Allen, Allen & Hemsley v. Deputy Federal Commissioner of Taxation & Ors

Judges:
Pincus J

Court:
Federal Court

Judgment date: Judgment handed down 2 September 1988.

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Pincus J.

Since late last year, the second respondent, Mr Fitton, has been trying to have access to the applicants' 1981 trust account records under sec. 263 of the Income Tax Assessment Act 1936, in his capacity as a Tax Department auditor. He has had no success, having seen not a single one of what is said to be a very large number of entries. The applicants (``Allens''), although they have no doubt had their trust accounts examined by auditors often enough in the past, object to examination by this particular auditor, finding an almost insuperable difficulty in his doing so. It is that, to fulfil their obligations to their clients, Allens would have to conduct a careful examination of each entry, perhaps consulting with the responsible partner and examining the relevant file, to determine whether such entry is the subject of legal professional privilege. Their principal case is that such an examination would take so long that, considering the purposes for which Mr Fitton desires to examine the records, his decision to seek to do so was unreasonable. Allens also take other points, perhaps the most important of which is the suggestion that Mr Fitton had no proper authority from the third respondent (the Commissioner) to seek access.

Section 263, as amended in 1987, reads as follows:

``(1) The Commissioner, or any officer authorized by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers.

(2) An officer is not entitled to enter or remain on or in any building or place under this section if, on being requested by the occupier of the building or place for proof of authority, the officer does not produce an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under this section.

(3) The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, under subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section.''

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Allens bring the dispute before this Court by way of an application under the Administrative Decisions (Judicial Review) Act 1977, seeking an order of review of four decisions said to have been taken. Of those, the fourth was added by amendment during the hearing, over the objection of counsel for the respondents. Permitting Allens to attack the fourth decision involved the grant of an extension of time, which, again over the respondents' opposition, I decided to grant during the hearing. The reasons for allowing the amendment and granting the extension of time are set out below.

There is a cross-claim for declarations and injunctive relief.

Mr Fitton, in seeking access to the trust account records, proceeded in some respects in a slightly muddled way, creating confusion as to what decisions he in fact took; that confusion was added to by the terms of reasons given under sec. 13 of the Judicial Review Act, making assertions as to Mr Fitton's purposes which he contradicted in his evidence. Although I am quite satisfied that Mr Fitton acted honestly, the difficulties to which I have alluded have created doubt as to the nature of and reasons for the decisions taken.

According to the application, there were three decisions to seek access, which may be summarised as follows:

• (i) 27 October 1987: Access to trust account ledgers for the period 1981 to date;
• (ii) 3 November 1987: Access to trust account ledgers for the 1981 financial year; and
• (iii) 29 April 1988: Access to trust account records for the 1981 financial year.

It seems clear enough on the evidence that the second decision superseded the first and the third the second, and in that sense the first and second decisions are now academic. As was pointed out on behalf of the respondents, however, the applicants declined to allow access sought under the first and second decisions, and if those decisions were properly taken, an offence may have been committed by one of the applicants. While counsel agreed that there is no need to deal with the legality of the first decision, the matter was argued on the basis that both the second and third decisions are still live issues. With regard to the second decision, that does not appear to me to be so, except as to the point mentioned - the possibility of an offence having been committed. There is no suggestion, however, of any intention to launch prosecutions. If there were, it would be unusual to allow these civil proceedings to be used as foundation for them: cf.
Sankey v. Whitlam (1978) 142 C.L.R. 1 at pp. 25-26 and
Imperial Tobacco Ltd. v. Attorney-General (1981) A.C. 718.

It will be noticed from the summary set out above that, according to the application, the second decision related to trust account ledgers and the third to trust account records. The difference is of some importance, as the latter description encompasses a much larger volume of material. Until the third decision was taken, the respondents' requests for access referred, at least sometimes, to ``ledgers'' by which I think was meant merely ``books'', although of course not all accounting books are properly called ledgers. I do not regard Mr Fitton as having now on foot two concurrent requests for access, namely that made on the second and that made on the third decision; it appears to me that the latter is the only current request. That conclusion, in a sense, makes the respondents' case more difficult: the minute examination of the records, searching for privileged entries, which Allens propose to make, must presumably be less onerous, if only the ledgers have to be looked at. I propose not to grant any relief in respect of the first and second decisions, but to deal with the third and fourth only.

The fourth decision was taken by the third respondent (the Commissioner) and was to issue an authority under sec. 263 of the Income Tax Assessment Act to Mr Fitton.

History of the dispute

The essential point of the case is the application of the doctrine of legal professional privilege. Without formally conceding the point, the respondents argued on the assumption that the right of access given by sec. 263 is subject to the application of that doctrine. The applicants' main argument is that the task of ascertaining whether any of the 1981 entries discloses (directly or otherwise) privileged information would take such time and effort that to allow Mr Fitton access to those entries which such an examination might show not to be priviledged would be utterly

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impracticable; his decision to seek access is therefore said to be unreasonable. Resolution of that problem depends in a large part upon consideration of questions of principle, rather than on the particular facts of this case; for if the applicants are right, it is hard to stop short of the conclusion that, in general, a large scale examination of solicitors' financial records is not permissible under sec. 263 of the Income Tax Assessment Act. But there is a need to set out, at least in a summary way, the exchanges between the parties which have in the end given rise to this litigation.

