Commissioner of Taxation v Coombes

Federal Court of Australia|1999-06-25|Before: Heerey J, Kenny JJ

BACKGROUND 1 In late 1997 the Australian Taxation Office ("the ATO") undertook a review of employee share plans and employee benefit trusts for the 1995, 1996 and 1997 financial years in order to ascertain how the Income Tax Assessment Act 1936 ("the Act") was being used in relation to such arrangements and the impact of those arrangements on revenue. The respondent, Mr David Coombes, is a partner in the firm of solicitors Deacons Graham & James ("the firm"). He specialises in taxation law. In October and November 1997 Ms Sylvana Camilleri of the ATO had two meetings with Mr Coombes about the arrangements his firm provided to its clients. On 5 December the ATO sent Mr Coombes a notice under s 264(1)(a) of the Act requesting information relating to employee share acquisition arrangements and employee benefit plans which had been prepared or marketed by his firm in the 1994 to 1997 tax years, including the names and addresses of clients who had purchased, implemented or entered into such arrangements. Mr Coombes replied by letter dated 15 January 1998, which is in part as follows: "I have made an assessment of the information which I believe you are looking for and to assist you, provide the following responses to the 'questions' raised in the notice: 1. Attached is a copy of the latest version of a memorandum which we have used from time to time as the basis for advice in relation to employee share plan. This is not to say that this is the only memorandum that has ever been issued. It has in fact been modified over the years and as well other memoranda have been sent to clients and potential clients. Tracing the various versions of the memorandum is however an almost impossible task. … 3. Generally we do not know whether particular arrangements have been implemented. We do know what advice we have given, and to whom, and what documents we have drafted and in many cases that is the extent of our knowledge. … 7. I attach a precedent set of the Memorandum and Articles of Association which we have used on occasions. It will be appreciated that in many cases modifications to the precedent documents have been made but these are our latest versions. …" 2 The memorandum accompanying Mr Coombes' letter is in part as follows: " EMPLOYEE SHARE PLAN Objectives of the Plan The plan is designed as an 'Employee Share Scheme' which partly falls within the provisions of the Division 13A of the Income Tax Assessment Act('Act'). The plan is designed as an incentive scheme for employees. The incentive is provided through the ability of the employee to save out of pre-tax savings. Namely, amounts contributed to the plan can be invested without first being exposed to tax. The plan is also designed so that amounts contributed by the employer under the plan will be tax deductible to the employer in the year of income in which the contribution is made. Plan Structure The structure of the plan requires the formation of a special purpose company ('ESPCo'). Each employer, or group of employers, would have its own ESPCo for the benefit of its employees. The shares that the employees receive under the 'Employee Share Scheme' are shares in ESPCo (and not shares directly in the employer company). ESPCo functions like any other company and is required, for example, to keep accounts and file returns. ESPCo may receive contributions from the employer (see later for details). If contributions are received, they are invested by ESPCo (see later regarding types of investment). Income derived from the investments after costs and company tax (payable by ESPCo) may be distributed as franked dividends to the employees holding employee shares under the plan. Ultimately, the employees will be entitled to redeem their employee shares and the employee will receive the value of the allocated investments held by ESPCo (see later for details). Employee Shares A redeemable preference share of 1c par value is issued to the employee concerned. The employer pays the subscription price on behalf of the employee. The employee's share does not usually entitle the employee at the time of issue to any underlying investment in ESPCo. Under Division 13A, the employee is subject to tax in the year the share is issued to the employee on the amount of the discount on the share, namely 1c. Employer Contributions Some time after the employee share is issued to the employee, the employer may make a contribution under the plan. It is important that at the time the employee shares are issued, the employer is not under an obligation to, and there is no understanding that the employer will, make a contribution. An employer contribution is made by the employer acquiring a specific class of share in ESPCo ('employer shares'). The employer shares have a nominal value of $1.00 with a premium of $999.00. Under the plan, the employer is prohibited from receiving back the premium. As such, the amount of the premium may be claimed by the employer as a tax deduction under s51(1) of the Act. This deduction is claimed in the year in which the contribution is made. The amount of premium paid on an employer share is effectively allocated to a specified employee." The memorandum then discussed the amount of contributions by the employee, and the need for the employer to establish that the amount was "commercially based". It mentioned the assessability of contributions, ongoing contributions, allocated investments, types of investments, income on investments, fringe benefits tax and administration and prospectus requirements. It was said that any employer or employee could participate in the plan. It was not necessary that all employees participate in a plan established by an employer, and varying benefits could be provided to different employees. It was said that savings under the plan were not relevant in calculating an employee's reasonable benefit levels for entitlements otherwise available under a superannuation scheme. 