Mount Murray Country Club Ltd & Ors v. Commission of Inquiry into Mount Murray & Anor (Isle of Man) [2003] UKPC 53 (7 July 2003)
ADVANCE COPY

	Privy Council Appeal No. 14 of 2003

(1) Mount Murray Country Club Limited
(2) Conrad Hotels Limited and
(3) Mount Murray Homes Limited	Appellants
	v.
(1)(a) Nigel Macleod 
     (b) Mark Solly
     (c) Martin Bradshaw 
(The Chairman and Members of the Commission of
Inquiry into Mount Murray) and
(2) Ian Q. Kelly (The Assessor of Income Tax)	Respondents

	FROM

THE HIGH COURT OF JUSTICE OF THE ISLE OF
MAN (STAFF OF GOVERNMENT DIVISION)
	---------------

	REASONS FOR REPORT OF THE LORDS OF THE
	JUDICIAL COMMITTEE OF THE PRIVY COUNCIL OF THE
7th May 2003, Delivered the 7th July 2003 
	------------------

	Present at the hearing:-
			Lord Bingham of Cornhill
			Lord Hoffmann
			Lord Rodger of Earlsferry
			Lord Walker of Gestingthorpe
			The Rt. Hon. Justice Tipping
[Delivered by Lord Walker of Gestingthorpe]
	------------------

The background
1. 	After a hearing on 6 May 2003 their Lordships announced on 7 May that they would humbly advise Her Majesty that this appeal should be dismissed for reasons to be given at a later date.  Their Lordships now give their reasons.

2. 	The appellants are three associated companies in a group which has been engaged, since about 1991, in obtaining planning permission for the development, and more recently in the actual development and management, of a substantial area of land at Mount Murray, Santon, Isle of Man.  The most active of the three appellants seems to have been Mount Murray Country Club Ltd, which was incorporated in 1990 as Conrad Hotels (IoM) Ltd; it changed its name in 1991 to Radcon Village Resorts Ltd and again in 1993 to its present name.  Information as to the beneficial ownership of each of the appellants’ share capital has not been disclosed, but they have been accepted as eligible for group relief for the purposes of Isle of Man income tax.  They have the same managing director, Mr Peter Willers.

3. 	The first three respondents are the members of a commission of inquiry (“the Commission”) appointed by the Lieutenant-Governor under the Inquiries (Evidence) Act 1950 (“the 1950 Act”) following resolutions of Tynwald made on 19 February and 19 March 2002.  The fourth respondent is (and has at all material times been) the Assessor of Income Tax, a senior official in the Isle of Man public service.

4. 	The background to the litigation is complicated but can be summarised fairly briefly, since much of it is covered in detail in the Report of an Inquiry into Planning and Development and other matters at Mount Murray (30 December 2000) by Professor Stephen Crow (the “Crow Report”) mentioned below.  During the 1980s the rapid expansion in cheap overseas holidays, especially in Mediterranean resorts, adversely affected tourism in the Isle of Man and other “cold water” destinations.  During that decade the number of bedrooms available for visitors in the Isle of Man almost halved, from almost 13,000 to just under 7,000.  The policy of the Isle of Man government was to encourage tourism and to give the island a more up-market image.  In 1982 a site of about 7.2 ha at Santon was zoned for “tourist development in parkland”. By 1991 the persons controlling the appellants had become interested in undertaking this development.

5. 	The planning history of the development was protracted and controversial.  Planning control in the Isle of Man is the responsibility of the Department of Local Government and the Environment (“DoLGE”).  Promotion of tourism is the responsibility of the Department of Tourism, Leisure and Transport (“the Department of Tourism”).  The Department of Tourism has throughout strongly supported the appellants’ proposals, and their efforts to have the terms and conditions of the original planning permission altered so as to make the development more profitable for the appellants.

