Supreme Court New South Wales Medium Neutral Citation: R v Kinghorn [2019] NSWSC 553 Hearing dates: 10 May 2019 Date of orders: 10 May 2019 Decision date: 10 May 2019 Jurisdiction: Common Law Before: Adamson J Decision: (1) Dismiss the notices of motion filed on behalf of the Commissioners of Taxation and the Australian Federal Police and on behalf of the Commonwealth Director of Public Prosecutions to set aside the subpoenas issued at the request of the accused. (2) Reserve the question of costs. Catchwords: CRIME – subpoenas to obtain material not disclosed by prosecuting authority – legitimate forensic purpose demonstrated – purpose to obtain evidence to prove non-compliance or illegality – notices of motion to set aside subpoenas dismissed Legislation Cited: Income Tax Assessment Act 1936 (Cth), s 264 Taxation Administration Act 1953 (Cth), ss 2, 3E Cases Cited: Attorney-General (NSW) v Chidgey [2008] NSWCCA 65; (2008) 182 A Crim R 536 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 Blatch v Archer (1774) 1 Cowp 63 Commissioner for Railways v Small (1938) 38 SR (NSW) 564 Gould v Director of Public Prosecutions (Cth) [2018] NSWCCA 109; (2018) 333 FLR 352 Ragg v Magistrates Court of Victoria (2008) 18 VR 300 R v Leach [2018] QCA 131; (2018) FLR 224 R v Reardon (No 2) (2004) 60 NSWLR 454; [2004] NSWCCA 197 Strickland v Director of Public Prosecutions (Cth) (2018) 93 ALJR 1; [2018] HCA 53 X7 v R [2014] NSWCCA 273; (2014) 292 FLR 57 Category: Procedural and other rulings Parties: Regina Commonwealth Director of Public Prosecutions (Applicant) Commissioner of Taxation (Applicant) Commissioner of the Australian Federal Police (Applicant) John Alan Kinghorn (Accused) Representation: Counsel: P W Neil SC/K Ginges (Crown) R Lee (Commonwealth Director of Public Prosecutions on notice of motion to set aside subpoenas) R Bhalla (Commissioner of Taxation, Commissioner of the Australian Federal Police) B Walker SC/S Buchen SC/G Huxley (Accused) Solicitors: Commonwealth Director of Public Prosecutions (Crown and Commonwealth Director of Public Prosecutions) Australian Government Solicitor (Commissioner of Taxation, Commissioner of the Australian Federal Police) King & Wood Mallesons (Accused) File Number(s): 2017/304079; 2017/304100 Judgment Introduction 1. The trial of John Kinghorn (the accused) is listed for hearing on 7 October 2019. He stands charged on indictment with three counts: the first, that he defrauded the Commonwealth by representing to the Commissioner of Taxation that he did not control any unlisted company outside Australia; and the second and third, that he dishonestly represented that he did not control two companies with the intention of dishonestly influencing a public official, the Commissioner of Taxation. The conduct the subject of the first count is alleged to have occurred between about 29 June 1997 and 1 July 1997 and the conduct the subject of the second and third counts is alleged to have occurred between about 6 March 2004 and 10 March 2007. Relevant facts 1. In 2005 a notice was issued to the accused pursuant to s 264 of the Income Tax Assessment Act 1936 (Cth) which required him to attend to give evidence upon examination. He attended and gave evidence on the following five separate days: 4 May 2005, 6 May 2005, 18 May 2005, 19 May 2005 and 14 June 2005 (the s 264 examinations). 2. Transcripts of the s 264 examinations were disclosed by James Walton (position unknown) of the Australian Taxation Office (ATO) to the Commonwealth Director of Public Prosecutions (CDPP) and two named persons who were apparently from the CDPP and three named persons who were apparently from the ATO under cover of an "office minute" dated 26 October 2006 which bore an issue date of 29 November 2006. The minute was said to have been received by the CDPP on 31 January 2007. This disclosure is referred to in the subpoenas as the "2007 Disclosure". The office minute identified the purpose of the communication as follows: "The purpose of this minute is to provide the CDPP with background information and material on a soon to be completed audit by the High Wealth Individuals Taskforce. SNC Investigations is seeking some preliminary advice from the CDPP as to whether an investigation into this matter is likely to be fruitful and worth attempting, based on the current evidence available and the likelihood of obtaining further admissible evidence." 1. Following the 2007 Disclosure, further partial disclosures of the s 264 examinations were made, the dates and contents of which have not been revealed to the accused. 