Deputy Commissioner of Taxation v Law Institute of Victoria
Document type: Decision Impact Statement
Venue: Supreme Court (No 3772 of 2009)
Judgment date: 8 April 2010
Date published: 23 July 2010
Decision outcome: Favourable

Summary of decision:
Outlines the ATO's response to the decision of the Court of Appeal of the Supreme Court of Victoria in Deputy Commissioner of Taxation v Law Institute of Victoria [2010] VSCA 73. At issue was whether the Law Institute of Victoria (LIV) was required to disclose certain documents pursuant to a notice issued by the Commissioner under paragraph 264(1)(b) of Income Tax Assessment Act 1936 (Cth); or whether such documents were protected from disclosure by reason of the LIV's statutory obligations under the Legal Profession Act (Vic ) ( 2004 ) and the common law doctrine of public interest immunity.

Overview of facts:
On 27 October 2008, a notice to produce documents was issued by the Deputy Commissioner of Taxation (the Commissioner), pursuant to paragraph 264(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936) (the s264 notice), to the LIV in the course of a Project Wickenby audit concerning the tax affairs of Mr Nicholas Kephala, a former practising lawyer in Victoria. | The categories of documents sought under the s264 notice were as follows: 1. Records showing the history of Mr Kephala's practice in Victoria; 2. Records of any audit conducted in respect of Mr Kephala's trust accounts; and 3. Records in respect of the cessation of Mr Kephala's registration as a practising lawyer. | 1. Records showing the history of Mr Kephala's practice in Victoria; 2. Records of any audit conducted in respect of Mr Kephala's trust accounts; and 3. Records in respect of the cessation of Mr Kephala's registration as a practising lawyer. | On 24 December 2008, the LIV sought a declaration from the Supreme Court that its compliance with the s264 notice would not constitute a contravention of the LIV's confidentiality obligations under s6.4.5 of the Legal Profession Act (Vic ) (LP Act). | Appeals | In an interim decision of Pagone J of 26 February 2009 [2009] VSC 55, his Honour found that, even if s6.4.5 of the LP Act was invalidated under s109 of The Constitution to the extent of any inconsistency with s264 of the ITAA 1936, the fundamental question was whether the Commissioner, in reliance upon s264, can require production of documents if they were protected from disclosure under the common law doctrine of public interest immunity. | In Pagone J's final decision of 12 May 2009 [2009] VSC 179, his Honour found that: • the documents in the first and third category contained information of a kind that did not attract public interest immunity; and • the documents in the second category were immune from disclosure by reason of public interest immunity because such disclosure of the information and content of these documents interferes with, and potentially damages, the discharge of the duties and functions by the LIV in its regulation of the legal profession. | • the documents in the first and third category contained information of a kind that did not attract public interest immunity; and • the documents in the second category were immune from disclosure by reason of public interest immunity because such disclosure of the information and content of these documents interferes with, and potentially damages, the discharge of the duties and functions by the LIV in its regulation of the legal profession. | The Commissioner lodged an appeal to the Court of Appeal against the decision of Pagone J on the primary ground that there was no evidence to show that complying with the s264 notice would interfere with or damage the LIV's discharge of its duties and functions under the LP Act or would otherwise support a claim to public interest immunity. | The LIV lodged a cross appeal on the ground that the primary judge erred in finding that public interest immunity did not attach to documents labelled 1C and 2C within the third category of documents because these documents contained the names of informers and details of their complaints against Mr Kephala; and such documents served no purpose in furthering the Commissioner's investigation into Mr Kephala's tax affairs. | Issue decided by the Court | At issue was whether the LIV was required to produce the three categories of documents sought by the Commissioner pursuant to the s264 notice; or whether these documents were immune from disclosure pursuant to the common law doctrine of public interest immunity. | The primary judge, having inspected the documents filed by the LIV and undertaken a balancing exercise of the parties' competing interests, concluded that only the second category attracted public interest immunity because these documents were created as part of the LIV discharging its statutory function of regulating the legal profession with an obligation to keep them confidentially. Conversely, the primary judge found that there was nothing to indicate in either documents 1C and 2C of the third category that the identity of the informants, who had made a complaint against Mr Kephala, be kept confidential. | The Court of Appeal also inspected the documents and concluded that they were innocuous and that there was nothing about their contents that should give rise for concern if they were disclosed to the Commissioner. | Insofar as the LIV was advancing a 'class' claim in respect of the second category of documents, the Court of Appeal considered that such a claim would fail at the threshold of showing that their disclosure was likely to cause harm to the public interest. At paragraph 50 the Court stated: Documents received or generated in the course of the statutory task of regulating the legal profession may be protected by public interest immunity but this class of documents is not of such high significance or importance that it will ever be protected from disclosure by public interest immunity irrespective of the contents. | The Court of Appeal found that, as there was no relevant concern about disclosing the contents of the second category of documents, the occasion to undertake a balancing exercise of the parties' competing interests, as performed by the primary judge, did not arise. | It was not necessary for the Court of Appeal to determine the LIV's cross appeal because the Commissioner was prepared to accept production of copies of the documents with the names of the informants blanked out.

