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Woellner, Robin; Bersten, Michael --- "Legal Professional Privilege in the Australian Tax System: Back to the Future for Law Reform?" [2022] JCULawRw 3; (2022) 28 James Cook University Law Review 19

Legal Professional Privilege in the Australian Tax System: Back to the Future for Law Reform?

Professor Robin Woellner[1] and Michael Bersten[1]


The doctrine of legal professional privilege (‘LPP’) has long been a fundamental principle of the common law, promoting the public interest and the administration of justice by protecting the confidentiality of communications between lawyer and client.

However, there is an inherent tension between the secrecy imposed by LPP and the views of regulators such as the Australian Taxation Office (‘ATO’), which take the understandable approach that they need access to all relevant information to enable them to deal appropriately with, in the case of the ATO, taxpayers.

In recent times, the ATO has been particularly concerned by what it sees as dubious claims for LPP which it believes are intended to improperly block its access to key information. As a result, it has become more aggressive in challenging such claims, and a number of recent cases have sharpened (if not extended) the boundaries of LPP.

Into this mix the ATO has thrown a very detailed ‘LPP Protocol’, which it suggests that potential LPP claimants should follow, but which has been criticised by professional bodies.

The result is a fascinating ‘state of play’ – or confusion. The authors argue that, to increase clarity and coherence, the reforms suggested by the ALRC in its comprehensive 2008 Report should be ‘dusted off’, updated and implemented in order to produce a coherent and comprehensive set of rules for legal professional advice privilege.

I Background

Legal professional privilege is a judicial doctrine which protects confidential communications[1] between a person and their legal advisor from disclosure to third parties, provided the communication was created for the dominant purpose [2] of giving or obtaining legal advice or for current or anticipated litigation.[3]

However, there has long been a tension between on the one hand the needs of justice – the need for courts and regulators to have access to the relevant information they need in order to make optimal, fully informed decisions - and on the other hand, the impact of legal professional privilege which prevents third parties (including a court or regulator such as the ATO) from accessing ‘privileged’ information.[4]

The privilege therefore plays a key role in the context of taxation (and other areas), and is relied on by taxpayers and their advisers to resist demands by the ATO for access to confidential information.[5] Given the important role played by the privilege and its effect of excluding access to relevant information, it is worrying that in recent years the ATO has expressed increasing concern that it suspects that some taxpayers and their advisers have been using claims for legal professional privilege in order to block or delay ATO investigations inappropriately by making claims for the privilege in situations where the ATO believes that there is no realistic basis to think that the privilege could apply.[6]

In response, the ATO has ‘ramped up’ its scrutiny of claims for the privilege, and taken a much more aggressive approach in challenging what it regards as dubious claims.[7]

The situation has been exacerbated by the development of technology, which means that cases may now involve tens of thousands of disputed electronic documents.[8]

At the same time, a number of recent court decisions and ATO practices have sharpened or refined the boundaries of the protection offered by legal professional privilege.[9]

This article explores these developments and evaluates their impact, concentrating on the principles applying to the common law position regarding legal advice, which applies to the pre-curial position prior to court proceedings. This article does not canvas the common law litigation privilege or the statutory client privileges in the Evidence Act 1995 (Cth).[10]

It is important to note that significant recommendations in relation to legal professional privilege were made by the Australian Law Reform Commission (‘ALRC’) in 2008. The Commission’s work has gathered dust to date, but the authors believe that the Report should be reconsidered, and updated as necessary, with the aim of developing a significant and principled cohesive legislative framework, in place of the piecemeal reform offered by the Judicial and Executive arms of Governments. This issue will be discussed at length in a further article which the authors are preparing.

II Introduction

The traditional public policy rationale for legal advice privilege is that the privilege ‘promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers ... by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to their lawyer’.[11] In the case of litigation privilege (not discussed beyond an occasional aside) in this article), the related public policy rationale is to safeguard the proper operation of the adversarial process.[12]

The question of whether the privilege applies in particular circumstances is important – not only because if communications are not privileged, the ATO will have access to them - but also because if the privilege is asserted wrongly, the ATO may seek to impose a penalty for making a false or misleading statement to the ATO (Taxation Administration Act 1953 (Cth) (‘TAA’) Sch 1, s 284-75(1)); or launch a prosecution under a provision such as s 8K TAA.[13]

While legal professional privilege has been recognised for centuries, its boundaries continue to evolve (or at least sharpen) from time to time. For example, in 2019 the High Court confirmed that the privilege is an immunity from an otherwise valid obligation to answer or produce documents and is in that sense perhaps a right but not an actionable right,[14] with the adviser under a duty to claim the privilege on behalf of the client.[15] More recently, the switch from a sole purpose test to one of dominant purpose was another significant development.[16]

The privilege continues to evolve – as noted above, the advent and development of computer technology means that many cases now (and will increasingly) involve disputes about newer modes of communication (including e.g. emails, Zoom transmissions, social media and emerging others) which may involve not only new modes of “messaging” but perhaps create thousands of communications – numbers not dreamed of in the past – which under current principles may need to be examined and analysed individually.