2. On 19 November 2015 Federal Agent Hiscoe of the Australian Federal Police (AFP) sent a brief of evidence to the CDPP which included the s 264 examinations. Federal Agent Hiscoe's covering letter sought the CDPP's "consideration" of particular charges which were listed in the letter. According to a receipt, the brief was apparently received on the same day by the CDPP. This disclosure is referred to in the subpoenas as the "2015 Disclosure". 3. Subsequently, a further brief was sent to the CDPP by the AFP which a receipt recorded was received on 17 March 2016. I understand it to be common ground that the s 264 examinations were included in the 2015 Disclosure and the further brief material sent in 2016. The procedural context 1. In purported discharge of the prosecutor's duty of disclosure, the CDPP provided to the accused an unredacted copy of the 2007 Disclosure, a partially redacted copy of the 2015 Disclosure and unredacted copies of the receipts of the service of the 2015 Disclosure and the 2016 brief. The CDPP contended that she was not obliged to provide any further documents relating to the disclosure of the s 264 examinations. 2. The accused's legal representatives contended that the CDPP, as part of the prosecutor's duty of disclosure, was obliged to disclose documents which constituted the various disclosures referred to above, as well as documents which purported to authorise such disclosures, constituted requests for such disclosures or indicated the purpose of such disclosures. By notice of motion filed on 15 April 2019, the accused sought a temporary stay of the criminal proceedings pending disclosure of material identified in a schedule (prayer 1); a permanent stay of the criminal proceedings (prayer 2); in the alternative to prayer 2, that the criminal proceedings be stayed until the prosecution team is comprised of persons who have not had any access to the s 264 examinations (prayer 3); and, in the alternative to prayer 2 and in addition to prayer 3, an order prohibiting anyone who had read the s 264 examinations from giving evidence in the criminal proceedings, assisting the CDPP in their preparation and conduct or being briefed by the CDPP in the criminal proceedings. The schedule set out the documents referred to above, which had been the subject of correspondence between the CDPP and the accused's legal representatives. 3. On 18 April 2018 subpoenas were issued at the request of the accused to the Commissioner of Taxation, the Commissioner of the AFP and the CDPP. They were in substantially the same form and required production of substantially the same documents. Further subpoenas were issued to the Commissioner of the AFP and the CDPP on 2 May 2018. The subpoenas were returnable before me on 10 May 2019. 4. For present purposes it is sufficient to extract the subpoena issued to the Commissioner of Taxation on 18 April 2019, the Schedule to which was as follows: "SCHEDULE Documents within the meaning of the Dictionary of the Evidence Act 1995 (NSW), which: (a) Constitute, record, or refer to: i. the 2007 Disclosure; ii. the 2015 Disclosure; iii. each of the Partial Disclosures; or iv. an Actual Disclosure, (b) To the extent not captured by (a) above, purport to authorise: i. the 2007 Disclosure; ii. the 2015 Disclosure; iii. each of the Partial Disclosures; or iv. an Actual Disclosure, (c) To the extent not captured by (a) or (b) above, record or refer to requests precipitating: i. the 2007 Disclosure; ii. the 2015 Disclosure; iii. each of the Partial Disclosures; or iv. an Actual Disclosure, (d) To the extent not captured by (a), (b) or (c) above, record or refer to the purpose of: i. the 2007 Disclosure; ii. the 2015 Disclosure; iii. each of the Partial Disclosures; or iv. an Actual Disclosure, including, for the avoidance of doubt, any documents that precede the relevant disclosure. Dictionary 19 March 2019 letter is the letter from the CDPP to King & Wood Mallesons dated 19 March 2019 (copy attached). 2007 Disclosure is as defined in the 19 March 2019 letter. 2015 Disclosure is as defined in the 19 March 2019 letter. Actual Disclosure is a communication by or to a Commonwealth Agency of the existence or any of the contents of any of the Kinghorn 264 Examinations, other than the 2007 Disclosure, the 2015 Disclosure or one of the Partial Disclosures. AFP is the Australian Federal Police, ATO is the Australian Taxation Office. CDPP is the Office of the Commonwealth Director of Public Prosecutions. Kinghorn 264 Examinations means the examinations of Mr Kinghorn conducted pursuant to s 264 of the Income Tax Assessment Act 1936 (Cth) on 4 May 2005, 6 May 2005, 18 May 2005, 19 May 2005 and 14 June 2005. Partial Disclosures are the "'partial disclosures following the 2007 Disclosure" referred to in the penultimate sentence of paragraph 4 of the 19 March 2019 letter. Commonwealth Agencies is: (a) the CDPP; (b) the ATO; or (c) the AFP, including each of their officers, employees and agents." 