No legal privilege in paradise

Key issues:

• The High Court of Australia unanimously decided in Glencore International AG v Commissioner of Taxation [2019] HCA 26 that legal professional privilege is not an actionable right for the grant of an injunction against the Commissioner of Taxation to not make use of, or deliver up, stolen documents which had come into his possession.
• The documents in question were created for the sole or dominant purpose of the provision of legal advice by Glencore’s Bermudian Lawyers in relation to the restructure of its Australian operations.
• Precautions should be taken, or reviewed, to ensure that adequate security infrastructure is used by anyone who has privileged information in their possession, including both external and internal legal advisers.

Introduction 

In the recent case of Glencore International AG v Commissioner of Taxation [2019] HCA 26, the High Court of Australia unanimously decided that legal professional privilege is not an actionable right for the grant of an injunction against the Commissioner of Taxation to not make use of, or deliver up, stolen documents which had come into the possession of the Commissioner. 

The documents in question were created for the sole or dominant purpose of the provision of legal advice by Glencore’s Bermudian Lawyers in relation to the restructure of its Australian operations. The documents were stolen from the lawyer’s electronic file management system and provided to the International Consortium of Investigative Journalists. The Commissioner subsequently came into the possession of a copy of the documents.

The Commissioner did not comply with Glencore’s demand that the documents be returned, prompting Glencore to commence proceedings. The Commissioner argued that legal professional privilege did not extend to an actionable right by Glencore to bring proceedings for injunctive relief.

In the alternative, the Commissioner argued he was not refrained from using the documents and was entitled and obliged to retain and use the documents by reason of section 166 of the Income Tax Assessment Act 1936 (Cth). This requires the Commissioner to make an assessment of a taxpayers taxable income from the taxpayers return “and from any other information in the Commissioners possession.” The decision was upheld on the first ground and it was not necessary for the Court to consider section 166.

The judgement

After consideration, the High Court noted and or determined:

• The earlier High Court decision of Daniels Corporation was correct. Legal privilege is an important common law immunity from disclosure of privileged communications. It is not a legal right capable of being enforced. It cannot found a cause of action. In other words, legal privilege is a shield against disclosure, not a weapon of enforcement.
• The immunity protects the privilege holder from certain powers of compulsion, such as subpoenas, search warrants or in the course of discovery, which would otherwise oblige the disclosure of privileged information. 
• If disclosure has already occurred, the immunity becomes obsolete. The privilege holder must then look elsewhere for a means of enforcement, rather than relying on a shield to guard against an event which has already occurred. 
• Glencore did not seek an injunction on the ground of confidentiality or seek to expand any area of law, such as any tort of unjustified invasion of privacy. Glencore claimed legal professional privilege was itself sufficient for the grant of an injunction.
• Glencore’s submission that common law courts had granted injunctions on a basis other than breach of confidentiality was incorrect. The cases it referred to were all situations where there was a loss of the necessary quality of confidentiality. It was the law of confidentiality preventing disclosure which would have otherwise been privileged and which remained confidential.
• The mere fact that information had been made technically accessible to the public at large did not necessarily affect the confidential character of the information.
• The cases referred to do not support the granting of an injunction solely on the basis of the wrongfulness associated with its taking. For an equity to arise, it is necessary that the person to be restrained must have an obligation of conscience. The basis for an injunction could be the need to protect the confidentiality of the privileged document.
• Once privileged documents have been disclosed to the Commissioner, a taxpayer could seek relief under the equitable doctrine of breach of confidence against its use. However, there may be difficulties to satisfy the requirements for relief where, as was here, the documents are already in the public domain and there was no allegation concerning the Commissioners conduct or knowledge.
• If there was a gap in the law, legal professional privilege is not the area which might be developed in order to prevent the remedy sought.

Implications 

Where privileged information is wrongfully taken, injunctive relief not to use it or return it can not be founded in legal professional privilege. The alternatives may be the equitable remedy of breach of confidentiality or tort of unjustified invasion of privacy.  

However, the above remedies need to be considered in light of the Commissioners undetermined second argument under section 166 and the cases already decided on wrongfully obtained or stolen information. For example, Denlay & Anor v FCT 2011 ATC 20-260 and FCT v Donoghue 2015 ATC 20-551.

Precautions should be taken, or reviewed, to ensure that adequate security infrastructure is used by anyone who has privileged information in their possession, be they external or internal legal advisers.

Care should be taken if operating in jurisdictions where data security may not be as high as other jurisdictions or where data theft is particularly prevalent.

For more information or discussion, please contact HopgoodGanim Lawyers’ Taxation team.