FEDERAL COURT OF AUSTRALIA

 

Deputy Commissioner of Taxation v Nicholls (No 3) [2009] FCA 785

Crimes Act 1914 (Cth) s 3E
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Federal Magistrates Act 1999 (Cth)

Commissioner of Taxation v Pratt Holdings Pty Ltd (2004) 136 FCR 357 cited
Deputy Commissioner of Taxation v Nicholls (No 2) [2009] FCA 234 referred to
Deputy Commissioner of Taxation v Nicholls [2009] FCA 122 referred to
Gold Securities Australia Pty Ltd v Siebe PLC (unreported, NSWSC, Giles J, 31 October 1990) applied
Grant v Downs (1976) 135 CLR 674 applied
National Crime Authority v S (1991) 29 FCR 203 applied
Nicholls v Australian Federal Police (No 2) [2009] FCA 123 referred to
Nicholls v Australian Federal Police (No 3) [2009] FCA 152 referred to
Nicholls v Australian Federal Police [2009] FCA 15 referred to

DEPUTY COMMISSIONER OF TAXATION v ARTHUR CHRISTOPHER NICHOLLS

 

 

 

 

 

SAD 137 of 2008

 

 

 

 

MANSFIELD J

23 JULY 2009

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	SAD 137 of 2008

 

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION Applicant
AND:	ARTHUR CHRISTOPHER NICHOLLS Respondent

 

JUDGE:	MANSFIELD J
DATE OF ORDER:	23 JULY 2009
WHERE MADE:	ADELAIDE

 

THE COURT ORDERS THAT:

 

1.         All material seized by the Australian Federal Police and the Australian Taxation Office pursuant to the search warrant executed on 6 May 2008, other than the following documents:

Ÿ          Term Sheet “3pm” Handwriting –

6 pages (4/05/2007)

Ÿ          Email Discussions – 4 & 8 May

2007/09:07 am & 8:11am (2

pages)

Ÿ          Spreadsheet of Whiteboard

discussions (undated) (2 pages)

Ÿ          Paper-clip 3 pages

“Nettina/Julian Gyngell

discussions re 4 May 2007 08:54am

Ÿ          08 May 2007 08:15am email re

Citech Conference Call

and the documents over which privilege is claimed as set out in the table annexed to the respondent’s letter of 23 October 2008 and as acknowledged in the applicant’s letter of 2 December 2008, be released to the applicant for inspection.

2.         Order 1 hereof is stayed pending the hearing and determination of the appeal in SAD 138 of 2008.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	SAD 137 of 2008

 

BETWEEN:

DEPUTY COMMISSIONER OF TAXATION Applicant

AND:	ARTHUR CHRISTOPHER NICHOLLS Respondent

 

JUDGE:	MANSFIELD J
DATE:	23 JULY 2009
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

BACKGROUND

1                          On 5 May 2008, an officer of the Australian Taxation Office (the ATO) applied for, and was issued with, a search warrant pursuant to s 3E of the Crimes Act 1914 (Cth). The search warrant was sought in relation to the investigation of alleged taxation offices by Mr Nicholls and certain business entities said to be operated by him. The search warrant was executed by officers of the ATO and the Australian Federal Police (the AFP) on 6 May 2008 at Mr Nicholls’ premises. Certain documents, files and records (both hard copy and electronically stored) were seized pursuant to the search warrant (the seized material).

2                          At the time the warrant was executed, Mr Nicholls claimed legal professional privilege over the seized material.  The seized material has not been inspected by the ATO.  It is presently in the custody of the Court.

3                          This action is one of two arising out of the grant and execution of a search warrant in respect of records of Mr Nicholls.

4                          Mr Nicholls challenged the validity of certain decisions concerning its grant and execution under various provisions of the Administrative Decisions (Judicial Review) Act 1977 (Cth).  His application was dismissed: Nicholls v Australian Federal Police [2009] FCA 15 (the first proceeding).

5                          An appeal from that decision is to be heard shortly.

6                          This is the second action.  It is in response to Mr Nicholls’ blanket claim to legal professional privilege over the seized material.  The process of having Mr Nicholls confine his claim to those documents which are in fact privileged has been prolonged.  I shall refer to certain details of that process below.  It is still incomplete.  The Deputy Commissioner of Taxation (DCT) lost patience and brought this proceeding, seeking an order that the DCT be entitled to inspect the seized material.

7                          Incidentally, there have been separate issues as to whether the documents on both files to which O 46 r 6(1) and (2) of the Federal Court Rules applies should be available for inspection by any member of the public.  I ruled on that issue: Deputy Commissioner of Taxation v Nicholls [2009] FCA 122 and Nicholls v Australian Federal Police (No 2) [2009] FCA 123.  I also ruled on an application by Mr Nicholls that certain documents be ordered to be confidential, pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth). I refused to make such an order: Nicholls v Australian Federal Police (No 3) [2009] FCA 152.

THE INITIAL CLAIM TO LEGAL PROFESSIONAL PRIVILEGE

8                          As noted above, at the time the search warrant was executed and the material was seized, Mr Nicholls made a “blanket” claim of legal professional privilege, that is, he claimed that the entirety of the seized material was subject to legal professional privilege.

9                          On 7 May 2008, the day after the search warrant was executed, Mr Nicholls wrote a letter by facsimile to an officer of the ATO, referring to his claim that “there exists substantial correspondence removed which relates both to legal professional and accounting privilege that we have been unable to identify given the volume of materials removed.”

10                        On 8 May 2008, Mr Nicholls wrote two further letters by facsimile to the ATO. The first foreshadowed an application by Mr Nicholls to dispute the validity of the search warrant (which was subsequently the subject of the first proceedings, and further noted, under a heading “Claims for Legal Professional Privilege”:

In the copy of the Search Warrant provided to me (Arthur Nicholls) on 6 May 2008, I informed the executing officers on numerous occasions that there existed a substantial amount of documentation in both hard copy and electronic copy which would be the subject of a claim of legal professional privilege.

The Search Warrant issued on 6 May 2008 stipulates that both my wife and I should have been provided with a “list of the relevant documents in cooperation with the person claiming privilege” and that “the list will show the general nature of each document, the ground on which privilege is claimed, and the name of the person claiming the privilege.”

No such list was provided to either me or my wife as occupiers of the premises nor were we advised that we had an entitlement to request such a list. We therefore, submit that the executing officers involved in the Search Warrant of 6 May 2008 failed to protect our rights in relation to the claims of legal professional privilege on the following grounds:

(a)        there is insufficient detail of the “things” taken by police from their records to enable us to identify whether a claim of legal professional privilege, in fact, applied;

(b)        the executing officers failed to prepare and provided a list of the relevant documents with our cooperation which showed the general nature of each document, the ground which privilege is claimed and the name of the person claiming the privilege;

(c)        at the time, we were unable to identify the specific nature of each document taken by police and, therefore, had no ability to protect our legal professional privilege;

(d)        we are now unable to commence proceedings within the prescribed four working days timeframe as we no longer have access to the documents because of the lack of detail from police records in relation to the description of the “things” removed form our house; and

(e)        for the reasons above, we no have no ability to stop the officers executing the search warrant from viewing legal professional privilege documentation.

…

We also request that all “things” which are in the possession of the executing officers including the ATO be immediately placed either in individually marked envelopes and/or containers and sealed until we are able to settle the issue of legal professional privilege and the legality of the Search Warrant.

The second letter of the same date was slightly amended and signed, and for present purposes does not need to be referred to further.

11                        On the same day, 8 May 2008, the ATO officer confirmed to Mr Nicholls, orally and by facsimile that the seized material had not been inspected by officers of the AFP or the ATO; that the seized material was sealed with tamper proof seals; and that the seized material would be delivered to the offices of the AGS.  The facsimile letter further noted:

Ÿ   That you will be allowed to take copies of material that you wish to make a claim of LPP over in order to make such claim.

Ÿ   That material will be either:

1.         Sealed and subject to further legal processes in line with established practices regarding LPP claims if the ATO disputes a claim made by you, or

2.         Retained by the ATO for further examination as part of the ATO investigation should no LPP claim be made by you, or

3.         LPP claim acknowledged by the ATO.

The seized material was subsequently placed into the custody of the Australian Government Solicitor (AGS) and has not, to date, been inspected by officers of the AFP or the ATO.  As a result of these proceedings, it is now in the custody of the Court.