3 On 23 January 1998 the ATO served on Mr Coombes a fresh s 264(1)(a) notice in substantially the same form as the earlier notice. On receiving it Mr Coombes obtained legal advice to the effect that legal professional privilege arguably applied to the identity of his clients, and that he should not release their names to the ATO without their consent. On 26 February Mr Coombes advised the ATO accordingly, and requested an extension of time in which to reply to the notice. 4 On 27 February the ATO served another s 264(1)(a) notice on Mr Coombes. This is the notice in question in the proceeding. So far as material the schedule to the notice is as follows: "The following information is requested in relation to any employee share acquisition arrangements or employee benefit plans which have been prepared or marketed by Deacons Graham & James ('the arrangements') in the [period 1 July 1994 to 30 June 1997]: Information: 1. Information of an explanatory nature that has been presented to past, present or prospective clients, including but not limited to, details of the manner in which the arrangements are intended to operate and the perceived benefits of entering into the arrangements. … 3. Names and addresses of clients who have purchased, implemented or entered into the arrangements ('employer participant'). Information was also sought of the firm's fee structure, the number of "special purpose companies" incorporated or acquired by the firm, the names of any trusts involved, the terms of any memoranda and articles of association, the terms of any trust deeds, details as to employer shares, and financial details as to subscription monies or share premiums and contributions. 5 Mr Coombes advised his clients of the ATO request and sought instructions as to whether they would consent to the release of their identity. Subsequently Mr Coombes provided the requested information to the ATO in relation to clients who had authorised him to disclose their identity. He informed the ATO that he could not release the names of a number of other clients who had instructed him not to disclose their names, on the ground of legal professional privilege. THE ATO PROCEEDING 6 The applicant ("the Commissioner") applied for declarations that legal professional privilege does not attach to the information requested by him in par 3 of the Schedule to the notice dated 27 February 1998, and that Mr Coombes is obliged to furnish the information. The Commissioner also sought an injunction requiring him to supply it. In par 10 of his Defence Mr Coombes pleaded that the "standard form memorandum of advice" was used by members of the firm to provide clients with advice about, inter alia, the arrangements defined in the schedule to the notice. The "standard form memorandum of advice" was identified as the memorandum Mr Coombes had provided to the ATO on 15 January 1998. In the course of cross‑examination about par 10 Mr Coombes accepted that the names of the clients to whom he had provided the memorandum had not been supplied to him in confidence, and that one or more of the clients had entered into or carried out the arrangement the subject of the advice with Mr Coombes' assistance. PRIMARY JUDGE'S REASONING 7 The primary judge examined the English, Australian, New Zealand and American cases dealing with the application of legal professional privilege, or client legal privilege as it is more accurately described, in the context of a request for disclosure of the name and/or address of a lawyer's client. His Honour derived from the American authorities, to which we will refer later in these reasons, the principle that the privilege applies "where the disclosure of the client's name will have the practical effect of disclosing confidential communications between lawyer and client". His Honour regarded this proposition as conformable with the principle underlying the common law doctrine of legal professional privilege. He rejected the Commissioner's submission that the American jurisprudence had no relevance for Australia because it was influenced by the existence of constitutional rights in the United States Constitution that are not found in our Constitution. The privilege was, his Honour said, regarded in the United States as having its source in the common law. 8 The primary judge identified the communication which was said to attract the privilege as "Mr Coombes communicating with existing clients, and they with him, as to the purchasing, implementation or entering into employee share acquisition arrangements or employee benefit plans". His Honour's reasons for upholding Mr Coombes' claim to privilege in respect of the information sought is contained in the following passages: "In my view the Memorandum itself was not confidential. Counsel for Mr Coombes did not contend that it was. It did not disclose anything as to the affairs of any individual or company. In its terms it was merely preliminary legal advice which would need to be considered in the light of a particular client's financial and commercial circumstance. In essence it seems to me no different from memoranda or newsletters which solicitors nowadays often provide to their clients advising of new developments in the law and ways in which the clients may better arrange their affairs. However, as already noted, the communications which would be disclosed in answer to the Commissioner's notice are not limited to the sending of a non‑confidential document by a solicitor to his client. If Mr Coombes were asked 'Did you discuss with your client XYZ Ltd its entering into an employee share arrangement?' the answer would clearly be privileged. What the Commissioner seeks to do in the present case is in substance no different." His Honour then rejected the Commissioner's claim that any privilege had been waived by a combination of the fact that Mr Coombes had furnished a copy of the memorandum to the Commissioner and his evidence that the advice he had provided to his clients "included advice substantially similar to the terms of the Memorandum". The claim was rejected for two reasons. The first was that only the client can waive the privilege, and the relevant clients had instructed Mr Coombes to claim privilege. The second was that "the relevant communication is not confined to the Memorandum".

