DUNKEL v DFC of TJudges:
This is an application filed as recently as 11 October last which was brought on this morning as an application for interlocutory relief. It seemed, however, when the evidence had been considered, that the entirely of the evidence necessary to decide the
ATC 4143matter on a final basis was in. I allowed an adjournment until 2.15 this afternoon and the matter has proceeded as a final hearing.
By his application, the applicant seeks two principal orders; namely an injunction restraining the respondent, the Deputy Commissioner of Taxation, from requiring the applicant to attend and give evidence as stipulated in and pursuant to a notice dated 28 September 1990, issued by the respondent pursuant to para. 264(1)(b) of the Income Tax Assessment Act 1936 addressed to the applicant, whilst there are present without the consent of the applicant persons who are not officers duly authorised in that regard pursuant to para. 264(1)(b) of the Act, and a declaration that Mr AH Slater of counsel is not an officer authorised for the purposes of para. 264(1)(b) of the Act.
The dispute arises because of the service on behalf of the Commissioner on the applicant of a notice under the abovementioned paragraph. The notice is in a usual form and says, having referred to the paragraph:
``TAKE NOTICE that in 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, Denis James Cortese do by this notice require you to attend at the Australian Taxation Office, 2nd Floor, 100 Market Street, Sydney on third day of October 1990 at 10 o'clock in the forenoon and give evidence on oath before W. Herbert and/or G. Smith and/or A. Martin and/or P. Walmsley, officers employed in the Australian Taxation Office who I hereby authorise in that behalf, concerning the income or assessment of the entities named in the attached schedule for the periods shown in the attached schedule.''
The notice is signed by Mr Cortese. The notice states the consequences of disobedience to it and the schedule sets out the names of a number of companies and the tax years in respect of which the applicant is likely to be asked questions.
Paragraph 264(1)(b) of the Act provides that the Commissioner may, by notice in writing, require any person, whether a taxpayer or not, including any officer employed in or in connection with any department of government, or by any public authority, to attend and give evidence before him or before any officer authorised by him in that behalf, concerning his or any other person's income or assessment and may require him to produce all books, documents and other papers, whatever, in his custody or under his control relating thereto.
The problem has arisen because, in response to an earlier notice served on the applicant, there was raised on his behalf the question of what might happen in the event that a claim to be entitled not to answer a question on the ground of legal professional privilege was made. The matter was raised in a letter dated 10 September 1990 from Messrs Michael Dunkel and Company Solicitors to the Deputy Commissioner of Taxation. The letter, amongst other things said:
``It occurs to us that your officers may wish to ask Mr Dunkel questions the answers to which may be the subject of legal professional privilege. After all, Mr Dunkel is a solicitor and from time to time during the period referred to in the notice has given legal advice to some of the entities referred to in the accompanying schedule, has prepared documents for the purpose of giving these entities advice and for the purpose of obtaining legal advice from others.
We are also aware that opinions can differ as to whether a question calls for a response which is the subject of legal professional privilege or as to whether a document is so privileged.
In these circumstances, we think it would be desirable if some procedure could be agreed upon to deal with the situation where your officers put a question to Mr Dunkel which is objected to on the ground that the answer is subject to legal professional privilege but where your officers dispute the objection and refuse to withdraw the question. The procedure we have in mind is that all such questions be stood over and that Mr Dunkel's examination be adjourned for sufficient time to enable him:
- (i) to take his client's instructions as to whether privilege is to be maintained. It is, after all, the client's privilege, not Mr Dunkel's, and if the client concerned is
ATC 4144prepared to waive that privilege then, to the extent that Mr Dunkel is able to answer the questions, he has instructed us that he will do so; and
- (ii) insofar as such privilege is maintained by the client, to seek a declaration from the Court that the question calls for a response which is so privileged.
If the Court grants the declaration then the question would be withdrawn. If the Court refuses the declaration then Mr Dunkel's examination will be resumed and he will, to the extent that he is capable of doing so, answer the question.''
Not surprisingly, the Commissioner in his response, which was made in a letter dated 19 September 1990, raised some problems. He said:
``We do not believe that it would be appropriate or practical to allow an adjournment for the purposes of instituting declaratory proceedings about legal professional privilege. The Commissioner proposes to engage counsel to advise him in relation to any claims your counsel may raise. If after consulting counsel the officers conducting the interview conclude that an objection has merit, the question will be withdrawn and there will be no need for you to seek your principal's permission to answer. If the officers conclude the claim was without merit then you will be asked to answer it. Should you refuse, the claim can be tested in proceedings under section 8D of the Taxation Administration Act.''