This dramatic increase in the number of documents in issue in some cases has significant consequences, because it would currently seem to be impractical (and extremely expensive) to have a (senior) lawyer examine each of thousands of communications individually, particularly as the ATO appears unwilling to accept electronic identification of ‘non/privileged’ documents.[17] This can create problems, because:

... It is common for [ATO] notices requesting documents to give a relatively short time period within which to respond, although extensions may sometimes be granted. If the request involves corporate emails, it can be necessary to analyse tens of thousands of documents to determine those that meet the notice, and then further identify those that are (or may be) privileged. The notice time can normally only be met by using analytical tools adopting conservative assumptions about document characteristics ...[18]

It will be interesting (and important) to see how this new reality is worked out in practice.

III The Elements Of Legal Professional Privilege

The privilege has several key elements (as noted, this paper focusses on common law legal advice privilege, which has been the most common area of dispute with the ATO in recent times):

1. there must be a ‘communication’;

2. that communication must be and (generally) must remain confidential;

3. the communication must (with some exceptions) have been between a person and their lawyer acting in that legal capacity;

4. the communication must have been created for the dominant purpose of either:

a. giving or obtaining legal advice; or

b. for the purposes of litigation which is underway or in reasonable contemplation;

5. the communication must not have been waived expressly or impliedly; and

6. the communication must not be a step in the commission of a ‘fraud’.

While each of these elements is discussed below, the emphasis is upon those elements which are contested or unclear.

Further, in the realm of Australian tax practice:

7. the ‘recommendations’ under the ATO’s 2022 LPP Protocol should be considered and evaluated.

Finally, the authors further submit that:

8. the recommendations in the ALRC 2008 Report should also be considered and adopted where appropriate, as they offer a coherent approach for development of the privilege in law and practice.

A There Must Have Been a ‘Communication’

It is well-established that the privilege protects communications, rather than the document or other vessel in which they may be contained,[19] though for convenience, reference is generally made in this Article to ‘documents’.

This requirement for a ‘communication’ is (generally) uncontroversial, but its scope continues to expand with developments in technology. Once limited to quill pens, a communication may now be in any form, including oral or written, printed or electronic.[20] Equally, a copy of a document may be privileged if it satisfies the relevant requirements, whether or not the original was itself privileged.[21]

It is important to note that each communication is treated separately for legal professional privilege purposes. Thus, in a chain of emails, each email will be treated separately (though in context).[22]

As noted, the practical expression of the privilege continues to evolve as new modes of electronic communication emerge.

B The Communication Must Be and Remain ‘Confidential’

Given its policy rationale, the requirement of confidentiality[23] is obvious, and in general, disclosure of the communication to a third party will destroy its privileged status.[24]

However, there are exceptions – for example, communications disclosed inadvertently to the ATO or other body can be restrained or recovered provided the party involved takes prompt action in equity.[25]

C The Communication Must Generally Be Between a Person and Their Lawyer Acting in that Legal Capacity

The requirement that the protection only applies to actions of a lawyer (including foreign lawyers,[26] government and in-house lawyers[27]) acting in that capacity means that communications by a lawyer acting in the capacity of business adviser or some other non-legal role will not attract the privilege.[28]

In early times, legal professional privilege applied only to communications between a person and their private sector lawyer, though there have always been exceptions.

This relatively straightforward requirement has had to adapt to changes over time, including communications with experts and other third parties engaged by a lawyer to assist them in giving legal advice to the client, and, more recently, the position of multi-disciplinary practices (discussed at sub-paragraph 2 below).

1 Communications with Third Parties

As noted, the basic LPP doctrine has evolved over time in relation to communications between a lawyer and third parties. It was first recognised that communications between a lawyer and a third party (non-lawyer) could be protected provided the third party was acting as the client’s agent. The principle was subsequently expanded to extend the protection of privilege to communications where the third-party is not the client’s agent, provided the third party’s function was to enable the client to obtain legal advice from the solicitor, and the communication satisfied the dominant purpose test.[29] The common example in practice is the engagement of an expert, who may or may not also become an expert witness, such as a valuer, accountant, engineer or indeed any expert who may assist a lawyer to give legal advice. It has therefore been held that communications between non-lawyers can attract the privilege in some circumstances.[30]

The expansion of this element of the privilege in this way has been logical and evolutionary – though it creates potential issues for third party disclosures and multi-disciplinary practices (‘MDPs – which raise questions about, for example, whether the client is dealing with a lawyer in a lawyer-client relationship and whether there is a dominant purpose of providing legal advice – issues which may require further adaptation of the privilege).[31]

2 Application of the Privilege to Multi-disciplinary Practices.

The requirement that communications must be with a lawyer acting in that capacity has raised some difficult issues, particularly for multi-disciplinary practices (“MDPs”),[32] where the practice comprises both legal and non-legal professional staff, and offers clients a mixture of legal and non-legal services.