6. 	The initial decision of the Planning Committee (on 22 February 1991) was for the construction of a resort village on 16.8 ha (42 acres), but with the buildings limited to the 7.2 ha (18 acres) originally designated in 1982.  The application included 120-140 houses, and was accompanied by various supporting documents including a “Buyer’s Guide” about which the Crow Report had a good deal to say.  There were various conditions, including a standard condition limiting the duration of the approval to four years, and a requirement that the accommodation should be for bona fide tourists.  However by stages the concept of the development grew and changed so that it ended up as what the Crow Report described, at paragraph 1.2, as
“a commitment until April 2003 to a development of 175 dwellings for permanent residents spread over a site of 16.8 ha (42 acres) (which also includes an hotel, parkland and one ‘hole’ of a golf course).”

7. 	The Crow Report subjected the planning history to close and critical scrutiny.  Two paragraphs from the report’s “Overview” give an indication of what went wrong.  After stating that there was no evidence to substantiate any charge of corruption against any of the officials concerned, the report continued, at paragraphs 1.42 and 1.43:
“So what was it that made officials act as they did?  It is clear that in the first instance nobody in DoLGE had read the documentation of the application in principle (PA90/1842) fully, and that everyone had been taken in by the assertion of the tourism value of the whole project.  So far as the residential development was concerned, it was a tourist accommodation scheme.

For this original lapse the officials concerned may (in my opinion) be forgiven if not excused.  The Buyer’s Guide in its original typescript (as it was in the material applications) ran to 49 pages, including such anodyne material as the Isle of Man occupying ‘a central position not only in the Irish Sea but in the British Isles’ and also many pages about the ‘philosophy’ of the holiday development.  Even if any of those concerned had taken the trouble to read the document from one end to the other, which nobody appears to have done, the one page on which permanent residential occupancy was far from directly stated could easily be missed.  Of course this now looms large as a consideration, but it must be remembered that at the time the proposal was being ‘sold’ to the Island as wholly a tourist enterprise, and this now apparent fiction did not loom large as an issue at the time.”

8. 	The appellants and those who controlled them also wished to make the development more profitable by securing more generous tax reliefs than were previously available in the Isle of Man.  One source of information about the appellants’ successful efforts to obtain tax incentives is files maintained and supplied (both to Professor Crow and to the Commission) by the Department of Tourism.  The other source is a statement, enlarged on in a supplementary statement, which Mr Ian Kelly, the Assessor of Income Tax, provided to the Commission.  His statement identified three measures which gave new reliefs:

(1)	the Income Tax (Capital Relief) Order 1991 (Circular No 110/91), approved by Tynwald on 16 April 1991, increasing first-year allowances on qualifying premises (including tourist premises) to 100% in respect of expenditure after 5 April 1991;

(2)	the Income Tax (Capital Relief) (Tourist Business Incentive Allowance) Order 1991 (Circular No 337/91), approved by Tynwald on 15 October 1991, which granted additional relief at the rate of 50% for a further three years after the first-year allowance, in respect of expenditure after 5 April 1991; and 

(3)	the Income Tax (Capital Relief) (Tourist Business Incentive Allowance) (Amendment) Order 1992 (Circular No 510/92), approved by Tynwald on 20 January 1993, which extended the definition of qualifying capital expenditure to include the installation of sports and associated recreational facilities for use solely or mainly in connection with tourist business (compliance with that condition to be certified by the Department of Tourism).

