FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Cranswick [2011] FCA 814 Citation: Deputy Commissioner of Taxation v Cranswick [2011] FCA 814 Parties: DEPUTY COMMISSIONER OF TAXATION v ANDREW NOEL CRANSWICK File number: WAD 223 of 2009 Judge: MARSHALL J Date of judgment: 21 July 2011 Catchwords: EVIDENCE – legal professional privilege – privilege claimed over documents produced in response to subpoenas – waiver of privilege Legislation: Evidence Act 1995 (Cth) Cases cited: Kennedy v Wallace (2004) 142 FCR 185 Australian Competition and Consumer Commission v Cadbury Schweppes (2009) 174 FCR 547 Schreuder v Murray (No 2) [2009] WASCA 145 Cook v Pasminco Ltd (No 2) (2000) 107 FCR 44 Deputy Commissioner of Taxation v Cranswick [2010] FCA 891 Telstra v BT Australia (1998) 85 FCR 152 Goldberg v Ng (1995) 185 CLR 83 Date of hearing: 23 June 2011 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 43 Counsel for the Applicant: Mr P Hannan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr A Young Solicitor for the Respondent: Middletons IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 223 of 2009 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW NOEL CRANSWICK Respondent JUDGE: MARSHALL J DATE OF ORDER: 21 JULY 2011 WHERE MADE: MELBOURNE (HEARD IN PERTH) THE COURT ORDERS THAT: IT IS DECLARED: 1. Legal professional privilege attaches to the documents listed at paragraph 11 of the affidavit of Nicholas Henry Brown sworn 17 May 2011 with the exception of those numbered 17, 22, 36 and 57. 2. Legal professional privilege attaches to the documents listed at paragraph 12 of the affidavit of Nicholas Henry Brown sworn 17 May 2011 with the exception of those numbered 12, 27, 119, 138, 151, 172 and 189. It is noted that legal professional privilege has been impliedly waived in respect of document 189. 3. The costs of the claim for legal professional privilege are costs in the set aside motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 223 of 2009 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW NOEL CRANSWICK Respondent JUDGE: MARSHALL J DATE: 21 JULY 2011 PLACE: MELBOURNE (HEARD IN PERTH) REASONS FOR JUDGMENT 1 This judgment concerns a claim by the respondent, Mr Cranswick, that certain documents produced to the Court in response to two subpoenas are subject to legal professional privilege. One subpoena was issued to Peter Lark & Co (a firm) and the other to Haydn Robinson (a solicitor). I will refer to them as the Lark and Robinson subpoenas respectively. Mr Peter Lark and Mr Haydn Robinson were former legal representatives of Mr Cranswick. 2 The applicant, Deputy Commissioner of Taxation ("DCT"), contends that no claim for legal professional privilege in respect of the documents the subject of the subpoenas has been properly asserted by adequate evidence. Alternatively, DCT submits that if Mr Cranswick has established a prima facie right to assert legal professional privilege in respect of any of the documents, he has impliedly waived such privilege in respect of a certain class of documents. Background 3 On 27 October 2010, the docket judge, McKerracher J, made a sequestration order against the estate of Mr Cranswick. Mr Cranswick has applied to the docket judge to set aside the sequestration order. What the parties have referred to as "the set-aside motion" is listed for hearing before McKerracher J on 5 August 2011. 4 Central to Mr Cranswick's motion is his claim that he had no prior knowledge of the hearing before McKerracher J on 31 August 2010 or of its listing for hearing by the Court on 5 August 2010. The Court listed the hearing of DCT's bankruptcy petition on 5 August 2010. Justice McKerracher heard the petition on 31 August 2010 and published his judgment and made a sequestration order on 27 October 2010. The most critical issue on the set aside motion will be Mr Cranswick's state of knowledge between 5 August 2010 and 31 August 2010 about the listing of the petition for hearing on 31 August 2010 and its hearing on that day. The Documents – a sufficient basis to claim privilege 5 The Court granted DCT leave to issue the Lark and Robinson subpoenas. Documents were produced in response to each subpoena. 6 In support of his claim for legal professional privilege, in respect of some of the subpoenaed documents, Mr Cranswick relies primarily on an affidavit sworn by his current solicitor, Mr Brown of Middletons, on 17 May 2011. In that affidavit Mr Brown makes the following important points, on instructions from Mr Cranswick: from April 2009, Mr Cranswick engaged Mr Lark "to review, provide advice, and where appropriate, lodge objections to notices of assessment issued to [Mr Cranswick] by the Australian Taxation Office"; and in or about February 2010, Mr Cranswick instructed Mr Robinson "to advise him with respect to steps which might be taken by the ATO to compel [him] to pay the sums…the subject of the assessments". 