Mr Fitton interested himself in what he described as an ``international tax avoidance scheme'' during the course of an audit of the taxation affairs of a number of companies and individuals, which he began at the end of July 1987. He ``came to believe'' during the audit that Allens had acted as solicitors for the companies in relation to the transactions forming part of the scheme, and that they were involved in the promotion of the same or similar schemes with other taxpayers. His suspicion was that Acceptor Enterprises Ltd. (``Acceptor'') may also have been involved, as well as an entity called European Business Consultants (``EBC''). Mr Fitton was cross-examined, but the assertions I have mentioned were not challenged. During October 1987, Mr Fitton had contact with Allens in relation to obtaining access to certain files concerning the companies and an individual, the subject of the audit I have mentioned. It is unnecessary to recount the details of that; I mention only Mr Fitton was unable to obtain five of the files. One was missing, and four others were said to have been given to a former partner in Allens. When these matters were ascertained, Mr Fitton said to Mr Magid of Allens:

``Could you advise me of the numbers of cases you have handled that have been associated with either EBC or Acceptor?''

Mr Magid replied:

``I don't think there are as many as there used to be.''

It appeared from Mr Fitton's evidence that he regarded that as an evasive answer; he immediately asked for access to Allens' trust ledger ``... for the years 1981 to 1987 to determine what cases have been involved with EBC or Acceptor''.

Mr Magid asked that that matter be deferred and that was agreed to by Mr Fitton. On 30 October 1987, Allens wrote to the first respondent (the Deputy Commissioner), in effect rejecting the request as unreasonable on the ground I have mentioned above, namely that it would be a great deal of trouble ``to review at partner level all material to be supplied, to determine what portions of it might be subject to a claim of privilege''.

On 3 November 1987, officers of the department, including Mr Fitton, went to see Allens again and spoke to a Mr Lind of Allens about access. Each of Mr Fitton and Mr Lind has given his version of conversations which occurred, on that day and later, between them; Mr Lind's account is much more succinct. It does not appear to me that much turns on the differences between the two versions, in view of the course I propose to take, namely to decide the matter of access only with respect to the third decision and not to deal with the validity of the first and second requests for access, which were the subject of conversations I shall discuss. In particular, it is not of any great consequence whether Mr Lind or Mr Fitton is right about the terms of a request for access admittedly made on 3 November 1987: Mr Lind says that Mr Fitton sought access to ``the solicitors' trust accounts of Allen Allen & Hemsley'', whereas Mr Fitton's recollection is that the reference was to ``your trust ledger''. Mr Fitton gave evidence before me, and appeared to me to do so honestly. Mr Lind gave no oral evidence. When Mr Fitton set out in an affidavit his account of the relevant conversations, differing somewhat from the account which had been given previously by Mr Lind in his affidavit, he said as to the latter:

``While I do not accept that the forms of words and the sequences of comments are in all cases correct, I agree that his affidavit accurately sets out the effect of the conversations at which both he and I were present except as follows...''

There were then set out some minor discrepancies between his recollection and that of Mr Lind; but I do not take it that Mr Fitton intends one to disregard his sworn account of the conversations except in the particular respects just alluded to.

On the whole, and not without doubt, I think I should accept Mr Lind's recollection on the

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point just mentioned - i.e. that the request made on 3 November related to trust accounts and not merely ledgers. I think it probable that, from time to time, Mr Fitton and other persons concerned, including Allens' personnel, referred without discrimination to ``ledgers'', ``records'' and ``accounts''; an example is the letter of 30 October 1987, to which I have referred, which speaks in the first paragraph of a request to seek access to trust account ledgers, but elsewhere speaks about accounting records generally.

According to Mr Lind's recollection, he told Mr Fitton on 3 November that he understood that the reason for his seeking access was:

``... to see whether you can identify clients of the firm who dealt with Acceptor Enterprises and European Business Consultants.''

Mr Lind says that Mr Fitton replied:

``The purpose is generally for the purposes of the Income Tax Assessment Act and includes the purpose you have indicated. I seek access immediately.''

When questioned about this answer, Mr Fitton said in effect that he did not want to restrict his search to payments ``going to Monaco and to EBC and Acceptor'':

``I was aware of 750 companies that EBC had set up and if I saw any payments to those companies I would consider that to be along the same lines.''

Although Mr Fitton was not completely consistent on this point, I am satisfied that the true purpose of his proposed examination of the trust account records was confined to examination of dealings with EBC and Acceptor and companies associated with them. In a statement of reasons for the purpose of sec. 13 of the Judicial Review Act dated 29 April 1988, Mr Fitton suggested the contrary; he said, in effect, that he decided to have access to the trust account records of Allens for purposes including:

``3. To determine whether entries were made which record payments or receipts that may be directly or indirectly associated with arrangements to avoid liability to income tax.

4. To ascertain the names of clients of Allen Allen & Hemsley that may possibly be involved in arrangements to avoid liability to income tax.''

At first sight, it seems improbable that these expressions could have been used, even with legal advice, if Mr Fitton's true purpose related only to Acceptor and EBC. However, I think his oral evidence was substantially accurate, although affected by the passage of time, and that he did not, in truth, have a purpose of looking for all transactions relating to avoiding liability to income tax, as opposed to transactions connected with EBC and Acceptor. I agree with the applicants' contention that the sec. 13 reasons and Mr Fitton's evidence cannot both be correct; I prefer the latter.