9. 	In his supplementary statement the Assessor said that proposals for the creation of new “taxation structures” aimed at encouraging investment in tourism had first been put to the Treasury by the Department of Tourism in November 1990.  The Assessor also described extensive contacts and discussions between himself and his deputy, Mr Robbie Kennaugh, officers of the Department of Tourism (especially its Chief Executive, Mr Terry Toohey, and Mr Stuart Mitchell) and persons acting for the appellants, especially Mr Gary Spence and a chartered accountant, Mr John Nugent of Pannell Kerr Forster of Douglas, Isle of Man. The Income Tax Division first became involved in discussions about the appellants’ development in May 1992, and it became apparent from documents supplied to the Income Tax Division that the appellants had already been discussing tax matters with the Department of Tourism.  There were meetings with the Assessor or his Deputy on 18 May, 30 July and 27 August 1992.  Certificates of compliance under the 1992 Order were issued by the Department of Tourism on 22 December 1992 (when it was still in draft), on 2 March 1993 and on 26 September 1994.  The Assessor stated that he was concerned about the latter certificate, and raised the matter with Mr Toohey.  This led to a surprisingly strongly worded letter dated 19 October 1994 from Mr Spence to the Chief Minister, complaining of what Mr Spence called “unauthorised interference by the Treasury”.  The letter ended with a threat of litigation.  Threats to withdraw from the development, and threats of litigation, seem to have been a weapon frequently used by the appellants’ representatives and advisers in their dealings with the public service in the Isle of Man.

10. 	The planning side of the history was also punctuated with similar threats.  These are set out in detail in Annex 3 to the Crow Report.  The origins of that report were that by 2000 there was serious public disquiet in the Isle of Man as to the Mount Murray development.  On 18 August 2000 the Council of Ministers commissioned Professor Crow, a distinguished planning expert, to inquire into the history of the development.  He undertook that task with great promptitude and (although assisted only by a single secretary) delivered his written report on 30 December 2000.  It consists of five chapters and six annexes.  All the chapters, and four of the annexes, have been published; two of the annexes have been kept confidential.  Parts of the report have already been referred to.  Professor Crow concluded that although there was no evidence of corruption of any officials, it was a “sad history”.  He made various recommendations for administrative improvements, set out in the last chapter of his report.

11. 	However the publication of the Crow Report (almost in its entirety) did not allay all public concern.  The matter came to a head when Mr Peter Karran, the Member of the House of Keys for Onchan, put down a resolution in Tynwald for the appointment of a commission of inquiry under the 1950 Act.  This resolution was moved by Mr Karran and debated on 19 February 2002.  After debate it was carried unanimously by the House of Keys and the Council.  On 19 March 2002 there was a further debate (mainly about the costs of the Commission).  On this occasion an amendment to the resolution about the Commission’s costs was proposed and carried unanimously; the resolution as amended was then carried by a majority.

12. 	The terms of the resolution carried on 19 February 2002 were as follows:
“(a)  that Tynwald requests the Governor to appoint a commission comprising three independent persons to investigate and report on the Government’s handling of the irregularities occurring at Mount Murray referred to in the Report of an Inquiry into Planning and Development and other matters at Mount Murray and to make any appropriate recommendations in relation thereto;

(b)	that the chairman of the commission so appointed be authorised to exercise all the powers set out in section 1(1) of the Inquiries (Evidence) Act 1950 with reference to requiring the attendance of persons to give evidence, the production of documents and the taking of evidence;

(c)	that the Commission be requested to report to His Excellency by 31 August 2002; and

(d)	that the report of the Commission be laid before Tynwald upon completion.”

The amendment to the resolution about costs carried on 19 March 2002 was as follows: 
“and further that the commission of inquiry be requested to investigate the allegations of corruption made in Tynwald Court at its sitting in February 2002.”

In a letter dated 14 March 2002 to Mr Nigel Macleod QC, the Lieutenant-Governor His Excellency Air Marshal IanMacFadyen set out the terms of the main resolution with the insertion in paragraph (d) of the words “save for any matters of commercial confidentiality” but they do not appear in the official report of the proceedings in Tynwald.

13. 	Mr Macleod accepted the Lieutenant-Governor’s invitation to chair the Commission, and Mr Mark Solly and Mr Martin Bradshaw agreed to serve as the other members of the Commission.  They set to work with little delay and completed the first stage of their work (intended to clarify the matters to be investigated) in May 2002.  During the first stage the Commission took evidence on oath from a number of witnesses including Mr Karran.  Both Mr Willers and the Assessor were summoned to give evidence to the Commission during the investigative stage, the Assessor being asked to furnish it with documents from his files.  The Assessor supplied these documents on 27 June 2002.

