FC of T v COOMBES (No 2)

Judges:
Heerey J

Court:
Federal Court

Judgment date: 23 December 1998

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Heerey J

The respondent Mr David Coombes is a partner in the legal firm Deacons Graham & James (``the firm''). He specialises in taxation law. By a notice dated 27 February 1998 given under s 264(1)(a) of the Income Tax Assessment Act 1936 (Cth) (``the Act'') the applicant Commissioner of Taxation requested certain information, and in particular the names and addresses of clients who had purchased, implemented or entered into employee share arrangements prepared or marketed by the firm.

It is common ground that s 264(1)(a) is subject to legal professional privilege. However the Commissioner contends that the privilege does not attach to the information sought in the present case. He seeks a declaration to that effect.

Earlier discussions

In mid-October 1997 Ms Sylvana Camilleri of the Australian Taxation office (``ATO'') telephoned Mr Coombes and said that the ATO was undertaking a review of employee share plans and employee benefit trusts. Mr Coombes asked Ms Camilleri that she confirm in writing the nature of the review and the information sought. Ms Camilleri then sent a letter dated 23 October requesting a meeting to discuss, amongst other things, the ``... arrangements that your firm provides to clients nationally...''.

On 26 November Mr Coombes met with Ms Camilleri at an ATO office. Ms Camilleri said that the ATO was undertaking a national review of employee share plans for the 1995, 1996 and 1997 financial years in order to understand how the Act was being used in relation to such arrangements and to determine the impact of those arrangements on revenue.

On 5 December the ATO sent to Mr Coombes a notice under s 264(1)(a) which requested information relating to employee share acquisition arrangements or employee benefit plans which have been prepared or marketed by the firm in the 1995 to 1997 tax years including the names and addresses of clients who had ``purchased, implemented or entered into'', such arrangements.

Mr Coombes replied by a letter dated 15 January 1998 which enclosed a version of a memorandum (``the Memorandum'') used as a basis for advice to clients in relation to share plans and a precedent memorandum and articles of association. I shall return to these documents later.

On 23 January the ATO served a fresh s 264(1)(a) notice. In February it granted two further extensions of time in which to reply to the notices.

Mr Coombes obtained independent legal advice which was to the effect that legal professional privilege arguably applied to the identity of his clients in the circumstances in question and that he should not release the

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names of clients to the ATO without the clients' consent. On 26 February Mr Coombes advised the ATO accordingly and requested an extension of time.

On 27 February the ATO served a third s 264(1)(a) notice. It is this notice with which the present proceeding is concerned.

Subsequently Mr Coombes wrote to his clients advising them of the ATO's request and seeking instructions as to whether they would consent to the release of their identity. By 3 April Mr Coombes was able to provide the requested information to the ATO in relation to clients who had authorised him to release their identity. At the same time he advised that he could not release the names of a number of other clients who had instructed him not to take this course.

The next communication with Mr Coombes was on 15 September when Mr UmbertoTorresi from the Australian Government Solicitor's office telephoned him and advised that he acted on behalf of the ATO and would shortly be serving a Federal Court application.

The s 264(1)(a) notice

Section 264(1)(a) provides:

``The Commissioner may by notice in writing require any person, whether a taxpayer or not,...

• (a) to furnish him with such information as he may require;
• (b)...''

The relevant notice is dated 27 February 1998. It is addressed to Mr Coombes and is under the hand of Mr David E Butler, Deputy Commissioner of Taxation, Small Business Income. By the notice Mr Butler requires Mr Coombes to furnish to him in writing at the ATO's Moonee Ponds office by 3 April 1998 the information described in the schedule for the period 1 July 1994 to 30 June 1997. The schedule relevantly provides:

``SCHEDULE

The following information is requested in relation to any employee share acquisition arrangements or employee benefit plans which have been prepared or marketed by Deacons Graham & James (`the arrangements') in the abovementioned period:

Information:

1. Information of an explanatory nature that has been presented to past, present or prospective clients, including but not limited to, details of the manner in which the arrangements are intended to operate and the perceived benefits of entering into the arrangements.