1. Correspondence ensued between the parties following the issue of the subpoenas referred to above. Each of the recipients requested that the accused identify the "legitimate forensic purpose" of the subpoenas. The accused's solicitors responded by letter dated 9 May 2019, relevantly as follows: "4 In June 2018, the Queensland Court of Appeal (QCA) handed down its decision in R v Leach (2018) 334 FLR 224 (Leach). For convenience, a copy of the decision is enclosed. In Leach, Sofronoff P, with whom Philippides JA agreed, held at [105] that "the use of the material by the prosecution constituted a miscarriage of justice", where the material in question was a transcript of a compelled examination, conducted prior to any charges being laid, which had been disclosed to the prosecution by a taxation officer. The accused contends that Leach is applicable authority that raises for consideration fundamental questions about the ability of the accused to obtain a fair trial. 5 Following the QCA's decision in Leach, the accused requested from the prosecution information about and supporting evidence of the dissemination and use of the Kinghorn 264 Examinations material, pursuant to the prosecution's duty of disclosure. To date, the accused has been informed that there have been five "full" disclosures and an unspecified number of "partial disclosures". The CDPP's 19 March 2019 letter, which is annexed to the April subpoenas, states that there were "two full disclosures" to the CDPP, being the "2007 Disclosure", purportedly made pursuant to "section 3E" and the "2015 Disclosure", purportedly made pursuant to "section 3G" (a provision not in force at that time)." 1. The accused's solicitors said that the documents sought in the subpoenas were relevant to identify the persons to whom the s 264 examinations were provided and for what purpose and in what circumstances they had been provided and to what use they had been put. The solicitors continued: "8 It is "on the cards" that the material will materially assist the defence application and hence the defence case because the material sought under the subpoenas will: (a) establish the factual basis of the dissemination of the Kinghorn 264 Examinations material; (b) provide the accused with the means to test the factual assertions made by the CDPP in respect of this issue (in this respect, see [67] of Attorney-General (NSW) v Chidgey (2008) 182 A Crim R 536, citing Gibbs CJ in Alister v R (1984) 154 CLR 404 at 414); (c) demonstrate that the provision of the Kinghorn 264 Examinations material was not permitted or authorised under the taxation legislation; and (d) demonstrate the extent of the use of the Kinghorn 264 Examinations material after it was received at various points in time by the CDPP and the AFP which will directly inform whether the accused can receive a fair trial and, if so, in what circumstances. 9 It is emphasised that to date, the CDPP, with the concurrence of the AFP, has provided selective and incomplete evidence in respect of these matters." 1. Each of the recipients moved on notices of motion to set aside the subpoenas. The evidence adduced in support of the notices of motion and the wording of the notice filed by the CDPP indicated that the sole challenge to the subpoenas was that they lacked legitimate forensic purpose, although challenges to their width were made in oral argument. The CDPP was separately represented for the notice of motion filed on her behalf. Mr Lee appeared on her behalf on the motion (but was not briefed as prosecutor in the trial). The Crown prosecutor played no part in the hearing of the motion to set aside the subpoenas and remained at the back of the courtroom as an observer. No evidence was adduced by any of the applicants as to the difficulty of locating and assembling documents which fell within the subpoenas or the time required to comply with them. 2. Mr Lee contended that the evident purpose of the subpoena was to engage in a "fishing expedition" to ascertain whether there had been any unauthorised disclosure to the CDPP. He contended that the Court ought not allow a subpoena to be used for this purpose when no basis had been established for the allegation. He relied on Attorney-General (NSW) v Chidgey [2008] NSWCCA 65; (2008) 182 A Crim R 536 at [64] where Beazley JA said: "The test for determining whether a party is required to produce documents pursuant to a subpoena was stated by Simpson J (Spigelman CJ and Studdert J agreeing) in Regina v Saleam [1999] NSWCCA 86 at [11], in the following terms: 'The principles governing applications [for