14. 	The second, investigative phase began on 1 July 2002, when Mr Willers gave evidence on oath before the Commission.  Mr Willers answered some questions put to him, but he met many questions with a blunt and uncompromising refusal to answer.  He did not rely on any privilege against self-incrimination.  He simply asserted that the questions were outside the Commission’s remit.

15. 	Shortly after he had given his evidence to the Commission (so far as he was prepared to answer questions) Mr Willers learned that the Assessor had passed documents to the Commission.  The appellants promptly applied to the Chancery Division of the High Court of the Isle of Man, by petition dated 8 July 2002, seeking interlocutory injunctive relief against the Commission (prohibiting them from using any information on the appellants’ tax affairs and requiring them to identify anyone to whom such information had been passed) and against the Assessor (prohibiting him from answering any questions about the appellants’ tax affairs).  The appellants’ basic complaint appears from an affidavit sworn by Mr Willers on 8 July 2002 (para 17):
“Even if the Crow Inquiry was legitimate and even if this Commission of Inquiry is legitimate there is no part of the remit to Mr Crow or to this Commission which could lead to the legal disclosure by the Treasury of the tax affairs of any person.  Even confidential disclosure is governed by section 106 of the Income Tax Act 1970, and a Commission of Inquiry set up by Tynwald does not fall within any of the categories there listed where disclosure is permitted.”

The Statutory Provisions
16. 	Before any summary of the proceedings below it is appropriate to set out the relevant statutory provisions.  The 1950 Act is based on the rather more elaborate provisions of the Tribunals of Inquiry (Evidence) Act 1921 of the United Kingdom. Section 1 is the 1950 Act’s only substantive section and sub-sections (1) to (4) (as amended by section 17 of the Civil Evidence Act 1973 and Schedule 6 to the Local Government Act 1985) should be set out in full:
“(1)	Where the Governor appoints a commission or committee to inquire into any cause or matter, or any Board of Tynwald causes an inquiry to be held relating to any of the duties or functions exercisable by such Board, the chairman, or vice-chairman, of such commission, committee or Board may, if authorised by a resolution of Tynwald —

(a)	by summons require any person to attend at such time and place as is set forth in the summons, to give evidence, or to produce any document in his custody or under his control which relates to any cause or matter in question at the inquiry; and

(b)	take evidence on oath, and, for that purpose, the chairman or vice-chairman of such commission, committee or Board may administer oaths, or may, instead of administering an oath, require the person examined to make and subscribe a declaration of the truth of the matter in respect of which he is examined.

(2)	If any person refuses or wilfully neglects to attend in obedience to a summons issued under this section, or to give evidence, or wilfully alters, suppresses, conceals, destroys or refuses to produce, any book or other document which he may be required to produce for the purposes of this section, or does anything which would, if the commission, committee or Board had been a Court of law having power to commit for contempt, have been contempt of that Court, the chairman or vice-chairman of such commission, committee or Board may certify the offence of that person under his hand to the High Court, and the High Court may thereupon inquire into the alleged offence, and after hearing any witnesses who may be produced against or on behalf of the person charged with the offence, and after hearing any statement that may be offered in defence, punish or take steps for the punishment of that person in like manner as if he had been guilty of contempt of the High Court.

(3)	A witness before any such commission, committee or Board shall be entitled to the same immunities and privileges as if he were a witness in civil proceedings before the High Court.
(4)	The commission, committee or Board holding the inquiry shall not at any of its proceedings for which the attendance of any witness is enforced or for which the production of any document is compelled under this section, refuse to allow the public, or any portion of the public, to be present at such proceedings unless in the opinion of the commission, committee or Board holding the inquiry, it is in the public interest expedient so to do for reasons connected with the subject matter of the inquiry or the nature of the evidence to be given.”