2....

3. Names and addresses of clients who have purchased, implemented or entered into the arrangements (`employer participant').''

Information is also sought as to the firm's fee structure, the number of ``special purpose companies'' incorporated or acquired by the firm, the names of any trusts involved, the terms of any memoranda and articles of association, the terms of any trust deeds, details as to employer shares and financial details as to subscription monies or share premiums and contributions.

The Memorandum

As already noted, the Memorandum was sent by Mr Coombes to the ATO under cover of a letter dated 15 January 1998. After raising a number of aspects of the s 264 notice which, he said, required clarification Mr Coombes continued, relevantly for present purposes:

``Leaving all of that to one side, I have made an assessment of the information which I believe you are looking for and to assist you, provide the following responses to the `questions' raised in the notice:

• 1. Attached is a copy of the latest version of a memorandum which we have used from time to time as the basis for advice in relation to employee share plan [sic]. This is not to say that this is the only memorandum that has ever been issued. It has in fact been modified over the years and as well as other memoranda have been sent to clients and potential clients. Tracing the various versions of the memorandum is however an almost impossible task.
• ...
• 3. Generally we do not know whether particular arrangements have been implemented. We do know what advice we have given, and to whom, and what documents we have drafted and in many cases that is the extent of our knowledge.

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• ...
• 7. I attach a precedent set of the Memorandum and Articles of Association which we have used on occasions. It will be appreciated that in many cases modifications to the precedent documents have been made but these are our latest versions.
• ...''

(Emphasis in original)

In an affidavit sworn in the present proceeding Mr Coombes deposed as to ``clients of my firm who had sought and received confidential advice'' from the firm with respect to arrangements the subject of the three s 264(1)(a) notices. He said:

``The advice provided to each such client included advice substantially similar to the terms of the Memorandum.''

The Memorandum relevantly provides as follows:

``EMPLOYEE SHARE PLAN

Objectives of the Plan

The plan is designed as an `Employee Share Scheme' which partly falls within the provisions of the Division of 13A of the Income Tax Assessment Act (` Act ').

The plan is designed as an incentive scheme for employees. The incentive is provided through the ability of the employee to save out of pre-tax savings. Namely, amounts contributed to the plan can be invested without first being exposed to tax.

The plan is also designed so that amounts contributed by the employer under the plan will be tax deductible to the employer in the year of income in which the contribution is made.

Plan Structure

The structure of the plan requires the formation of a special purpose company (` ESPCo '). Each employer, or group of employers, would have its own ESPCo for the benefit of its employees. The shares that the employees receive under the `Employee Share Scheme' are shares in ESPCo (and not shares directly in the employer company). ESPCo functions like any other company and is required, for example, to keep accounts and file returns.

ESPCo may receive contributions from the employer (see later for details). If contributions are received, they are invested by ESPCo (see later regarding types of investment). Income derived from the investments after costs and company tax (payable by ESPCo) may be distributed as franked dividends to the employees holding employee shares under the plan. Ultimately, the employees will be entitled to redeem their employee shares and the employee will receive the value of the allocated investments held by ESPCo (see later for details).

Employee Shares

A redeemable preference share of 1c par value is issued to the employee concerned. The employer pays the subscription price on behalf of the employee. The employee's share does not usually entitle the employee at the time of issue to any underlying investment in ESPCo. Under Division 13A, the employee is subject to tax in the year the share is issued to the employee on the amount of the discount on the share, namely 1c.

Employer Contributions

Some time after the employee share is issued to the employee, the employer may make a contribution under the plan. It is important that at the time the employee shares are issued, the employer is not under an obligation to, and there is no understanding that the employer will, make a contribution.