To return to the narrative, Mr Lind told Mr Fitton on 3 November that he could not give access immediately and was refusing access until he had an opportunity to consider the matters set out in the letter of 30 October, to which I have referred. Mr Fitton enquired whether Mr Lind would regard items relating to Acceptor or EBC as privileged. Mr Lind said:

``Privilege is like a horse: you know one when you see one.''

In response to an inquiry as to how much time was needed to determine if any entries were privileged, Mr Lind said, among other things:

``Perhaps by the end of the week would be a reasonable time.''

The end of the week was Friday, 6 November.

On 5 November Mr Lind told Mr Fitton that a search would be made of the ledger for the 1981 year to find any payment to EBC or Acceptor. Mr Fitton did not then accept that proposition but agreed to consider it. He told Mr Lind he would call on the following Monday to have access.

On 6 November Mr Lind told Mr Hassarani, another Tax Department employee, that a check had been made of the ledger and no record had been found of any payment to Acceptor or EBC.

On the next Monday, 9 November, Mr Fitton renewed his request for access and Mr Lind replied:

``We have received conflicting legal advice and will seek further advice tomorrow I

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will let you know as soon as possible what action we propose to take.''

He also told Mr Fitton that ``para-legals'' had gone through the 1981 trust ledger and part of the 1982 year and had found no reference to EBC or Acceptor; Mr Fitton replied, in effect, that he wished to look for himself.

During the hearing, Mr Gleeson Q.C., with whom Dr Flick appeared for Allens, asked Mr Fitton if he understood Allens to be a reputable firm of solicitors. Mr Fitton replied: ``From my point of view, no'', giving as his reason that they had been involved in a number of schemes and that:

``... they were giving more than just legal advice, they were actually encouraging people to engage in activities that were most immoral in my opinion.''

At least as a general proposition, the right of the Commissioner to have access under sec. 263 does not depend upon his holding an unfavourable opinion of persons whose records are being searched, nor is there a sliding scale of rights of access depending upon the standing or reputation of those whose records are being searched. It is my opinion that the intention of sec. 263 is that, subject to its not being unreasonable in the Wednesbury sense, the Commissioner may examine records relevant to his administration of the tax legislation himself, or by one authorised by him to do so; he is not obliged to abandon attempts to obtain access upon being informed by those in charge of the records that they contain nothing relevant to the Commissioner's purposes.

Mr Fitton, having told Mr Lind that he wanted to see the ledgers himself, asked how much of the ledgers have been checked - meaning, checked for privilege. Mr Lind replied:

``None, I would like to obtain legal advice first. Each entry would have to be looked at from the point of view of the nature of the advice given.''

Mr Fitton:

``But you wouldn't know the nature of the advice. Only the partner who dealt with the case would know that and most are either unavailable or are no longer with the firm.''

Mr Lind:

``Yes, some are dead also.''

Mr Fitton then told Mr Lind he would be back formally to demand access. On 11 November Mr Lind told Mr Fitton that letters would be delivered explaining Allens' position.

Allens wrote two letters to the Deputy Commissioner, each dated 11 November, saying in effect that access was refused on the ground of legal professional privilege and that many of the entries in the trust accounts were confidential. Allens sought reasons under sec. 13 of the Judicial Review Act and, after months of cogitation on the part of the respondents, that produced the letter of 29 April, to which I have referred above. In the meantime, the Commissioner had issued to Mr Fitton a new authority to exercise ``all powers under: Section 263 Income Tax Assessment Act 1936...'', which authority was dated 6 April 1988.

On 29 April 1988, the same day as that on which the sec. 13 reasons were given, the respondents' solicitor wrote to Allens requesting that they identify entries in the 1981 trust account records claimed to be subject to legal professional privilege and the basis of that claim; the letter also said that if the lists were not received within 14 days, officers would attend on 16 May to have access to the 1981 trust account records.

Mr Fitton decided on 29 April 1988 to seek access again; in his affidavit he speaks of access to ``ledgers'', but I accept that, as stated in the letter of 29 April to which I have referred, the decision was to have access to trust account records. I accept the submission of Mr Gleeson that the cross-claim amounts to an admission, on that point.

On 13 May 1988 Burchett J. issued an interlocutory injunction, restraining the first and second respondents from seeking access to the 1981 trust account records until further order, and ordering that the respondents pay the costs.

It will be clear from what I have already said that before the third decision was taken on 29 April 1988, Allens had contended, in a general way, that determination of questions of legal professional privilege would be burdensome. In these proceedings, affidavit evidence was filed on behalf of Allens, making more detailed assertions in that direction. The point was taken on behalf of the respondents that only information available to the decision-maker at or before the time of making the decision could

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be relevant to the question of the validity of the decision and that later explanations of facts relevant to privilege were inadmissible. I expressed the view, to which I adhere, that the more detailed explanation of the difficulties attending the grant of access is at least relevant to the form of the relief which should be granted if the cross-claim succeeds.

Extension of time

I have mentioned above that during the hearing Allens sought to make amendments so as to attack the Commissioner's decision to issue the authority in favour of Mr Fitton dated 6 April 1988. Mr Rayment argued that an amendment should not be allowed, as an application attacking that decision would be out of time, and time should not be extended.