Section 1 (5) enables the commission to make orders for costs and provides for their enforcement.  

17. 	Section 106 of the Income Tax Act 1970 (as amended by section 7 of the Income Tax Act Etc (Amendment) Act 1985 and Schedule 2, to the Treasury Act 1985) (“the 1970 Act”) is headed “Information secret and confidential”.  Sub-section (1), and the main part of sub-section (2), are as follows:
“(1)  Every person having any official duty under this Act shall regard and deal with returns, assessment lists and copies of such lists relating to the income, or items of the income, of any person, as secret and confidential documents.

(2)	Every person having possession of, or control over, any return or assessment list or copy of such list, or information contained in, or extracted from such return or list, who at any time communicates or attempts to communicate anything contained in such return, list or copy to any person [subject to ten exceptions lettered (a) to (j)] shall be guilty of an offence against this Act.”

Three of the ten exceptions were relied on below, but only that in para (j) was relied on before the Board:
“(j)  unless required or authorised to do so by any enactment or by order of a court in the Island.”

18. 	Sections 106A and 106B of the 1970 Act (added by section 80 of the Income Tax Etc (Amendment) Act 1985 and section 78 of the Income Tax Act 1989 respectively) authorise disclosure of information by the Assessor to the Collector of Customs and Excise, and to the Assessor by the Department of Health and Social Security and the Collector of Customs and Excise.

The proceedings below
19. 	The appellants’ application for injunctive relief was heard by Acting Deemster King who gave judgment on 23 July 2002.  He had before him an affidavit of Mr Macleod from which he quoted para 75:
“The Commission has read, but has not yet fully considered, the documents which are the subject of this application.  In general, the documents fall into two categories.  The first category is correspondence and memos between Government officials and the developers and their various agents as the development was planned and taken forward and those documents deal with tax and town and country planning.  The second category is the tax assessments of the companies involved in the Mount Murray development. These require further study, but they identify the companies involved in the Mount Murray development and the other companies within the same group for tax purposes.  They provide the final step of the audit trail which will enable the Commission to dispel or confirm the suspicions that are held by a Member of Tynwald about the tax aspects of Mount Murray.  There would be no need to make the details of the tax affairs of the developers public unless the Commission is satisfied that the public interest requires it.”

20. 	The Acting Deemster attached importance to the distinction between the documents connected with the development, and the granting of tax reliefs in order to make the development more financially advantageous (“the lobbying documents”) and the tax returns and associated material (“the tax return documents”).  He held that section 106 of the 1970 Act could not apply to the lobbying documents, since they did not fall within the description of “returns, assessment lists and copies of such lists”.  But he thought it “highly arguable” that not only were the tax return documents within section 106 (a point that has never really been in dispute), but also that section 106 (2)(j) did not make an exception for documents covered by a summons issued under the 1950 Act.

21. 	The Acting Deemster also addressed arguments that the lobbying documents had not been validly requisitioned either because they were not relevant to the inquiry being conducted by the Commission, or because they were covered by public interest immunity.  He rejected those arguments.  On the subject of public interest immunity he said,

“Again, assuming for the moment section 106 does not apply, it seems to me that on any balancing exercise, so long as the documentation is patently relevant to the issues which I have raised in short form in this judgment — that is, the linkage between the planning permission and the development of the amended legislation in relation to tax reliefs — and the seeking out of tax relief on tourist business grounds (not the detail of quantum as such, but the linkage of the general development of the two issues), there really is no sensible argument that the public interest demands, on a balancing exercise, that it be withheld from the Commission.”

22. 	Accordingly the Acting Deemster granted an injunction restraining the documents falling within the description in section 106(1), but not other documents.  The parties’ representatives failed to agree as to the practical effect of this order (in terms of which documents should be allocated to each category) but that controversy was overtaken by the appellants’ appeal and the respondents’ cross-appeal.  The parties agreed to treat the outcome of the appeal to the Staff of Government Division as the final disposal of the proceedings (subject, no doubt, to any appeal to the Board).