THE APPEAL 9 The Commissioner's appeal raises two issues. The first is whether par 3 of the notice implicitly requires the disclosure of privileged communications, namely the advice Mr Coombes gave his clients. The second is whether, if it does, the privilege has been waived.

DOES THE NOTICE REQUIRE DISCLOSURE OF PRIVILEGED COMMUNICATIONS? 10 Section 264(1)(a) empowers the Commissioner by notice in writing to require any person, whether a taxpayer or not, "to furnish him with such information as he may require". Section 264(1)(a) is subject to legal professional privilege. Legal professional privilege is the doctrine which prevents the disclosure of confidential communications between a lawyer and client, confidential communications between a lawyer and third parties made for the benefit of a client, and confidential material that records the work of a lawyer carried out for the benefit of the client. These communications may be disclosed only if the client consents. It is the communication of information that attracts the privilege and not documents that contain the information or the information itself. See generally Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 515‑516, 543, 550, 568, 585. 11 Central to Mr Coombes' argument was the submission that disclosure of his clients' names and addresses amounted to a disclosure of confidential communications between him and his clients. We were taken to the cases dealing with the application of the privilege to clients' names and addresses and to other related decisions. 12 Parkhurst v Lowten (1818) 2 Swans 194; 36 ER 589 involved a solicitor who had refused to answer interrogatories on the ground that they referred to transactions in which he had been employed as solicitor. He did not identify his client. The interrogating party submitted that the solicitor must state for whom he was employed, because the privilege arises not from the character of the attorney, but from the fact that the attorney is attorney to a particular individual. It is the privilege of the client, who may waive it. "It would be singular, that a plea of privilege should omit to name the party privileged". Lord Eldon LC accepted the submission - "The witness demurring, on the ground that his answer would violate the confidence reposed in him as attorney, must name the party to whom he was attorney" (at 591). 13 In Levy v Pope (1829) M & M 410; 173 ER 1206 Pope, the Sheriff of Surrey, was sued for failing to execute a writ of fieri facias which required him to seize certain goods of the debtor within his bailiwick. One Denton was the officer charged with the execution of the writ. A difficulty arose in proving this as against the sheriff, and in order to show that Denton was the real defendant, the plaintiff's counsel called the attorney who conducted the defence and asked him who employed him to defend the cause. Parke J overruled the objection that the answer would be a breach of confidence between attorney and client. His Lordship said the attorney "may be asked between whom the relation exists, to show who is the real defendant, in order that his acts and declarations may be admitted". 14 Gillard v Bates (1840) 6 M & W 547; 151 ER 529 concerned an attorney who had sued a bank for fees alleged to be due for legal work. The bank's defence was that the plaintiff had been retained to do the work by one Bendle and not by the bank. In order to establish this, the bank called an attorney who had acted for the plaintiff in another matter, who said that the plaintiff had called on him accompanied by Bendle. It was then proposed to ask the witness whether the plaintiff had not then said that he had been employed by Bendle to do the work for which he was now suing the bank. The plaintiff's objection to the question on the ground of legal professional privilege was overruled, the witness answered the question in the affirmative, and the jury found for the defendant. The plaintiff's motion for a new trial on the ground that the answer ought not to have been received was dismissed. The Court said: "This is in no respect a privileged communication. It is something said by the plaintiff to his agent, on introducing an individual who was to be the plaintiff in another action. The privilege does not attach to every thing which the client says to his attorney: the test is, whether the communication is necessary for the purpose of carrying on the proceeding in which the attorney is employed; if it is necessary, it becomes privileged." 15 In Forshaw v Lewis (1855) 10 Exch 712; 156 ER 626 Parke B answered an argument that an attorney's bill of costs and letters sent to his client were privileged by saying: "There was a case at Nisi Prius where evidence of the retainer of counsel was rejected as a privileged communication; but that cannot be law, for anything which merely shows the relation then existing, and does not disclose confidential matter, is admissible. As to whether these letters are privileged depends on their contents. The defendants are entitled to any letters which merely shew a retainer, but not to letters which are confidential between attorney and client." 16 Brown v Foster (1857) 1 H & N 736; 156 ER 1397 involved a barrister who at his client's trial had viewed certain books of account. In subsequent proceedings it was held that he could testify whether they contained a particular entry when he saw them at the first trial. Martin B rejected a submission that the privilege extended "to all collateral information acquired by the legal adviser while acting in his professional character". His Lordship said (at E R 1399): "The counsel was called to state, not what he learned from his client, but whether on a particular occasion he saw a certain book, and whether a certain entry was then in that book. There is no breach of professional confidence in answering those questions. I agree that what passes between counsel and client ought not to be communicated and it is not admissible in evidence, but with respect to matters which the counsel sees with his own eyes, he cannot refuse to answer." 17 Ex parte Campbell; Re Cathcart (1870) 5 Ch App 703 concerned a witness in a bankruptcy examination who was asked where the bankrupt's father was residing. The witness, who was the father's solicitor, declined to answer on the ground that his client's place of residence came to his knowledge in his "professional capacity, and in the course and in consequence of the professional employment in which I was engaged on his behalf". The claim to privilege was rejected. James LJ said (at 705): "What a solicitor is privileged from disclosing is that which is communicated to him sub sigillo confessionis - that is to say, some fact which the client communicates to the solicitor for the purpose of obtaining the solicitor's professional advice and assistance; the principle being, that such communications ought to be privileged, because otherwise a man would be deterred from fully disclosing his case, so as to obtain proper professional aid in a matter in which he is likely to be thrown into litigation. But a solicitor's knowledge of his client's residence, even though he knows it simply in consequence of the professional business in which he has been acting for him, is not on that ground alone a matter of confession, so as to be in the nature of a privileged or confidential communication." His Lordship observed that the solicitor might know of the address simply by seeing it on a letter from the client, or because the client asked that a document be forwarded to that address. The client's address in those cases would be "a mere collateral fact, which the solicitor knows without anything like professional confidence". Accordingly, the ground assigned by the witness for refusing to answer the question was "not sufficient". On the other hand, where the address had been given to the solicitor in confidence because, for example, the client was in hiding, the address would, according to the Lord Justice, be a matter of professional confidence. 