THE ATTEMPTS BY THE ATO TO PROGRESS THE CLAIM TO LEGAL PROFESSIONAL PRIVILEGE

12                        On 15 May 2008, the ATO officer again wrote to Mr Nicholls, relevantly, in the following terms:

The ATO and AFP have so far acquiesced to what amounts to a “blanket” claim for LPP notwithstanding that you have no legal basis for doing so.

Opportunity was provided at the time of the warrant execution for you to make specific LPP claims which you did not do. You were also provided the opportunity to examine documents before they were removed from your premises and indeed I have been informed that you appeared to do so in the presence of the AFP Federal Agents Allen and Cameron in attendance at the time.

On three occasions you attended in the shed at your property and examined documents and other records set aside for seizure by me whilst I was present but made no claim at the time in relation to those records.

I acknowledge that you made reference to communications with lawyers at the time in the context that electronic records were likely to contain such communications however, I am informed by Federal Agent Allen that you did not make specific reference to any communication or document nor seek to claim LPP for such communication(s).

A claim for LPP is based upon communications or documentation made for the dominant purpose of obtaining or giving legal advice and/or for the dominant purpose of conducting actual or contemplated litigation.

Based upon records of the seizure, there appears to be a significant amount of documentation relating to financial records, invoicing, receipts, expenses, banking documents, diaries, notebooks and like documents. As such, there does not appear to be any basis for a claim of LPP.

That letter then referred to the “dominant purpose test” in determining whether legal professional privilege exists, as set by Kenny J in Commissioner of Taxation v Pratt Holdings Pty Ltd (2004) 136 FCR 357, and continued:

In relation to any LPP claim you wish to make in respect of records held in electronic form, please indicate the location of such records and specifically identify the parties to the communications.

The ATO will seek to have the LPP issue dealt with expeditiously and will not agree to or accept any unnecessary delay in respect of the same.

13                        The ATO officer then set out a proposal for access to be granted to the seized material for the purpose of Mr Nicholls identifying the seized material over which he claimed legal professional privilege. The letter differentiated between the hard copy seized material and the electronically stored seized material, requiring Mr Nicholls to identify with sufficient particularity his claim to legal professional privilege, with a full and proper description of each document and the basis upon which he claimed legal professional privilege:

Each non-electronic document over which you make an LPP claim should be addressed by you vide the following criteria:

(a)        the nature of the document (e.g. advice, invoice, contract, etc):

(b)        the exact number of pages;

(c)        the date the document was prepared or executed;

(d)        the identity of each person(s) who prepared and/or signed the document and the identity of the person(s), if anyone, to whom it was directed;

(e)        a physical description of the document (e.g. typed or handwritten);

(f)        whether the document is an original or a copy;

(g)        whether LPP is asserted over the whole document or a part of the document and, if the latter, what part;

(h)        the basis upon which a claim of LPP is asserted; and

(i)         the person(s) in whose name the LPP claim is asserted and whether consent to the asserting of LPP has been given by that person or those persons.

With regard to electronically stored communications and documents, as I stated, you have the original source in your possession. Upon attending any viewing process or at any time before that, you should be able to supply a list of such communications or documents electronically stored over which you wish to claim LPP which addresses the following criteria:

(a)        the filename of the document (eg. Smith.doc);

(b)        the location of the document (eg. C:/My Documents/Partner);

(c)        the nature of the document (e.g. advice, invoice, contract, etc);

(d)        the exact number of pages;

(e)        the date the document was prepared or executed;

(f)        whether LPP is asserted over the whole document or a part of the document and, if the latter, what part;

(g)        the basis upon which a claim of LPP is asserted; and

(h)        the person(s) in whose name the LPP claim is asserted and whether consent to the asserting of LPP has been given by that person or those persons.

The letter then set out that any claims to legal professional privilege, in respect of both hard copy and electronically stored seized material, should record “sufficient information for the ATO to determine whether they wish to challenge the claim”.

14                        Mr Nicholls replied by way of letter on 15 May 2008, relevantly, that he did not accept the ATO or AFP’s “recollection of events in relation to the matters relating to LPP”, and indicated that he was in the course of communications with the Legal Services Commission (LSC) in relation to his claim to legal professional privilege and advised:

until such time as we have received a formal response from the LSC and have secured legal representation to adequately respond to the issues at hand, we do not waive our claim of legal professional privilege nor do we agree to the ATO accessing our documentation in the interim period.

It appears that the process of identifying the claim to legal professional privilege stalled at that stage.

15                        There is nothing to indicate that Mr Nicholls communicated to the ATO the outcome of that application for legal representation or funding from the LSC.

THE PROCEEDINGS IN THE FEDERAL MAGISTRATES COURT

16                        The DCT initiated these proceedings on 10 July 2008 in the Federal Magistrates Court under s 39B of the Judiciary Act 1903 (Cth) and s 18 of the Federal Magistrates Act 1999 (Cth), seeking a declaration that the hard copy and electronically stored seized material seized pursuant to the search warrant are not subject to legal professional privilege and that the officers of the AFP and the ATO have full and free access to the seized material. The DCT also sought its costs on an indemnity basis.  It accepts that, if Mr Nicholls makes out a claim for legal professional privilege in respect of any particular seized material, it has to be isolated and may not be inspected.

17                        The DCT’s application was brought on the basis that it suspected that the “blanket” claim to legal professional privilege was made by Mr Nicholls without foundation, for the purpose of stalling the progress of the investigation into his affairs by the ATO.

18                        The logical first step was to identify the seized material, both hard copy and electronically stored, to the intent that Mr Nicholls could then identify the parts of that seized material over which he claimed legal professional privilege. Orders were made to progress the matter in this way.

19                        Federal Magistrate Brown made orders on 17 July 2008, inter alia, that the DCT file an amended application, and that Mr Nicholls file and serve a response and affidavit in support, and that the parties were to meet within 14 days with a view to narrowing the list or categories of documents over which Mr Nicholls claimed legal professional privilege. If such meeting were unsuccessful, Mr Nicholls was ordered to provide particulars of the privilege attaching to the documents concerned and the basis on which he claimed privilege within 14 days.

20                        An amended application was filed by the DCT, but Mr Nicholls did not file any response or affidavit in support of such response. Nor did Mr Nicholls file any particulars of his claim to legal professional privilege.  Mr Nicholls had not complied with the orders of 17 July 2008.  It should be noted, however, that the task of providing such a list was by no means a simple one. 

21                        On 22 August 2008 further orders were made by Federal Magistrate Simpson that Mr Nicholls inspect the seized material, in the presence of a representative of the ATO, for the purpose of making a list, and putting the seized material into categories so as to facilitate the speedy resolution of the legal professional privilege claim.  Again, Mr Nicholls did not complete any such inspection or compile any such list.

22                        The time within which that inspection was to occur was extended by order on 29 August 2008 to be completed by 5 September 2008. Again, Mr Nicholls did not complete any such inspection.  He appears to have simply ignored these orders.  No progress had by then been made towards identifying the seized material said to be protected by legal professional privilege.

23                        Upon application by the DCT, the proceedings were transferred on 9 September 2008 to the Federal Court pursuant to s 39(1) of the Federal Magistrates Act 1999 (Cth). When the proceedings were transferred to the Federal Court.  So too was custody of the seized material.

THE PRINCIPLES

24                        A document is subject to legal professional privilege if it is a confidential communication between a client and the client’s legal adviser, whether oral or in the form of written or other material, if it was made for the dominant purpose of submission to the legal adviser for advice (whether connected with litigation or not), or for use in existing or anticipated litigation: see Grant v Downs (1976) 135 CLR 674 at 688 per Stephen, Mason and Murphy JJ.

25                        In Grant v Downs (1976) 135 CLR 674 at 689, Stephen, Mason and Murphy JJ held that is for the party asserting or claiming legal professional privilege to establish the facts giving rise to it: see also National Crime Authority v S (1991) 29 FCR 203 at 211 per Lockhart J (Keely J agreeing).

26                        The onus is on the party claiming privilege to show that the document is privileged by pointing to the nature of the document itself or by evidence describing the circumstances in which the document was brought into existence: see Grant v Downs (1976) 135 CLR 674 at 689, and Gold Securities Australia Pty Ltd v Siebe PLC (unreported, NSWSC, Giles J, 31 October 1990).

THE DESCRIPTION OF THE SEIZED DOCUMENTS

27                        It is convenient at this point to distinguish between the hard copy seized material and the electronically stored seized material, as the progress made in relation to each type of seized material differed significantly. It is also convenient at this point to set out the details of the seized material, as currently identified.