It is true that the making of the decision in question was within the knowledge of Allens well before the application for amendment was made. It is also true that Mr Fitton has acted on the authority dated 6 April 1988 in other matters, and would no doubt be inconvenienced if it were held to be invalid now.

As against that, the respondents have proceeded in this matter in a way calculated to create some confusion and difficulty for Allens. Mr Fitton has taken a series of three decisions, each being perhaps prompted by doubts about the validity of its predecessor. Added to that is the fact that the reasons given under sec. 13 of the Judicial Review Act were not, in my view, accurate, but misleading; I have accepted Mr Fitton's oral evidence that his purposes did not include a general search for entries relating to tax avoidance, although a reading of the sec. 13 reasons would make one think that doing so was one of the purposes. I have taken these matters into account in determining that I should exercise my discretion in favour of the applicants as to the amendment and the question of extension of time. I have also regarded it as being a matter in favour of the applicants, on this aspect, that the validity of the authority issued on 6 April 1988 is a question of general importance and one closely connected with other issues in the case.

Privilege

Mr Gleeson emphasised what might be called the civil liberties aspect of the case. It does not seem to me, however, that help in deciding any of the questions raised before me is to be gained from approaching them with a particular level of indignation. It is desirable to protect citizens' access to legal assistance untrammelled by State interference; it is also desirable to make it possible to ascertain tax liabilities where those liabilities are, or may be, dependent upon transactions effected through solicitors. One of these ends must give way, where disclosing the details of a transaction effected on legal advice tends to reveal the nature of the advice.

On the applicants' argument, privilege throws up an obstacle in the path of the tax authorities, of a kind which could also arise in litigation, for example, in giving discovery in a damages claim for breach of contract to enter into a solicitors' partnership. The second respondent wants to search 1981 trust account records, looking for transactions of certain kinds. The applicants say those transactions, if there are any, are included amongst very numerous other transactions, and that to examine each one to decide whether the existence of privilege precludes disclosure would be an onerous task.

Not its least onerous aspect would be to determine, as a matter of law, what kinds of trust account records are privileged; then one would need to consider whether each of the thousands of entries in question passed the test. Added to that is the daunting prospect, emphasised by the applicants' counsel, of having to contact hundreds or perhaps thousands of clients to seek a waiver of privilege. Further, it is argued that, to ascertain whether all or some of the entries are privileged, it will be necessary to consult the numerous partners responsible for the relevant files, some of whom are no longer with the firm.

In short, it is rather impracticable to ascertain the status of the entries, as to privilege, in such a fashion as is proposed.

If the process of examination of the entries as discussed on behalf of the applicants is truly necessary, one must, in my view, lean towards the conclusion that only in an unusual case can it be other than an unreasonable course for the Commissioner to search for entries of a particular kind amongst those in a solicitor's financial records. It appears to be necessary, then, to consider in the first place what is the scope of the privilege as to trust account

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records; no doubt particular disputes as to whether privilege attaches to an entry or class of entries can be decided as (and if) they arise.

One starts from the proposition that documents or entries which are privileged are protected not only in the hands of the solicitor but also in those of the client. The privilege is that of the client, not the solicitor, so that if information is privileged, the client has just as much right to resist its production as has the solicitor - indeed, more right, because it is the client, not the solicitor, who may waive the privilege. Suppose a client consults a solicitor and receives a written advice recommending that, for reasons stated in it, the client enter into a series of monetary transactions. Prima facie, neither the client nor the solicitor may be forced to give up the written advice or any copy of it, but does the same protection apply to documents effecting or recording the transactions themselves?

One approach to the problem of defining the scope of privilege is to proceed from the assumption that, except in so far as the High Court has expressly rejected older statements as to the scope of the privilege, such statements continue to be authoritative: cf.
Packer & Ors v. D.F.C. of T. 84 ATC 4666 at p. 4679; (1985) 1 Qd. R. 275 at p. 295, where that technique is used. I incline, on the other hand, to the course of assuming that the High Court's recent analyses of the topic must constitute the main source of the relevant principles.

The first of the three main High Court cases is
Grant v. Downs (1976) 135 C.L.R. 674, relating to privilege in the course of litigation. In the major judgment, that of Stephen, Mason and Murphy JJ., it is said (at p. 686) that:

``An individual seeking legal advice cannot be required to disclose the information he communicated to his legal adviser nor the nature of the advice received; nor may the legal adviser disclose it. However, a litigant is, of course, bound to disclose his own knowledge of relevant facts.''

Applying that statement, the individual seeking the advice I have postulated cannot be asked what he told the solicitor about transactions into which he had entered or proposed to enter, but may be asked about the transactions themselves. I would also infer from this dictum that anyone who effected the transactions, including the solicitor, may also be asked about them, if that information is relevant in the course of litigation. Extra-curially, the same principles would apply.

The second case is
O'Reilly & Ors v. Commr of the State Bank of Victoria & Ors 82 ATC 4671; (1983) 153 C.L.R. 1. There, Mason J. (as his Honour then was) said at ATC p. 4680; C.L.R. p. 22 that:

``Legal professional privilege is a privilege which protects from disclosure by the solicitor, in the absence of the consent of the client, confidential communications between the two...''

