R v Kinghorn

The procedural background

1. It is necessary to provide some background to the application for adjournment in order to understand the significance of the evidence which the Crown proposes to adduce.
2. On 5 separate days in May and June 2005 John Kinghorn (the accused) was compulsorily examined by the ATO pursuant to s 264 of the Income Tax Assessment Act 1936 (Cth) (the ITAA). The taxation legislation, which will be referred to in more detail below, contains prohibitions on the disclosure of taxation information, including examinations, subject to well-defined exceptions. Breach of these provisions is unlawful and, in some cases, carries criminal penalties.
3. The transcripts of these examinations were disclosed by the ATO to the AFP in 2007 and by the AFP to the CDPP in 2015. There is an issue about whether there were other disclosures.
4. On 6 October 2017 the accused was charged with three offences: the first, that he defrauded the Commonwealth by representing to the Commissioner of Taxation that he did not control any unlisted company outside Australia; and the second and third, that he dishonestly represented that he did not control two companies with the intention of dishonestly influencing a public official, the Commissioner of Taxation. The conduct the subject of the first count is alleged to have occurred between about 29 June 1997 and 1 July 1997 and the conduct the subject of the second and third counts is alleged to have occurred between about 6 March 2004 and 10 March 2007. The period of counts 2 and 3 includes the period during which the accused was compulsorily examined. I understand that his answers in the examination are relied on in support of these counts.
5. The accused contended that the Crown was, as part of its duty of disclosure, obliged to provide documents to establish the legality of the disclosure of the examinations to the AFP and CDPP. The Crown maintained its position that the duty of disclosure did not extend to these documents.
6. On 21 December 2018 the accused's solicitors wrote to the CDPP and sought information which included details of all disclosures of any of the examinations by the ATO to the AFP or the CDPP; the power which was said to authorise such disclosures; identification of the person at the ATO who made such disclosures; and a detailed description of what use has been made of the contents of the examinations in the investigation of the accused and his prosecution. A schedule annexed to the letter set out the documents sought.
7. On 15 March 2019 the accused filed a notice of motion seeking orders which included a temporary stay pending disclosure of the documents in the schedule attached to his solicitors' letter dated 21 December 2018.
8. By letter dated 19 March 2019, the CDPP represented that the examinations had been lawfully disclosed by the ATO to the AFP and from the AFP to the CDPP; that the examinations were admissible on counts 2 and 3; that "incidental disclosure of the [examinations] in relation to [count 1] is permitted"; and that there had been two "full" disclosures of the examinations, the first from the ATO to the AFP in 2007 and the second from the AFP to the CDPP in 2016. The CDPP also said, of present relevance: "5. Unlike in Leach [R v Leach [2018] QCA 131; (2018) FLR 224], a purpose of the 2007 and 2015 Disclosures was to enable the CDPP to consider, and subsequently prosecute, offences concerning the falsity of the answers given by Mr Kinghorn in the Section 264 Examinations. That it was an offence under the Taxation Administration Act 1953 (Cth) (TAA) to give false or misleading statements to a taxation officer abrogates, by necessary implication, the 'accusatorial' principle with respect to proceedings for an offence concerning false or misleading answers given in a compulsory examination. 6. Accordingly, there was no impediment to the Section 264 Examinations being provided to the AFP and CDPP pursuant to the disclosure provisions in the TAA (in force at the relevant time). Specifically, the 2007 Disclosure was permitted by section 3E, the 2015 Disclosure to the AFP was permitted under sub-section 3G(1), and the on-disclosure by the AFP to the CDPP was permitted under sub-section 3G(7). 7. The CDPP can on-disclose the Section 264 Examinations under sub-section 355-175(2) of the TAA for the purpose of establishing counts two and three. The same provision permits the incidental disclosure of the Section 264 Examinations with respect to count one. 8. In light of the lawful disclosure of the Section 264 Examinations to the CDPP, we do not presently consider the information requested in paragraphs (a) to (i) of the Schedule to your Disclosure Letter (Schedule), to the extent that it has not been provided above, to be disclosable." [Emphasis added.]