28                        The entirety of the seized material is set out in a Record of Receipt, dated 8 May 2008.  The seized material is divided into “items”, numbered 001 to 033, and each item is given a short description. Items 001 to 030 comprise the hard copy seized material. Items 031 to 033 comprise the electronically stored seized material. It will be necessary to refer in greater detail to the contents of some of the particular items later in these reasons.

(i)         The progression of the claim to legal professional privilege over the hard copy seized material

29                        On 15 October 2008 I made orders, inter alia, that Mr Nicholls file and serve by 22 October 2008 a list of the hard copy seized material over which he claimed legal professional privilege, setting out with sufficient particularity the description of each document so as to enable the applicant to determine whether to dispute the claim for privilege.

30                        Mr Nicholls did not file a list of the documents over which he claimed privilege.

31                        On 23 October 2008, Mr Nicholls’ solicitor sent a letter to AGS, copied to my chambers, attaching a table describing in categories a number of documents over which apparently Mr Nicholls claimed legal professional privilege. That list was not filed. No point was taken by the DCT about that.

32                        On 28 November 2008, I directed the DCT to file and serve by 5 December 2008 a document which, by reference to each of the documents over which Mr Nicholls claimed legal professional privilege in the letter of 23 October 2008, set out whether that claim is accepted or disputed. In respect of any disputed claims to legal professional privilege, Mr Nicholls was further directed to file and serve by 19 December 2008 such affidavit evidence as advised to support the claim for legal professional privilege. The DCT complied with that direction.  Mr Nicholls did not.

33                        The DCT accepted the claim to legal professional privilege over hard copy seized material in a number of instances, but in two categories of documents (those numbered items 001 and 015), it did not do so. Consequently, the DCT contended that the parts of the hard copy seized material over which the claim to legal professional privilege was accepted should be removed (only), and the balance of that hard copy seized material be released to the DCT.

34                        On 24 December 2008, I extended the time for Mr Nicholls to file and serve any affidavit evidence in support of the claim to legal professional privilege over the hard copy seized material over which there was a dispute as to their status (those numbered items 001 and 015).

35                        On 15 January 2009, Mr Nicholls swore an affidavit in which he contended, in relation to item 015, that:

as the information and materials contained in this exhibit relates specifically to discussions and preparation between myself and the solicitors of Citech Holdings Pty Ltd and Citech Research Pty Ltd and in particular Julian Gyngell of Gyngell & Co, concerning threatened legal action by US shareholders in Citech Holdings Pty Ltd and Citech Research Pty Ltd against those corporations and therefore covered by legal professional privilege. In particular, I refer to what is described as Folder “Shareholders – CR” comprising the following material:

Ÿ   Report from me to Julian Gyngell on US shareholder’s claims dated 8 May 2007;

Ÿ   My handwritten notes of discussion between myself and Julian Gyngell on 4 May 2007 comprising six pages;

Ÿ   Two e-mails dated 4 and 8 May 2007 from myself to Julian Gyngell;

Ÿ   Two page copy of whiteboard notes of conference between myself and Julian Gyngell, undated;

Ÿ   Three pages of notes made by me of conference between myself and Julian Gyngell;

Ÿ   E-mail from me to Julian Gyngell dated 8 May 2007

As to item 001, Mr Nicholls contended that it “includes a series of e-mails between myself and Julian Gyngell concerning the same matter” as referred to in the context of item 015, and “concerning legal matters to do with Citech Holdings Pty Ltd”.

36                        I made further orders on 15 January 2009 that Mr Nicholls file and serve such further affidavit as he may be advised by 22 January 2009 in support of his claim to legal professional privilege over the documents described as items 001 and 015 (in addition to his affidavit of 15 January 2009). I also gave leave to the DCT to file and serve any affidavit evidence in opposition to Mr Nicholls’ claim for legal professional privilege.

37                        As to the remainder of the hard copy seized material, it became clear (as was accepted by the then counsel for Mr Nicholls) that Mr Nicholls had made various claims to legal professional privilege (which generally had been accepted by the DCT). I ordered that Mr Nicholls redact a copy of that hard copy seized material, excluding only those parts of the documents over which legal professional privilege was claimed (and accepted by the DCT), and the balance of the hard copy seized material to be released to the DCT. The release of the documents was stayed for 14 days in order that Mr Nicholls could institute an appeal in the first proceedings.  He subsequently did.  The stay order has been extended to the hearing and determination of that appeal.  As noted above at [5], that appeal has not yet been heard. None of the hard copy seized material has been inspected by the DCT or any officers of the ATO.

38                        On 12 March 2009 I ruled on Mr Nicholls’ claim for legal professional privilege in respect of items 001 and 015: Deputy Commissioner of Taxation v Nicholls (No 2) [2009] FCA 234. I rejected the claim for legal professional privilege in respect of the documents in item 001, but upheld the claim for legal professional privilege in respect of the documents in item 015 described in the letter of 23 October 2008 as:

Ÿ   Term Sheet “3pm” Handwriting –

6 pages (4/5/2007)

Ÿ   Email Discussions – 4 & 8 May

2007/09:07am & 8:11am (2

pages)

Ÿ   Spreadsheet of Whiteboard

discussions (undated) (2 pages)

Ÿ   Paper-clip 3 pages

“Nettina/Julian Gyngell”

discussions re 4 May 2007 08:54am

Ÿ   08 May 2007 08:15am email re

Citech Conference Call

Mr Nicholls did not appeal from that decision.

39                        The position therefore is that, in respect of seized items 001 and 015, described on the Record of Receipt of 8 May 2008 respectively as:

·          Item 001:          11 x A4 sheets of documents on 1 x CD “SDS CITECH EMAILS GIVEN TO THE ATO”

·          Item 015:          Folder named Product development, Folder named SDS (invoices), Folder named SDS, Folder named Shareholders – CR,

legal professional privilege exists in respect only of the five documents in item 015 set out in the preceding paragraph.

40                        There remained the broad claims for privilege over certain other hard copy documents seized which, on the basis of Mr Nicholls’ table enclosed with his solicitor’s letter of 23 October 2008, the DCT had accepted in principle that privilege existed.  As to that material, on 12 May 2009 I ordered Mr Nicholls to lodge in a sealed envelope or envelopes, marked as the case may be, the redacted documents, being the copy of the hard copy seized material, a copy of which was provided to Mr Nicholls by the Registry, redacted to exclude material which Mr Nicholls claimed to be privileged.

41                        The following day, on 13 March 2009, Mr Nicholls lodged in the Registry, with a covering letter, what purported to be a “redacted” version of the hard copy seized material. Upon a cursory inspection of that “redacted” material, I noted that Mr Nicholls had apparently stapled to each loose page over which he purported to claim legal professional privilege a single A4 piece of paper with the words: “Protected by Legal Professional Privilege”, effectively claiming privilege over the entire contents of those pages. As a consequence of my cursory inspection of that material, I had sufficient concern to doubt Mr Nicholls’ understanding of legal professional privilege and/or his ability to identify material what might be the subject of legal professional privilege to cause me to raise this with the parties at the next directions hearing.

42                        On 1 April 2009, in respect of Mr Nicholls’ attempt to “redact” the hard copy seized material, I gave leave to Mr Nicholls to better identify and if appropriate, redact, the material over which he claimed legal professional privilege, to be completed by 24 April 2009.  I noted that his counsel or a solicitor should be present during such process to assist him in identifying material which might properly be the subject of a claim to legal professional privilege.

43                        Mr Nicholls has not, to date, availed himself of the opportunity to do so.

44                        As he has apparently simply ignored that opportunity, and he has had now nearly four months to have carried out that task, I will arrange for a Registrar or other Court officer to carry out the redaction where the documents clearly have the content which is accepted to be privileged.

45                        I therefore determine that all the documents which are hard copy documents as described in items 001 to 030 in the Record of Receipt dated 8 May 2008, other than the documents in respect of which a claim for legal professional privilege has been upheld in the earlier judgment (and as described in the orders then made, and as set out in [38] above) and as have been accepted by the DCT as set out in Mr Nicholls’ table to his letter of 23 October 2008 and as acknowledged in the letter from the AGS of 2 December 2008, are not shown to be the subject of a proper claim for legal professional privilege and may be inspected by the DCT.  That order is stayed pending the hearing and determination of the appeal in the first proceeding.