His Honour added a little later:

``... if communications in written form are to be privileged they must still be confidential communications between solicitor and client made for the purpose of advice or for the purpose of use in existing or anticipated litigation. The documents must come into existence for, and be prepared for, that purpose.''

So, a written communication not made for the purpose of advice or litigation - e.g. directing the solicitor to send some money to a third party - would not be privileged; nor would the documents evidencing the carrying out of that instruction.

The learned Judge then went on to discuss certain contracts and the like, which were in issue in that case, the subject of a notice addressed to a solicitor, Mr Perry. His Honour said (at ATC p. 4681; C.L.R. p. 23):

``... there is real doubt whether all the documents involve confidential communications between solicitor and client or whether instead they are documents which merely evidence various transactions. In relation to documents received by Perry the test is not whether they were received by him for the purpose of tendering professional legal advice, but whether they were brought into existence for that purpose.''

Without going into detail, I observe that it is clear that the test so laid down would not hold to be privileged all documents which have in the past been so held, e.g.
Davies v. Waters 152 E.R. 257. I draw particular attention to his Honour's reference to documents which ``merely evidence various transactions''. After

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further reference to authority, including Grant v. Downs, his Honour remarked (at p. 24):

``The privilege cannot attach to contracts, agreements and extracts of other transactions. I am unable to perceive how they could have been brought into existence for the purpose which is the central element of the privilege claimed.''

Gibbs C.J. agreed to the answers proposed to the questions in the case relating to legal professional privilege by Mason and Wilson JJ. and ``could not usefully add to what they have said on the matter'' (at ATC p. 4675; C.L.R. p. 14). Murphy J., while dissenting on the question whether the privilege was confined to judicial or quasi-judicial proceedings, remarked (at ATC p. 4683):

``The privilege does not attach to contracts, conveyances, declarations of trust or other transactions or arrangements, even if they have come into the hands of a solicitor for legal advice.''

That statement of opinion is consistent with what Mason J. said.

The third case in the series is
Baker v. Campbell 83 ATC 4606; (1983) 153 C.L.R. 52. The question of the sort of documents and statements the privilege catches was not directly in question there, but some of the Judges treated that point as bearing upon the principal issue, namely whether the privilege arose other than in judicial or quasi-judicial proceedings. Murphy J. made a remark similar to that just quoted (at p. 4624):

``The privilege does not attach to documents which constitute or evidence transactions (such as contracts, conveyances, declarations of trust, offers or receipts) even if they are delivered to a solicitor or counsel for advice or for use in litigation.''

Wilson J. (at p. 4629) referred to:

``... the extension of the privilege more than a century ago... beyond communications between the client and his professional adviser in relation to pending or anticipated litigation to embrace any communications undertaken with the object of seeking or giving legal advice...''

That formulation would not include privilege for transactions, whether or not entered into on legal advice.

Two other members of the majority in Baker v. Campbell made statements relevant to the present point. Deane J. at ATC p. 4639; C.L.R. p. 112 referred to the privilege as one which:

``... protects a person from disclosure of oral or written confidential communications, between himself and his solicitor or barrister, made or brought into existence for the sole purpose of seeking or giving advice or for the sole purpose of use in existing or anticipated litigation...''

That statement of the privilege would not include transactions, whether or not effected on legal advice.

Dawson J. regarded the statement of the communications to which the privilege applies as an important matter for the purpose of solving the principal problem before the Court. His Honour said (at p. 4645):

``The problem, although one of basic principle, should not be seen to have a greater significance than it in fact has. In the first place, those communications to which legal professional privilege attaches are closely confined and the extent to which the privilege could constitute an impediment to administrative or executive investigations is limited...

Legal professional privilege attaches only to communications made for the purpose of giving or receiving advice or for use in existing or anticipated litigation. Moreover, if the communication in question is in the form of a document submitted by a client to his solicitor for use in existing or anticipated litigation, privilege will attach to it only if it comes into existence solely for that purpose. The privilege cannot operate to put beyond the reach of the law documentary or other material which has an existence apart from the process of giving or receiving advice or the conduct of litigation... There is no privilege for physical objects other than documents and there is no privilege for documents which are the means of carrying out, or are evidence of, transactions which are not themselves the giving or receiving of advice or part of the conduct of actual or anticipated litigation.''

There is thus, in these recent High Court decisions, ample authority tending against the

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proposition that documents giving effect to or evidencing transactions carried out on legal advice are privileged; I have found nothing in them pointing in the contrary direction.

In Packer & Ors v. D.F.C. of T. (supra) this precise problem arose; that is, the issue was whether trust account entries were privileged as tending to disclose the nature of advice given. Andrews S.P.J., as his Honour then was, referred to evidence from the solicitor concerned that disclosure of entries in the ledgers ``would tend to reveal the nature of the legal advice confidentially given by his firm as solicitors'' (ATC p. 4667; Qd.R. p. 276). His Honour remarked:

``Disclosure of the nature of a transaction or matter in respect of which legal advice is sought or given is not privileged unless the disclosure reveals the communication itself, which may occur in the case of detailed bills of costs, for example''

(emphasis added).

McPherson J. remarked, at ATC p. 4674; Qd.R. p. 287:

``It has long been acknowledged that the justification for recognising legal professional privilege is the public interest in the proper administration of justice according to law... No such interest is raised by entries in a solicitor's trust account ledger except to the extent that such entries record communications referable to the relationship of solicitor and client in a professional sense''

(emphasis added).