That is a provision which provides for a prosecution in the event of a witness failing to answer questions asked under the relevant paragraph of the Act.
There was a further letter of 21 September from Messrs Michael Dunkel and Co to which I need not refer, the service of a new notice, that is to say, the notice now under consideration, and a letter dated 9 October 1990, from Messrs Michael Dunkel and Co referring to the new notice. The letter said that the solicitors had been instructed that at the time that Mr Dunkel was served with the notice, he was informed by Mr Herbert of the Commissioner's office, that the Commissioner had retained Mr A.H. Slater of counsel to be present at his examination. This was confirmed that morning by Mr Walmsley in the presence of a Miss Garner. The letter continued: ``We are instructed to inform you that Mr Dunkel objects to giving evidence before any person other than the officers who have been authorised in that behalf and his own legal advisers.''
Notice was given of the likely institution of these proceedings unless an indication that Mr Slater would not be present was forthcoming. It was made clear in a letter dated 10 October 1990, from the Australian Taxation Office, that the undertaking would not be given; hence the institution of these proceedings on 11 October. Affidavits by both Mr Walmsley and Mr Herbert were filed. Mr Herbert said that, having considered the matters raised in the applicant's solicitors' letter of 10 September 1990, he determined, following discussion with Mr Walmsley, that counsel should be available to him in the s. 264 examination of the applicant. The applicant was informed of this in the letter to which I have referred dated 19 September 1990.
Mr Herbert said that as a case manager in the audit branch of the Australian Taxation Office, he had conducted many examinations pursuant to s. 264. He outlined the usual procedure which was followed. Reference was made to the presence of an officer of the Commonwealth Court Reporting Service for the purpose of taking a record of the proceedings, and other information was given of the usual practice, including the practice in relation to objections.
Mr Herbert said that he had had no experience of examinations in which an objection on the ground of legal professional privilege had been made, and further that the sole purpose of having counsel present at the examination of the applicant was to enable him to have immediate legal advice in relation to any claim of legal professional privilege that might be made by the applicant in the course of the examination. He concluded by saying that he wished to have counsel present to give him immediate advice to enable him properly to carry out his duty in conducting the examination.
Mr Walmsley in his affidavit referred to a discussion he had had with Mr Herbert. In that discussion evolved the suggestion that counsel be retained to be present to advise Mr Herbert
ATC 4145in the conduct of the examination on matters associated with legal professional privilege. Mr Walmsley said that in his experience it was not unusual for a person being examined, pursuant to s. 264, to have counsel present at the interview. If the person being examined wished to have counsel present the Commissioner did not object. He said that this policy was public knowledge. Mr Walmsley also indicated an underlying concern within the Australian Taxation Office about the numbers of claims for legal professional privilege which were made and how these, in some circumstances, could become disruptive of the course of the examination.
Counsel for the applicant made two principal submissions. He said that it was the clear implication from the section that the examination was to be held before one of the Commissioner's officers, and not before another person, such as counsel. In my opinion this submission must be rejected because the course which the Commissioner's officers propose does not involve, and will not involve, the examination being held before Mr Slater or any other counsel. The only purpose of Mr Slater being present will be to advise the person who holds the examination, who is apparently to be Mr Herbert, on matters connected with legal professional privilege; he has no other function to perform and it could certainly not be a correct assessment of the proceedings that the examination was being conducted before counsel.
It is true to say, though, that the examination will be conducted in his presence, and that is made the basis of the second submission by counsel for the applicant, which is that the implication from the section is that the examination is to be carried out in private.
I do not have any trouble with that proposition. I think, and counsel for the Commissioner conceded as much, that s. 16 of the Act makes it quite clear that the examination is to be carried out in private. But it is a well-established principle of the construction of statutes of the kind in question here, that a statutory power of such a kind will be construed as impliedly authorising everything which can fairly be regarded as incidental or consequential to the power itself. The doctrine is not applied narrowly. I refer to Wade, Administrative Law, 6th ed., at p. 239,
Attorney-General v. Great Eastern Railway Company (1880) 5 App. Cas. 473, and
The Queen v. Gough & Anor; Ex parte Australasian Meat Industry Employees' Union (1965) 114 C.L.R. 394, particularly per Windeyer J. In relation to the power in question there, which was a power to join an industrial organisation of employers, his Honour said: ``To do so can, I consider, fairly be regarded as incidental to, or consequential upon, the statutory duty or authority to conduct the enterprise...''