An employer contribution is made by the employer acquiring a specific class of share in ESPCo (` employer shares '). The employer shares have a nominal value of $1.00 with a premium of $999.00. Under the plan, the employer is prohibited from receiving back the premium. As such, the amount of the premium may be claimed by the employer as a tax deduction under s 51(1) of the Act. This deduction is claimed in the year in which the contribution is made. The amount of premium paid on an employer share is effectively allocated to a specified employee.''

(Emphasis in original)

The Memorandum goes on to discuss the amount of contributions by the employer and the need for the employer to establish that the

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amount was ``commercially based''. There is mention of the assessability of contributions, ongoing contributions, allocated investments, types of investments, income on investments, fringe benefits tax, administration and prospectus requirements. Under the heading ``Who Can Participate?'' it is said:

``Any employer or employee may participate in the plan. The plan is particularly attractive for generating loyalty of key employees. If a plan is established by an employer, it is not necessary that all employees participate. The plan is also designed so that varying benefits can be provided to different employees and different conditions to entitlements under the plan can be established for each employee.''

It is said that savings under the plan are not relevant in calculating the employee's reasonable benefit and for superannuation purposes. Finally there is discussion of the issue of shares under an employee share scheme to relatives of the employee.

There is also a pro forma memorandum and articles of association. When I refer to the Memorandum I include these documents.

In par 10 of his defence Mr Coombes says that the Memorandum was used by members of the firm to provide clients with advice, inter alia, pertaining to the arrangements defined in the Schedule to the notice. Mr Coombes was cross-examined as to that paragraph as follows:

``Q. The clients you're there referring to, were they existing clients of the firm?

A. Yes.

Q. I take it that you had the names and addresses of those clients at the time that you provided to them that memorandum of advice in each case. Is that right?

A. Yes, well, I was dealing with those clients at the time.

Q. You knew their names and you knew their addresses?

A. Yes.

Q. None of that information had been provided to you in confidence?

A. I'm not sure that I can answer that.

Q. Mr Coombes, did any one of the clients that you have just referred to ever say to you, `I am providing and communicating to you my name in confidence'?

A. No.

Q. It is the case that to your knowledge, is it not, that one or more of those clients did enter into or carry out the arrangement the subject of the advice?

A. Yes.

Q. And did so with your assistance in each case?

A. Yes.''

Legal professional privilege

A recent authoritative restatement of the doctrine will be found in the judgment of McHugh J in
Commr of Australian Federal Police & Anor v Propend Finance Pty Limited & Ors (1997) 188 CLR 501 at 550:

``Legal professional privilege is the shorthand description for the doctrine that prevents the disclosure of confidential communications between a lawyer and client, confidential communications between a lawyer and third parties when they are made for the benefit of a client, and confidential material that records the work of a lawyer carried out for the benefit of a client unless the client has consented to the disclosure.''

As was emphasised by all members of the High Court in Propend it is the communication of information that attracts the privilege: see per Dawson J at 515-516, per Gaudron J at 543, per Gummow J at 568 and per Kirby J at 585. As Kirby J said in the last-mentioned passage:

``It is not the documents, as such, which attract the privilege, still less the information within them. It is the communication to and by the lawyer.''

Disclosure of client's name and address

A number of authorities consider the application of the privilege in the context of a demand for disclosure of the name and/or address of a lawyer's client. It will be convenient to consider them by jurisdiction.

(i) England

In
Ex parte Campbell. In re Cathcart (1870) 5 Ch App 703 a witness in a bankruptcy examination was asked where the bankrupt's father was residing. The witness, who was the father's solicitor, declined to answer. The Court

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of Appeal rejected this claim for privilege. Sir WM James LJ said (at 705):

``What a solicitor is privileged from disclosing is that which is communicated to him sub sigillo confessionis - this is to say, some fact which the client communicates to the solicitor for the purpose of obtaining the solicitor's professional advice and assistance; the principle being, that such communications ought to be privileged, because otherwise a man would be deterred from fully disclosing his case, so as to obtain proper professional aid in a matter in which he is likely to be thrown into litigation. But a solicitor's knowledge of his client's residence, even though he knows it simply in consequence of the professional business in which he has been acting for him, is not on that ground alone a matter of confession, so as to be in the nature of a privileged or confidential communication.''