23. 	The Staff of Government Division (Judge of Appeal Mr Geoffrey Tattersall QC and Acting Deemster Mr Roger Kaye QC) gave judgment on the appeal on 1 November 2002.  The judgment identified four issues as follows:

(1)	The documents issue: how should the documents supplied by the Assessor be categorised?

(2)	The gateway issue: could the documents be lawfully disclosed, in the light of section 106 of the 1970 Act and principles of public interest immunity?

(3)	The relevance issue: were the documents (however categorised) relevant to the inquiry which the Commission was conducting?

(4)	The conditions issue: could and should the Court impose on the Commission any conditions as to the use which it made of documents disclosed to it?

24. 	On the first issue, the Staff of Government Division followed the Acting Deemster in distinguishing in principle between the tax return documents and the lobbying documents.  Only the former fell within section 106, although the latter were confidential material which the Assessor should not disclose without good reason and for a proper purpose.  But on the second issue it differed from the Acting Deemster in accepting the respondents’ submission that section 106(2)(j) did provide a gateway to disclosure.  The summons issued by the Commission was merely machinery for giving effect to disclosure authorised by an enactment (that is, the 1950 Act).

25. 	On the third issue, relevance, the Staff of Government Division rejected the argument that the test of relevance was akin to that applied to discovery of documents in civil proceedings (para 66):
“Such an investigation is not a form of civil proceedings; there is no lis or action between identifiable parties.  The functions of the Commission are primarily to conduct an investigation and make recommendations, which, or at least the first of which, is essentially a fact finding matter, not the resolution of a dispute.”

On the fourth issue it declined to impose conditions which might fetter the Commission’s discretion.  Accordingly it dismissed the appellants’ appeal and allowed the cross-appeal.  

26. 	Special leave to appeal was granted by Her Majesty in Council on 17 December 2002.  The respondents agreed to the continuation of the injunctions until the giving of judgment by the Board.  

Relevance
27. 	Before their Lordships the issues have been much the same, but relevance has emerged as the most controversial issue, and it is best to deal with it first.  As the Staff of Government Division observed, the task of the Commission is not to determine an issue, defined by pleadings, between two parties.  It is to inquire into a matter of public interest and concern defined only by the terms of the two resolutions of Tynwald.  The terms of the resolutions referred to the Government’s “handling of the irregularities occurring at Mount Murray” and referred to the Crow Report. That Report had been limited to planning matters, and Mr Karran’s allegations of corruption had been made in that context (although he seems to have expanded his allegations when he gave evidence on 23 May 2002 during the first stage of the Commission’s work). But in their Lordships’ view it cannot have been Tynwald’s intention, in the light of Mr Karran’s allegations, to limit the Commission’s inquiry in any way which might invite its being criticised as  a cover-up.  No government (and especially no government in a community as small as the Isle of Man) works in watertight compartments.  The appellants’ representatives appear to have raised issues as to tax reliefs with the Department of Tourism before they were raised with the Treasury.  The Department of Tourism was closely involved in the planning process (although the Department responsible was DoLGE).  In these circumstances it would not have been right for the Acting Deemster or the Staff of Government Division, with much less knowledge of the facts than the Commission, to intervene in order to impose on the scope of the inquiry restrictions which might prove arbitrary, or unworkable, or against the public interest.