(ii)        The progression of the claim to legal professional privilege over the electronically stored seized material

46                        Items 031 to 033 inclusive as recorded in the Record of Receipt, dated 8 May 2008, referred to in [28] above, comprise the electronically stored seized material. Their contents are described as follows in the Record of Receipt:

Ÿ   Item 031: Serial 9QG363132 harddrive Seagate containing image of Acer Travelmate model CG!#TMI laptop (office) + 30 GB external Fujitsu drive + 2 x CD images (office)

Ÿ   Item 032: Seagate hard drive S/N 5QO4S54A containing image of Leader MSC 029 Laptop S/N H/Drive SOAOJ1OP136599

Ÿ   Item 033: Seagate H/D 94Z865 – 560 Serial # 5NF25566 300GB

47                        The Court’s management of this aspect of the matter contemplated a series of steps:

(1)        the provision to Mr Nicholls of a copy of the electronically stored seized material;

(2)        the inspection of the electronically stored seized material so that Mr Nicholls could identify the contents which were the subject of a privilege claim;

(3)        in respect of the contents over which privilege was claimed:

(a)        the opportunity for Mr Nicholls to describe the claim so that it could be assessed;

(b)        the opportunity for the DCT to respond to the claim;

(c)        to the extent of any dispute, the exchange of material and submissions to enable adjudication on the claim; and

(4)        concurrently with (3), the exchange of proposals to isolate any privileged material so that, by agreement (or if necessary by adjudication after the opportunity to exchange relevant material and submissions) the privileged material could be isolated and the balance of the seized material inspected.

48                        The intention was that that process should continue pending the hearing and determination of the appeal from the first proceeding so that, depending on its outcome, the non-privileged material could be inspected promptly.

49                        On 15 October 2008, I noted that the parties were to confer to agree upon a procedure by which a copy of the electronically stored seized material (that is, items 031 to 033 inclusive) could be made to be released to Mr Nicholls, to the intent that he could then inspect those records to identify any over which he claimed legal professional privilege.

50                        On 24 October 2008 I made further orders, that the DCT have access to the electronically stored seized material in order to make a copy of that material to provide to Mr Nicholls. I ordered Mr Nicholls as soon as practicable thereafter to prepare a list of each document in the electronically stored seized material over which he claimed legal professional privilege, and to provide that list to the DCT, together with details of the basis for his claim to legal professional privilege in relation to each such document.

51                        The DCT, or an agent of the DCT, made a copy of the seized material stored electronically and provided that copy to Mr Nicholls by 7 November 2008. No list or detailed information in relation to the documents over which Mr Nicholls claimed legal professional privilege was provided by him by the next directions hearing.

52                        On 28 November 2008, I directed Mr Nicholls to file and serve by 10 December 2008 a document setting out his proposal as to how the privileged documents may be identified and isolated so that the non-privileged documents may be made available to the DCT for inspection.  The next directions hearing was listed on 24 December 2008.

53                        Mr Nicholls did not file such a document.

54                        On 24 December 2008, Mr Nicholls’ counsel handed up in Court a document entitled “Main Points”. It had no apparent reference to the item numbers on the Record of Receipt and their specific contents.  I was told the “Main Points” document purported to claim an “exemption” for certain of the electronically stored seized material on the basis that it was not “within scope of search warrant as it relates to external material”, or that it was “Parliamentary Communications”. In addition, there were several claims to legal professional privilege, on the basis of either “Legal documents” or “Communications with Privacy Commissioner re ATO”, but the documents over which such privilege was claimed were not identified with any precision other than their location on an “E” drive, nor was the basis for the claim to legal professional privilege supported by any other material.  There was no affidavit filed.

55                        On 24 December 2008, I directed Mr Nicholls to file and serve by 13 January 2009 a document better describing those documents over which legal professional privilege was claimed in the document entitled “Main Points” with sufficient particularity to enable the DCT to determine whether it accepted or disputed each claim to legal professional privilege.

56                        Mr Nicholls did not file such a document.

57                        On 15 January 2009, Mr Nicholls filed a document entitled “Schedule of Documents Subject of Respondent’s Claim of Legal Professional Privilege” (the Schedule), which purported to be a list of the documents contained on one of the seized hard disk drives. The Schedule contained a list of each document, the date it was created, the date it was last modified, the date it was last accessed, the size of the file, the file name, the folder name and the short name of the document. The Schedule purported to categorise each document as either the subject of a legal professional privilege claim, or “deemed to be exempt on grounds that it is not within scope of search warrant executed on 6 May 2008” or “agreed for release”. Mr Nicholls marked approximately 36 of the 6587 documents listed in the Schedule as subject to legal professional privilege. In relation to those particular files which were denoted as the subject of a claim to legal professional privilege, there was no further information about the document, other than that described above.

58                        On 15 January 2009 I ordered that Mr Nicholls file and serve by 29 January 2009 such affidavit evidence as he may be advised in support of the claim that the electronically stored seized material over which no claim to legal professional privilege was made should be “exempt” from inspection by the DCT, and the DCT to file and serve any affidavit evidence in response to that claim. I listed argument on that point for 9 February 2009.

59                        As to the documents listed in the Schedule over which Mr Nicholls claimed legal professional privilege (the some 36 or so documents as noted in [57] above), I ordered that Mr Nicholls file and serve by 22 January 2009 a description of those documents and affidavit evidence in support of that claim to legal professional privilege, and the DCT to file and serve any affidavit evidence in response by 4 February 2009. To the extent there was dispute between the parties in relation to those documents, I listed argument on that point for 9 February 2009.

60                        As to the electronically stored seized material remaining to be inspected by Mr Nicholls in order to identify any further claims to legal professional privilege, I ordered that he file and serve an affidavit by 27 January 2009 setting out a proposed program for doing so, and reasons why his proposed program is appropriate.  He did not do so.

61                        I also gave leave to the DCT to file and serve any proposed minutes of order of a regime to which Mr Nicholls should be required to adhere in identifying documents over which he claimed legal professional privilege and any affidavit evidence in support of that regime. The DCT subsequently proposed a regime entailing a copy of the electronically stored seized material being made, and being sent to an expert who would then create a “User Folder Listing” of, in effect, the user-created files contained on the hard disk drives. It was contended that it would only be the user-created files that Mr Nicholls would need to inspect, rather than the entirety of the contents of the hard disk drives, which would otherwise include computer settings and drivers and software related material that could not have been created by Mr Nicholls, and in any event could not possibly be the subject of a legal professional privilege claim. The DCT contended that creating a “User Folder Listing” of the contents of the hard disk drives would improve the efficiency of the process by which Mr Nicholls was inspecting the contents of the hard disk drives, as he would be confined to inspecting fewer documents, and only relevant documents.

62                        No material was filed by Mr Nicholls to comply with the orders referred to in [58], [59] and [60].  Immediately before the next hearing on 9 February 2009, Mr Nicholls filed an affidavit deposing to certain material allegedly being stolen when he allegedly left the material on the ground in the vicinity of the Burnside swimming pool. Mr Nicholls alleged that the “stolen” material comprised the copies of the four hard disk drives from which he had been inspecting the electronically stored seized material; a USB storage device which he used to store all of his court-related material; the hard disk drive caddy that he used to connect each hard disk drive to a computer supplied by the ATO for the purposes of conducting the inspection; a CD-Rom relating to the Schedule that he had produced and a spiral binder notebook used to make handwritten notes.

63                        Consequently, on 9 February 2009, I granted Mr Nicholls an extension of time within which to comply with my previous orders, that is, to file and serve his affidavit evidence in support of his claim to legal professional privilege, to support his claim that the so-called “exempt documents” should not be available for inspection, and to propose a program for identifying any privileged documents in the balance of the electronic material.

64                        I also ordered Mr Nicholls to file and serve an outline of submissions in respect of his claim that certain of the seized material may contain “irrelevant” material which may not be inspected by the DCT. I ordered the DCT to file submissions in response. The DCT complied with that direction.

65                        On that date, I relisted the hearing on certain issues to 12 March 2009, and I authorised the DCT to reproduce copies of the seized electronic materials to provide them to Mr Nicholls.

66                        I also made orders in accordance with the DCT’s proposed minutes of order of the regime for producing a “User Folder Listing”. The DCT complied with that regime in that the electronically stored seized material was copied and sent to an expert to produce the “User Folder Listing” which was subsequently filed. On 23 February 2009 I ordered that Mr Nicholls inspect all of the documents listed in the “User Folder Listing” (that is, only the user-created files), to determine whether he wished to claim legal professional privilege in relation to any of those documents, and that he file and serve by 9 March 2009 a document identifying with sufficient particularity those documents and any evidence in support of any such claim.  No submission was put on behalf of Mr Nicholls, and no evidence was adduced by him to show that confining the focus to the user-created files was inappropriate.

