Donoghue v Commissioner of Taxation [2013] FCA 84: Use of Information

The Federal Court handed down a decision last Thursday (14 February 2013) which stated that financial documents coming into the possession of the Federal Commissioner of Taxation, concerning the applicant's financial affairs that had come into the Commissioner’s possession via the applicant's former solicitor, without his consent, were actually subject to legal professional privilege, in the case of Donoghue v Commissioner of Taxation [2013] FCA 84.

The Facts

After the applicant joined a property litigation initiated by his former partner, he failed to pay the legal fees due by his lawyers, Moore & Associates. The lawyers therefore disclosed the financial documentation to the Commssioner of Taxation, as a result of non-payment of legal fees.

As a direct result, the Commissioner reissued the income tax assessments for the applicant for

The Current Case

In the current proceeding, the applicant sought an interlocutory injunction to prevent the Commissioner from making any future use of the documents, on the basis that they were subject to a duty of confidentiality and/or protected by legal professional privilege. Counsel for the Commissioner submitted that any alleged duty of confidentiality had been extinguished by the operation of ss 166 or 263(1) of the Income Tax Assessment Act 1936.

The Decision

The Federal court granted the interlocutory relief sought by the applicant. The court accepted that there was a prima facie basis for concluding that the financial documentation as provided to the Commissioner by the lawyers was in breach of a duty of confidentiality and/or without regard to the existence of legal professional privilege in some, or all of them. The court also considered that the balance of convenience on the application favoured the applicant. It was clear that the applicant might suffer irreparable harm if the Commissioner was allowed to use any confidential information in those documents before the applicant’s rights on these issues were finally determined in the proceedings.

Struggling to navigate through tax legislation? Sign up for a free trial to our Income Tax Point in Time Service and gain convenient and reliable access to complete histories of legislative provisions, compare changes over time and search for relevant content at any date.