28. 	In taking that view their Lordships have derived much assistance from the decision of the Board (on an appeal relating to the powers of a commission appointed under the Commissions of Inquiry Act of Barbados) in Douglas v Pindling [1996] AC 890. Lord Keith of Kinkel, delivering the judgment of the Board, quoted (at pp 902-903) from the judgment of Ellicott J in Ross v Costigan (1982) 41 ALR 319, 334-335, a decision of the Federal Court of Australia:
“In determining what is relevant to a Royal Commission inquiry, regard must be had to its investigatory character. Where broad terms of reference are given to it, as in this case, the commission is not determining issues between parties but conducting a thorough investigation into the subject matter.  It may have to follow leads.  It is not bound by rules of evidence.  There is no set order in which evidence must be adduced before it.  The links in a chain of evidence will usually be dealt with separately.  Expecting to prove all the links in a suspected chain of events, the commission or counsel assisting, may nevertheless fail to do so.  But if the commission bona fide seeks to establish a relevant connection between certain facts and the subject matter of the inquiry, it should not be regarded as outside its terms of reference by doing so.  This flows from the very nature of the inquiry being undertaken.”

Ellicott J then cited an earlier authority and continued:
“This does not mean, of course, that a commission can go off on a frolic of its own.  However, I think a court if it has power to do so, should be very slow to restrain a commission from pursuing a particular line of questioning and should not do so unless it is satisfied, in effect, that the commission is going off on a frolic of its own.  If there is a real as distinct from a fanciful possibility that a line of questioning may provide information directly or even indirectly relevant to the matters which the commission is required to investigate under its letters patent, such a line of questioning should, in my opinion, be treated as relevant to the Inquiry.”

29. 	After referring to some other authorities Lord Keith of Kinkel summarised the position (at p 904):
“If there is material before the commission which induces in the members of it a bona fide belief that such records may cast light on matters falling within the terms of reference, then it is the duty of the commission to issue the summonses.  It is not necessary that the commission should believe that the records will in fact have such a result.  The commission can do no more than pursue lines of inquiry that appear promising.  These lines may or may not in the end prove productive.

As regards the function of the court in the event that the commission’s decision to issue a summons is challenged, the matter is to be approached upon the traditional judicial review basis.  The applicable criteria are those set out in the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.  In particular, the decision of the commission should not be set aside unless it is such as no reasonable commission, correctly directing itself in law, could properly arrive at.  It would appear that this is the test which Ellicott J had in mind in Ross v Costigan 41 ALR 319,335, when he spoke of a Commission going off ‘on a frolic of its own.’”

Their Lordships see no reason to suppose that the Commission under the chairmanship of Mr Macleod is embarking on some unauthorised diversion into matters which could not be relevant. The two affidavits of Mr Willers provide no evidential basis for that supposition, and the affidavits of Mr Macleod indicate that the Commission is approaching its task in a responsible and focussed manner.

Disclosure and conditions as to use
30. 	Their Lordships agree with both courts below that the documents fall to be dealt with in two categories, and that only the tax return documents are within the description in section 106(1) of the 1970 Act.  On the basis that both categories may be relevant to the work of the Commission, it is necessary to consider whether section 106(2)(j) provides a gateway to disclosure by the Assessor of the tax return documents, and conversely whether public interest immunity or some kindred principle of confidence prevents the Assessor from providing documents not within section 106(1).

31. 	As regards the tax return documents which are within section 106(1), Mr Venables QC submitted that there was an analogy with legal professional privilege, recently considered by the House of Lords in R (on the application of Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563.  That case concerned a  notice under section 20(1) of the Taxes Management Act 1970 requiring Morgan Grenfell to produce documents relating to a tax avoidance scheme, including documents containing the advice of leading counsel and solicitors as to the efficacy of the scheme.  Section 20, like section 106 of the 1970 Act of the Isle of Man, contains no specific reference to privileged documents, although section 20B(2) preserves a limited form of litigation privilege in relation to tax appeals, and a notice under section 20(1) or (3) or section 20A(1) may not be given to a lawyer.  These and other similar factors complicated the interpretation of section 20(1), but the House of Lords clearly stated the principle that legal professional privilege is a fundamental human right which, although capable of being overridden by an Act of Parliament, can be overridden only by express words or necessary implication.  Lord Hobhouse of Woodborough (at p 616, para 45) pointed out that necessary implication is a stringent concept, being a matter of express language and logic, not interpretation.