Issues decided:
At issue was whether the LIV was required to produce the three categories of documents sought by the Commissioner pursuant to the s264 notice; or whether these documents were immune from disclosure pursuant to the common law doctrine of public interest immunity. The primary judge, having inspected the documents filed by the LIV and undertaken a balancing exercise of the parties' competing interests, concluded that only the second category attracted public interest immunity because these documents were created as part of the LIV discharging its statutory function of regulating the legal profession with an obligation to keep them confidentially. Conversely, the primary judge found that there was nothing to indicate in either documents 1C and 2C of the third category that the identity of the informants, who had made a complaint against Mr Kephala, be kept confidential. The Court of Appeal also inspected the documents and concluded that they were innocuous and that there was nothing about their contents that should give rise for concern if they were disclosed to the Commissioner. Insofar as the LIV was advancing a 'class' claim in respect of the second category of documents, the Court of Appeal considered that such a claim would fail at the threshold of showing that their disclosure was likely to cause harm to the public interest. At paragraph 50 the Court stated: Documents received or generated in the course of the statutory task of regulating the legal profession may be protected by public interest immunity but this class of documents is not of such high significance or importance that it will ever be protected from disclosure by public interest immunity irrespective of the contents. The Court of Appeal found that, as there was no relevant concern about disclosing the contents of the second category of documents, the occasion to undertake a balancing exercise of the parties' competing interests, as performed by the primary judge, did not arise. It was not necessary for the Court of Appeal to determine the LIV's cross appeal because the Commissioner was prepared to accept production of copies of the documents with the names of the informants blanked out.

ATO view of decision:
The decision of the Court of Appeal recognises that documents created or received in the course of the statutory task of regulating the legal profession are capable of being protected by public interest immunity, depending on their contents.

Administrative treatment:
Implications on current Public Rulings & Determinations | None

Legislative references: Income Tax Assessment Act 1936 (Cth) 264(1)(b) Legal Profession Act 2004 (Vic) 6.4.5 The Constitution (Cth) 109
Case references: State of Victoria v Brazel (2008) 19 VR 553 [2008] VSCA 37 Royal Women's Hospital v Medical Practitioners Board of Victoria (2006) 15 VR 22 [2006] VSCA 85 Sankey v Whitlam (1978) 142 CLR 1 [1978] HCA 43 Alister v R (1984) 154 CLR 404 [1984] HCA 85 The Commonwealth v Northern Land Council (1993) 176 CLR 604 [1993] HCA 24 Neilsen v Laugharne [1981] 1 QB 736 Borg v Barnes (1987) 10 NSWLR 734 Law Institute of Victoria v Irving [1990] VR 429 Legal Services Commission v Trotter (1990) 54 SASR 74 Finch v Grieve (1991) 22 NSWLR 578 Middencorp Electric Co Pty Ltd v Law Institute of Victoria & anor [1994] 2 VR 313 R v Young (1999) 46 NSWLR 681 [1999] NSWCCA 166 Zarro v Australian Securities Commission (1992) 36 FCR 40 State of Victoria v Seal Rocks Victoria (Australia) Pty Ltd (2001) 3 VR 1 [2001] VSCA 94 Federal Commissioner of Taxation v Coombes (No 2) (1998) 160 ALR 456 40 ATR 403 (1998) 99 ATC 4082
Subject references: practice & procedure public interest immunity