67                        On 12 March 2009, a number of things happened.  Mr Nicholls abandoned any assertion that the seized material (other than that which might be legally privileged) should not be inspected by the DCT because they were somehow “exempt”.  Secondly, his counsel again sought further time to comply with the orders requiring him to list the privileged electronically stored seized material, and to justify those claims.  Thirdly, I ruled on the disputed claim for privilege in respect of certain hard copy documents.  Fourthly, I made orders about the redacting of those hard copy documents in which, apparently, some privileged material may have existed.

68                        It is noteworthy that, up to this time and notwithstanding his repeated failures to comply with directions of the Court and the Federal Magistrates Court, Mr Nicholls had filed only two affidavits: one sworn on 15 January 2009 and one sworn on 9 February 2009.  The latter concerned the loss of documents provided to him, as noted in [62] above.  The former concerned his claim for privilege in relation to the hard copy seized material described as items 001 and 015, referred to in [35] above.

69                        He had, by this time, been given many indulgences on oral applications on his behalf by counsel, without having been required to support his claims by evidence.

70                        He was given a further extension of time to identify and make out his claim to privilege to 26 March 2009.  He did not meet that deadline.

71                        On 1 April 2009 I yet again extended the time for Mr Nicholls to comply.  I further ordered that, if Mr Nicholls did not file and serve that material, or any evidence in support of such claim, that his application for legal professional privilege over any of the electronically stored seized material would be listed for hearing on 20 April 2009. I also ordered that if Mr Nicholls did file and serve any material in support of that claim, the DCT was to file and serve a document indicating any material which was accepted as being the subject of legal professional privilege, and where disputed, any affidavit evidence in opposition to that claim. In that event, I listed all outstanding issues for argument on 1 May 2009.

72                        By facsimile letter dated 15 April 2009, Mr Nicholls’ solicitor sent a letter to AGS, copied to my chambers, asserting that Mr Nicholls was unable to complete the inspection of the electronically stored seized material due to being supplied with an incorrect caddy and therefore would require a further extension of time to comply with the orders I had made earlier.  There was no application to vacate the hearing date, nor at that time any affidavit evidence adduced to support the privilege assertions.

73                        Mr Nicholls did not file any material or evidence in support of a claim to legal professional privilege. In the absence of any such material in accordance with the earlier direction, the application as directed was listed for hearing on 20 April 2009. On that date, Mr Nicholls filed an affidavit in Court stating that he had completed approximately 70% of the document inspection in relation to the electronically stored seized material. Notwithstanding his failure to comply with the earlier orders, he was allowed to rely on that affidavit, even though it did not explain his past disputes. The affidavit alleged that he was unable to inspect certain file types due to the manner in which the data was recorded, and alleged that it was “highly likely that legal professional privilege arises for materials in those files” which he had been unable to access. He identified some ten file types or formats which he said he had been unable to open. Mr Nicholls alleged that he had originally been provided with an incorrect “caddy” (being, as I understand it, a device to connect the copies of the electronically stored seized material to a computer for the purposes of inspection), which prevented him from completing his inspection of the electronically stored seized material. His affidavit alleged that:

Between 7 March 2009 and up until 14 April 2009 I obtained the use of a loan PC system which contained the hard-wiring loom to connect IDE 3.5” [hard disk drives] to a computer for document inspection.

When I was required to return the loan PC, I opened the caddy unit provided by the ATO on 14 April 2009 along with the [hard disk drives] and CDROM and discovered that the ATO had mistakenly supplied me with a caddy unit that will only allow Serial ATA (SATA) [hard disk drives] to be connected to a computer as opposed to the supplied IDE [hard disk drives].

This has prevented me from any further document inspection.

74                        His affidavit deposed that he “first identified” the difficulty in accessing the electronically stored seized material on 31 March 2009, but that “[a]s of 20 April 2009, I have found no solution to accessing these records”. This was the first occasion on which Mr Nicholls had formally indicated to the Court, other than by letter copied to my chambers set out in para [72] above, that he was having difficulty in accessing the electronically stored seized material. On that occasion, the DCT acknowledged that they had supplied the incorrect caddy and provided Mr Nicholls with the correct caddy.

75                        There were two annexures to Mr Nicholls’ affidavit of 20 April 2009. Annexure A, in the first five pages, set out a list of documents or user-created files contained in item 031 which he was either unable to open, or over which he claimed legal professional privilege. The remainder of that Annexure addressed the contents of item 033 in the same way. Annexure B to the affidavit also concerned item 031 and Mr Nicholls’ identification of material contained in that item over which he claimed legal professional privilege and the “explanation” for that claim.  That annexure contained various descriptions for the basis of the claims to legal professional privilege. One such description was “Medical Client/Doctor Privilege” and “Confidentual [sic] discussions between me and medical pr[actitioner]”. I raised with Mr Nicholls and his counsel that this would not support a claim for legal professional privilege. This was acknowledged by Mr Nicholls and his counsel, and his claim over those documents was withdrawn. The remaining basis for claims to legal professional privilege was “Confidential Information between myself & Legal Counsel”.  However, there was no substantive explanation for why those documents, or any of them, fell into that category.  For reasons which are already apparent, it was not clear that Mr Nicholls himself fully appreciated the limits on what documents were legally privileged.

76                        In Court, Mr Nicholls stated that there was a further document addressing the contents of item 032 in the same way, that is, identifying any claims to legal professional privilege and identifying those documents or files which he had been unable to open. That document was not annexed to the affidavit. Mr Nicholls undertook to provide the Court with a copy of that document.  It was not adequately explained why that document was not also annexed to his affidavit.

77                        On the basis of Mr Nicholls’ affidavit, I further extended the time for Mr Nicholls to complete the inspection of the electronically stored seized material described as items 031, 032 and 033 over which he claimed legal professional privilege and to file and serve any material in support of such claim, to 24 April 2009.  That date was selected on the basis of Mr Nicholls’ affidavit of 20 April 2009, where he said that he had carried out an inspection of 70% of the electronic material (in the copies provided to him) in the period between 7 March 2009 and 14 April 2009, so time was allowed for the further 30% to be inspected.  Mr Nicholls had until 20 April 2009 to complete that task, as he knew, so I inferred that (but for the return on 14 April 2009 of the borrowed computer) he planned to complete the remaining 50% by 20 April 2009.  As it happened, he has had much longer than that to complete the task.

78                        On that date, I also directed both parties to file and serve by 12 April 2009 a document setting out proposals for the means by which the documents over which legal professional privilege was established to be isolated. I ordered that if Mr Nicholls says he is still unable to access the electronically stored seized material for the purposes of inspection, that he was to file and serve a form of order proposing a means of enabling him to do so by 4:00 pm on 21 April 2009, and any affidavit evidence in support of such an order.

79                        On 22 April 2009 Mr Nicholls filed an affidavit, presumably in purported compliance with my orders of 20 April 2009, in which he deposed to having sought the assistance of “User Friendly Computer Systems and its principle [sic, principal], Tim Nicholls” to provide a “technical opinion” on the alleged difficulties with accessing the hard disk drives, and annexing thereto a “Technical Report”. The annexed report suggested that a “full restoration” of the electronically stored seized material was required, which would take “a considerable time and effort”.  There was no affidavit from Mr Tim Nicholls, and the “Technical Report” did not comply with the Federal Court Guidelines for Expert Reports.

80                        On 22 April 2009 I listed the matter to be heard on 28 April 2009 at 4:30pm at the request of the DCT.  As is explained in more detail below, there was an adjournment application made by Mr Nicholls in relation to that hearing, such that the issue of legal professional privilege was not heard on that date. The DCT in the meantime, by letter, proposed a procedure by which the particular documents in items 031 to 033 could be isolated so that the remainder of the documents in those items could be inspected, which involved their expert having access to the items, and without inspecting any of the documents or contents of those items, deleting those documents over which legal professional privilege is established.  Mr Nicholls did not file any alternative proposal, nor at any time suggest that the DCT’s proposal was inappropriate for any reason.