7 Counsel for DCT, Mr Hannan, concedes that if Mr Lark and Mr Robinson had given evidence about the material relevant to them as set out in the above paragraph, no issue would have arisen as to the adequacy of Mr Cranswick's evidence to be able to assert legal professional privilege. Counsel for Mr Cranswick, Mr Young, counters by submitting that it cannot be assumed that Mr Lark or Mr Robinson would be prepared to go into evidence in support of Mr Cranswick. I prefer the submissions of Mr Young in this respect. They find support from the judgment of Black CJ and Emmett J in Kennedy v Wallace (2004) 142 FCR 185 at [27], where their Honours said: we incline to the view that in the ordinary case of a client consulting a lawyer about a legal problem in uncontroversial circumstances, proof of those facts alone will provide a sufficient basis for a conclusion that legitimate legal advice is being sought and is being given, irrespective of the particular ethical and legal obligations applicable to an Australian lawyer. 8 The evidence referred to above, provided by Mr Brown on information and belief in this interlocutory application, is evidence that Mr Cranswick consulted Mr Lark and Mr Robinson and sought legitimate legal advice about the matters referred to Mr Brown. Other evidence 9 Mr Cranswick also relies on his own affidavit, sworn 16 May 2011, which refers to correspondence from Mr Lark stating that Peter Lark & Co informed DCT on 28 July 2010 that it had ceased to act for Mr Cranswick. In an earlier affidavit, sworn on 23 March 2010, Mr Cranswick gave evidence that: on and before 31 August 2010 he did not know about the DCT's creditors petition or that there was a hearing of it on 31 August 2010; had he known of the hearing he would have made arrangements to be represented at the hearing; and he learnt about the creditor's petition and its outcome in October 2010 after being so informed by Mr Robinson, who was then the solicitor for Mr Cranswick's brother. 10 Mr Hannan referred the Court to several affidavits relied on by the DCT. Many were voluminous. No assistance was given to the Court about the relevance of that material or about the particular passages on which reliance was placed by DCT for the purposes of the resolution of the current issues. The test for legal professional privilege 11 As legal professional privilege is asserted at an interlocutory stage of a proceeding the common law, and not the Evidence Act 1995 (Cth), governs the determination of claims for legal professional privilege; see Australian Competition and Consumer Commission v Cadbury Schweppes (2009) 174 FCR 547 at [31]. 12 In Schreuder v Murray (No 2) [2009] WASCA 145 in the Court of Appeal of the Supreme Court of Western Australia, Buss JA, with whom McLure JA agreed, set out the content of legal professional privilege. His Honour made the following points, among others, at [58] to [62]: A person may invoke the privilege to resist giving information or producing documents that would reveal confidential communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or providing legal services (See [58]); The person claiming the privilege must prove the privilege exists (see [60]); and Privilege is not established by use of verbal formula. The Court may examine documents where there is a dispute about whether they are subject to legal professional privilege; a party claiming legal professional privilege must properly identify the basis on which it is claimed (see at [61]). Categorisation of the documents 13 In Mr Brown's 17 May 2011 affidavit he sets out the basis upon which legal privilege is claimed in respect of certain documents which he states were "brought into existence" for various purposes including the provision of legal advice and legal services and the provision of instructions and the seeking of legal advice. 14 Those paragraphs state: 11. Of the documents produced by Peter Lark & Co: (a) documents 3-4, 9, 11-15, 17, 19-22, 36, 38, 48, 51, 55-63 on the List comprise or contain confidential communications brought into existence by Peter Lark & Co for the purposes of providing legal advice or providing legal services in relation to anticipated legal proceedings, being review and/or appeal proceedings concerning whether the relevant assessments were excessive and whether the Respondent's objections to those assessments ought to be fallowed (Anticipated Legal Proceedings); (b) documents 7, 11-16, 20-21 and 55 on the List comprise or contain confidential communications brought into existence by the Respondent for the purposes of obtaining legal advice, providing instructions or seeking advice in respect of the Anticipated Legal Proceedings; (c) documents 10, 27, 33 and 46-47 on the List comprise or contain confidential communications brought into existence by and Robinson for the purposes of providing legal advice or providing legal services in relation to the Anticipated Legal Proceedings and these proceedings; and (d) documents 29, 30, 64 and 65 on the List comprise or contain confidential communications brought into existence by Peter Lark & Co. and Middletons for the purposes of providing legal advice or providing legal services in relation to the Anticipated Legal Proceedings and these proceedings. 