In
Bursill v Tanner (1885) 16 QBD 1 judgment had been signed in an action against a married woman and an enquiry was directed before a Master as to whether she was possessed of any separate estate. The solicitor to the trustees of her marriage settlement was subpoenaed by the judgment creditor. The solicitor stated that the deed of settlement was in his possession as solicitor to the trustees but he refused to state the names of the trustees or produce the deeds on the ground of professional privilege. The Court of Appeal upheld the Master's rejection of the solicitor's claim of privilege. Lord Esher MR said (at 4):

``With regard to the question whether the solicitor could refuse to disclose the names of the trustees on the ground that they were communicated to him in confidence, the matter stands thus: he is in this predicament. He must allege that the communication was privileged because the trustees, his clients, made it to him in confidence, and then he cannot refuse to say who these clients are. I agree with the opinion expressed by James, L.J., in Ex parte Campbell, In re Cathcart, that the fact who the clients were was not the subject of a professional confidence. The client does not consult the solicitor with a view to obtaining his professional advice as to whether he shall be his solicitor or not.''

Cotton LJ said (at 5):

``It is not everything that solicitors learn in the course of their dealings with clients that is privileged from disclosure... The privilege extends only to confidential communications... In my opinion, the names of the trustees did not constitute such a communication. The mere fact who the trustees are cannot be said to be a matter communicated to the solicitor confidentially for the purposes of obtaining his professional advice, or at any rate, it is highly improbable that it should be so.''

(ii) Australia

Cook v Leonard [1954] VLR 591 was a ruling in the course of a trial in the Supreme Court of Victoria. The plaintiffs sued for money due under a deed. Counsel for the plaintiffs asked a solicitor witness, who had admitted preparing a document, on whose instructions he prepared it. Sholl J said (at 591-592):

``If I were not instructed by authority, I should reject that question on the ground that to allow it to be answered involved a disclosure by the witness of the communication made to him by the client of the matter to be included in the document. It seems to me that, if he answers `I was acting for Jones' or `I was acting for Smith', that answer inevitably discloses also that it was Jones or Smith respectively who gave him, presumably under the seal of professional confidence, the instruction to put in the document what is now found in it. I agree that in order to establish privilege, there must be proof of a solicitor and client relationship, and to prove a solicitor and client relationship involves proof of some retainer between the solicitor and the client. And it is said by Mr. Monahan that the objection itself cannot be sustained without disclosing the very retainer which it is the object of his question to ascertain. That difficulty, I think, explains the decisions in Levy v. Pope and Gillard v. Bates. What the Courts have done in those cases is really to say that the mere fact of a retainer between solicitor and client may be proved as an evidential fact when it is relevant to other issues and when it does not involve entering upon the details of the client's confidential instructions to the solicitor. That, I think, is all that was insisted upon in those two cases. The case, however, which has occasioned me a good deal of difficulty and which, contrary to my own inclination, I think I

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must follow, is the case of Bursill v. Tanner.''

His Honour referred (at 592)

``to the many occasions on which it has been said that in the interests of uniformity this Court ought to follow decisions on matters of general legal principle of the Court of Appeal in England.''

However this restraint no longer applies to Australian courts:
Cook v Cook (1986) 162 CLR 376.