18 In Bursill v Tanner (1885) 16 QBD 1 judgment had been signed against a married woman, and an inquiry was directed before a master as to her separate estate. In response to a subpoena to produce the deed of settlement made upon the woman's marriage, the solicitor to the trustees of the settlement, whose firm had prepared the deed, refused to state the names of the trustees of the settlement or to produce the document on the ground that it was in his possession as solicitor to the trustees. The Court of Appeal rejected the claim to privilege and required him to state the names of the trustees and produce the deed. Lord Esher MR said (at 4): "With regard to the question whether the solicitor could refuse to disclose the names of the trustees on the ground that they were communicated to him in confidence, the matter stands thus: he is in this predicament. He must allege that the communication was privileged because the trustees, his clients, made it to him in confidence, and then he cannot refuse to say who these clients are. I agree with the opinion expressed by James LJ, in Ex parte Campbell, In re Cathcart, that the fact who the clients were was not the subject of a professional confidence. The client does not consult the solicitor with a view to obtaining his professional advice as to whether he shall be his solicitor or not." Cotton LJ said that not everything that solicitors learn in the course of their dealings with clients is privileged from disclosure. The privilege extends only to confidential communications, and it was "highly improbable" that the name of a client would be communicated to a solicitor confidentially for the purpose of obtaining advice (at 5). Lindley LJ said that it had been established ever since Parkhurst v Lowten that a solicitor claiming privilege on behalf of his client must disclose the client's name (at 6). Bursill v Tanner was applied by the Court of Appeal in Pascall v Galinski [1970] 1 QB 38 at 44. 19 In the course of giving evidence in Cook v Leonard [1954] VLR 591 a solicitor was asked whether he had prepared a certain document. He said he had. He was then asked on whose instructions he had prepared it. On objection on the ground of privilege Sholl J said: "If I were not instructed by authority, I should reject that question on the ground that to allow it to be answered involved a disclosure by the witness of the communication made to him by the client of the matter to be included in the document. It seems to me that, if he answers 'I was acting for Jones' or 'I was acting for Smith', that answer inevitably discloses also that it was Jones or Smith respectively who gave him, presumably under the seal of professional confidence, the instruction to put in the document what is now found in it. I agree that in order to establish privilege, there must be proof of a solicitor and client relationship, and to prove a solicitor and client relationship involves proof of some retainer between the solicitor and the client. And it is said by [counsel asking the question] that the objection itself cannot be sustained without disclosing the very retainer which it is the object of his question to ascertain. That difficulty, I think, explains the decisions in Levy v Pope and Gillard v Bates. What the Courts have done in those cases is really to say that the mere fact of a retainer between solicitor and client may be proved as an evidential fact when it is relevant to other issues and when it does not involve entering upon the details of the client's confidential instructions to the solicitor. That, I think, is all that was insisted upon in those two cases. The case, however, which has occasioned me a good deal of difficulty and which, contrary to my own inclination, I think I must follow, is the case of Bursill v Tanner." His Honour then examined the facts of Bursill, and said that when the solicitor in that case named his clients and produced the deed, he thereby by inference stated that the clients had given him the instructions which resulted in the preparation of the document, and he thereby, although perhaps indirectly, was compelled to disclose the details of the instructions he had been given when he was retained to prepare the settlement. Sholl J was of the view that the position was the same in the case before him. If the witness said that he had prepared the deed for X, he would be disclosing that his client had given him instructions to put in the document what now appears in it. His Honour allowed the question to which objection had been taken. 20 In The Queen v Bell; Ex parte Lees (1980) 146 CLR 141 an interim custody order in respect of a young child had been made in favour of the husband. The wife had taken the child in contravention of the order. The wife consulted a solicitor to protect her interest in the matrimonial home. The solicitor had not acted for her in the custody proceedings. She gave him her address and asked him to keep it confidential. The High Court held that the communication of the address was not privileged, by Gibbs and Murphy JJ on the ground that the client had improperly endeavoured to conceal the whereabouts of the child from the court, and by Stephen, Aickin and Wilson JJ on the ground that the object of the communication was the furtherance of an unlawful purpose. Gibbs J, at 144‑145, said: "a solicitor may not, without the consent of his client, disclose his client's address if that was communicated to him confidentially for the purpose [of obtaining or giving legal advice or assistance], although it will not be enough to attract the privilege that the address came to the solicitor's knowledge in consequence of his professional employment if it was not confidentially communicated to him: Ex parte Campbell; In re Cathcart; Re Arnott; Ex parte Chief Official Receiver (1888) 60 LTNS 109." His Honour went on to say that if nothing more appeared, the general principle would apply to the address in question. However, the case fell within one of the exceptions to the general rule. 21 Stephen J, at 155, said: "When, as here, it is a client's address for which privilege is claimed special considerations may sometimes arise. In a number of cases it has been said that the identity of a client is not something to which the privilege applies, and this because a litigant is entitled to know who in truth is his opponent, 'who is the real defendant': Levy v Pope per Parke J, and see Gillard v Bates, Bursill v Tanner, and Cook v Leonard. There may be cases in which knowledge of an opponent's address is an element essential to any real knowledge of his identity. In such cases it would seem right that privilege should not attach. On the other hand, if the likelihood of disclosure of a person's address would operate as a real deterrent from his seeking professional advice, this would suggest that the privilege should apply, as James LJ observed in Ex parte Campbell. Each of these considerations reflect different aspects of public policy. There are, no doubt, other such aspects which may emerge in particular cases. If they may sometimes seem to conflict one with another, it will be for the Court to resolve the conflict by the familiar process of weighing the respective considerations against each other." His Honour went on to say that he did not understand James LJ in Campbell to have said that it was enough to attract the privilege that the client had asked that the address be treated as confidential. That fact may help to establish that the privilege should attach on the ground that, but for the expectation of confidentiality, legal advice would not have been sought. But it could not of itself be conclusive. 22 Wilson J, with whom Aickin J agreed, treated Campbell as authority that while the address of a client is ordinarily a mere collateral fact, the solicitor's knowledge of which does not arise out of any professional confidence, it may become a matter of professional confidence if the client has communicated it confidentially for the purpose of being advised by the solicitor, and has not made it known to the world at large. 23 Southern Cross Commodities Pty Ltd (In Liquidation) v Crinis [1984] VR 697 involved a law clerk who had sworn an affidavit in support of an application to set aside judgment entered in default of defence, in which he deposed that his firm's client, who was not named, had a good defence to the action. In the course of cross‑examination he was asked for the name of the client. He refused to answer the question on the ground that the information had been conveyed to him in confidence as a legal adviser for the purpose of the client obtaining legal advice. He was invited or required to write the name and address of the client on a slip of paper which was placed in a sealed envelope, and it was ordered that the envelope not be opened except by order of the Court. The plaintiff applied for an order that the name and address be disclosed to it. It appeared from a later affidavit sworn by the clerk that the client had given express instructions that he retained the firm by which the clerk was employed on condition that his identity should be kept confidential and should not be disclosed. 24 Young CJ referred to Bursill and Cook v Leonard, and noted that in neither case was it suggested that the name had been given to the solicitor in confidence or that it was made a term or condition of the solicitor's engagement that the client's name should not be disclosed. However, his Honour said (at 702): "Nothing suggests that it was necessary in the present case for the communication of the client's name to be treated as immune from disclosure in order that he might obtain legal advice. As Lord Esher said in Bursill v Tanner the client did not consult his solicitor for advice as to whether he should be his solicitor. Moreover, since the basis of the privilege is founded in public policy, it must follow that the client cannot by contract extend the area covered by the privilege."

