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Supreme Court 18 October 2019

R v Kinghorn (No 4)

[2019] NSWSC 1420

Fraud & dishonesty
PRACTICE SUBPOENAS CONSIDERATION OF INCONSISTENCY WHETHER WAIVER IMPUTED LEGALITY PARTIES INDEPENDENT ROLE OF PROSECUTOR

Citation: R v Kinghorn (No 4) [2019] NSWSC 1420
Court: Supreme Court of New South Wales
Date: 18 October 2019
Judge(s): Adamson J

Background

The accused faced charges of defrauding the Commonwealth and making false representations to the Commissioner of Taxation, connected to alleged concealment of his control over offshore companies. Central to the prosecution were answers he had given during compulsory examinations conducted by the Australian Taxation Office (ATO) under s 264 of the Income Tax Assessment Act 1936 (Cth), a provision that abrogated his privilege against self-incrimination.

The accused sought a permanent stay of the prosecution, arguing that his s 264 examination material had been unlawfully disseminated to the Australian Federal Police (AFP) and the Commonwealth Director of Public Prosecutions (DPP), and that this breached fundamental principles protecting an accused from being compelled to assist the prosecution. To establish the factual foundation for the stay, he subpoenaed documents from the ATO Commissioner, the AFP Commissioner, and the DPP. Those subpoenas survived earlier motions to set them aside.

Each of those bodies then filed privilege motions, seeking to protect production of listed documents on grounds of legal professional privilege. The accused contested those claims on multiple bases, including that the disclosures were unlawful (negating privilege), that there had been imputed or partial waiver, and that the Crown's opposition to the stay was inconsistent with maintaining privilege. Separately, the Crown restructured the indictment during proceedings, ultimately discontinuing the defrauding charge and proceeding only on the false representation charges.

  • Whether the ATO, AFP, and DPP had established a prima facie claim for legal professional privilege over the disputed documents
  • Whether privilege was lost because the disclosure of s 264 examination material to the AFP and DPP was unlawful (the "crime or fraud" exception)
  • Whether the Crown's opposition to the accused's stay application amounted to imputed waiver of privilege, on the basis of conduct inconsistent with maintaining it
  • Whether partial disclosure of some documents had waived privilege over related undisclosed documents
  • Whether objections by the DPP to documents held by the AFP and ATO (third parties) were governed by the common law or the Evidence Act 1995 (NSW), particularly in light of UCPR r 1.9(4A)
  • Whether the DPP could claim privilege as a "client" over internal DPP documents
  • When litigation was sufficiently anticipated to ground a claim for litigation privilege
  • The scope of the Court's inspection powers under s 133 of the Evidence Act 1995 (NSW)
  • Whether the ATO was entitled to redact "protected information" under s 355-75 of Schedule 1 to the Taxation Administration Act 1953 (Cth)

Decision

Privilege claims generally. The Court worked through the claims of the ATO, AFP, and DPP document by document, assessing whether each body had discharged the evidentiary onus of establishing a prima facie claim for privilege. The analysis distinguished between legal advice privilege (protecting confidential communications for the dominant purpose of legal advice) and litigation privilege (protecting communications for the dominant purpose of litigation that was reasonably anticipated). The Court also considered when, in the timeline of the investigation, litigation had been sufficiently anticipated to engage privilege.

The unlawfulness argument. The accused argued that because the disclosure of his s 264 material to the AFP and DPP was unlawful, privilege could not attach to documents produced as a consequence. The Court examined the statutory framework governing disclosure of taxation information, including the relevant provisions of the Taxation Administration Act 1953 (Cth) and the Income Tax Assessment Act 1936 (Cth). The Court assessed whether disclosures fell within the exception permitting disclosure in the performance of an officer's duties. The legality or otherwise of specific disclosures was central to determining whether the crime-fraud exception, or an analogous principle, defeated privilege over documents derived from those disclosures.

Imputed waiver. The accused contended that the Crown's active opposition to the stay application, which depended on the Court accepting that the prosecution was legitimate, was inconsistent with the Commonwealth authorities simultaneously asserting privilege over documents that might illuminate how the s 264 material had been used. The Court considered the Mann v Carnell principle of imputed waiver, which arises where a party's conduct is inconsistent with maintaining privilege. The Court also examined whether the DPP and the investigative bodies should be treated as sharing a common interest for the purpose of privilege analysis, given the accused's submission that they were effectively one prosecutorial enterprise rather than independent actors.

Procedural and structural issues. The Court addressed the construction of UCPR r 1.9(4A) in determining whether the DPP's objections to production by the AFP and ATO were governed by the common law or the Evidence Act. The Court also considered whether the DPP, in her own right, could be treated as a "client" capable of holding privilege over internal DPP documents. On the protected information question, the Court accepted evidence that part of one ATO document identified an entity unrelated to the proceedings, and held that the ATO was entitled to redact that portion under s 355-75 of the Taxation Administration Act.

Orders Made

• The Commonwealth authorities provide access to the accused over documents in accordance with these reasons

The judgment indicated that the Court proposed to order the Commonwealth authorities to provide the accused with access to documents in accordance with the reasons, but the matter was to be relisted for finalisation of the form of orders and further directions. The Commonwealth authorities had requested a pause before formal orders were made to permit consideration of a possible appeal under s 5F of the Criminal Appeal Act 1912 (NSW).

Key Takeaways

  • The lawfulness of disclosures of compulsorily obtained examination material under s 264 of the Income Tax Assessment Act 1936 (Cth) is directly relevant to whether privilege attaches to documents generated from those disclosures: an unlawful disclosure may negate privilege over derived material.

  • Imputed waiver under Mann v Carnell requires conduct that is genuinely inconsistent with maintaining privilege; the mere fact that a prosecuting body opposes a stay application does not automatically constitute such inconsistency, but the relationship between the Crown's litigating stance and the privilege claims requires careful analysis.

  • The independent roles of the DPP, AFP, and ATO are legally significant in privilege analysis: the Court scrutinised whether these bodies share a sufficiently common interest to treat their documents as part of a single privileged enterprise, rather than as separate holders of distinct claims.

  • Under s 355-75 of Schedule 1 to the Taxation Administration Act 1953 (Cth), a taxation officer cannot be compelled to disclose "protected information" to a court unless necessary to carry into effect a taxation law; where a document contains protected information relating to an entity unrelated to proceedings, the ATO is entitled to redact that portion.

  • The construction of UCPR r 1.9(4A) raises a distinct question as to whether objections by a third party (such as the DPP) to production by the recipient of a subpoena are governed by the common law rules of privilege or by the Evidence Act 1995 (NSW), and the Court treated this as a substantive issue warranting separate analysis.

Legislation and Cases Referenced

Legislation
- Income Tax Assessment Act 1936 (Cth), ss 16, 264
- Taxation Administration Act 1953 (Cth), ss 355-30, 355-75 (Sch 1)
- Evidence Act 1995 (NSW), ss 117, 118, 119, 122, 125, 126, 131A, 133
- Criminal Procedure Act 1986 (NSW), s 20
- Criminal Appeal Act 1912 (NSW), s 5F
- Director of Public Prosecutions Act 1983 (Cth), ss 6, 9
- Australian Federal Police Act 1979 (Cth), ss 6, 60A
- Criminal Code Act 1995 (Cth), ss 134.2, 135.1, 137.1
- Crimes Act 1914 (Cth), s 29D
- Uniform Civil Procedure Rules 2005 (NSW), r 1.9(4A)

Key Cases
- Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66
- Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997)