In
Southern Cross Commodities Pty Ltd (in liquidation) v Crinis [1984] VR 697 the plaintiff sued for conversion of a motor vehicle. The defendants were a solicitor and his clerk. On an application to set aside a judgment in default of defence, the clerk deposed that a person had instructed him to obtain possession of the vehicle, which was registered in the name of another person. The clerk deposed that the client gave express instructions to the effect that he retained the firm on condition that his identity should be kept confidential and should not be disclosed. In the course of cross- examination the clerk was asked the identity of the client. The clerk claimed privilege and the name was provided in a sealed envelope to be released only on order of a judge. Young CJ rejected the claim. His Honour pointed out (at 701) that the only distinction between the present case and Bursill v Tanner and Cook v Leonard was that in neither of those cases was it suggested that the name was given to the solicitor in confidence. His Honour said (at 702):

``Nothing suggests that it was necessary in the present case for the communication of the client's name to be treated as immune from disclosure in order that he might obtain legal advice. As Lord Esher said in Bursill v. Tanner the client did not consult his solicitor for advice as to whether he should be his solicitor. Moreover, since the basis of the privilege is founded in public policy, it must follow that the client cannot by contract extend the area covered by the privilege.''

The Queen v Bell; Ex parte Lees (1980) 146 CLR 141 was concerned with a solicitor for a wife who had taken a child of the marriage in contravention of a custody order. She consulted the solicitor (who had not been engaged in the custody proceedings) to take steps to protect her interest in the matrimonial home. She gave him her address and asked him to keep that information confidential. The High Court held that the communication to that solicitor was not privileged because the client had improperly endeavoured to conceal the whereabouts of a child from the Family Court. Gibbs J said (at 144-145) that:

``... a solicitor may not, without the consent of his client, disclose his client's address if that was communicated to him confidentially for the purpose mentioned, although it will not be enough to attract the privilege that the address came to the solicitor's knowledge in consequence of his professional employment if it was not confidentially communicated to him.''

His Honour went on to discuss a number of exceptions to this general rule. Stephen J said at 155 (citations omitted):

``In a number of cases it has been said that the identity of a client is not something to which the privilege applies, and this is because a litigant is entitled to know who in truth is his opponent, `who is the real defendant'... There may be cases in which knowledge of an opponent's address is an element essential to any real knowledge of his identity. In such cases it would seem right that privilege should not attach. On the other hand, if the likelihood of disclosure of a person's address would operate as a real deterrent from his seeking professional advice, this would suggest that the privilege should apply... Each of these considerations reflect different aspects of public policy. There are, no doubt, other such aspects which may emerge in particular cases. If they may sometimes seem to conflict one with another, it will be for the Court to resolve the conflict by the familiar process of weighing the respective considerations against each other.''

(iii) New Zealand

Police v Mills [1993] 2 NZLR 592 was a case stated to the New Zealand High Court arising out of a prosecution of the respondent Miss Mills, a barrister. The driver of a motor vehicle of which Miss Mills was the registered owner had been involved in a traffic-related altercation. It seemed likely, although there was no evidence, that Miss Mills was a passenger in the vehicle at the time. The driver of the vehicle instructed a solicitor who then retained Miss Mills as counsel. (The solicitor claimed that he

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invariably retained her in all civil and criminal matters - an assertion treated with some scepticism by the police.) Miss Mills refused to inform the police who was the driver of the vehicle and was charged under s 67(1) of the Transport Act 1962 (NZ). Blanchard J referred (at 599) to an article in the Solicitors' Journal (UK) by Clive Morrick ``Professional Privilege: the Client's Identity'' (1980) 124 Sol J 303 which concluded that the requisites necessary to support a claim by a solicitor that a client's name is privileged were (at 305)

``1. The client must have disclosed his identity in confidence

2. The solicitor must be acting as legal adviser, not as an agent

3. The client must not be a party in litigation

4. The client must either be acting in the public interest, or

5. The client's identity would, in the circumstances, be incriminating information.''

Blanchard J was ``prepared to accept that as a statement of the position'' (at 600). However, if the lawyer had been selected with a view to using a cloak of professional privilege so as to avoid the need for the lawyer in the capacity of vehicle owner giving information under s 67(1), the court should not, in his Honour's view, lend its assistance to such a stratagem. His Honour remitted the matter to the District Court for further hearing to ascertain whether the predominant purpose leading to Miss Mills being instructed was a desire on the part of the client to defeat an attempt by the police to use s 67(1).