81                        On 24 April 2009 the DCT filed an affidavit sworn by a Forensic Computer Analyst, Mr Ilett, in response to the affidavit of Mr Nicholls filed on 22 April 2009 and its annexures. Mr Ilett deposed:

I can confirm that none of the seized electronic documents were in any way altered during the process of copying them on to exhibits 31, 32 and 33 and that they remained in their original electronic format exactly as they were at the time they were originally seized …

In other words, there is no reason why the seized electronic documents contained within exhibits 31, 32 and 33 could not be accessed using the same computer equipment from which they were originally copied …

82                        Some time later, on 30 April 2009, the DCT filed an affidavit sworn by Ms Loveband, an employee of the ATO, specifying the DCT’s position with respect to the documents identified in item 031 as being the subject to legal professional privilege in Mr Nicholls’ affidavit of 20 April 2009 in Annexure B thereto.  She said:

[The DCT] is unable to accept [Mr Nicholls’] claims to LPP because of his demonstrated inability to properly identify documents as being subject to LPP. I was present at the hearing on 1 April 2009 in this matter when comments were made by Justice Mansfield in relation to the Respondent’s redaction of a hard copy document. In particular, His Honour observed that the documents had not been redacted appropriately.

Further, the [DCT] is unable to accept [Mr Nicholls’] claims to LPP because of the scant information he has provided in relation to the particular electronic documents. [Mr Nicholls] has been given many opportunities by the Court to provide information by way of affidavit to support any claim for LPP.

83                        The affidavit also set out the position in relation to the claim for legal professional privilege over the identified documents on an E drive, located in the “My Documents\Chris Home” folder, in the subfolders “Chapman Case”, “Fax”, “Legal”, “PCMC” and “Perrett Case” for the following reasons:

a.         [Mr Nicholls] has not provided any sworn information regarding his involvement in the “Chapman Case”/“Perrett Case”/“Oyster Cover trial” including when he instructed lawyers to act for him and for what purpose;

b.         the file name “court submission”, without any more information, suggests that it may have been a document filed in court and therefore would not attract LPP;

c.         the description of documents as being related to “application for Legal Aid” and “Information provided to LSC for legal funding” does not support a claim of LPP;

d.         the description of “confidential discussions between me and medical practitioner” does not attract LPP; and

e.         the file names of “Full Commission of Inquiry Transcript”, “Full Court Transcript Latest” and “Oyster Cover Trial Extracts” indicate that these documents do not attract LPP.

84                        The affidavit further sets out the DCT’s position that it does not accept the claim for legal professional privilege in respect of the documents identified in the E drive in a folder “My Documents\Citech” and subfolders “Citech Letters”, “Emails\Email backup” and “Kelly&Co” for the following reasons:

a.         [The DCT] alleges that Citech was one of the companies used by [Mr Nicholls] to lodge false taxation claims, as set out in the search warrant issued by Magistrate Grasso on 5 May 2008. The claims [to] LPP in relation to these Citech electronic documents are based upon very general/descriptions assertions without any proof;

b.         [Mr Nicholls] has not provided any sworn information regarding who was briefed by Citech and when;

c.         The file names and descriptions themselves indicate different lawyers (Cowell Clark, [Iles] Selley and Kelly & Co) with no information as to their respective involvement or relationship with [Mr Nicholls] at any particular time; and

d.         The file description of Tax Invoice does not support a claim for LPP.

The DCT indicated that Ms Loveband’s affidavit was to be treated as the DCT’s submissions in respect of the claim to legal professional privilege over the material which Mr Nicholls had already inspected.

(iii)       The adjournment application

85                        The matter was listed at short notice on 28 April 2009. The day before, Mr Nicholls contacted my chambers and requested that the matter be adjourned for a week due to his withdrawal of legal aid funding. I did not vacate the matter on that informal request.  Mr Nicholls was required to attend and make an application for an adjournment and to file and serve any evidence in support of his application.  He attended on that day, and sought an adjournment, without supporting affidavit material.

86                        On 28 April 2009 I ordered that, if Mr Nicholls sought an adjournment of the hearing listed on 1 May 2009, he was to file and serve by 11:00 am 30 April 2009 any affidavit in support of that adjournment application, and was to have the deponent of any such affidavit available for examination, and was to produce for inspection by the DCT at 11:15am 30 April 2009 all documents directly relevant to any matter which he sought to prove, and to give notice to the DCT by 11:15am 30 April if he sought to cross-examine Mr Ilett or any other deponent of any affidavit filed by the DCT. I also ordered the DCT to give written notice to Mr Nicholls of any witness proposed to be relied upon at the hearing.  Such notice was duly given, indicating that the DCT only intended to rely upon the evidence of Mr Ilett. I gave leave to both parties to issue subpoenas, and indicated to Mr Nicholls that if he filed any affidavit referring to the conduct of, or communications with, his legal representative in which he attributed responsibility for his failure to comply with any previous orders he should serve a copy of that affidavit on that legal representative.

87                        On 30 April 2009 a “Notice of Change of Appearance” was filed by Mr Nicholls, indicating that he was no longer represented by that legal representative.  He represented himself.

88                        Mr Nicholls also filed an affidavit on 30 April 2009 supporting his application for an adjournment of the hearing listed for 1 May 2009 and the grounds for that application. That affidavit set out the background to his legal aid funding being withdrawn on 28 April 2009. In that affidavit, Mr Nicholls deposed as follows:

Up until 22 April 2009, I have had legal aid for the substantive matter by way of the proceedings in the Federal Magistrate Court and then the Federal Court from the [Legal Services] Commission.

The Commission’s late withdrawal of funding in [these proceedings] and its advice received by me to this effect less then 36 hours prior to the hearing in [these proceedings] on Friday, 1 May 2009, on the issue of legal professional privilege has resulted in the loss of my legal representation.

The issues relating to the protection and preservation of my legal professional privilege are complex areas of law of which I am unable to represent myself nor do I have the legal expertise in to adequately deal with these proceedings particularly when dealing with issues relating to legal professional privilege.

…

I request the Court allow me to exercise my rights to appeal the Commission’s decision as invited by the Commission in writing on 28 April 2009 to have my funding reinstated and legal counsel engaged to protect my interests in these proceedings.

89                        In his affidavit, Mr Nicholls contested the affidavit evidence of Mr Ilett:

on the basis that he provides no information or evidence that he has attempted to open the electronic records contained on the copies of the [hard disk drives] provided to me [by the DCT] on two separate occasions described as [items 031, 032 and 033] in the present proceedings and therefore, has not experienced the same difficulties that I have experienced.

90                        Further, Mr Nicholls stated:

I do not accept the evidence provided by Mr Ilett in his affidavit of 24 April 2009 (paragraph 3) that none of the seized electronic documents were in any way altered during the process of copying them on to [items 031, 032 and 033] and that they remain in their original electronic format since he has provided no evidence or information that he has endeavoured to access the original materials or documentation seized unlawfully by the ATO and AFP from my residence on 6 May 2008 to make any such determination.

91                        Mr Nicholls sought an adjournment of the hearing to allow him time to seek the reinstatement of his legal aid funding, to engage a new solicitor and counsel, and to complete the inspection of the electronic copy seized material held by the Registry.

92                        On 30 April 2009, Mr Nicholls sent a letter by facsimile to the solicitors for the DCT, copied to my chambers. In that letter, Mr Nicholls advised that:

·          he may claim legal professional privilege over communications between himself, the Legal Services Commission and his former instructing solicitor;

·          he had advised his former counsel of the hearing of the matter in order that he might attend, and had provided that solicitor with a copy of his affidavit of even date;

·          the author of the “Technical Report”, Mr Tim Nicholls, was unavailable to attend the hearing on 1 May, and further required “additional time” to prepare an Expert Witness report complying with the Federal Court Guidelines;

·          in the light of the above, including Mr Tim Nicholls’ unavailability to attend the hearing on 1 May 2009, he suggested that:

i.          Mr Ilett be available to give evidence and for cross-examination on 1 May 2009;

ii.          a further date be set for Mr Tim Nicholls to prepare and present his Expert Witness Report; and

iii.         Mr Nicholls’ application for an adjournment be heard.

93                        On 1 May 2009 I heard the application for an adjournment.

94                        Mr Nicholls was cross-examined on the basis of his affidavit  of 30 April 2009, and specifically in relation to whether he was ever actually granted legal aid funding for the purposes of the present proceedings. Counsel for the DCT drew attention to the wording of the letters from the Legal Services Commission that were in evidence, which referred to a “prosecution”, and “Fraud/Crimes Act”, which appeared not to be relevant to the present proceedings. Counsel for the DCT asked Mr Nicholls whether he was currently being prosecuted. Mr Nicholls said that he was not. Counsel for the DCT then asked Mr Nicholls to reconsider his answer to that question, and reminded him that was currently being prosecuted by the ATO for failure to lodge tax returns.  It became evident, through cross examination, that Mr Nicholls did not have before him, and had not provided to the Court, the full record of correspondence between himself and the Legal Services Commission in relation to his application for legal aid funding. It was then clear that it would be difficult to determine whether he did have legal aid funding for the purpose of the present proceedings without such information.

