At the hearing before the respondent on 20 April 1995 the applicant was represented by counsel. (Mr C was not present, but the applicant's counsel was heard too on Mr C's entitlement to refuse to answer the relevant questions.) The applicant invoked legal professional privilege in respect of questions concerning legal advice sought and obtained from Mr C about the sale of shares in Y Pty Ltd and the purchase of a freehold commercial property in Sydney. On the voir dire the applicant was examined by his own counsel and cross-examined by counsel assisting the respondent. Counsel assisting also tendered material, including copies of witness statements by two chartered accountants. One document, a copy of a mortgage, was included in the tender at the request of the applicant's counsel.
The information so disclosed may be briefly summarized. I shall use only the initial of the surname to identify individuals and I shall also render anonymous by an appropriate initial all business entities. The applicant had been a director of a company which I shall call X Pty Ltd. That company had owned a freehold commercial property in Sydney ("the property"), which had been mortgaged in 1984 to the Commonwealth Bank of Australia ("the bank"). On 26 September 1988 a registered valuer, acting under instructions from Citibank-Private Bank, had determined the current market value of the property for mortgage purposes as $4 million.
Some time prior to November 1988 a chartered accountant in Sydney, Mr W, was consulted by the applicant in the company of Mr C and two other solicitors, Mr F and Mr D. They sought from Mr W tax advice on the purchase of a building. He gave this and confirmed it later in writing. The applicant also sought advice on how to avoid income tax and capital gains tax on any profit on the sale of the building. Mr W declined to give such advice on the basis that it may possibly involve defrauding the Commonwealth by evasion of tax. Mr W did, however, refer the applicant to Mr T, a chartered accountant in Hong Kong, although he said that he could not be involved in the implementation of any scheme. Mr W telephoned Mr T to tell him that the applicant would be seeking a tax structure.
Mr C telephoned Mr T and told him that he was acting for the applicant. He wished to establish a structure whereby a trust established in Hong Kong, of which the applicant was to be the beneficiary, became the beneficial owner of the shares in Y Pty Ltd. The trust was to purchase the shares in a Hong Kong shelf company which was, in turn, to purchase the shares in another Hong Kong shelf company. This last mentioned company was to be granted an option to purchase the shares in Y Pty Ltd at an exercise price of $100,000. The option was to be granted by attorneys in Hong Kong appointed by Mr F and Mr D, who were the shareholders in Y Pty Ltd.
Mr T arranged for a trust to be established in Hong Kong on 20 November 1988. It may be referred to as the B Trust. The same day the trust purchased the two issued shares in a Hong Kong company that I shall call B Limited, and B Limited purchased the two issued shares in another Hong Kong company that I shall call A Limited. Mr T's firm provided the trustee of the B Trust and the nominee facilities for B Limited and A Limited.
On 22 November 1988 Mr T faxed Mr C draft powers of attorney to be executed by Mr F and Mr D. On 2 December 1988 Mr T faxed Mr C a draft agreement providing for the attorney named in the draft powers to grant A Limited an option to purchase the shares
in Y Pty Ltd at a price of $100,000 exercisable within 5 years. Mr T has never received from Mr C an executed option agreement.
By an instrument dated 6 December 1988 X Pty Ltd transferred the property to Y Pty Ltd for a stated consideration of $1.7 million. This entire amount was apparently paid by X Pty Ltd to the bank in discharge of its mortgage.
On 17 January 1989 the applicant presented a debtor's petition under the Bankruptcy Act 1966. It was accepted on 31 January 1989. The applicant's statement of affairs showed the Australian Tax Office as an unsecured creditor for $4 million in respect of income tax and penalties. The applicant also disclosed his ownership of 30,000 shares in X Pty Ltd to which he attributed "Nil" value.
On 29 January 1990 Mr C received by telegraphic transfer from Hong Kong the sum of $99,845. His trust account receipt shows the sum as being for "exercise of option" and the client as Mr T. The relevant ledger card shows the funds so received being distributed the same month to Mr F and Mr D.
At the hearing before the respondent counsel assisting conceded that "prima facie" the communications between the applicant and Mr C were within the ambit of legal professional privilege. However, he submitted that they fell within what the cases described as "the well-recognized crime or fraud exception". Specifically, counsel assisting charged that the transfer of the property from X Pty Ltd to Y Pty Ltd for $1.7 million in December 1988 was part of a fraud designed to raise enough money to discharge the mortgage to the bank but
"preserve for [the applicant's] benefit his equity in the property and then put it beyond the reach of tax by transferring the money overseas". On the other hand, the primary submission of the applicant's counsel was that the exception did not apply at all at a hearing before the respondent under the Act. This submission was renewed on the hearing before me.
Since the respondent published its decision on 23 May 1995, the importance of the doctrine of legal professional privilege has again been affirmed by the High Court in Carter v Northmore Hale Davy & Leake (1995) 69 ALJR 572. Counsel for the respondent submitted that the judgments in this case demonstrated the flaw in the applicant's central contention in support of his present application. In particular, the judgments of Deane J at 578-579 and McHugh J at 595 explain the true nature of the recognized exceptions. McHugh J said:
"The so-called exceptions to the doctrine are in truth not exceptions at all. Rather they identify circumstances where the doctrine does not apply to communications between legal adviser and client. They exclude from the protection of the privilege communications that are designed to facilitate future wrongdoing. Thus, communications that come within the exceptions never attract the grant of legal professional privilege."