an order that documents not be produced] are no different from those governing applications for access to documents produced in answer to a subpoena. Before access is granted (or an order to produce made) the applicant must (i) identify a legitimate forensic purpose for which access is sought; and (ii) establish that it is 'on the cards' that the documents will materially assist his case. So much was established in earlier proceedings brought by this applicant: R v Saleam (1989) 16 NSWLR 14, per Hunt CJ at CL; see also R v Ali Tastan (1994) 75 A Crim R 498 per Barr AJ, as he then was.'" 1. Mr Bhalla, who appeared on behalf of the Commissioner of Taxation and the Commissioner of the AFP, made submissions to similar effect. He referred to authorities which supported the proposition that there must be a rational relevant connection between the material sought and the case that the party seeks to make out based on that material. He also submitted that the definition of "actual disclosures" was so broad that it would cover "peripheral" documents. Mr Bhalla also contended that neither the accused nor the Court required any of the documents which fell within the subpoenas to form a view about whether any of the disclosures were improper in the sense used by the Queensland Court of Appeal in R v Leach [2018] QCA 131; (2018) FLR 224. Consideration The prosecutor's duty of disclosure 1. It is a fundamental tenet of the accusatorial system in criminal proceedings that the Crown must disclose material which, first, is or might be relevant to an issue in the case; secondly, raises a new issue, the existence of which is not apparent from the prosecution case; and, thirdly, holds out a real prospect of providing a lead on evidence in the first two categories: R v Reardon (No 2) (2004) 60 NSWLR 454; [2004] NSWCCA 197 at [46]-[54] (Hodgson JA, Simpson and Barr JJ agreeing); see also Gould v Director of Public Prosecutions (Cth) [2018] NSWCCA 109; (2018) 333 FLR 352 at [4] (Basten JA, Johnson and Adamson JJ agreeing). As was said in Gould v Director of Public Prosecutions (Cth) at [65], following R v Reardon (No 2) at [58] "[t]he duty of disclosure extends to material which might open up useful lines of inquiry to the defence, without any narrow view being taken of what might be relevant". The use of subpoenas to obtain documents not disclosed by the prosecutor 1. The Crown's duty of disclosure is not enforceable directly although the Court has power to grant a stay until the duty is complied with. An accused who contends that disclosure from the Crown is inadequate is entitled to request that subpoenas be issued to obtain the documents in respect of which disclosure is sought: Gould v Director of Public Prosecutions (Cth) at [14], [18] and [19]. The relevance of the documents sought and the accused's legitimate forensic purpose 1. Mr Walker SC, who appeared with Mr Buchen SC and Ms Huxley for the accused, identified the following legitimate forensic purposes for the production of the documents sought on subpoena. He submitted first, that the documents would tend to indicate whether the provisions in the Taxation Administration Act 1953 (Cth) about disclosure of "information" relating to the affairs of a taxpayer had been complied with (the non-compliance ground); and, secondly, that the documents would tend to reveal the identity of persons who had had access to the s 264 examinations in order that it could be determined whether, if the principles enunciated in R v Leach were found to be applicable to the present case, it was possible to quarantine those exposed to the s 264 examinations so that the prosecution of the accused could proceed in the hands of those who had not been privy to them (the Leach ground). As referred to above the primary relief sought by the accused is a permanent stay, the appropriateness of which will depend on whether the accused can demonstrate illegality of a high order such as that which led to that result in Strickland v Director of Public Prosecutions (Cth) (2018) 93 ALJR 1; [2018] HCA 53. The documents sought are also relevant to the application for a temporary stay and, if the trial proceeds, to any application that such evidence should be rejected on the grounds of unfairness or illegality. In oral argument, Mr Walker expanded on the issue relating to the legality of the disclosure by the Commissioner of Taxation under the Taxation Administration Act as assessed by reference to the provisions of that legislation by reference to the 2007 Disclosure, which is referred to in more detail below. 