9. By letter dated 25 March 2019 the accused's solicitors reiterated their concerns that the CDPP was not complying with her duty of disclosure. They said, in part: "4. …Please also provide the underlying material (whether documentary and/or a witness statement) to support the contention that the disclosure was authorised under s 3E of the Taxation Administration Act, namely, that the Commissioner was satisfied the information was relevant to establishing whether an offence had been or was being committed. … 6. The material requested clearly falls within prosecutorial disclosure obligations, as set out in Lee v The Queen (2014) 253 CLR 455 and R v Reardon (No 2) (2004) 60 NSWLR 454. In Lee v The Queen at 470 [44] the Court referred to the particular responsibilities of the prosecution to ensure that its case is presented properly and with fairness to the accused. In the context of the prosecution's possession of transcripts of an accused's compulsory examination, the Court said- 'The prosecution should have inquired as to the circumstances in which the evidence came into its possession and alerted the trial judge to the situation, so that steps could be taken to ensure that the trial was not affected. The trial judge could have ordered a temporary stay, while another prosecutor and other DPP personnel, not privy to the evidence, were engaged.' (at 470 [44]) 7. Any failure to provide the accused with proper and adequate disclosure will unfairly limit or obstruct his ability to properly litigate an issue, already seized between the parties, which ultimately concerns whether the accused can have a fair trial in light of the Crown's access to and use of the s 264 transcripts Further, any such failure will require the accused to pursue burdensome and time-consuming means (by way of subpoena, examination of witnesses and the like) to 'fossick for information' to which he is entitled in the 'proper conduct of the prosecution' against him Mallard v The Queen (2005) 224 CLR 125 at 150 [66], referring to Grey v The Queen (2001) 75 ALJR 1708 at 1712 [16]. This is precisely the situation that the Crown's disclosure obligation is intended and required to avoid."
10. On 26 March 2019 the CDPP responded in part: "6. … In light of our view that the requested material is not disclosable, we do not currently consider that our obligations extend to assisting your client to verify the basis for our position or otherwise litigate a point that he wishes to pursue. … 11. Paragraph 4 of your letter also seems to suggest that we contended that both the 2007 and 2015 disclosures were authorised, under section 3E of the Taxation Administration Act 1953 (Cth) (TAA). For the avoidance of doubt, we note that paragraph 6 of our letter only stated that the 2007 disclosure was permitted under this provision. The 2015 disclosure from the AFP to the CDPP was permitted under section 3G(7) of the TAA." [Emphasis added.]
11. On 18 April 2019, at the request of the accused, subpoenas were issued to the ATO and the Commissioners for the documents sought in the schedule to the accused's solicitors' letter dated 21 December 2018.
12. On 29 April 2019, the CDPP served written submissions in support of her motion to set aside the subpoenas in which she maintained her position on non-disclosure. She attached documents which were said to authorise the disclosures of the examinations.
13. At the hearing of the motions to set aside the subpoenas on 10 May 2019, Mr Walker SC, who appeared with Mr Buchen SC and Ms Huxley for the accused, made submissions to the effect that the disclosures were, at least, prima facie, unauthorised as the material did not demonstrate that they were authorised by the provisions which had been identified by the CDPP. He did this in support of the submission that the accused had a legitimate forensic interest in obtaining the document described in the subpoenas.
14. At the conclusion of the hearing on 10 May 2019, I dismissed the motions to set aside the subpoenas and made directions as to the production of the documents: R v Kinghorn [2019] NSWSC 553. Of present relevance, I said at [19]: "… Disclosure of documents, whether pursuant to the prosecutor's duty of disclosure or on subpoena, is necessary to enable the primary facts relating to the non-compliance and Leach grounds to be determined: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 at [52]-[53] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ). As is apparent from X7 v R [2014] NSWCCA 273; (2014) 292 FLR 57, the appropriateness of a permanent stay of criminal proceedings (being the principal relief sought by the accused in his notice of motion) depends on the 'nature and extent of the unfairness': [109] (Bathurst CJ, Beazley P (also at [114]-[115]) and Hidden, Fullerton and R A Hulme JJ agreeing). The onus of establishing the nature and extent of the unfairness falls on the accused, as the applicant for the stay."