95                        In further cross examination, counsel for the DCT clarified the status of Mr Nicholls’ inspection of the electronically stored material. Mr Nicholls stated that he had opened and inspected all the files that he was able to open on items 031 and 032, but not on item 033. He then, somewhat flippantly to my mind, stated that there were some documents on items 031 and 032 that he hadn’t “bothered” to open, but “probably should” open, and so would require more time to do so because he now “feels the need” to check them.

96                        Mr Nicholls again reiterated that a document did exist which set out his claims to legal professional privilege over item 032, and that his solicitor had a hard copy of the document, and that he had an electronic copy of that document. He said that a copy of that document could be provided to the AGS “instantly” by email.  He had, to that point, not produced the document in either form.

97                        Counsel for the DCT also cross examined Mr Nicholls further in relation to computers that he was using to access the electronically stored seized material, and how he was conducting his inspection. At one stage, Mr Nicholls suggested that some of the electronically stored seized material had been tampered with, and that he had some “enquiries going on” about the “origins” of the documents. 

98                        The adjournment application was adjourned to enable Mr Nicholls to produce the file of the Legal Services Commission.

99                        On 4 May 2009, the Deputy Director of the Legal Services Commission produced the Legal Services Commission’s file in relation to Mr Nicholls’ legal aid application. Two bundles of documents were marked for identification MFI1 and MFI2. I gave Mr Nicholls an opportunity to consider whether he claimed legal professional privilege over the contents of those bundles of documents. After some discussion, I caused copies of the bundles of documents to be redacted to exclude those parts of the documents that may have been the subject of legal professional privilege.  Mr Nicholls was given the opportunity to comment on them.  The balance of the bundles of documents were released to the DCT for inspection.

100                      On 5 May 2009, Mr Nicholls issued a subpoena, directed to the Deputy Director of the Legal Services Commission, seeking the production of the funding guidelines and criteria relied upon by the Legal Services Commission to determine Mr Nicholls’ eligibility for legal aid funding. That subpoena was duly answered.

101                      On 6 May 2009 the adjournment application continued. Counsel for the DCT continued her cross examination of Mr Nicholls, and in particular queried why the alleged document setting out his claim to legal professional privilege over item 032 had not been “instantly” (or at all) provided to the AGS since the last occasion. Mr Nicholls claimed that the document was actually stored on someone else’s computer, and that he didn’t have access to that computer. It transpired, through cross examination, that Mr Nicholls was conducting his process of inspection of the electronically stored seized material at a “secret premises” belonging to someone else, in a shed in which there was a particular laptop. He said that the owner of that shed was currently overseas, and therefore he could not get access to that shed or the computer inside the shed in order to continue his work.  The cross examination continued on 7 May 2009.  Mr Nicholls clarified that he knew the occupants of the “secret premises” were going overseas, and that he had tried to contact them in their absence, but had to date been unsuccessful. Counsel for the DCT asked why, as he knew in advance that they were going away, he did not make arrangements for access whilst they were away.  Mr Nicholls did not give a satisfactory explanation.

102                      On that occasion, Mr Ilett, the expert for the DCT, also gave evidence about the copying process for the electronically stored seized material, and in relation to the problems that Mr Nicholls alleged he was having with opening particular file types. I found him to be an honest and frank witness.

103                      On 7 May 2009 I refused Mr Nicholls’ application for an adjournment of the hearing about whether any of the electronically stored seized material to which Mr Nicholls had accepted he had accessed is privileged from inspection on the ground of legal professional privilege, as well as in respect of the hard copy seized material.

104                      I granted leave to Mr Nicholls to file and serve by 22 May 2009 any further affidavit evidence to support any claim for legal professional privilege in respect of any of the electronically stored seized material which he had not yet inspected, being those documents referred to in his affidavit of 20 April 2009, together with a written outline of argument in support of his claim for legal professional privilege. I also gave leave to the DCT to file and serve any further affidavit evidence in response to any such affidavit evidence filed by Mr Nicholls, or an outline of argument in response to any such outline filed by Mr Nicholls.

105                      Mr Nicholls did not file any further affidavit evidence to support any claim for legal professional privilege in respect of the electronically stored seized material which he had not yet inspected. He did not then or at any time, file in Court a document setting out his claim to legal professional privilege over item 032.

106                      Mr Nicholls has not exercised the liberty to apply at all.  It was not restricted as to time.  It is now some two months after that liberty to apply was given.  He has over time demonstrated that he does not feel constrained by time limits fixed by the Court.  He had a deadline of 22 May 2009, unless he exercised the liberty to apply after that date.  His previous practice shows that he is alert to the prospect of relying on material in support of his claim to legal professional privilege which is adduced after a deadline.

107                      I also gave liberty on 7 May 2009 to both parties to apply, if so advised, including to Mr Nicholls in the event that he obtained legal representation following his proposed appeal to the Legal Services Commission against the withdrawal of his grant of legal aid funding, to vary the time table set for the filing and service of that further evidence.

108                      The intention of so doing was, as I indicated, that I would rule on the remaining privilege disputes in the light of all then available material.  The Legal Services Commission appeal, if one was instituted, was likely to be heard within a week or two.  Evidence to that effect was given by its Deputy Director.  In the event that Mr Nicholls had something substantial to adduce relevant to his putative privilege claim, he was able to exercise that liberty to apply to do so but he could not simply adduce further material (beyond 22 May 2009) without exercising the liberty to apply.

(iv)       Reasons for refusing to grant the application for an adjournment

109                      I noted at the time of refusing to grant Mr Nicholls’ adjournment application in respect of the hard copy seized material and the electronically stored seized material that Mr Nicholls had already had an opportunity to inspect that I would later publish reasons for that refusal.

110                      I refused to grant the application for an adjournment for several reasons.  I had regard to the history of the proceedings and the conduct of Mr Nicholls as set out at length in these reasons.  In particular, Mr Nicholls has shown a failure to make timely progress on his claim to legal professional privilege.  Despite being legally represented until recently, he has not conducted a timely inspection of the electronically stored seized material.

111                      His own evidence does not suggest that he embarked upon any serious inspection of that material.  He had a copy of that material by about 7 November 2008.  The only documents Mr Nicholls produced by the time those copies were lost (reported in his affidavit of 9 February 2009) were the “Main Points” document and the “Schedule of Documents Subject of Respondent’s Claim of Legal Professional Privilege”.  They were unsupported by affidavit evidence.  They were unsatisfactory in form and substance to make out such a claim.

112                      Once a focus was accepted upon a User Folder Listing, Mr Nicholls received a further copy of the seized electronic materials, and a list of the user-created files as listed in the document provided to him on or by 23 February 2009.  His affidavit indicates that he was able to access and inspect some 70% of the electronic material in the period between 7 March 2009 and 14 April 2009.

113                      I do not accept that, but for a short period between about 14 April 2009 and shortly after 20 April 2009 (when Mr Nicholls was trying to use a caddy unsuited to the task), Mr Nicholls has been unable to access the copy of the electronically stored seized material provided to him.  I accept Mr Ilett’s evidence that the copy provided to him is in the format as it was when seized.  There is no cogent evidence to the contrary.

114                      I do not accept Mr Nicholls’ evidence to the contrary.  I find that he was not truthful in his evidence that he had not been able to access that material.  Quite apart from the lengthy history of his failure to comply with Court directions in a timely way and the absence of any timely explanation for those failures, I found his demeanour during his evidence unimpressive.  I got the distinct impression that he was simply making up matters to avoid confronting the issue as to what, if any, of the seized material was privileged.  He was defensive in his answers, and endeavoured on a number of occasions to avoid answering questions by overgeneralising and failing to respond to the particular question.  He did not satisfactorily explain why the list from item 032 has never been produced.  He said a hard copy was held by his former legal representatives.  His attempt to get that, on his own evidence, was futile.

115                      I find that at all times from about 7 November 2008, other than for a short time prior to 9 February 2004 and for a week or so after 14 April 2009, Mr Nicholls has had access to a copy of the electronically stored seized material.  There is no satisfactory evidence why he could not, within the time allowed as extended up to 7 May 2009, have completed his inspection of that material so as to list the documents in it over which legal professional privilege is claimed, and to provide evidence in support of those claims where they have been disputed.  He has simply not done so, over a period of nearly six months.  In fact, in my view, he has deliberately prolonged the process to frustrate the resolution of that issue.