2. I accept Mr Walker's submission that, if either of these matters were to be tested on appeal, it would be necessary for the appellate court to consider the question by reference to a substratum of facts, as found by the trial judge. Disclosure of documents, whether pursuant to the prosecutor's duty of disclosure or on subpoena, is necessary to enable the primary facts relating to the non-compliance and Leach grounds to be determined: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 at [52]–[53] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ). As is apparent from X7 v R [2014] NSWCCA 273; (2014) 292 FLR 57, the appropriateness of a permanent stay of criminal proceedings (being the principal relief sought by the accused in his notice of motion) depends on the "nature and extent of the unfairness": [109] (Bathurst CJ, Beazley P (also at [114]-[115]) and Hidden, Fullerton and R A Hulme JJ agreeing). The onus of establishing the nature and extent of the unfairness falls on the accused, as the applicant for the stay. Non-compliance ground 1. As to the non-compliance ground, Mr Walker contended that the 2007 Disclosure, on its face, did not comply with s 3E of the Taxation Administration Act, which was in force at the time of the disclosure. He referred to s 3E(1) which relevantly provided: "(1) Notwithstanding any taxation secrecy provision, the Commissioner [of Taxation] may disclose information acquired by the Commissioner under the provisions of a tax law to an authorised law enforcement agency officer . . . if the Commissioner is satisfied that the information is relevant to: (a) establishing whether a serious offence has been . . . committed: . . ." 1. The term "authorised law enforcement agency officer" is defined by s 2(1) to mean either the head of a law enforcement agency or an officer of a law enforcement agency authorised in writing by the head of the agency to perform the functions of an authorised law enforcement agency officer under the Act. 2. Mr Walker submitted that no document had been disclosed which enabled the accused to ascertain whether Mr Walton was the Commissioner or whether he had any authority to make the 2007 Disclosure on behalf of the Commissioner. Nor had any document been disclosed to indicate that the Commissioner was satisfied that the information was relevant to establishing whether a serious offence had been committed. Mr Walker also submitted that there was no evidence that each of the five people, other than the CDPP, who received the 2007 Disclosure (who are named on the office minute), was an "authorised law enforcement agency officer". Further, Mr Walker drew my attention to the wording of the purpose of the minute which he submitted was insufficient to establish that the Commissioner of Taxation had reached the degree of satisfaction required by s 3E before the disclosure could be made. 3. In these circumstances, I accept that the issue of subpoenas could not accurately be described as a "fishing expedition" since the documents already disclosed are insufficient to enable the accused to ascertain whether the laws governing the disclosure of information pertaining to his taxation affairs had been complied with by governmental authorities, including the Commissioner of Taxation, and there would appear to be some irregularity, if not illegality, on the face of the 2007 Disclosure. The principle in Blatch v Archer (1774) 1 Cowp 63 at 65 per Lord Mansfield CJ is of significance, namely, that "all evidence is to be weighed according to the proof which was in the power of one side to have produced, and in the power of the other to have contradicted". In effect, the accused is seeking to use the subpoenas to obtain the evidence to prove such non-compliance and illegality as the documents may establish for the purposes of his notice of motion for a permanent or temporary stay. This is a legitimate forensic purpose. Aside from holding the prosecutor to the duty of disclosure, the issue of subpoenas against the Commissioner for the AFP and ATO and the CDPP is the only mechanism available to the accused to obtain such evidence. Leach ground 1. As to the Leach ground, Mr Walker submitted that the extent to which the s 264 disclosures had been made was relevant to the question whether a temporary stay would be sufficient to enable a prosecution team and witnesses to be assembled who had not been privy to the s 264 disclosures or whether a permanent stay was required, as in Strickland v The Queen. 