15. By letter dated 22 May 2019 the accused's solicitors cited R v Bunting (2002) 84 SASR 378 and said: "10 Noting the observations from Bunting, quoted above, the accused's position is that: (a) ambit privilege claims made by the Director in respect of material produced in response to any of the subpoenas issued on behalf of the accused will be challenged; and (b) continuation of the course taken to date of resisting production of disclosable material will be relied upon in support of the application for a permanent stay."
16. By letter dated 25 July 2019 to the accused's solicitors, the CDPP referred to the submissions made on behalf of the accused at the hearing on 10 May 2019 regarding s 3E of the Taxation Administration Act 1953 (Cth) (TAA). She said that in the letter of 26 March 2019 she had confirmed that the 2007 disclosure was "permitted" rather than "authorised" under s 3E. The CDPP continued: "The Australian Taxation Office (ATO) advises that the 2007 Disclosure was made pursuant to s 16(2A) of the [ITAA]."
17. This was the first occasion on which s 16(2A) had been identified as the source of the power for the disclosures in 2007.
18. In the written submissions which were filed on behalf of the accused in opposition to the Motions, the accused submitted that s 3G of the TAA could not authorise the 2015 disclosure (as contended for in the CDPP's letter of 26 March 2019) as the section had been repealed in 2010.
19. On 31 July 2019, after the hearing of the Motions had commenced, the CDPP wrote to the accused's solicitors to confirm that she no longer relied on s 3G of the TAA but instead relied on s 355-70(1) to authorise the disclosure in 2007 of the examinations by the ATO to the AFP and s 355-175(2) to authorise their disclosure in 2015 by the AFP to the CDPP.
20. On 1 August 2019, the second day of the hearing of the Motions, the CDPP wrote to the accused's solicitors and apologised for the earlier errors in identifying the source of the authority to make the 2007 and 2015 disclosures. She confirmed the CDPP's position that the 2007 disclosures were authorised by s 16(2A) and that the 2015 disclosures were authorised by ss 355-70 and 355-175(2). She described the error in the 19 March 2019 letter as "inadvertent". She also said: "Application for an adjournment 8. Given the foregoing circumstances, the Crown will provide the accused and the Court with evidence as to the lawfulness of the 2007 and 2015 Disclosures. 9. This evidence will also be relevant to the issue of whether the Director's privilege has been waived as a result of the application of subs 125(1) of the Evidence Act 1995 (NSW). 10. The Director therefore intends to seek a two week adjournment of the proceedings in respect of the privilege claims. In this period, this Office will obtain and serve evidence in respect of the authorisation underlying the 2007 and 2015 Disclosures. It is expected that this evidence will take the form of affidavits provided by relevant officers of the ATO and AFP, which would annex where appropriate copies of relevant documents. 11. The Director will make the adjournment application in court this morning. The Director accepts that she should pay the costs of today. Schedule of Office personnel 12. During the proceedings on 31 July 2019 Justice Adamson made a number of statements about the information the accused may be entitled to receive in respect of who has had access to transcripts of the s 264 examinations of the accused. In light of her Honour's statements, the Crown encloses a schedule of CDPP officers and counsel retained by this Office who, so far as the Crown has ascertained, have read the transcript received by this Office via the 2007 and 2015 Disclosures or who have supervised those officers and so are likely to have reviewed material in which a portion of the transcript is contained. 13. This schedule is indicative at this stage and will likely be subject to further revision by the Crown. 14. The Crown maintains that provision of this schedule is not presently required by its disclosure obligations as outlined within the Statement on Disclosure in Commonwealth Prosecutions. However the Crown provides this list in order to facilitate the progress of these proceedings."