More closely related to the present problem are the decision of the House of Lords in
Hearts of Oak Assurance Company Limited v. Attorney-General  A.C. 392 and In
re Gaumont-British Picture Corporation Limited (1940) 1 Ch. 506. In the former case an inspector appointed by the Industrial Assurance Commissioner under s. 17(1) of the Industrial Assurance Act 1923 (U.K.) for the purpose of examining into and reporting on the affairs of an industrial assurance company, was not entitled to conduct the inspection in public. But it was held that this did not prevent him from admitting from time to time any persons, the presence of whom was reasonably necessary to enable him to carry out his duty under the statute. That was the holding of the House of Lords and is reflected in the declaration made by their Lordships in that case.
In the Gaumont-British Picture Corporation case, an inspector had been appointed by the Board of Trade under s. 135 of the Companies Act 1929 (U.K.) to investigate the affairs of the company. It was held that he was entitled to the assistance of any person whom he might reasonably require to be present at the investigation to enable him to prepare his report. One of the questions involved the presence of a shorthand writer to take a note of the proceedings. Crossman J said (p. 512):
``What I have to consider is whether the presence of the shorthand writer is something which is reasonably necessary to enable the inspector properly to carry out his duty under the statute. I come to the conclusion that it is so necessary. The taking of a shorthand note is not for the purpose of publishing the proceedings or doing anything of that kind. It is for the purpose of enabling the inspector to prepare his report. When he comes to prepare his report he wants a record of what has
ATC 4146occurred and the shorthand note is for that purpose. The presence of a shorthand writer for that purpose is, in my view, reasonably necessary to enable the inspector properly to carry out his duty under the statute. In these circumstances it seems to me that there is no more to be said in the matter.''
Earlier at p. 511 his Lordship had referred to the decision of the House of Lords in the Hearts of Oak Assurance case.
It has been put to me by counsel for the applicant that the presence of counsel to advise Mr Herbert, or whoever else conducts the examination, on matters connected with legal professional privilege has not been made out to be something which is reasonably necessary for the conduct of the examination. I disagree with this submission. As the correspondence which passed between the solicitors and the Australian Taxation Office indicated, the questions that arise in relation to legal professional privilege can be difficult and will be extremely difficult for someone such as Mr Herbert who is quite unfamiliar with the law and practice in relation to such questions.
It seems to me, particularly bearing in mind that the applicant himself is likely to be represented by counsel, that it is not only something which the Commissioner is entitled to do, but it is also highly desirable in the public interest that the Commissioner's officer be advised by a competent and responsible counsel. It is only in that way that I think there is a chance that the examination may proceed with a sufficient degree of economy and expedition. I therefore reject the submission which has been made, that the presence of counsel is not necessary or reasonable in the circumstances. On the contrary, I think that the presence of counsel may, as I have indicated, facilitate the proper conduct of the examination.
I think I should not conclude this judgment without saying this. Members of the legal profession, and particularly counsel, who are by their very calling independent of clients and solicitors, are under a duty to assist courts and tribunals before whom they appear and persons who they may be called upon to advise. The duty in relation to lay tribunals is recognised as an onerous one and it is, in some circumstances, professional misconduct for counsel consciously to mislead such a tribunal or to put to it arguments or submissions, and I would add give it advice, which counsel knows to be wrong. Counsel is not under quite the same duty when he or she appears before a judge who is presumed to have a sufficient grasp of legal affairs to be able to resist the sort of submission that one sometimes gets which is far fetched and which has no merit or base. I would hope that the presence of two responsible counsel at this examination - one for the applicant who is to be examined, and the other for the Commissioner - may be something which leads constructively to the expeditious conduct of the examination and the reduction to a minimum of captious objections, not that I am suggesting there would necessarily have been captiousness in any objection that may have been taken, and the facilitation of the dealing with such objections if that becomes necessary.
One of the matters which has been raised on the applicant's behalf is that he may need in some circumstances to consult the clients, whose privilege may be in question. Undoubtedly, in a proper case, it would only be right to allow that opportunity because it is the client's privilege and not the solicitor's privilege that is in question. That may perhaps occasion some delay, but it would be quite unreasonable, as I say in a proper case, not to allow that opportunity to be taken. I do not think there is anything else I can usefully add, except that whilst no one would inhibit the Commissioner in the exercise of the discretion he has in instituting a prosecution, I would hope that if there were genuine disputes about a particular question or a particular line of questioning because of some problem associated with legal professional privilege, that the sensible course would be taken of not insisting on an answer, but allowing time for the matter to be tested in this Court.
In the result however, I have reached the conclusion that this application must be dismissed and I make an order accordingly. The applicant is to pay the respondent's costs of the application.