12. Of the documents produced by Haydn Robinson: (a) documents 68, 110, 112, 113, 116, 117, 118, 119, 120, 125, 130, 137, 138, 139, 141, 143, 146-151, 153, 167, 172-174, 187, 189, 193, 197, 198 and 212 on the List comprise or contain confidential communications brought into existence by the Respondent for the purposes of obtaining legal advice, providing instructions or seeking advice in respect of the Anticipated Legal Proceedings and these proceedings; (b) documents 111, 112, 114, 115, 121-124, 126, 127, 129, 131-136, 140, 142, 144, 145, 152, 154-165, 168, 170, 171, 175-186, 188, 190, 192, 194-196, 199-211 and 213-216 on the List comprise or contain confidential communications brought into existence by Haydn Robinson for the purposes of providing legal advice or providing legal services in relation to the Anticipated Legal Proceedings and these proceedings; and (c) documents 182 and 209 on the List comprise or contain confidential communications brought into existence by Peter Lark & Co. and Haydn Robinson for the purposes of providing legal advice or providing legal services in relation to the Anticipated Legal Proceedings and these proceedings. 15 It is inherent in those passages from Mr Brown's affidavit (combined with the description of the documents in Exhibit NHB1) that he alleges that the dominant purpose for the existence of these documents was for the seeking and obtaining of legal advice. 16 As a claim for legal professional privilege has been asserted properly by appropriate identification of the basis on which it is claimed, and there is a dispute about whether the privilege exists, I will examine each relevant document and assess whether the privilege arises in respect of it. the documents produced by mr lark (a) The documents referred to at paragraph 11(a) of Mr Brown's affidavit of 17 May 2011 17 These documents, Mr Brown says, "comprise or contain confidential communications brought into existence by Haydn Robinson for the purposes of providing legal advice or providing legal services in relation to the Anticipated Legal Proceedings and these proceedings". 18 Having viewed the documents referred to at paragraph 11(a) of Mr Brown's affidavit, I am satisfied that legal professional privilege attaches to the documents numbered 3, 4, 9, 11, 12, 13, 14, 15, 20, 21, 38, 48, 51, 55, 56, 59, 60, 61, 62 and 63. 19 Document 17 is a tax invoice from Peter Lark & Co to Mr Cranswick dated 30 March 2010. It is a memorandum of fees not containing legal advice. It is not immune from production on the basis of legal professional privilege; see Cook v Pasminco Ltd (No 2) (2000) 107 FCR 44 at [46], per Lindgren J. The relevance of the document for the purpose of the set aside motion remains a question for the docket judge. Document 19 is also a memorandum of fees. It is dated 7 April 2010 and appears to be in the same form as document 17, apart from bearing a different date. 20 Document 22 is a letter from Peter Lark & Co to Mr Cranswick dated 23 July 2010. It does not provide any legal advice or reveal the giving of any legal service with respect to anticipated legal proceedings as claimed in Exhibit NHB1 to Mr Brown's affidavit. It is a plea for further instructions from Mr Lark to Mr Cranswick and a request for the payment of outstanding fees. It is not properly subject to a claim for legal professional privilege. Again, its relevance to the set aside motion is a matter for the docket judge. 21 Document 36 is a letter from Mr Lark to Mr Robinson dated 28 May 2010, contained in an email dated 31 May 2010. It was not brought into existence by Peter Lark for the dominant purpose of providing legal advice to Mr Cranswick or providing legal services to him in relation to anticipated proceedings. It contains an inquiry from Mr Lark to Mr Robinson about the whereabouts of Mr Cranswick and an inquiry about whether Mr Robinson acts for Mr Cranswick and whether he, Mr Lark, is expected to do anything further for Mr Cranswick "in relation to his taxation affairs". It is not properly subject to legal professional privilege. 22 Document 57 contains an email from a Mr Lucy of the ATO dated 3 December 2009 to Mr Lark, which Ms Petrucci, of Peter Lark & Co, forwards to Mr Robinson on 22 February 2010. It does not relate to the provision of legal advice or legal services. Document 58 is an email chain between Mr Lucy and Mr Lark, forwarded to Mr Robinson. The matters discussed amount to no more than that Mr Robinson objects to certain tax assessments and that Peter Lark is acting for him. 23 Although some of the documents listed at [18] above emanate from Mr Lark or his firm after he ceased to act for Mr Cranswick, their contents concern matters pertinent to events when that firm did so act. (b) The documents referred to at paragraph 11(b) of Mr Brown's affidavit of 17 May 2011 24 These documents are said by Mr Brown to contain confidential communications brought into existence by Mr Cranswick for the purposes of obtaining legal advice, providing instructions or seeking advice in respect of anticipated legal proceedings. 25 Having viewed the documents set out at paragraph 11(b) of the Brown affidavit, I am satisfied that legal professional privilege attaches to the documents numbered 7, 11, 13, 14, 15 and 16. 