21. Mr Buchen SC, who appeared with Mr Atkin for the accused, opposed the adjournment. He contended that the CDPP ought not be permitted another opportunity to establish the legality of the disclosures, having regard to the ample opportunities provided to date and what he described as "misleading" statements as to the source of power.

Consideration

1. An examination under s 264 of the ITAA is compulsory. The examinee has no right to refuse to answer questions, including on the ground that the answer might be incriminating. The accused proposes to argue that it is not open to the Crown to use such an examination in his trial because he has a right to have the Crown prove its case against him without his involuntary assistance. I understand that the accused will rely on Lee v The Queen (2014) 253 CLR 455; [2014] HCA 20 at [44] (French CJ, Crennan, Kiefel, Bell and Keane J), in which the High Court held that derivative use by the prosecutor of transcripts of evidence of examinations of two accused before the New South Wales Crime Commission required the convictions to be quashed. The criminal trial of the appellants was found to have been affected in a fundamental respect because the provision of the transcripts to the Crown "altered the position of the prosecution vis-à-vis the accused" ([51]).
2. The accused also relies on R v Seller; R v McCarthy (2015) 89 NSWLR 155; [2015] NSWCCA 76 at [239]-[240] (Fullerton J, Bellew J agreeing) in which the Crown, in a prosecution for tax offences, accepted that it had an obligation to ensure, and to provide assurances to the Court, that none of its legal team has had access to such transcripts.
3. In the present case, the CDPP has maintained that, by reason of the second and third counts on the indictment, the examinations are not only able to be accessed by anyone on the prosecution team, but they are also admissible in evidence at the trial. The Crown (who was represented at the hearing of the Motions by counsel who are not briefed in the trial) confirmed at the hearing on 1 August 2019 that it accepted that, had the accused been tried on count 1 alone, the s 264 examinations would not be admissible and it would be necessary for those who had had access to the examinations to be excluded from any involvement in the prosecution. A question will arise for future consideration whether, in these circumstances, it is either necessary or desirable in the interests of justice to sever counts 2 and 3 from the indictment pursuant to s 29 of the Criminal Procedure Act 1986 (NSW).
4. As is apparent from the narrative set out above, the accused has, for an extended period, sought documents relevant to the following issues: 1. whether the disclosure of the s 264 examinations was authorised by the taxation legislation; and 2. the extent to which the examinations have been disseminated to the AFP and the CDPP, to whom they have been disclosed and for what purpose.
5. The accused initially sought such documents by contending that the Crown had a duty to disclose them. When this proved unsuccessful because the Crown did not accept that its obligation extended to disclosure of these documents, the accused issued subpoenas. As referred to above, the applications by the CDPP and the Commissioners to set aside the subpoenas were dismissed. In my reasons for that decision I referred to category (1) as the "non-compliance ground" and category (2) as the "Leach ground" (because of its reliance on R v Leach [2018] QCA 131; (2018) 334 FLR 224). It is convenient to use these shorthand expressions.
6. The Motions sought orders that the claims for privilege by the CDPP and the Commissioners be upheld. The bases for the claims were client legal privilege, litigation privilege and public interest immunity, of which only the first two are in dispute. According to calculations performed on behalf of the accused, the CDPP has produced 628 documents and claimed privilege over 2,907 documents; the AFP produced 732 documents and claimed privilege over 130; and the ATO produced 3,806 documents and claimed privilege over 132 documents. It can be seen that the CDPP's claims are relatively substantial.
