Courts’ double standards

It appears there is one law for taxpayers and another for criminals.

What constitutes legal privelege appears to differ according to whether a matter is criminal or a tax case. Picture: AAP

The Australian court system appears to have double standards on the issue of legal privilege — there is one set of rules that are applied to ordinary taxpayers and another set of rules for people convicted of criminal offences.

Inevitably, until explanations are given, these apparent double standards will reduce trust in the legal system and the two sets of rules may become an issue that the proposed royal commission into the “Lawyer X” and Mokbel affairs will need to consider — so widening the scope of the royal com­mission.

And many will now seek a review of the legal system because contrast in the treatment of taxpayers and criminals on such a vital issue goes to the heart of the role of lawyers in justice in Aus­tralia.

Last week the High Court of Australia severally criticised Victoria Police for using the lawyer for alleged criminals as an informer against those alleged criminals. The High Court said such actions “undermine the entire criminal justice system”.

Yet in 2015 the High Court took a stance that, on the surface at least, looks to be entirely the reverse of its statements against Victoria Police. The High Court refused to hear an appeal against a Federal Court decision that upheld the Australian Taxation ­Office’s right to use privileged information provided by a taxpayer’s lawyer to help achieve a prosecution against the taxpayer.

In the taxpayer case, an Australian lawyer had told his client that if the lawyer’s bill was not paid, he would send incriminating material to the tax office. The lawyer eventually carried out his threat and the ATO then used the lawyer’s information to widen is ­proposed claims against the taxpayer.

The taxpayer, Garry Donoghue, did not file tax returns in 2005, 2006 and 2007 because he did not believe he was an Australian resident for taxation purposes. Donohue’s lawyer carried out his threat by sending 127 pages of ­material plus two computers to the ATO. The ATO was looking at proceeding against Donoghue for one year but widened its claims to three years and, with penalties, interest and other charges the ATO claim against Donoghue reached $26 million.

Donoghue challenged the ATO in the courts and the case was heard by eminent jurist judge John Logan in the Federal Court. Justice Logan took the same view as the latest High Court stance in the Mokbel case.

Justice Logan declared that the use of the lawyer’s material by the ATO constituted breach of privilege and amounted to “conscious maladministration by the ATO”.

In the Mokbel/“Lawyer X” case the High Court declared that Victoria Police were guilty of “reprehensible conduct” in knowingly encouraging the lawyer to do as she did.

The ATO’s “conscious maladministration” in the Logan judgment and Victoria Police’s “reprehensible conduct” under the High Court judgment are remarkably similar, so Justice Logan and the High Court were on the same page in their views of the duty of lawyers and the use of privileged material.

Unlike Victoria Police, the ATO was able to appeal to the full bench of the Federal Court to try to overturn the Logan judgment. And it was successful. Indeed, the Federal Court did not mince words in setting a new paradigm for the behaviour of lawyers.

The Full Federal Court said: “Where the commissioner is provided with a taxpayer’s privileged documents and uses them in the process of assessing the taxpayer’s assessable income in a given income year, this will not involve conscious maladministration.

“The common law of privilege has nothing to say in such a circumstance and any claim for a breach of confidence involved in the process of assessment cannot withstand the operation of section 166 (of the tax act)”.

Donoghue was stunned at this clear court doctrine that appears to mean that it’s perfectly permissible for the lawyers for taxpayers to dob in the taxpayer to the ATO, using the lawyer’s privileged ­material. Accordingly, Donoghue sought leave to appeal to the High Court.

In a historic decision, High Court judges Susan Kiefel and Patrick Keane declared on June 15, 2016: “An appeal in these matters would involve no question of principle. There is no reason to doubt the correctness of the decision of the Full Court of the Federal Court of Australia. Special leave is refused.”

I must emphasise that the facts in each case are different and one is a criminal case and the other a tax case. Accordingly, there may be a perfectly good explanation as to why the High Court did not think it was worth hearing an appeal, despite its strong contrasting views given some three years later in the Mokbel case.

And it should not be forgotten that at the time the lawyer helped the police, the Melbourne gangland war was out of control with regular murders including the shooting of rival gang members in front of children in a public park. Police at the time seemed unable to end the carnage.

In my view an explanation needs to be given because, as it now stands, there is one law for the alleged criminals and another for law-abiding, taxpaying people.

One explanation is that the ATO is completely above the law and not subject to any laws that elected politicians may choose to pass.