His Honour also said, at ATC p. 4675; Qd.R. p. 289, referring to the trust account ledger card:

``It may be another matter whether they may not indirectly disclose the nature of the instructions given or received... To make good a claim to privilege on that ground it would, at the very least, be necessary that, in depositing or withdrawing or expending funds held in those accounts, the solicitors should have been acting in a character to which their peculiar skills and knowledge as legal advisers and assistants were critical or at least relevant. The acts of paying or investing or transmitting money, do not necessarily wear that aspect because done by a solicitor...''

In so far as this passage suggests that the depositing or withdrawing or expending of funds can be a matter of legal professional privilege, where the solicitor exercises his legal skills in the process, I cannot reconcile it with the views I have quoted from the High Court cases. The notion that if transactions are effected on legal advice, they are privileged, is inconsistent with those views.

Shepherdson J. said (at ATC p. 4679), in effect, that whether trust account ledgers are privileged:

``... will depend on the particular ledger and whether or not that ledger is written up in such a way that it records the advice given by the solicitor to the client''

(emphasis added).

In my opinion, only in a most unusual case would an entry in a trust account ledger be privileged. I suppose any document whatever could have written on it a memorandum of legal advice which has been given or is to be sought, so that in that sense a particular entry may in theory be privileged. Equally, in the client's own financial records such entries may be found. That does not produce the result that the client is, in general, entitled to refuse access to his financial records under sec. 263, nor that the solicitor is so entitled. I do not stay to consider whether that is a desirable state of the law - a point irrelevant to the case before me.

Reasonableness

It was argued for the applicants that unreasonableness is relevant in two ways.

Firstly, as Mr Gleeson Q.C. emphasised in his reply, the contention was that on the proper construction of sec. 263 there must be a reasonable proportionality between the purpose and the manner of the exercise of power.

Although such a doctrine may be relevant in considering the conformity of certain purported exercises of legislative power to the limits set by the Constitution, it does not appear to me that the contention gives a proper construction to sec. 263. The general rule restricting interference, in administrative law proceedings, on the ground of unreasonableness is still that laid down in
Associated Provincial Picture Houses v. Wednesbury Corporation (1948) 1 K.B. 223 at p. 230:

``It is true to say that, if a decision on a competent matter is so unreasonable that no

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reasonable authority could ever have come to it, then the courts can interfere.''

That is a severe test. As Mr Rayment Q.C. (with whom Mr Robertson appeared for the respondents) argued, Mr Gleeson's contention was a plea for a widening of the permissible grounds of review. Ordinarily the charge of unreasonableness is laid against administrative action sought to be justified by some statute which on its face permits interference with a citizen's rights. As far as I have been able to discover, the test of ``reasonable proportionality'' has never been applied in determining the validity of such action. If it were, that must lessen the burden on those challenging administrative action for, as I understand the submission, acceptance of it would involve the Court's holding invalid any attempt to gain access which, in the Court's opinion, exceeded reasonable proportionality.

The Wednesbury test, on the other hand, which is in effect given statutory expression in sec. 6(2)(g) of the Judicial Review Act, directs attention to the possible range of decisions which a reasonable authority could have made, not to the Court's opinion as to what was the appropriate decision. Of course, in considering that point, a suggestion that the decision taken exceeded the reasonable necessities of the occasion must receive attention. But I do not accept that there is a special test of reasonableness, to be applied under sec. 263, along the lines suggested by Mr Gleeson.

The second way in which an argument based on reasonableness was used was, of course, one using the Wednesbury test itself. The test was recently reviewed in the Full Court in
Minister for Arts Heritage and Environment v. Peko-Wallsend Ltd. (1987) 75 A.L.R. 218 at p. 255.

Standing in the way of the applicants' obtaining a finding that no reasonable person could have come to the decision attacked is the fact there is, in essence, nothing in support of it except that the applicants, being a substantial firm of solicitors, have made numerous entries in their trust records for the relevant year. It was not suggested that Mr Fitton has any other than a proper purpose in seeking access, nor is it proved that his doing so will necessarily be futile from the Commissioner's point of view, nor is it said that it is clear that there is no such scheme as that he claims to wish to investigate. It is not suggested that, because of the decision in Baker v. Campbell (supra), solicitors' trust account records are immune from access under sec. 263; the point is simply that there is a very large number of entries - over 11,000 payments are recorded and Mr Fitton desires to see records of receipts as well.

It is not easy to find, at least in this country, recent reported examples of applicants for relief in administrative law cases succeeding on this ground of unreasonableness. Decisions in that category were taken to the Full Court in
The Minister of State for Immigration and Ethnic Affairs v. Chan Yee Kin (unreported, 18 July 1988), and the Court reversed the primary Judge, quoting a number of tests which it apparently regarded as equivalent to that set out in the statute; the last quoted was from
Council of Civil Service Unions v. Minister for the Civil Service (1985) 1 A.C. 374 at p. 410 and is set out below.