32. 	The decision in Morgan Grenfell was founded on the absolute nature of legal professional privilege.  It does not depend on any balancing exercise, a point strikingly illustrated by R v Derby Magistrates' Court ex parte B [1996] AC 487, in which legal professional privilege (not of the accused, but of a witness) was incapable of being overridden even in the context of a criminal prosecution for murder.

33. 	A taxpayer’s returns of income are not covered by legal professional privilege.  In the hands of the Revenue they are entitled to be treated as confidential, and subject to public interest immunity, because they relate to a taxpayer’s personal affairs and are obtained by the Revenue under statutory compulsion: Lonrho plc v Fayed (No 4) [1994] QB 775, 786-788.   At the end of that passage Sir Thomas Bingham MR (with whom Leggatt LJ agreed) said:
“I think that a claim made by the revenue to withhold documents relating to a taxpayer’s tax affairs from production without his consent is properly to be regarded as a claim for public interest immunity.  But what matters more than the label is the practice, and in this instance the practice seems to me to be very clear.  For the reasons which Lord Reid gave [in Conway v Rimmer [1968] AC 910, 946], the courts will give very great weight to preserving the confidentiality of such documents in the hands of the revenue.  They will override that confidentiality only if, according to settled principles, the applicant shows very strong grounds for concluding that on the facts of the particular case the public interest in the administration of justice outweighs the public interest in preserving the confidentiality of the documents.”

34. 	Section 106(1) of the 1970 Act imposes a strong statutory duty of confidence (“as secret and confidential documents”).  But section 106(2) creates a considerable number of gateways, including para (j) - “unless required or authorised to do so by any enactment or by order of a court in the Island” - which recognise that the confidential nature of tax returns may in special circumstances have to give way to some other public interest. Their Lordships agree with the Staff of Government Division that section 106(2)(j) does permit the Assessor to disclose the tax return documents, despite their confidential nature, in obedience to the summons issued by the Commission.  Disclosure is in that way authorised by an enactment, that is the 1950 Act, section 1(1)(a) of which confers on the Commission power to require the production of documents.  In the context of the 1950 Act that power would be nullified if confidential documents were impliedly excluded.

35. 	The lobbying documents are on the Assessor’s files not because the appellants were under a statutory duty to submit them, but because they chose to do so for their own purposes.  They are no doubt entitled to some limited degree of confidentiality simply in the sense that the Assessor as a responsible public servant would not, without good reason, reveal any of the contents of his files to any casual inquirer.  But the Commission is not in the position of a casual inquirer.  Their Lordships agree with both courts below that there was no possible reason why the lobbying material should not be produced to the Commission, in case it proves to be relevant. There is much to be said for transparency in any attempt by private interests to obtain special tax reliefs for their own financial advantage.  Their Lordships are in general agreement with the observations of the Acting Deemster quoted at paragraph 21 above, but would substitute “potentially” for “patently”.

36. 	Their Lordships also agree with the Staff of Government Division that it would not be appropriate to impose any conditions on the Commission as to the use of material which the Commission has not yet fully evaluated.  In these circumstances the Commission is the guardian of the public interest.  It has been given extraordinary powers in order to investigate what Tynwald must have seen as an extraordinary situation.  The Chairman of the Commission has already indicated that the use which the Commission will make of any material will depend on the course and outcome of its investigations.  The Commission, having been granted extraordinary powers, must be relied on to exercise them responsibly in the public interest.  It would not therefore be right to impose any conditions on the use which the Commission makes of material disclosed to it.  The Commission will of course respect the confidentiality of documents produced to it so far as is consistent with its public duty to report.  Still less would it be appropriate to consider imposing any conditions on the Lieutenant-Governor, to whom the Commission’s report is to be given in the first instance.

37. 	For these reasons their Lordships will humbly advise Her Majesty that the appeal should be dismissed.  The parties have 14 days from the date of this judgment in which to lodge written submissions as to the costs of this appeal.