His Honour then rejected an argument based on Campbell, that since a solicitor could not be required to disclose a client's address if it had been communicated in confidence, the same must apply to the name so imparted. He said (at 702):

"The fact that it is the client's privilege that is sought to be asserted leads, I think, albeit paradoxically, to the conclusion that the identity of the owner of the privilege which is claimed must be disclosed."

25 Tickell v Trifleska (1990) 24 NSWLR 548 involved a claim to privilege in respect of two documents: a letter from a client to his solicitor giving instructions for the preparation of a will, and the will itself which operated by way of incorporating as the testamentary disposition the instructions given in the letter. In support of the claim it was submitted that the letter was a communication to a solicitor with a view to obtaining legal assistance. It was said that the instructions contained an implicit request for advice as to the proper form of the will. The Chief Judge of the Commercial Division (Rogers J) declined to draw that implication. He said that while there may be circumstances in which there is a request for advice of that nature, the material before him was inadequate to raise it. His Honour rejected the claim to privilege on an alternative ground (assuming the validity of the "implication" argument), namely that the sole purpose test was not satisfied. One purpose for which the documents had been brought into existence was to bring into existence a will as the record of the client's testamentary dispositions and to serve as a document which would in due course be admitted to probate.

26 In National Crime Authority v S (1991) 29 FCR 203 at 218 Heerey J, as a member of a Full Court, expressed the view that:

"it is only communications which are privileged. The privilege does not prevent a legal adviser being required to give evidence of observed fact, notwithstanding that he observed that fact while acting in the course of a retainer and would not have observed the fact had he not been so retained."