I accept that, whatever the true scope of the protection of solicitors' trust account records by the doctrine of privilege, Mr Fitton should have appreciated that compliance with his request might involve the applicants in some considerable trouble, depending on the degree of meticulousness applied to the task of considering the question of privilege. I am satisfied that he in fact appreciated that, but he was inclined to think that the applicants had exaggerated the difficulty. It will be recalled that at one stage it was suggested on behalf of the applicants that Mr Fitton might be satisfied if he came back within a week, but as the matter was placed before Mr Fitton later, it seemed that the task of giving access to the entries sought would be a Herculean one.

As I understand the applicants' case, the circumstances surrounding each entry must be examined to determine whether a person having knowledge of it and those circumstances could draw inferences as to privileged matters. An example is given in one of Mr Lind's affidavits. He has (presumably by a scrutiny of the trust records) ascertained that a sum was paid for inquiry fees ``in a different year''. Mr Lind remarks:

``Unless I also knew that the name of the payee was the name of a private enquiry agent the description would not be enough to alert me to the fact that the payment recorded was privileged information.''

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It is not unfair to notice that this rather thin example has been drawn, not from the year in question, but from another period.

Another example Mr Lind gives, but by way of possibility rather than actuality, is that a payment made to an independent expert in the course of preparation of a case is privileged in that the name of the expert is ``part of the confidential privileged information of the client''. Mr Lind goes on to say that unless the privilege has been waived by calling the expert, the name would remain privileged. He says:

``Only those involved in the conduct of the actual litigation may recall the circumstances which would enable the determination of privilege or not to be made. The other source of information would be to review the files in each relevant matter and those files may well be voluminous.''

In legal practice, the engagement of experts who have not been called is not treated as a privileged matter; it is frequently cross-examined on. Even under English practice, the scope of privilege attaching to the process of engagement of an expert, in litigation, is rather narrow:
Reg. v. King (1983) 1 W.L.R. 411 at p. 414B. Assuming, however, that the applicants held such a generous view of the scope of the clients' privilege as Mr Lind's affidavit implies, Mr Fitton's not sharing it does not necessarily invalidate his decision.

Although authorities, particularly in the 19th century, can be found in favour of a very wide view of legal professional privilege, its scope appears to me to have been rather carefully confined by the recent Australian decisions. To the extent that Mr Fitton may have acted on the view that the likelihood that entries in the trust account records would be held privileged was low, and may have acted on the assumption that the mammoth investigation proposed by the applicants was not a necessary precondition of his having access, he was at least arguably correct. At the very least, his having done so was not ``so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it'', to use the expression quoted by the Full Court in the Chan Yee Kin case, referred to above.

It appears to me necessary, when considering a suggestion that an exercise of power under sec. 263 is excessive, to have close regard to the terms of that section itself. It says that the Commissioner ``shall at all times have full and free access...'', not that there shall be only such access as this Court thinks fit to allow in a particular case. Although no contention of the present kind has ever been to the High Court, in so far as that Court has had to deal with suggestions that the language the legislature chose to express its intention in sec. 263 should be read down, the results have not been favourable to those who would argue for a narrow reading:
Southwestern Indemnities Limited v. Bank of New South Wales and F.C. of T. 73 ATC 4171 at pp. 4174-4175; (1973) 129 C.L.R. 512 at p. 519;
F.C. of T. & Ors v. The ANZ Banking Group Ltd. 79 ATC 4039 at p. 4052; (1979) 143 C.L.R. 499 at p. 534 and O'Reilly & Ors v. Commrs of the State Bank of Victoria & Ors 83 ATC 4156 at pp. 4158-4159; (1983) 153 C.L.R. 1 at p. 42; in the last passage, Gibbs C.J. and Wilson and Dawson JJ. describe the right of access as ``very broad and general''.

It is the applicants' task, in my opinion, and a heavy one, to prove that the breadth and generality of Mr Fitton's request for access make his attempted exercise of the power under sec. 263 ``so unreasonable that no reasonable person could have so exercised that power''. I am of opinion that it cannot be so described and that it was not, in the relevant sense, unreasonable.

Other questions

I understood Mr Gleeson to contend, albeit rather summarily, that the authorities to Mr Fitton in question in this case, including that given by the fourth decision, were invalid as not complying with the requirements for search warrants. He said that the same degree of particularity is required for an authority under sec. 263 as for a search warrant. In my opinion, that is not so. I was informed, without objection, that the authority used in O'Reilly's case was in the same general form as that presently in issue; that is, it did not refer to any particular premises, but only to sections of the Act. Although the point was not there argued, it is I think important to notice that the Court assumed the validity of such an authority: see 82 ATC 4671 at pp. 4677-4678; (1983) 153 C.L.R. 1 at p. 18, and 83 ATC 4156 at

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pp. 4157 and 4160; C.L.R. pp. 39 and 44. I was referred to a number of reported cases concerning the requirements as to search warrants, but have found no case which applies those requirements to such a provision as sec. 263. An attempt to apply old search warrant cases in order to cut down a special statutory tax-search provision failed in the House of Lords in
I.R. Commrs v. Rossminister Ltd. (1980) A.C. 952; see especially per Lord Wilberforce at p. 997H and Lord Diplock at p. 1,008E.

