The Independent Commission Against Corruption will ask the High Court to overturn a decision shutting down its controversial inquiry into Crown prosecutor Margaret Cunneen, warning the decision jeopardises other inquiries.
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In a ruling the ICAC believes "fundamentally alters" its powers to conduct investigations, the majority of the NSW Court of Appeal ruled on Friday that the commission had "no power" to investigate Ms Cunneen, SC, over allegations she attempted to pervert the course of justice.
The commission is seeking special leave to appeal the decision in the High Court "as a matter of urgency".
Legal sources said the 2-1 decision could kill off current and future inquiries, as well as undermining those which have already been completed.
The decision has already derailed the ICAC's plans to hand down reports in late January in its high-profile inquiries into Obeid-linked company Australian Water Holdings and Liberal Party donations.
The commission said the decision "fundamentally alters the basis of the commission's powers" in relation to "significant parts" of those inquiries.
It will not hand down reports in those inquiries, codenamed Operations Credo and Spicer, until the High Court proceedings are resolved.
The Court of Appeal ruled the commission was acting outside its powers by investigating Ms Cunneen, 55, over allegations that she and her son, 26-year-old Stephen Wyllie, told his 25-year-old girlfriend Sophia Tilley to fake chest pains to avoid a police breath test after a car crash in May. The allegations are denied.
The state's top judge, Chief Justice Tom Bathurst, dissented from the majority decision of Justices John Basten and Julie Ward. He would have allowed the commission to continue its investigation into the trio.
The commission had intended to start public hearings into the allegations on November 10 but the inquiry was delayed when Ms Cunneen took urgent Supreme Court action to shut down the inquiry.
Justice Clifton Hoeben dismissed Ms Cunneen's case but her legal team immediately appealed against the decision.
The question that would need to be decided by the High Court, if it grants leave to appeal, is whether the conduct in this case meets the definition of "corrupt conduct" in section 8 of the ICAC Act.
The majority ruled that it did not, and therefore it was outside of the commission's powers to conduct an inquiry.
The commission said it was "critical to the exercise of the commission's powers generally that the construction of section 8 of the ICAC Act is settled" by the High Court.
The section defines "corrupt conduct" to include conduct of any person that could "adversely affect" the official functions of a public official, such as a police officer, and says such conduct could involve perverting the course of justice.
All three judges agreed the alleged conduct in this case could amount to perverting the course of justice. But the majority said it could not "adversely affect" the official functions of a police officer because it did not have the potential to "compromise public administration".
Justices Basten and Ward said, assuming the alleged conduct took place, "it could not be said that the police officer acted otherwise than honestly and impartially in taking steps in accordance with his or her understanding of the circumstances".
Chief Justice Bathurst said he had the "misfortune to differ" from his colleagues. He said the alleged conduct could adversely affect a police officer's official functions because it "had the potential effect of diverting the police officer from the performance of an investigation into a suspected crime" and the tendency to "frustrate or deflect the course" of possible court proceedings.
Ms Cunneen also challenged the ICAC's power to hold a public rather than private hearing into the allegations.
It was not necessary for the court to decide this issue because the majority shut down the investigation altogether. But Justices Basten and Ward raised questions about the necessity of a public hearing in light of the potential damage to Ms Cunneen's reputation.
"The damage which can be done to a reputation, possibly rendering the continued holding of public office untenable, in circumstances where denials may later be accepted or, apparently serious conduct may be held to be a minor infraction, tend in favour of caution in exercising the power to hold a public inquiry," Justice Basten said.
However, neither judge said the ICAC was acting outside its powers by deciding to hold a public inquiry.
