FEDERAL COURT OF AUSTRALIA Commissioner of Taxation v de la Vega [2003] FCA 972 COURTS – FEDERAL JURISDICTION – where Commissioner of Taxation seeks access to documents pursuant to federal legislation in respect of which legal professional privilege is claimed Judiciary Act 1903 (Cth) ss 39B(1A)(a), 39B(1A)(c) Income Tax Assessment Act 1936 (Cth) s 263 COMMISSIONER OF TAXATION v JOSE DE LA VEGA, JANE DE LA VEGA, DELMO PTY LIMITED ACN 001 788 950, DELMO (NO 2) PTY LIMITED ACN 089 241 609 and GADENS LAWYERS SYDNEY PTY LIMITED ACN 100 963 308 N 742 OF 2003 GYLES J 12 SEPTEMBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 742 OF 2003 BETWEEN: COMMISSIONER OF TAXATION APPLICANT AND: JOSE DE LA VEGA FIRST RESPONDENT JANE DE LA VEGA SECOND RESPONDENT DELMO PTY LIMITED ACN 001 788 950 THIRD RESPONDENT DELMO (NO 2) PTY LIMITED ACN 089 241 609 FOURTH RESPONDENT GADENS LAWYERS SYDNEY PTY LIMITED ACN 100 963 308 FIFTH RESPONDENT JUDGE: GYLES J DATE OF ORDER: 12 SEPTEMBER 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The matter stands adjourned to 19 September 2003 at 11.30am. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 742 OF 2003 BETWEEN: COMMISSIONER OF TAXATION APPLICANT AND: JOSE DE LA VEGA FIRST RESPONDENT JANE DE LA VEGA SECOND RESPONDENT DELMO PTY LIMITED ACN 001 788 950 THIRD RESPONDENT DELMO (NO 2) PTY LIMITED ACN 089 241 609 FOURTH RESPONDENT GADENS LAWYERS SYDNEY PTY LIMITED ACN 100 963 308 FIFTH RESPONDENT JUDGE: GYLES J DATE: 12 SEPTEMBER 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application by the Commissioner of Taxation ('the Commissioner') against various respondents seeking a declaration that the applicant is entitled to full and free access pursuant to s 263(1) of the Income Tax Assessment Act 1936 (Cth) ('the Act') to the documents described in par 27 of a certain affidavit and an order that the respondents be restrained from denying to the applicant and his authorised officers access to the documents. 2 The circumstances in which the application comes to be made are explained in evidence filed on behalf of the applicant. That evidence details certain events which have occurred in relation to the investigation on behalf of the Commissioner of the affairs of various persons and which led to the attendance on various premises by officers of the Commissioner pursuant to s 263 of the Act. That attendance led to access being granted to a substantial number of documents from a number of premises. Legal professional privilege was claimed in relation to a large number of the documents to which access had been granted. Certain arrangements were made between the parties to endeavour to resolve the claims for legal professional privilege. I need not set out the details of that except to say that the procedures involved took quite some time and did not end in agreement as to the position. Indeed, there were some hundreds of documents which remained in dispute. This led to the commencement of these proceedings which have been opposed by and on behalf of the respondents. 3 Counsel for the Commissioner submits that jurisdiction is conferred on the Court by s 39B(1A)(a) and s 39B(1A)(c) of the Judiciary Act 1903 (Cth). Counsel for the respondents has not contested that submission, and I agree that jurisdiction is conferred in that way. This leads to a rather unusual situation. There is no traditional lis to be decided which might lead to the grant of what might be called ordinary relief. On the other hand, a matter does arise under a federal law and there is no method of resolving it save for curial intervention. 4 Confronted with a difficult practical problem, my first reaction was to give consideration to the exercise of the power of the Court to order arbitration, albeit with consent of the parties, as it appeared to me that there would be the necessity to review, not just matters of principle, but the application of those principles to many documents. Counsel for the parties proposed another method of proceeding, and, after discussion, the method adopted was to examine the disputed documents relating to several discrete projects which were the subject of the underlying investigations in the light of the evidence which has been led and to rule seriatim on whether those documents were privileged in whole or in part. That has now taken place over about a day and a half and a substantial number of documents have been ruled upon. Counsel are of the view that, by now, the principles which have guided my rulings have become relatively clear and they are confident that the balance of the documents can be reviewed between counsel with a fair degree of assurance of agreement as to how my rulings would apply, at least in relation to the bulk of the documents. 