7. Among the issues in dispute between the accused and the applicants on the Motions was whether the Crown's duty of disclosure was relevant to the question whether the maintenance of the privilege was inconsistent with its bringing proceedings against the accused for tax offences. This issue has been considered in decisions which are binding on me: see, for example, R v Seller; R v McCarthy at [161]-[165]. The facts in R v Seller; R v McCarthy are very different from those in the present case because in that case the Crown assured the court that no present member of the prosecution team had ever seen the examinations or the compulsorily acquired material. Further, Mr Fagan SC (as his Honour then was) is recorded at [240] (Fullerton J) as having made the following submission: "As Mr Fagan SC submitted, and as the Chief Justice emphasised in his Honour's analysis of the question, if the documents protected by the privilege revealed, whether patently or by necessary inference, that there had been communication of the content of the compulsory examinations or of the material compulsorily acquired from the respondents to anybody in the Crown prosecution team, including independent counsel retained by the CDPP, then that material would have to have been disclosed in discharge of prosecuting counsel's overriding duty of disclosure. The respon­dents do not submit that Mr Fagan SC was in breach of this duty. To the contrary."
8. The Crown in R v Seller; R v McCarthy took a significantly different approach to that taken in the present case. The only distinction which the Crown suggests is relevant is the presence of counts 2 and 3 on the indictment.
9. The question whether the disclosures of the accused's examinations were authorised by the TAA is a significant one for the purposes of the privilege claims. Where the CDPP or the Commissioners are unable to provide the accused with evidence that the disclosures were lawful, the inference might be drawn that the disclosures were unlawful. If the disclosures were unlawful, it is arguable that client legal privilege does not attach to the communications regarding the disclosures: Commissioner Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 556 (McHugh J); [1997] HCA 3.
10. For this Court to proceed with the Motions on the basis of the current evidence would be to run the risk that any finding of apparent illegality was not soundly based. As appears from the terms of the CDPP's most recent correspondence, the CDPP and the Commissioners maintain that the disclosures are lawful on the basis of documents in their possession. They have offered to provide such evidence to the accused within a relatively short period. In my view, they ought be permitted to do so. It is well established that reference to an incorrect source of power does not affect the exercise of that power if it can be supported by another statutory provision to which reference is not made: Brown v West (1990) 169 CLR 195 at 203; [1990] HCA 7.
11. The conduct of the proceedings to date by the CDPP and the errors in correspondence, which are evident from the summary set out above, weigh against the granting of the adjournment. However, they are not a sufficient reason to refuse it. It is important to recall that the Crown, which appears by the CDPP, represents the community: Strickland v Director of Public Prosecutions (Cth) [2018] HCA 53; (2018) 93 ALJR 1.
12. Whatever findings I make as to the legality or otherwise of the disclosures may have a significant impact on the fate of the privilege claims. I say "may" because it is possible that, in accordance with the principles set out in R v Seller; R v McCarthy at [161]-[164] (Bathurst CJ, Bellew J agreeing), the Leach ground, of itself, will lead to a finding that there has been an implied waiver of privilege in accordance with Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 at [29] (Gleeson CJ, Gaudron, Gummow, and Callinan JJ) which will have the effect that the CDPP is held to have implicitly waived the privilege which she claims. It is not appropriate to say anything more on this topic as it is one of the questions to be decided on the Motions.
13. I note that the CDPP has offered to pay the accused's costs thrown away by reason of the adjournment. This Court has no power to make an order in those terms, its power being confined to an order staying the proceedings until such costs are paid: R v Mosely (1992) 28 NSWLR 735 (Gleeson CJ, Kirby P and Mahoney JA agreeing). I note that no application for a stay has been made. Further, having regard to the stage at which the Motions have reached, it would not necessarily be in the accused's interests for there to be a stay pending payment of such costs, since his motion for a temporary or permanent stay of the trial is listed for hearing in October 2019. In these circumstances, it is appropriate to reserve the costs of the adjournment.

Orders

1. For the reasons given above, the orders I made on 1 August 2019 were as follows: 1. Adjourn the notice of motion filed by the Commissioner of Taxation on 16 July 2019, the notice of motion filed by the Commonwealth Director of Public Prosecutions on 22 July 2019 and the amended notice of motion filed by the Commissioner of the Australian Federal Police on 30 July 2019 to 6 September 2019. 2. Reserve the costs of the adjournment.

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