The Crown's legal professional privilege
2014 case note - the law of solicitor/client privilege applicable to the CIR is the common law and can only be waived by the Attorney-General.
A judicial review application was brought by the taxpayer, seeking a report (with relevance to the taxpayer) in relation to which the Commissioner of Inland Revenue ("the Commissioner") claimed solicitor/client privilege.
Impact of decision
The law of solicitor/client privilege applicable to the Commissioner is the common law. This privilege can only be waived by the Attorney-General.
The Commissioner obtains all legal advice on behalf of the tax system as a whole, pursuant to her duties and responsibilities under sections 6 and 6A of the Tax Administration Act 1994 ("TAA").
A judicial review application was brought by Leanne Martinovich ("the applicant") seeking an order requiring the Commissioner to provide the applicant with a copy of an independent report ("the report") resulting from a review of the applicant's file.
On 14 August 2009, the Commissioner issued a default assessment for $867,758.73 against the applicant for unexplained deposits into her bank account totalling $2,252,360.
On 10 December 2009, the applicant filed a Notice of Proposed Adjustment ("NOPA"). The applicant advised that the deposits in her bank account were not returnable as income as they were capital amounts raised from the sale of company stock.
In her Notice of Response ("NOR") of 9 February 2010, the Commissioner rejected the applicant's NOPA contending that her assessment was correct. The Commissioner's reasoning was that the applicant had not provided evidence that established on the balance of probabilities that the default assessment was incorrect, the reason why it was incorrect; and by how much it was incorrect.
The applicant's solicitors made requests for documentation under the Official Information Act 1992 and Privacy Act 1993. On 8 February 2011, Mr Jeram, the Inland Revenue investigator of this matter, responded to this request. Some of the documents Mr Jeram provided in response to the request had been redacted due to Inland Revenue's procedures and information containing details of another taxpayer.
The applicant's solicitors wrote to the Commissioner on 25 February 2011. This letter included concerns around the Commissioner's decision to withhold certain information. The letter also requested that a senior officer within Inland Revenue review the way in which the investigation had been conducted.
On 2 March 2011, the investigator responded by letter stating that a review would be conducted and the outcome of the review would be produced in due course.
The Investigations Manager formed the view that a legal review was required by a senior lawyer who could provide legal advice on the Commissioner's next steps, taking into account the relevant law, facts and Inland Revenue's procedures. Accordingly, a senior solicitor within Inland Revenue was approached to complete the review.
Upon completion of the review, senior management offered to meet with the applicant's solicitors to discuss the outcome. The applicant's solicitors were available to meet, but in the interim they requested a copy of the report under the Official Information Act and the Privacy Act. The Commissioner refused to provide the report on the basis of legal privilege.
A complaint was then made to the Ombudsman, without any success. On 3 November 2011, the investigator's team leader wrote to the applicant's solicitor advising that the 2009 default assessment would be withdrawn as a result of information obtained by the Commissioner from third parties.
Issues and decision
The relevant factors are set out below.
Whether the Commissioner undertook an independent review on behalf of the taxpayer
The Court found that based on the evidence before it, the independent review was not undertaken on behalf of the taxpayer: there had been an overlap between the applicant's request for a review of her file and the investigator's manager's request for a review from a case management perspective.
The Court also found that the Commissioner acts not on behalf of a taxpayer but on behalf of the tax system as a whole. The Commissioner obtains all legal advice, including the report in this instance, for the purpose of, and in the course of, carrying out her duties and responsibilities under sections 6 and 6A of the TAA.
Whether the report produced as a result of the independent review is subject to solicitor/client privilege in favour of the Commissioner
The law of solicitor/client privilege applicable to the Commissioner is the common law, being the same law that applies in commerce and to disputes between private persons. The Court found that the common law on solicitor/client privilege should be applied in respect of the Commissioner and that privilege could only be waived by the Attorney-General, to comply with the Cabinet Manual.
The Court found that the report was legally privileged and that the Commissioner was entitled to the benefit of solicitor/client privilege, and had not done anything to waive that privilege.
Whether the applicant had a legitimate expectation to receive a copy of the report produced as a result of the independent review
The Court noted that the Commissioner had promised the applicant, in her letter of 25 February 2011, "the outcome" of the review. This was not a promise to disclose the content of the review.
Judicature Amendment Act 1972, High Court Rules, Tax Administration Act 1994