(iv) United States

In
Elliot v United States 23 App DC 456 (1904) a lawyer was a witness in a contested will case. He was asked to state what, if anything, the testator had said to him about a will. He answered that when visiting the testator on one occasion the latter said:

``Harry, where have you been?''

To which the lawyer replied:

``Well, I have just been up to make some memoranda to prepare a gentleman's will.''

The testator replied:

``That reminds me - I want mine fixed.''

On cross-examination the lawyer was asked the name of the person for whom he prepared the memorandum. He refused to answer, claiming privilege. The lawyer was committed to prison for contempt of court. On his petition for habeas corpus he stated that he had promised the client not to divulge his name and identity. The Appeals Court for the District of Columbia upheld the lawyer's claim for privilege. Alvey CJ, after noting that it was alleged that the lawyer in fact had no client, said (at 469):

``In this case, it was competent to show by independent evidence that the witness, claiming and insisting upon his privilege, had in fact no such client as he pretended to have, and thus, by such proof, to impeach the credibility of the witness. But not by compelling the witness against his claim of privilege to make the disclosure. For by making the disclosure of the name of his client he would certainly have committed a breach of professional confidence, and violated a privilege of his client, supposing him to have one, as he had stated in his testimony.''

His Honour then referred to an earlier decision
Chirac v Reinicker 11 Wheat 280 (1826), 6 L ed 474 where it was held that counsel could not disclose whether they were employed to conduct an ejectment suit for their client as landlord of the premises. The question was not merely whether the witnesses were employed, but whether they were employed to conduct the ejectment for Reinicker as landlord of the premises. The questions therefore sought a disclosure of the title and claim set up by Reinicker to his counsel. The Court said:

``It cannot be pretended that counsel could be asked what were the communications made by Reinicker as to the nature, extent or grounds of his title; and yet, in effect, the question, in the form in which it is put, necessarily involves such a disclosure.''

Returning to Elliott, Alvey CJ noted (at 470) that the fact of the lawyer being employed to take the memorandum for preparing the will was fully within the privilege of confidential communications:

``Few people who find it necessary to employ an attorney to prepare a will desire the fact to be publicly known. It is essentially a confidential and privileged communication; and few attorneys would be employed to draft wills if it were understood that they were at liberty to disclose the fact

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to any person, or upon any occasion, when disclosure might be desired.''

This authority is important for present purposes because it shows that, depending on the circumstances, the disclosure of the client's name may necessarily disclose a confidential communication. If this be the case, the disclosure of the name is subject to privilege, not as such, but because of what it conveys.

In
Blumenfeld v Kaplan 8 NY 2d 214 (1960) the Court of Appeals of New York upheld a claim for privilege by a lawyer who acted for an association of fruit merchants. A member of the association had given the lawyer information concerning corrupt political protection of illegal parking in the vicinity of the fruit market. The lawyer passed this information on to a New York City Commissioner of Investigation but refused to identify the member. The Court said (at 218, citations omitted):

``Usually, it is not the client's name but the client's communication to his lawyer which is held to be sacred, and so, ordinarily, there is no need to conceal the name to preserve the confidence. But here the client's communication had already been divulged to the Commissioner and it was the client's name that deserved and needed protection... for fear of reprisals, etc. Since there was no reason to doubt that the informant was a client of appellant, it was unnecessary to investigate that relationship. Since the client's communication to appellant was made in the aid of a public purpose to expose wrongdoing, and not, as in the Vogelstein case, to conceal wrongdoing, the seal of secrecy should cover the client's name, so long as his information was made available to the public authorities. The contrary holding serves no right end, contravenes the ancient policy expressed in section 353, and embarrasses and penalizes a lawyer for taking a course consistent with his professional and civil responsibilities.''