26 Document 12 is not a document brought into existence by Mr Cranswick. It is an email to Mr Cranswick from Mr Lark noting that Mr Lark has forwarded copies of documents to Mr Robinson and asking if he or Mr Robinson should return a phone call from the ATO. It is not a document to which legal professional privilege attaches. (c) The documents referred to at paragraph 11(c) of Mr Brown's affidavit of 17 May 2011 27 Mr Brown says that these documents comprise or contain confidential communications brought into existence by Mr Robinson for the purposes of providing legal advice or providing legal services in relation to anticipated legal proceedings and the creditor's petition. 28 Having viewed the documents referred to at paragraph 11(c) of the Brown affidavit I am satisfied that legal professional privilege attaches to the documents numbered 10, 33, 46, 47 and 48. 29 Document 27 is an email to Mr Lark from Mr Robinson of 5 March 2010. It specifically states that Mr Robinson is not yet instructed by Mr Cranswick. It was not brought into existence by Mr Robinson for the dominant purpose of providing legal services in relation to any proceeding. Legal professional privilege does not attach to it. (d) The documents referred to at paragraph 11(d) of Mr Brown's affidavit of 17 May 2011 30 These documents are said to be or contain communications brought into existence by Peter Lark & Co and Middletons for the purpose of providing legal advice or services in relation to anticipated legal proceedings concerning Mr Cranswick's taxation assessments and the creditor's petition. 31 Having viewed the documents referred to at paragraph 11(d) of the Brown's affidavit I am satisfied that legal professional privilege attaches to the documents numbered 29, 30, 64 and 65, being all the documents referred to at paragraph 11(d). the documents produced by mr robinson (a) The documents referred to at paragraph 12(a) of Mr Brown's affidavit of 17 May 2011 32 These documents, Mr Brown says, comprise or contain confidential communications brought into existence by Mr Cranswick for the purpose of obtaining legal advice, providing instructions or seeking advice regarding anticipated legal proceedings concerning his taxation assessments and the creditor's petition. 33 Having viewed the documents referred to at paragraph 12(a) of the Brown affidavit, I am satisfied that legal professional privilege attaches to the documents numbered 68, 110, 112, 113, 116, 117, 118, 120, 125, 130, 137, 139, 141, 143, 146, 147, 148, 149. 34 Document 119 is an email from Mr Cranswick to Mr Robinson of 23 November 2010, which attaches a letter from an English firm of solicitors, Ashfords, on behalf of Mr Cranswick's trustee in bankruptcy, seeking a meeting with Mr Cranswick in London on 3 December 2010. It is not a confidential communication between Mr Cranswick and Mr Robinson which was brought into existence for the dominant purpose of obtaining legal advice. 35 Document 138 is an email from Mr Cranswick to Mr Robinson attaching an article from "The Herald" newspaper in Zimbabwe. It is not apparent that it bears on Mr Cranswick seeking legal advice to challenge taxation assessments in Australia or oppose the creditor's petition. Legal professional privilege does not attach to it. Its relevance on the set aside motion remains a matter for the docket judge. 36 Document 151 is an email from Mr Cranswick to Mr Robinson dated 22 October 2010. It attaches a draft affidavit from a retired Zimbabwean judge concerning the affairs of a company in Zimbabwe of which Mr Cranswick was the Chief Executive Officer. The draft affidavit does not appear to bear on any legal issue relevant to Mr Cranswick in Australia. Legal professional privilege does not attach to it. Again, the relevance of the draft affidavit to the set aside motion is a matter for the docket judge. Document 153 is an email from Mr Cranswick to Mr Robinson dated 22 October 2010 which attaches a magazine article about the diamond industry in Zimbabwe. Again the article has no apparent relevance to any legal issue in Australia concerning Mr Cranswick. Its relevance to the set aside motion is a matter for McKerracher J, should DCT seek to tender it. Legal professional privilege does not attach to it. 37 Document 172 is an email from Mr Cranswick to Mr Robinson requesting Mr Robinson to accept service on his behalf from his ex-wife's lawyers. Legal professional privilege does not attach to it. It was not made for the purpose of obtaining legal advice concerning any tax assessment and creditor petition related issue. Similarly document 173 is an email to Mr Lark from Mr Cranswick simply requesting that all documents concerning his case be given to Mr Robinson. The email is dated 21 October 2010. Legal professional privilege does not attach to it. Document 174 is an email from Mr Cranswick dated 21 October 2010 to Mr Robinson which forwards an email from the Associate to McKerracher J in which notice is given of judgment to be delivered on 27 October 2010 on the creditor's petition. Legal professional privilege does not apply to that email. It is not a document generated by Mr Cranswick with the dominant purpose of seeking legal advice. 