27 In most of the American cases a lawyer is required to furnish the name of the client even though the information was communicated confidentially to the lawyer in a professional capacity, and in some cases in spite of the fact that the lawyer has been sworn to secrecy. See, for example, National Labour Relations Board v Harvey (1965) 349 F 2d 900. The usual basis for these rulings is that since the privilege presupposes the attorney‑client relationship, it does not attach to its creation. Thus a client's identity, which is necessary proof of the existence of the relationship, is not privileged information. See, for example, Behrens v Hironimus (1948) 170 F 2d 627 and Harvey at 904.

28 While the disclosure of the name of the client is not of itself a matter within the privilege, it will be protected where so much has been divulged with regard to the legal services rendered or the advice sought that to reveal the client's name would be to disclose the whole relationship and confidential communications. In Harvey, after stating the general rule that the existence of the lawyer and client relationship is not privileged, the Court of Appeals for the Fourth Circuit said (at 905):

"To the general rule is an exception, firmly embedded in the rule itself. The privilege may be recognized when so much of the actual communication has already been disclosed that identification of the client amounts to disclosure of a confidential communication."

29 Ralls v United States (1995) 52 F 3d 223 involved a lawyer who had been subpoenaed to provide information concerning the identity of a fee‑payer who retained him to defend a third party, where the fee‑payer had advised the lawyer of his involvement in the crime with which the defendant was charged. The Court of Appeals for the Ninth Circuit held that the fee arrangements and fee‑payer's identity were so inextricably intertwined with confidential communications that they were protected by lawyer‑client privilege. The Court said (at 225‑226):

"Generally, the attorney‑client privilege does not safeguard against the disclosure of either the identity of the fee‑payer or the fee arrangement. This is so because the attorney‑client privilege applies only to confidential professional communications, and the payment of fees is usually incidental to the attorney‑client relationship. However, a narrow exception to the general rule of disclosure exists. An attorney may invoke the privilege to protect the identity of a client or information regarding a client's fee arrangements if disclosure would 'convey information which ordinarily would be conceded to be part of the usual privileged communication between attorney and client'. … Hirsch explicitly states that the attorney‑client privilege protects the fee payer's identity where 'disclosure would convey the substance of a confidential professional communication between the attorney and the client'. Contradicting this holding, the district court ordered Ralls to reveal the fee‑payer's identity and the fee arrangements despite the fact that they are inextricably intertwined with other privileged communications. The district court failed to apply the correct test which is whether the fee‑payer's identity and the fee arrangements are so intertwined with confidential communications that revealing either the identity or the arrangements would be tantamount to revealing a privileged communication." Ralls had sworn an affidavit in which he said that his unnamed client had specifically discussed his or her own criminal liability in connection with the same crime for which the defendant had been charged. The Court said that the affidavit left no doubt that the fee arrangements and the fee‑payer's identity were inextricably intertwined with confidential communications. 30 In United States v Blackman (1995) 72 F 3d 1418 the Internal Revenue Service issued a summons seeking to discover from an attorney the identity of clients who had engaged in cash transactions of over $10,000. The Ninth Circuit held that the disclosure of the clients' identity was not protected by the privilege. There were no Ralls‑like facts established by the sealed affidavit filed in Blackman. 31 The following propositions, amongst others, can be distilled from the cases we have examined: · Privilege attaches to communications, and not to facts which a lawyer observes while acting in the course of a retainer.

· Privilege does not attach to everything a client says to the lawyer, but only to communications made by the client for the purpose of obtaining the lawyer's professional assistance. It will not attach to "mere collateral facts". The address and identity of a client will usually be "collateral facts".

· Privilege attaches to communications only if they are confidential. In almost all cases the client's name and address will not have been communicated confidentially.

· Instructions to a lawyer to do a particular thing, for example to prepare a legal document such as a will, are generally not privileged, because instructions to do something do not necessarily amount to a request for advice.

· As a general rule, the identity of a client will not be privileged, as the privilege belongs to the client, and the retainer between the lawyer and the client must be demonstrated in order to establish the privilege. This requires disclosure of the client's identity.

· Disclosure of the client's identity is necessary before the privilege can arise even if the client's name was given in confidence, and it was a condition of the lawyer's retainer that the client's identity be kept confidential. The client cannot by contract extend the area of privilege.

· Some of the cases support an exception to this general rule when so much of the actual communication has already been disclosed that identification of the client amounts to disclosure of a confidential communication. This will be the case when the client's identity is so intertwined with the confidential communication that to disclose the identity would be to disclose the communication.