In
Baird v Koerner 279 F 2d 623 (1960) the appellant, a lawyer specialising in tax, was consulted by another lawyer acting on behalf of undisclosed taxpayers. The appellant was told that the other lawyer's clients believed they had understated their income and wished to pay the tax involved but without disclosing their identity. The appellant was given the amount of tax involved which he duly passed on to the Internal Revenue Service. The latter then commenced administrative proceedings seeking the identification of the taxpayers and their lawyer. The appellant stated that he did not know the names of the taxpayers and declined to name their lawyer on the ground that the information came to him as a privileged communication. This claim was upheld by the United States Court of Appeals for the Ninth Circuit. Speaking for the Court, Circuit Judge Barnes said (at 630):

``In the instant case, a disclosure of the persons employing the attorney-appellant would disclose the persons paying the tax; the fact of payment indicates clearly what is here specifically admitted, that an additional tax was payable and that the unknown clients owed it. But as yet the clients are unnamed. Suppose those unknown clients had related certain facts to their attorney, and asked that attorney for an opinion as to whether the clients, as taxpayers, owed the government additional taxes. Could the attorney be required to state the information given him in confidence by the clients, and the attorney's advice in response thereto? Or could the government require every tax attorney to reveal the name of those clients who had consulted the attorney with respect to possible taxes payable, so that the government could institute investigations of all such taxpayers?

We think the answer is `no' to both such questions. If it were not, the government could obtain by indirection, through demand for identity of a taxpayer, the information it seeks simply because a certain amount has been paid in as a tax in accordance with a tax law that permits such an anonymous payment.''

His Honour also said (at 632):

``If the identification of the client conveys information which ordinarily would be conceded to be part of the usual privileged communication between attorney and client, then the privilege should extend to such identification in the absence of other factors.''

In
National Labor Relations Board v Harvey 349 F 2d 900 (1965) the Board was investigating a charge that a company had placed one Shrader, a union official, under surveillance by detectives during an organizing campaign. The head of the detective agency,

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under pain of contempt, disclosed he had been employed by Harvey, a lawyer. In the words of the judgment in a later case (
United States v Jones 517 F 2d 666 (1975) at 672) the first link in the chain of evidence had been supplied by the detective. This revelation indicated the obvious - that a third party had hired Harvey. It was the third party's identity which the Labor Board sought to compel Harvey to disclose. The Court of Appeals for the Fourth Circuit, after citing many cases supportive of the general principle against privilege applying to the fact of retainer or the identity of the client, stated (at 905):

``To the general rule is an exception, firmly bedded as the rule itself. The privilege may be recognized when so much of the actual communication has already been disclosed that identification of the client amounts to disclosure of a confidential communic- ation.''

Amongst other authorities, the Court cited Chirac v Reinicker and Baird v Koerner.

While on the subject of the American cases, I should say that I do not accept the submission of counsel for the Commissioner that the American jurisprudence on legal professional privilege has no relevance for Australia. Although in the United States the privilege may, in its operation, sometimes overlap with some constitutional rights, such as the guarantees against unreasonable searches and seizures (Fourth Amendment) and against self- incrimination (Fifth Amendment) and the right to counsel in criminal cases (Sixth Amendment), notwithstanding what was said by Murphy J in
Baker v Campbell 83 ATC 4606 at 4624; (1983) 153 CLR 52 at 85, legal professional privilege is regarded as having its source in the common law. It was said in Baird v Koerner (at 629, citations omitted):

``Confidential communications between client and attorney were privileged under common law. The privilege is of ancient origin... The doctrine is subject to statutory regulation and limitation, but except as so modified the statutes are merely declaratory of the common law rule... The doctrine is based on public policy.''

It was suggested by counsel for the Commissioner that the due process clause of the Fourteenth Amendment may be relevant. But the doctrine of legal professional privilege goes back 400 years (Baker v Campbell at ATC 4623; CLR 84) and the Fourteenth Amendment was not introduced into the Constitution until 1868, following upon the Civil War.