38 Document 189 is an email dated 23 August 2010 to Mr Robinson from Mr Cranswick. It provides a link to a judgment of McKerracher J of 18 August 2010, Deputy Commissioner of Taxation v Cranswick [2010] FCA 891. That judgment makes provision for substituted service on Mr Cranswick of the creditor's petition and refers to the creditor's petition being heard at 2.15 pm on 31 August 2010. The email which provides a link to the judgment only provides the following communication to Mr Robinson from Mr Cranswick, "I assume u are aware of this??" It may be assumed favourably to Mr Cranswick that he drew the judgment to Mr Robinson's attention to seek advice concerning it. However, if the document is protected by legal professional privilege, that privilege has been waived for the reasons set out below. 39 In the set aside motion, Mr Cranswick has put in issue his state of mind concerning the listing of the creditor's petition before the docket judge on 31 August 2010. In the set aside motion, Mr Cranswick asserts a lack of knowledge about the hearing of the petition on 31 August 2010. Yet document 189 directly contradicts that proposition. By bringing the set aside motion, Mr Cranswick is taken to have consented to the use of otherwise privileged material or to have waived reliance on the privilege in so far as it affects his state of knowledge about the listing on 31 August 2010. As Branson and Lehane JJ said in Telstra v BT Australia (1998) 85 FCR 152 at 166 in similar circumstances to these obtaining here: Reliance on the privileged nature of the material would, in the circumstances, be unjust and would inhibit the proper functioning of the legal process. 40 As Mr Cranswick has put in issue his state of knowledge about the listing of the creditors petition, between 5 and 31 August 2010, that state of knowledge cannot be fairly assessed without the examination of what Mr Cranswick told Mr Robinson. See also Telstra per Branson and Lehane generally at 166 to 167, where their Honours stressed that the effect of such action is to "waiv(e) reliance on the privilege which such material would otherwise attract". I reject the submission of Mr Young that the privilege has not been waived in respect of this document because the ATO asserts that Mr Cranswick knew of the hearing on 31 August 2010 and Mr Cranswick denies it. Mr Young said that a denial of that sort does not result in a waiver of the privilege. I disagree. The implied waiver results from the act of Mr Cranswick in displaying his knowledge of facts highly relevant to the listing of creditor's petition and hence the set aside motion. Considerations of fairness require that the privilege be considered to be waived; see Goldberg v Ng (1995) 185 CLR 83 at 96, per Deane, Dawson and Gaudron JJ. Having put his state of knowledge about the status of the creditor's petition, including its listing for hearing, in issue, Mr Cranswick is taken to have impliedly waived his reliance on legal professional privilege in respect of documents which demonstrate his relevant state of knowledge. Document 189, for the reasons given above is such a document. (b) The documents referred to at paragraph 12(b) of Mr Brown's affidavit of 17 May 2011 41 These documents, according to Mr Brown, consist of confidential communications brought into existence by Mr Robinson for the purposes of providing legal advice or services to Mr Cranswick in relation to taxation assessment and creditor's petition issues. Having viewed those documents, I am satisfied that each of them has legal professional privilege attached to it and that no such privilege is subject to any implied waiver. (c) The documents referred to at paragraph 12(c) of Mr Brown's affidavit of 17 May 2011 42 These documents, Mr Brown asserts, comprise or contain confidential communications brought into existence by Peter Lark & Co and Mr Robinson for the purposes of providing legal advice or services to Mr Cranswick regarding the taxation assessment issues and the creditor's petition. Two such documents are document 182 and document 209. Having viewed those documents I am satisfied that legal professional privilege attaches to each of those documents. No implied waiver of that privilege has occurred in respect of those documents. Disposition 43 Having regard to the foregoing analysis, the Court will order as follows: IT IS DECLARED THAT: 1. Legal professional privilege attaches to the documents listed at paragraph 11 of the affidavit of Nicholas Henry Brown sworn 17 May 2011 with the exception of those numbered 17, 22, 36 and 57. 2. Legal professional privilege attaches to the documents listed at paragraph 12 of the affidavit of Nicholas Henry Brown sworn 17 May 2011 with the exception of those numbered 12, 27, 119, 138, 151, 172 and 189. It is noted that legal professional privilege has been impliedly waived in respect of document 189. 3. The costs of the claim for legal professional privilege are costs in the set aside motion. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 21 July 2011