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Focus: Commercial Litigation – June 2008

Regulating the regulators' information gathering powers

In brief: The Administrative Review Council has recently released a report outlining a range of 'best practice' principles it proposes government agencies should adopt when exercising their coercive information-gathering powers. Partner-elect Richard Harris (view CV), Senior Associate Chris Peadon and Lawyer James Windon discuss the report's key recommendations and their potential impact.

How does it affect you?

  • The ARC recommendations are likely to be accorded significant weight by the Federal Government. The recommendations may lead to legislative changes, influence the way in which federal regulators go about investigations, and the way in which a court or tribunal might assess a regulator's decision to formally demand the disclosure of information.
  • One key ARC recommendation is that government agencies meet certain prescribed thresholds before exercising their coercive information-gathering powers. If adopted, it may make agencies more circumspect in deciding to request information and more accountable for the manner in which they exercise those powers.

The role and power of the ARC

The Administrative Review Council (the ARC) is the body responsible for overseeing and monitoring the Australian system of administrative review. It provides its advice to the Federal Attorney-General in the form of letters of advice and reports, which are subsequently tabled in Parliament.

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Coercive information-gathering powers

Coercive information-gathering powers are statutory powers to obtain information, conferred on government agencies, such as the Australian Taxation Office, the Australian Competition & Consumer Commission, the Australian Securities and Investments Commission and the Australian Prudential Regulatory Authority. The relevant legislation confers powers on a regulator to require disclosure of information by way of production of documents or, in some cases, formal examination. Certain agencies also have the power to enter and search premises.

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Key proposals of the report
Agencies should meet threshold levels before invoking their power

The ARC recommends that agencies be permitted to exercise coercive information-gathering powers only if certain thresholds are met. The ARC further recommends that these thresholds be specified in the relevant legislation before seeking the disclosure of information. For example, the ARC recommends that in circumstances where an agency is carrying on a specific investigation, the legislation require the relevant decision maker to have 'reasonable grounds' for the belief that a person may be able to assist with the investigation before seeking the disclosure of information. If this recommendation is adopted it may result in government agencies being more circumspect in exercising their information-gathering powers. Depending on how the recommendations are implemented, they may have the effect of broadening the scope for challenging an agency's purported exercise of such a power.

A power is not to abrogate privilege unless provided for by legislation

Client legal privilege is a fundamental common law right1 protecting, in certain circumstances, communications between a client and a lawyer, or a client or lawyer and a third party, made for the dominant purpose of seeking or providing legal advice or for the purpose of actual or anticipated legal proceedings from forced disclosure to regulators or in litigation. Unless a legislative provision expressly or by necessary implication provides otherwise, individuals and corporations may rely on client legal privilege to resist giving information to Commonwealth agencies.2

The ARC recommends that legislation should clearly state whether client legal privilege is abrogated, and when, how and from whom the privilege may be claimed.

This appears to adopt a similar theme to a 2008 report released by the Australian Law Reform Commission (the ALRC) also dealing with Federal regulators, but with specific focus on claims for privilege. (See AAR Focus: Commercial Litigation – October 2007.) That report recommended, among other things, that any legislation abrogating client legal privilege in respect of federal investigations should be passed rarely and only if:

  • the subject of the investigation concerns a matter of major public importance;
  • the information cannot be obtained in a timely and complete way using other means; and
  • the legal advice is central to the issue being investigated.3
The rules governing disclosure within and between agencies need to be clarified

The ARC also recommends in its report that legislation dealing with the circumstances in which Federal Government agencies may share information gathered through an investigation with other agencies be simplified and clarified. In particular that:

  • requests between agencies for information carefully describe the information that is sought and its probable uses; and
  • a threshold or 'trigger', similar to that discussed above, be applied so as to limit the circumstances in which information may be disclosed to other agencies.

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Other recommendations

The ARC also recommends that agencies adopt 20 'best practice' principles in exercising their coercive information-gathering powers aimed at ensuring the fair, efficient and effective use of coercive information gathering powers. (These principles are set out at the start of the ARC's report.) These guiding principles do not have the force of law. If adopted, however, the principles may be considered by courts and tribunals in assessing the appropriateness of an agency's exercise of an information-gathering power. More importantly, they should positively influence the way in which regulators go about investigations.

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Conclusion

The ARC's recommendations, if implemented, will go some way to restoring a more even balance between an individual's rights and the powers of government agencies.

It will be interesting to see whether and the extent to which the government will act on the recommendations made by both the ALRC and ARC.

Footnotes
  1. Baker v Campbell (1983) 153 CLR 52.
  2. See Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; FCT v Citibank Ltd (1989) 20 FCR 403; Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319.
  3. ALRC, 2008, Privilege in Perspective, Recommendations 6-1.

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