DISCUSSION 32 In December 1997 the Commissioner requested Mr Coombes to supply, amongst other things, information of an explanatory nature that had been provided to clients about any employee share acquisition arrangements or employee benefit plans prepared or marketed by the firm ("the arrangements"). In response to the request Mr Coombes furnished a copy of the memorandum. He did not claim privilege in respect of the document, doubtless because it had not come into existence in the course of a retainer by any particular client. As the primary judge said, it was like a newsletter which solicitors provide to their clients, independent of any current retainer, advising of new developments in the law and ways in which the clients may better arrange their affairs. In February 1998 the Commissioner requested Mr Coombes to furnish him with the names and addresses of clients who had purchased, implemented or entered into the arrangements. The request was not that Mr Coombes provide the names and addresses of clients to whom he had given advice about the arrangements. What was inquired after was in the nature of a fact observed by Mr Coombes, namely whether at the date he complied with the request in the notice, certain clients had entered into the arrangements. The lawyer in Brown v Foster could be asked whether he had seen a book entry while acting for his client. We see no difference between that and the situation where Mr Coombes either witnessed a client's entry into the arrangements, or through an examination of the firm's records discovered that certain clients had entered into the arrangements. The provision of the names of those who entered into the arrangements will not disclose a confidential communication passing between Mr Coombes and any client, any more than the lawyer's answer about the book entry disclosed a confidential communication between him and his client. It is true that some or perhaps all of the clients who entered into the arrangements had the scheme in the memorandum modified to suit their particular situations. But the notice does not ask about communications concerning the modifications or any advice surrounding them, and privilege is not claimed, and does not exist, in respect of the memorandum. 33 According to Wigmore, what distinguishes a communication, which is privileged, from an act of the client or a fact observed, which is not, is that the former involves a disclosure by the client and the latter does not. Thus he says: "the privilege is seen to secure the client's freedom of mind in committing his affairs to the attorney's knowledge. It is designed to influence him when he may be hesitating between the positive action of disclosure and the inaction of secrecy. There is, therefore, by hypothesis, always some voluntary act of disclosure - some removal of that secrecy which would otherwise have existed as between the client and the attorney." Wigmore on Evidence (McNaughton rev 1961) vol 8, par 2306. That distinction accords with the basis of the privilege in our law. Thus, in Grant v Downs (1976) 135 CLR 674 at 685 it was said that by keeping secret the communications between lawyer and client, legal professional privilege encourages the client to make full and frank disclosure of the relevant circumstances to the lawyer. While the existence, the execution or the place of custody of a document may be part of a communication to the lawyer, ordinarily it will not be. The execution of a document in the attorney's presence is not usually intended as an act of disclosure by the client. See Wigmore par 2309. Entering into the arrangements was presumably constituted by the execution of documents. The clients who "signed up", whether in Mr Coombes' presence, in the presence of his clerk, or at their own premises, did not thereby disclose anything to their solicitor. Furthermore, since the existence of the arrangements had to be made public in order to achieve their purpose (ie employees acquiring shares or joining the benefit plans), the fact that the clients entered into the arrangements could hardly be confidential. 34 The exception to the general rule that the identity of a client is not privileged does not apply here. Cases such as Ralls deal with the situation where so much of a communication has already been disclosed that identification of the client amounts to disclosure of a confidential communication. The notion is that to attach the client's name to an anonymous communication is to make that communication a privileged one. But that is not the case here. The provision of the names and addresses will not disclose any confidential communication between Mr Coombes and his clients. It may disclose that particular clients were likely to have received the memorandum. But the memorandum was not a confidential communication. Mr Coombes did have confidential communications with some clients, but the content of those communications will not become known by reason of the provision of the names. For want of a confidential communication, there is no inextricable intertwining of a client's identity with a confidential communication. 35 We do not agree that the question posed by the primary judge - "Did you discuss with client XYZ Ltd its entering into an employee share arrangement?" - is in substance no different from the request made by the Commissioner. An affirmative answer to his Honour's question would not disclose anything other than that there had been a discussion, and would not be privileged. The next question, which is the one his Honour plainly had in mind - "What were those discussions about?" - would be disallowed because it seeks disclosure of a confidential communication. Neither question is analogous to the Commissioner's request, which does not ask whether there were discussions with clients relating to the arrangements or about the content of those discussions. His Honour identified the communications said to attract the privilege as "Mr Coombes communicating with the existing clients, and they with him, as to the purchasing, implementation or entering into employee share acquisition arrangements or employee benefit plans". But that is not what par 3 of the notice asks about. It does not inquire about communications between Mr Coombes and his clients. It asks for the identity of the clients who have in fact entered into the arrangements. 