The American authorities are in my respectful opinion conformable with the principle underlying the common law doctrine of legal professional privilege. They consistently uphold privilege in circumstances where the disclosure of the client's name will have the practical effect of disclosing confidential communications between lawyer and client. The only Australian authority directly in point is Cook v Leonard. Were it not for the now discarded rule of deferral to the English Court of Appeal, it is clear Sholl J would have upheld the claim for privilege.

What was the relevant communication?

It is essential to identify the communication which is said to attract the privilege. The reason that ordinarily the identity of a client will not attract the privilege is because the communication of a client's name to his or her solicitor is usually not a matter of confidence. Thus an essential component of a claim for the privilege is absent. The most obvious example is where a solicitor is retained for the purpose of litigation. The solicitor has to appear on the record for a named client; thus there can be no question of confidentiality. Ordinarily the same result would follow where the retainer is in a non-litigious setting. But as the American cases indicate, there may be circumstances in which the identification of the client conveys something else which will constitute a privileged communication.

In the present case the relevant communications were not the occasions when the clients asked the firm to act for them as their solicitor in taxation matters and the firm accepted their retainer. Nor was it the bare fact of Mr Coombes sending the Memorandum to clients. Rather it was Mr Coombes communicating with existing clients, and they with him, as to the purchasing, implementation or entering into employee share acquisition arrangements or employee benefit plans.

Confidentiality

In my view the Memorandum itself was not confidential. Counsel for Mr Coombes did not contend that it was. It did not disclose anything as to the affairs of any individual or company. In its terms it was merely preliminary legal advice which would need to be considered in

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the light of a particular client's financial and commercial circumstances. In essence it seems to me no different from memoranda or newsletters which solicitors nowadays often provide to their clients advising of new developments in the law and ways in which the clients may better arrange their affairs.

However, as already noted, the communications which would be disclosed in answer to the Commissioner's notice are not limited to the sending of a non-confidential document by a solicitor to his client. If Mr Coombes were asked ``Did you discuss with your client XYZ Ltd its entering into an employee share arrangement?'' the answer would clearly be privileged. What the Commissioner seeks to do in the present case is in substance no different.

Waiver

Counsel for the Commissioner argued that any privilege had been waived by Mr Coombes' consent in providing the Commissioner with a copy of the Memorandum and deposing in his affidavit that the advice provided to his clients ``included advice substantially similar to the terms of the Memorandum''. Reliance was placed on common law waiver (
Attorney- General (NT) v Maurice (1986) 161 CLR 475) and s 122(2) and (4) of the Evidence Act 1995 (Cth).

But it is only the client, not the solicitor, who can waive the privilege. The evidence is that the relevant clients have expressly instructed Mr Coombes to claim privilege.

In any case, this argument fails because, as I have already said, the relevant communication is not confined to the Memorandum.

Cross-claim

By a cross-claim Mr Coombes claimed that each of the three s 264(1)(a) notices were invalid and beyond power of the Commissioner. Particulars of the alleged invalidity of the notices were as follows:

• ``(a) they are vague and ambiguous;
• (b) they seek, in effect, the production of documents but do not confine the request to documents relating to the income or assessment of a particular taxpayer, as required by section 264(1)(b);
• (c) they seek information (including documents) other than information necessary to allow the cross-respondent to perform his functions under the Act;
• (d) they seek to compel the disclosure of information (including documents) the subject of legal professional privilege.''

Particular (d) is covered by Mr Coombes' defence to the Commissioner's substantive claim. In any event, it is not a matter going to validity of the notice. If a client waives the privilege (as some of Mr Coombes' clients did) the notice will be otherwise valid and effectual.

The other grounds of invalidity were but faintly pressed, if at all. In any case, I think they are without substance.

The cross-claim will be dismissed.

Orders

The application will be dismissed. There will be an order that the Commissioner pay Mr Coombes' costs, including reserved costs.

The cross-claim will be dismissed with no order as to costs.

THE COURT ORDERS THAT:

1. The application is dismissed.

2. The applicant pay the respondent's costs, including reserved costs.

3. The cross-claim is dismissed.

4. There be no order as to costs on the cross- claim.