) a notice which was validly and effectively made or brought into existence for the purposes of sec. 264 of the Act?
  • (b) a notice falling within the provisions of the said section with which Perry was obliged to comply? "

Answer: Yes, in each case.

Question 6:

• " Was Cornell an officer authorized within the meaning of sec. 264(1)(b) of the Act to receive from Perry evidence and books, documents and other papers? "

Answer: Yes.

Question 7:

• " Whether in the circumstances and notwithstanding the provisions of sec. 264 of the Act Perry in his capacity as solicitor for the Lawsons is excused in law and if so to what extent from complying with the requirements of Sch. F on the grounds that to do so would result in breach of:
  • (a) the contractual duty of confidence he owed to the Lawsons;
  • (b) the duty which arose by reason of the circumstances referred to and set forth in para. 33;
  • (c) the duty which arose by reason of the circumstances referred to and set forth in para. 34. "

Answer: No, in each case.

Question 8:

• " If yes to any of the questions in para. 7 hereof, is Perry entitled to decide in the first instance whether compliance with the requirements of Sch. F would result in a breach by him of:
  • (a) the contractual duty of confidence he owed to the Lawsons;
  • (b) the duty which arose by reason of the circumstances referred to and set forth in para. 33;
  • (c) the duty which arose by reason of the circumstances referred to and set forth in para. 34. "

Answer: Unnecessary to answer.

Order that the defendants pay the plaintiffs' costs of the issues raised by questions three to eight inclusive of the case stated.