36 It is not necessary in the present case to decide whether Sholl J was correct in Cook v Leonard in doubting Bursill v Tanner on the ground that disclosure of the clients' names in that case amounted to disclosing the instructions which led to the deed taking the form it did. The present case is quite unlike Bursill and Cook v Leonard. As we have said, naming those who entered into the arrangements will not amount to a disclosure of any instructions which led to the making of the arrangements. It may well be that in Bursill the identification of the clients would disclose the instructions which led to the deed taking its executed form. But in the present case there is no comparable document. The only document is the memorandum, which was not prepared during the subsistence of any retainer. All we need add about Bursill v Tanner is that it was not argued in that case that disclosure of the trustees' names had the effect described, and accordingly the case is not a rejection of any such submission. WAIVER 37 In his affidavit in opposition to the relief sought by the Commissioner, Mr Coombes explained his response to the notice as follows: "I was concerned that the Notice purported to require me to provide information that may have been the subject of legal professional privilege owned by clients of my firm who had sought and received confidential legal advice from Deacons Graham & James with respect to arrangements the subject of the January Notice (and the subsequent 17 February 1998 and 27 February 1998 notices). The advice provided to each such client included advice substantially similar to the terms of the Memorandum. I therefore obtained independent legal advice which was to the effect that legal professional privilege arguably applies to the identity of the clients in the circumstances in question and that I should not release the names of the clients to the ATO without the client's consent. [Emphasis added] … On or about 5 March 1998, I wrote to each of the clients referred to in paragraph 11 above advising them of the circumstances and that a question had arisen as to whether their identity was protected by legal professional privilege in the unusual context of the particular facts relating to my dealings with the ATO in this matter. I sought instructions from each client by 26 March 1998 as to whether he, she or it would consent to the release of his, her or its identity to the ATO." Mr Coombes thus voluntarily and intentionally disclosed the substance of the legal advice he had provided. Plainly the disclosure was made with the implied or ostensible authority of the clients on whose behalf the privilege was being claimed. See Great Atlantic Insurance Co v Home Insurance Co [1981] 2 All ER 485 at 492-494 per Templeman LJ and Causton v Mann Egerton (Johnsons) Ltd [1974] 1 All ER 453 at 457 per Lord Denning MR. In any event Mr Coombes was acting in the proceeding in the common interest of his clients, and fairness mandates that any waiver of privilege constituted by his conduct in the course of the proceeding will bind the clients on whose behalf he was claiming privilege. See Newcrest Mining (WA) Ltd v The Commonwealth (1993) 40 FCR 507 at 509 per French J. 38 It is well established that where there is a voluntary and intentional disclosure of the content of a privileged communication, and the disclosure is made generally and not for a limited and specific purpose, there will be an express waiver of legal professional privilege even if the disclosure was not intended to have that consequence. See Goldberg v Ng (1995) 185 CLR 83 at 95 per Deane, Dawson and Gaudron JJ and at 106 per Toohey J and Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 487 per Mason and Brennan JJ and 497 per Dawson J. 39 Where only part of the content of a privileged communication is disclosed, waiver may be imputed by operation of law. In such a case the governing consideration is whether fairness requires that the privilege shall cease. If fairness so requires, it does not matter that there was no intention to waive privilege. See Goldberg v Ng at 96 per Deane, Dawson and Gaudron JJ and Attorney-General (NT) v Maurice at 481 per Gibbs J and 488 per Mason and Brennan JJ. As was said by Toohey J in Goldberg v Ng (at 106), if the disclosure is "incompatible with the retention of confidentiality" there will ordinarily be a general waiver of privilege. The principle applied in Great Atlantic Insurance Co v Homes Insurance Co at 490, which was cited with approval in Maurice at 488 by Mason and Brennan JJ, is that fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication on that subject matter. We can see no reason why that principle should not apply in the present case. 40 Accordingly, whether the waiver constituted by disclosing the substance of Mr Coombes' legal advice to his clients may properly be regarded as express or imputed by operation of law, in our view it is plain that the disclosure resulted in a waiver of legal professional privilege in respect of the advice given. Thus, even if, contrary to our view, by requiring identification of the clients who had entered into the relevant arrangements the notice implicitly required disclosure of the legal advice given to the clients, that advice is no longer privileged. Accordingly, the Commissioner is entitled to the relief he seeks on the alternative ground of waiver of privilege. 41 The result at which we have arrived is not, as was submitted for Mr Coombes, anomalous. In reality Mr Coombes sought to protect from disclosure the names of the persons who entered into the arrangements described in the notice rather than the legal professional advice he had given them. The circuitous route of disclosing the substance of the advice, and then claiming that disclosing the identity of the persons who entered into the arrangements would disclose the legal advice they were given, does not achieve his objective. It is only by reason of his evidence that he provided his clients with advice substantially similar to the terms of the memorandum that he was able to argue before the primary judge that, on the particular facts of the present case, disclosure of the names of his clients would amount to disclosure of the advice given. CONCLUSION 42 The appeal should be allowed. In lieu of the orders made by the primary judge, the Court will declare that legal professional privilege does not attach to the information required in par 3 of the schedule to the notice dated 27 February 1998, and that Mr Coombes is obliged to furnish the Commissioner with that information. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg, the Honourable Justice Merkel and the Honourable Justice Kenny.

Associate: Dated: 25 June 1999 Counsel for the Appellant: D Bloom QC, G J Davies QC and J Davies

Solicitor for the Appellant: Australian Government Solicitor

Counsel for the Respondent: G T Pagone QC and W Harris

Solicitors for the Respondent: Deacons Graham & James

At a glance

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Judgment (24 paragraphs)

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Cases Cited (8)

Cited By (3)