The Tax Man and the Law Institute, round III

In Deputy Commissioner of Taxation v Law Institute of Victoria [2010] VSCA 73, the Court of Appeal unanimously overturned the trial judge’s decision in Law Institute of Victoria Limited v Deputy Commissioner of Taxation (No 2) [2009] VSC 179, which I posted about here.  I posted about round 1, before that, here.  Justice of Appeal Mandie, with whom the other judges agreed, said that the documents were ‘innocuous’ and suggested that they would not have attracted public interest immunity even had the Law Institute argued that the nature of their contents was so secret and sensitive that the public interest in keeping them secret outweighed the public interest in protecting the revenue for which the Tax Man wanted them.  But the situation was worse than that for the Law Institute, according to his Honour.  The Law Institute argued in favour of public interest immunity on the basis that the documents were part of a class of documents so secret and sensitive that they should be protected irrespective of their contents.  ‘Bollocks’ said the Court of Appeal.The Tax Man believed a particular solicitor had an association with Operation Wickenby.  It used a statutory power to compel the production of records relating to his practising certificate history , results of trust account audits, and documents associated with the solicitor ceasing to hold a practising certificate. The power used was given by s. 264(1)(b) of the Income Tax Assessment Act, 1936 (Cth). The obligation of secrecy owed by the Institute in its capacity as a delegate of the Legal Services Board, found in a Victorian Act, yielded by virtue of s. 109 of the Constitution to the inconsistent obligation to divulge secrets in response to an exercise of the power of compulsion.  The obligation of secrecy was found in s. 6.4.5 of the Legal Profession Act, 2004.

Though in the case of two out of three of the relevant categories of documents,  the trial judge rejected the Law Institute’s contention that public interest immunity justified the maintenance of secrecy over the documents notwithstanding the Tax Man’s compulsion, the Court of Appeal held that he did not go far enough in scrutinising the Law Institute’s claim.  The Court of Appeal said that the Law Institute had not satisfied the heavy burden of establishing a public interest against disclosure which falls on those public bodies which assert that the very nature of the communications recorded militate as a matter of public interest against disclosure, regardless of the degree of secrecy and sensitivity which they may happen to contain.  That being the case, no occasion for carrying out the balancing exercise between competing public interests arose, and the trial judge erred in undertaking that exercise. Justice of Appeal Mandie, with whom Justice of Appeal Bongiorno and Acting Justice of Appeal Hansen agreed, held:

’51 It seems to me, therefore, that insofar as the LIV was advancing a ‘class’ claim, then it failed at the threshold ….

52 As I have already said, I do not think that the LIV was, in general, claiming protection for the documents based on their particular contents but, in case that is wrong, I note that the LIV said on appeal, when it came to the question of the balancing exercise, that ‘there’s not much to be said on our side’. I took this to be a concession that there was nothing much about the contents of the particular documents … that demonstrated that there was likely to be any harm to the public interest occasioned by their disclosure. I have inspected the documents myself and can only agree with that concession. It seems to me that the documents are innocuous. There are a number of auditor’s reports but I hardly think that the prospect that such reports might be disclosed to the Commissioner would be likely to affect an auditor’s due performance of his duties and it does not appear to me and it was not suggested either below or on appeal that there was anything about their contents that should give rise to relevant concern. The other documents comprise mainly routine correspondence and memoranda and, again, it does not appear to me and it was not suggested that there was anything about their contents that should cause concern.

53 It seems to me therefore that, insofar as the claim was a ‘contents’ claim, it did not get off the ground. Accordingly, in my opinion, the occasion to undertake a balancing exercise did not arise. However, even if the occasion for undertaking a balancing exercise had arisen, I do not think that it would assist the position of the LIV. As I understood it, the learned trial judge considered, having inspected the documents, that the public interest involved in the Commissioner having access to them was not established or was slight. I respectfully disagree because I do not think it can be concluded from an uninformed inspection of the documents that their contents would necessarily be of little or no use to the Commissioner. There is material in the documents that may or may not be of use to the Commissioner and I do not think it is valid to characterise the Commissioner’s exercise of power as a ‘fishing expedition’ when that is the nature of the power involved.’

See also:

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