2. Neither the Commissioners for the ATO and the AFP nor the CDPP made any substantive submissions in response to Mr Walker's identification in oral argument of the accused's legitimate forensic purpose in obtaining production of the documents in the schedules to the subpoenas. Although Mr Lee and Mr Bhalla objected to the use of the word "refer" in the subpoenas, neither adduced any evidence of oppression. Nor was there any evidence to indicate that there would be a substantial number of documents which referred to the accused's taxation affairs as part of the disclosures which had no bearing on the legality of the disclosures or the ambit of their subsequent use. The word "refer" is not objectionable per se. Unlike "relating to", it does not require a judgment to be made about a connection between documents in the recipient's possession and the noun to which the documents are said to "relate": see Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573 (Jordan CJ). 3. The question whether a subpoena issued in criminal proceedings ought be set aside involves different considerations to those applicable in civil proceedings. The differences may be particularly relevant where a subpoena is issued at the request of a party who alleges that the Crown has not fulfilled its disclosure obligations. The courts have been astute to point out that the purpose of the prosecutor's duty of disclosure or, where it is used as another avenue to obtain such documents, the issue of subpoenas against the prosecutor or investigating authorities, is, in part, to entitle the accused to form a judgment about whether the law has been complied with. 4. The passage from Attorney-General (NSW) v Chidgey extracted above ought not be read in isolation. Beazley JA continued in the judgment to address the issues to which subpoenas in criminal proceedings gave rise. Her Honour said at [67]: "It is both important and instructive to understand the manner in which Gibbs CJ [in Alister v The Queen (1984) 154 CLR 414] saw this test operating at a practical level. He said, as a continuation of the passage just quoted: 'If, for example, it were known that an important witness for the Crown had given a report on the case to ASIO it would not be right to refuse disclosure simply because there were no grounds for thinking that the report could assist the accused. To refuse discovery only for that reason would leave the accused with a legitimate sense of grievance, since he would not be able to test the evidence of the witness by comparing it with the report, and would be likely to give rise to the reproach that justice had not been seen to be done.'" 1. Beazley JA then addressed the meaning of "on the cards" in the passage extracted above from Attorney-General (NSW) v Chidgey and adopted the test approved by Bell J in Ragg v Magistrates Court of Victoria (2008) 18 VR 300 at [95] in which his Honour said, in the context of a criminal trial: "A legitimate purpose is demonstrated where the court considers, having regard to its fundamental duty to ensure a fair trial that there is a reasonable possibility that the documents will materially assist the defence." Conclusion 1. In the present case, I am satisfied that there is a reasonable possibility that the documents will materially assist the accused's defence, either because they show whether or not the disclosure of his taxation information conformed to the legislative requirements or because they demonstrate the breadth and intensity of the dissemination of his taxation information. Indeed, I did not understand either Mr Lee or Mr Bhalla to articulate any substantive reason why this would not be so, having regard to Mr Walker's submissions by reference to the 2007 Disclosure and the paucity of material on its face to demonstrate compliance with the legislation. 2. In these circumstances, it would not be right to refuse disclosure simply because the documents produced might show that the disclosure was lawful or might not show that it was sufficiently egregious to warrant a permanent stay. To set aside the subpoenas for that reason could create real or apparent injustice and would leave the accused with a legitimate sense of grievance, since he would not otherwise be able to test the legality and extent of the disclosures of information relating to his taxation affairs. Costs 1. Mr Walker sought an order for costs of the notices of motion to set aside the subpoenas. The parties agreed that it would be appropriate for written submissions on the question to be exchanged and the matter of costs determined on the papers. Accordingly, costs will be reserved. Orders 1. At the conclusion of the hearing on 10 May 2019 I made the following orders, for the reasons set out above: 1. Dismiss the notices of motion filed on behalf of the Commissioners of Taxation and the Australian Federal Police and on behalf of the Commonwealth Director of Public Prosecutions to set aside the subpoenas issued at the request of the accused. 2. Reserve the question of costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 May 2019