The view taken in this Court has been that a search warrant must identify with particularity the things authorised to be searched:
Arno v. Forsyth (1986) 65 A.L.R. 125; it must describe the offences in relation to which seizure is authorised so as to enable those whose premises are to be searched to know ``the exact object of the search'':
Parker v. Churchill (1986) 65 A.L.R. 107 at p. 120. I cannot construe sec. 263 as consistent with these requirements. Its natural reading is that if the Commissioner has a need to go into a building to look at books he may do so; there is nothing to say he needs any authority other than the section itself. If he does not go himself, but authorises another to do so, it does not appear to me, on the natural reading of the provision, that it is contemplated that the person authorised must have his power limited as it would be under a search warrant. It is enough that the officer has ``an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under this section'', meaning, of course, sec. 263; if the document is to that effect, it suffices. Had Parliament intended the authority to state something more elaborate, it surely would have said so.

Another criticism advanced by Mr Gleeson was that the authority relied on did not show on its face that privileged material was not to be the subject of access and was therefore void. Whether or not that is an essential of a valid search warrant, a point on which I express no opinion (see
Allitt v. Sullivan, Victorian Supreme Court, Full Court, 26 June 1987), it is impossible to read down sec. 263 in that way.

Next, it was argued that there was a failure to comply with the requirements of natural justice, in making the relevant decisions. In my opinion, the Commissioner has no obligation to do so, or to consult anyone else before issuing an authority to an officer to exercise powers under sec. 263; nor has the Commissioner or any such officer any obligation of that kind when having access: cf. the view of Northrop J., as to sec. 264, expressed in
Sixth Ravini Pty. Ltd. and Eighth Dufan Pty. Ltd. v. D.F.C. of T. 85 ATC 4307 at p. 4313. In
Norwest Holst Ltd. v. Secretary of State for Trade (1978) 1 Ch. 201, the Court of Appeal had to consider a provision (set out at p. 207D) empowering an administrative body to require the production of books and papers, in terms fairly comparable with those of sec. 263. It was held in the Court of Appeal that there was no need for the rules of natural justice to be applied: p. 224C.

On the other hand, and especially since those whose premises are entered now have an express obligation to help, under sec. 263(3), a failure on the part of the Commissioner or the authorised officer to explain what it is he wants may, in some circumstances, support an argument that a purported exercise of power is bad for unreasonableness.

The specific criticism Mr Gleeson made of Mr Fitton, as to the requirements of natural justice, was that Mr Fitton should have made it clear, or clearer, what it was that he wanted. If the requirements of natural justice applied, and in my opinion they did not, the alleged failure on Mr Fitton's part would not, I think, be invalidating. The ultimate stance of the applicants was simple; they were not prepared to let Mr Fitton see the 1981 records, as he wished to do, and there is no reason to think that that was influenced by any lack of definition of the object of his search.

Some other, lesser, points were mentioned in argument, but I do not think it necessary to deal with them.

Relief

The question of the relief to be granted, if any, on the cross-claim, received little attention at the hearing; it was perhaps expected that would be discussed when the fate of the applicants' claims was known. It appears to me, however, convenient to make at least provisional orders; that is, I will make them and direct that they not be formally entered for seven days.

As to the matter of legal professional privilege, to enable the Court to deal with disputes which arise, liberty to apply with respect thereto will be given. I propose to

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declare that the third and fourth decisions were validly taken.

The third decision, as I have held in accordance with the applicants' submissions, related to ``trust account records''. What is plainly only a partial list of the content of those records is given in Mr Lind's affidavit of 2 June. When Mr Fitton made his decision to seek access, he did not know what form the records took or what was in them. However, in his evidence he seemed to say, speaking generally, that what he really wished to see was what Mr Lind described as the trust cash payments journal, recording payments made from the trust account, and also what Mr Lind identified as the trust cash receipts journal, recording receipts into that account. It appears to be sufficient, as a matter of discretion, to issue an injunction with respect to those two journals. In doing so, I do not of course decide that the Commissioner may not have access to other documents which might fall within the description of trust account records - for example, cheque butts and vouchers - but the practicalities of doing so were not put in issue. It appears to me convenient to leave it to the respondents, if they desire access to any other specific trust account records, to make a separate decision relating to the particular records desired.

The respondents' costs of the proceedings must be paid by the applicants, with the exception of those relating to the interlocutory proceedings heard by Burchett J.

THE COURT:

1. declares that the third decision the subject of this application, namely that taken by the second respondent on 29 April 1988, was validly made;

2. declares that the fourth decision the subject of this application, namely that taken by the third respondent on 6 April 1988, was validly made;

3. orders that the applicants be restrained from denying to the respondents access to the:

• (i) trust cash payments journal referred to in the affidavit of Frederick Paul Lind of 2 June 1988, for the year 1 July 1980 to 30 June 1981;
• (ii) trust cash receipts journal referred to in the said affidavit, for the said year,

subject to any proper objection based on the doctrine of legal professional privilege;

4. orders that any party may apply to the Court on reasonable notice for determination, in these proceedings, of any question relating to the matter of legal professional privilege, either as to particular entries in such journals or classes of such entries;

5. orders that orders 1 to 4 not be entered until Friday, 9 September 1988, before which date the applicants and the respondents may apply for a further postponement of the date of entry to enable submissions to be made with respect to such orders or any additional orders sought in consequence of the Court's reasons;

6. that the applicants pay the costs of and incidental to these proceedings, other than the costs of the proceedings heard by the Honourable Mr Justice Burchett on 13 May 1988.