Plaintiff v Defendant

Plaintiff v Defendant - [2009] VSC 179 - VSC 2009 case summary — Zoe

[9]

7 No doubt part of the problem for the LIV is the patently broad description adopted by the Commissioner to describe the documents sought in the exercise of his statutory power. A failure by a recipient to comply with a notice under s 264 carries with it a substantial jeopardy of sanction. The law has long been established that the Commissioner may use his statutory powers of investigation to undertake what are frequently described as "fishing" enquiries. The existence of the power, and its breadth extending to fishing enquiries, does not absolve the Commissioner from an obligation to exercise the powers wisely and responsibly. The description adopted by the Commissioner for the first category of documents is broad and of its nature potentially cast upon the recipient of the Notice a burden which is disproportionate to the likely benefit to the Commissioner by the LIV's compliance. The two affidavits filed by Mr Cheetham on behalf of the Commissioner make no attempt to indicate that the information sought by the first category could not be obtained from other sources. Mr Cheetham's first affidavit does little to "assist" the Court in the task of having to balance competing policies beyond expressing his view that the documents sought "are likely to make a unique contribution to the audit" into Mr Kephala's business and financial affairs; no explanation of that assertion is given. His second affidavit goes little further by saying that he had reviewed the information in the Commissioner's audit files and on the basis of his review of the list of documents provided by the LIV had formed an opinion that it was "distinctly possible" that the information contained in the documents held by the LIV might be of some assistance in the audit. No further assistance was given to the Court by Mr Cheetham or by submissions for the Commissioner and no attempt was made to explain why it was a responsible exercise of statutory power by the Commissioner to cast upon another regulatory authority a burden to provide documents by reference to such broad descriptions in the exercise of a statutory power which carried with it potential sanction upon the other regulatory authority for failure to comply. A consequence of a broad description by the Commissioner is inevitably that he will be requiring more than is likely to be of assistance to his investigation, that he will put a burden upon independent regulators which might not be justifiable as a matter of proper administration, and which may unnecessarily expose other regulators to the risk of sanction.

[10]

8 In any event, whatever my misgivings about the Commissioner's exercise of statutory power in the way in which it has occurred, no objection to the Notice was made by the LIV on the grounds of invalidity or excess of power. For present purposes, therefore, my task is to assume that all of the documents in Schedule 1 fit the description in the first category of the Commissioner's Notice under s 264 and that all documents should be made available unless any one of them attracts the doctrine of public interest immunity. I have read carefully each of the documents and none in Schedule 1 attract the doctrine of public interest immunity. In saying that I should add that there are several documents which contain the names of other solicitors as well as that of Mr Kephala. Document 24A is one such example where Mr Kephala's name appears in a document listing solicitors who had been audited by a particular auditor. It is conceivable that this, and other documents like it, might have qualified for the immunity if evidence had been submitted on behalf of the LIV concerning the particular information it contained. No such evidence was led and, as was explained by senior counsel from the bar table, evidence was in large part unavailable because of the length of time that had transpired between the creation of the document and the date of hearing. There was no evidence led about any steps taken by the LIV to make enquiries of those mentioned in the documents, nor of any steps undertaken by the LIV to inform third parties who might potentially be affected by disclosure of their names to the Commissioner of Taxation. I express no view about the propriety of the LIV not notifying the parties affected by the potential disclosure which receipt of the s 264 Notice, and this proceeding, exposed them.[2] I conclude only that on the basis of the material before me I see no foundation for public interest immunity applying to any of the documents in Schedule 1 in accordance with the principles I outlined in my earlier decision in this matter.

[12]

10 The disclosure of the information and content of these documents does interfere with, and potentially damages, the discharge of the duties and functions by the LIV in the regulation of the legal profession. The considerations arising in the preparation of an audit for the LIV in the context of its statutory duty and function to regulate the legal profession are different from those arising in an audit to determine the taxable income of a solicitor from his or her practise. The disclosure to the Commissioner of documents prepared in the discharge of the LIV's duties and functions carry with it the risk that the discharge of the LIV's function needs to take into consideration the potential impact on matters otherwise, and properly, wholly extraneous to the LIV's statutory task. There may be circumstances when it would nonetheless be proper for disclosure to the Commissioner of documents created by or for the LIV in the exercise of its statutory duty and function. However, I do not consider this to be one such case. The reports themselves are all based upon other material. The conclusions drawn by the auditors are conclusions and opinions by the auditors for the LIV's statutory task and do not establish anything independently of the source documents beyond opinions or conclusions wholly drawn for the LIV's statutory function. These documents contain no more information than the Commissioner could create himself by undertaking the task of having someone analyse source documents. The Commissioner has not sought to rely upon any material in support of disclosure of these documents beyond a power to require the documents, the existence of an audit and the possibility that these documents might be of assistance. He has not sought to assist the Court by indicating (either in an open affidavit or by some confidential affidavit or exhibit) what source information is currently available to the Commissioner, what steps have been taken by the Commissioner to obtain the source information, or whether the need to secure the conclusions drawn from these documents are more likely to assist the Commissioner than for the Commissioner to draw his own conclusions and himself undertake the work which the LIV's auditors have done. In short, no material has been put before me on behalf of the Commissioner beyond an assertion of power, the existence of an audit, and the possibility that disclosure of the documents might be of assistance, from which I should conclude that the balance of competing interests favours disclosure of these documents to the Commissioner. In my opinion the balance I must strike in this case favours the preservation of them from disclosure. To disclose these documents, in the absence of anything tipping the balance in favour of the Commissioner, adversely interferes and affects the public policy evident in the acquisition of the documents by the LIV with an obligation to keep them confidentially.

[15]

13 Many of the remarks and reservations I expressed concerning the description and circumstances of the first category of documents sought by the Commissioner are applicable to this category as well. The LIV sought only to rely upon the information in two of the documents as justifying a claim of public interest immunity beyond its general contention that all of the documents in its possession attracted the doctrine by reason of the circumstances by which the LIV came to hold them. The two documents in question were those numbered 1C and 2C and the particular information said to attract the immunity was the record of complaints against Mr Kephala. In particular the documents identified the name of the complainants. In that regard it was said on behalf of the LIV that the names of complainants attracted the privilege in the same way as the courts in other cases have sometimes protected from disclosure the identity of "whistleblowers". I am unable to accept that submission in respect of these documents. It may be that the LIV received the complaints pursuant to its obligation not to reveal the fact of complaints other than in pursuance to its statutory duties. However, there is nothing in any of the materials to indicate that the complainant was relevantly a "whistleblower" in the sense that the complainant was making a complaint on the basis of the identity being kept confidential. The cases protecting the identity of whistleblowers focus upon the risk to the whistleblower in determining whether the identity needs to be kept confidential. Nothing in the material on its face indicates that either of the two complainants identified in documents 1C and 2C respectively had made the complaint on the basis that their identity be kept confidential. Nothing in any of the other material filed in the proceeding indicated that the LIV had undertaken at any stage between the receipt of the Notice by the LIV and the hearing before me even the simple task of ringing (or even attempting to ring) the people concerned to inform them of the possibility that their identity might be revealed to the Commissioner. One would have thought it a relatively simple step for the LIV to ring the two complainants and ask whether they had any objection to their identity being revealed to the Commissioner, or to have asked whether either had only made the complaints upon the basis of their identity being kept confidential, and then to have put that response (if any) in an affidavit in the proceeding before me. Indeed, I find it surprising that the LIV had apparently undertaken no steps to ascertain the attitude of the persons whose identity were in these proceedings sought to be protected.[3]

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