5 They have therefore sought, and I have agreed, to adjourn the matter until next Friday to enable that process to take place, and to enable draft short minutes to be prepared to give effect to what has taken place and what is proposed, and, in the event that there are residual matters for determination, to give me the opportunity of doing so then. I have ruled during the course of the hearing as to the existence of privilege, document by document, and my rulings will be recorded in the transcript. They have not been elaborate rulings. I trust that the parties understand what the basis of each of them was. Having in mind the volume of documents, I do not propose to elucidate those rulings any further, unless next Friday there is a particular request made in relation to any particular ruling and I will then consider whether I should expand upon it or not. 6 I should indicate that the method which has been adopted here will not necessarily be appropriate for every such application. It is an unusual jurisdiction, although I know that there has been a continuing problem over the last couple of decades concerning the resolution of claims for legal professional privilege in relation to documents seized by compulsory process. It will be up to each judge who considers the matter to work out the best way of handling a difficult practical situation. 7 The nature of the jurisdiction being undertaken involves, in this case, the Commissioner seeking relief in the Court. The Commissioner is entitled to be properly represented in these proceedings and the Court is entitled to the best assistance it can get in undertaking the role committed to it. That involves reading and considering the relevant documents, in some cases spending some time understanding the underlying transactions, and becoming aware in the process of the material claimed to be privileged. As experience shows, this material will almost certainly include some communications which are properly privileged. In cases such as the present there are obvious difficulties in making that sort of information available to the officers of the Commissioner because that would defeat the privilege. However, I would not rule out, in appropriate cases, officers of the Commissioner being given access to documents in order to properly instruct solicitors and counsel. There would have to be anxious consideration given to the protection which might be ordered in such a case. In my experience from a number of cases in which I have been involved, both as counsel and as judge, when dealing with sensitive information there is usually a suitable mechanism to be found. 8 In the present case the nature of the documents was such that it was most undesirable that I plough through them on my own assisted by hypothetical submissions put by counsel for the Commissioner. I therefore encouraged instructions to be received to enable counsel for the Commissioner to give undertakings about confidentiality of a fairly normal kind together with the recognition that those counsel would not represent the Commissioner in any matter involving the documents which were provided to them and which are ruled to be privileged. This is not the kind of arrangement in which I would normally become involved but it seemed to be an appropriate way of ensuring that the court receives assistance and that the Commissioner be properly represented. The respondents did not present any reasoned argument against that course and, whilst they were anxious to ensure that confidentiality was preserved, it seemed to me that I should encourage the course which was proposed. I accepted undertakings from counsel for the Commissioner and on that basis the documents were made available to counsel for their consideration. That has very much assisted the smooth flow of this matter and a great deal of ground has been made in a relatively short time. 9 I also note that the Commissioner submits that the forensic onus to establish the claim of privilege was on the respondents, and there has been no contrary submission put. In order to discharge that onus, some evidence has been led by way of affidavit, some of which was rejected. Because a reasonable range of documents has been produced in relation to each project one can deduce a good deal of material from the documents themselves. In the events which have happened I do not think there has been any particular difficulty in resolving the issues through the lack of evidence. Although, no doubt, more specific evidence could have been given, the volume of it would have been quite daunting. 10 The matter will stand adjourned until 19 September 2003 at 11.30am. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 16 September 2003 Counsel for the Applicant: A Robertson SC, J Hmelnitsky Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: R Gordon Solicitor for the Respondent: Gadens Date of Hearing: 11, 12 September 2003 Date of Judgment: 12 September 2003