116                      Although the adjournment application was refused, I have allowed him further time to properly assert and to make out his claim for legal professional privilege over those parts of the electronically stored seized material which he says he has not yet inspected.

(v)        Status of legal professional privilege in the electronically stored seized material which Mr Nicholls has had an opportunity to inspect

117                      The basis of Mr Nicholls’ claim to legal professional privilege over the electronically stored seized material which he has had an opportunity to inspect is set out in the Annexures A and B to his affidavit of 20 April 2009. The affidavit sworn by Ms Loveband, filed on 30 April 2009 on behalf of the DCT, sets out the DCT’s position with respect to that claim.

118                      In Annexure A, the first five pages concern the contents of item 031. Mr Nicholls has identified eight documents as being the subject of legal professional privilege on the basis of being “Confidential information provided by me to Julian Gyngel/counsel in Flinders dispute”. A further nine documents are identified as privileged on the basis of “Confidential materials between Citech legal counsel – Julian Gygnell” and “Information provided to counsel in Citech Holdings commercial dispute”. The DCT rejects the claim to privilege over these documents on the basis that Citech is one of the companies allegedly used by Mr Nicholls to lodge false taxation claims, and that Mr Nicholls has not provided any sworn information regarding who was briefed by Citech and when.

119                      There are further documents identified and claimed to be privileged by reason of “Medical Client/Doctor privilege” (which were abandoned orally – see [75] above) and two documents labelled “Information provided to LSC for funding”. The DCT rejects Mr Nicholls’ claim over these two documents as they do not ostensibly support a claim to legal professional privilege.

120                      The first two documents identified in Annexure B to Mr Nicholls’ affidavit are said to be protected by legal professional privilege on the basis that they comprise confidential information between Mr Nicholls and legal counsel, and are a “Legal brief to my soclitiors in Chapman DPP case”. The DCT does not accept that claim to privilege on the basis that Mr Nicholls has not provided any sworn information regarding his involvement in the “Chapman Case”, including when he instructed lawyers to act for him and for what purpose. In addition, one of those two files is named “Court Submission”, and the DCT submits that the file name “Court Submission”, without any more information, suggests that it may have been a document filed in Court and would therefore not attract legal professional privilege. There are also further documents claimed to be protected by legal professional privilege on the basis that “Lister was solicitor in Chapman case” and “Confidential information re Chapman matter provided”. The DCT rejects the claim to privilege in respect of those documents on the same grounds.

121                      The next three documents identified as subject to legal professional privilege have the name “Dibden” in the title of the documents, and the explanation for privilege is “Dibden was my solicitor in the Chapman case”. For the same reasons as above, the DCT rejects the claim to legal professional privilege in respect of those three documents.

122                      The following 16 documents are said to be covered by legal professional privilege on the following ground: “Application for Legal Aid”. The DCT rejects Mr Nicholls’ claim on the basis that the description of documents as being related to “Application for Legal Aid” does not support a claim to legal professional privilege. The DCT also rejects Mr Nicholls’ claim to legal professional privilege over other documents in the same annexure on the basis of “Information provided to LSC for legal funding”, for the same reasons.

123                      The next three documents are claimed to be subject to legal professional privilege on the following basis: “Transcripts contain in-camera evidence in CJC Inquiry”. The DCT rejects the claim over these documents on the basis that the file names of those documents, being “Full Commission of Inquiry Transcript” and “Full Court Transcript Latest” indicates that those documents do not attract legal professional privilege.

124                      The following five documents are described as being subject to legal professional privilege on the basis of “Briefing from me to counsel in Oyster Cove trial”. The DCT rejects the claim over those documents because Mr Nicholls has not provided any sworn information regarding his involvement in such trial, including when he instructed lawyers to act for him and for what purpose.

125                      Two documents, titled “+3 New Media Solicitor Letter Code Letter.doc” and “+3 New Media Solicitor Letter.doc” are claimed to be protected by legal professional privilege on the basis that they are “Confidential Information provided from me to counsel in AMMC”. There is no further information about that claim. The DCT has not directed any particular submission to those documents, aside from the general submissions about Mr Nicholls’ ability to identify privileged material.

126                      The following six documents are said to be privileged because they are “Information provided by me to counsel re defence in…(unclear)”. The file names refer to Cowell Clarke and Iles Selley Lawyers. The DCT reject the claim to privilege over these documents on the basis that the file names and descriptions themselves indicate different lawyers (Cowell Clark, Iles Selley and Kelly & Co) with no information as to their respective involvement or relationship with Mr Nicholls at any particular time.

127                      The next 22 documents are claimed to be protected by legal professional privilege on the basis of “Confidential Discussions involving Citech Holdings pro… (unclear)” and “Briefing to legal counsel re Citech Holding commercia… (unclear)”. The DCT rejects these claims on the basis that the DCT alleges that Citech was one of the companies used by Mr Nicholls to lodge false taxation claims, as set out in the search warrant issued by Magistrate Grasso on 5 May 2008. Further, the claims to legal professional privilege in relation to those Citech electronic documents are based upon very general descriptions assertions without any proof. In addition, Mr Nicholls has not provided any sworn information regarding who was briefed by Citech and when, and again, that the reference to Kelly & Co, without further information as to the firm’s involvement or relationship with Mr Nicholls at any particular time does not support a claim to legal professional privilege. Three of those documents are labelled “JL Tax Invoice”, and in respect of those documents, the DCT submits that the file description of Tax Invoice does not support a claim to legal professional privilege.

128                      With respect to the electronically stored seized material that Mr Nicholls has had an opportunity to inspect, and the particular files or contents of items 031 and 033 that he has identified as being the subject of legal professional privilege, and the basis for that privilege being as expressed in his affidavit of 20 April 2009, Mr Nicholls bears the onus of establishing that claim to legal professional privilege.

129                      Mr Nicholls has not adduced any evidence to support his claim that any of the documents over which he claims privilege were communications properly to be protected by legal professional privilege. In the absence of any such material, I am not satisfied that any of the documents in items 031 and 033 are protected by legal professional privilege.  Those items should be released to the applicant for inspection.

130                      With respect to item 032, Mr Nicholls alleged that there existed a document setting out his claim to privilege over specific documents in that item.  He has had ample opportunity to make such document available to the Court. He has not done so. In the absence of any material either identifying any particular claim to legal professional privilege over any of the documents in item 032, and any material to support any such claim, I am not satisfied that any of the documents in item 032 are protected by legal professional privilege.  That item should also be released to the applicant.

131                      With respect to the documents in items 031 to 033 that Mr Nicholls says he has been unable to open, whether due to alleged computer difficulties or otherwise, the position is slightly different. I found Mr Nicholls’ evidence on the subject of his alleged computer difficulties to be untruthful. I preferred the evidence of Mr Ilett in that respect. I find that Mr Nicholls has been able to open those particular files or documents.  In any event, even if that were not so, there is no evidence which I accept that he has been unable to do so.  He has not put on any evidence to support a claim to legal professional privilege in respect of those documents.  I order that none of those documents are protected by legal professional privilege.  They too should be released to the applicant for inspection.

ORDERS

132                      The Orders of the Court are that all documents seized by the AFP and the ATO pursuant to the search warrant executed on 6 May 2008, other than the following documents:

Ÿ          Term Sheet “3pm” Handwriting –

6 pages (4/05/2007)

Ÿ          Email Discussions – 4 & 8 May

2007/09:07 am & 8:11am (2

pages)

Ÿ          Spreadsheet of Whiteboard

discussions (undated) (2 pages)

Ÿ          Paper-clip 3 pages

“Nettina/Julian Gyngell

discussions re 4 May 2007 08:54am

Ÿ          08 May 2007 08:15am email re

Citech Conference Call

and the documents over which privilege is claimed as set out in the table in Mr Nicholls’ letter of 23 October 2008 and as acknowledged in the letter from the AGS of 2 December 2008 (such material, being part only of voluminous material, being redacted from the voluminous material by a Registrar or other officer of the Court), be released to the DCT for inspection.  As the appeal from the first proceeding is extant, the Order so made is stayed pending the hearing and determination of that appeal.

133                      I will give the parties an opportunity to make submissions about costs.

 

I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: 

Dated:         23 July 2009

Counsel for the Applicant:	L Chapman
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	The respondent appeared in person

Date of Hearing:	1, 4, 6 and 7 May 2009
Date of Judgment:	23 July 2009