The issues are well illustrated by the decision in Federal Commissioner of Taxation v PricewaterhouseCoopers.[33] PricewaterhouseCoopers (‘PwC’) is registered as a multi-disciplinary practice between legal and non-legal practitioners and provides both legal and non-legal services to clients.[34] In that case, PwC was retained by JBS SA, a multinational company, to advise on the reorganisation and tax structuring of the JBS Global Group. In the course of an audit of the tax affairs of Flora Green Pty Ltd, an Australian subsidiary of JBS SA, the ATO issued notices to a partner at PwC and to Flora Green under s 353-10 TAA requiring the production of specified communications.

PwC argued that some 44,000 communications (emails and attachments) were protected by legal professional privilege and declined to produce them in response to the notice. The ATO disputed the claim of privilege in relation to some 15,500 of these documents, arguing in effect that among other things, PwC had appointed a relatively junior lawyer to participate in the process in order to attract legal professional privilege artificially when the advice work was ‘really’ being done by more senior non-lawyers.

Given the number of documents involved, Moshinsky J in the Federal Court decided to proceed by first examining 116 ‘sample’ documents (around half being selected by each of the ATO and PwC), in order to establish the applicable principles and categories.

The ATO argued that:

(1) the terms of engagement under which PwC were operating did not establish a ‘legal’ relationship which would support a claim for legal professional privilege;

(2) as a matter of substance, the services were not actually provided pursuant to a relationship of lawyer and client; and

(3) the communications were not made for the dominant purpose of providing legal advice.[35]

Moshinsky J rejected arguments (1) and (2) as general propositions, finding that a sufficient lawyer-client relationship existed between PwC and JBS in at least some circumstances to potentially justify a claim of privilege. However, he upheld the ATO’s third argument and held that each document had to be examined individually to determine if privilege applied to it, with the onus of establishing that privilege applied being borne by PwC (as the body claiming the privilege[36]).

After examining the 116 sample documents[37], Moshinsky J concluded that 49 (42%) were privileged, 6 (5%) partly privileged, and 61 (53%) were not privileged.

The principles that His Honour applied in determining whether the privilege applied to a particular communication included:

1. Whether privilege applies was to be determined by reference to the content of the document in its context in light of the evidence in relation to each document. His Honour noted that ‘[a] critical part of the context ... is that the services were provided by a multi-disciplinary practice ...’[38] so that in many cases both lawyers and non-lawyers had provided advice to the client[39];

2. The test for the privilege was to be applied to each document individually. This underlines the necessity of ensuring that any ‘Statements of Work’ or similar documents make it clear that the dominant purpose is the giving of legal advice, rather than non-legal (eg, business or commercial) advice.

Three amici curiae[40] were appointed to provide recommendations to Moshinsky J on the status of various documents. While Moshinsky accepted the amici curiae’s recommendations in many cases,[41] there were a number of instances where he disagreed with their recommendations,[42] largely because the amici curiae had posed the test as being whether advice given was legal or commercial in character, whereas Moshinsky J regarded the appropriate dichotomy as being between legal and non-legal advice.[43]

In approaching the classification of the communications, Moshinsky J reiterated the general principles that[44] communications were:

• privileged where they satisfied the dominant purpose test;[45]

• privileged where a lawyer had substantively reviewed the draft advice prepared by others and adopted it as their own;[46]

not privileged where the dominant purpose test was not satisfied;[47] and

not privileged where the advice provided was non-legal in character.[48]

In passing, Moshinsky J observed that there appeared to have been a few instances where non-legal advice had been ‘routed’ through a lawyer in order to obtain the protection of legal professional privilege.[49]

Applying these general principles, Moshinsky J summarised their application in a passage at the end of his judgment which provided the following helpful guidelines:[50]

• Advice given by a non-legal PwC Australia practitioner on stamp duty,[51] valuations,[52] or accounting[53] would generally not be privileged.[54]

• Accounting advice prepared by a non-legal PwC Australia practitioner which was provided to the PwC Australia legal practitioner and presented to the client as ‘legal advice’ was generally not made for the dominant purpose of giving or receiving legal advice and would therefore generally not be privileged.[55]

• Where an email passed between a non-legal PwC Australia practitioner and an overseas PwC firm which contained substantive advice provided by that non-legal practitioner (but not by the Australian legal practitioner) this would indicate that there were multiple purposes (including the giving of non-legal advice) of equal weight for the making of the communication, so that the dominant purpose test would not be satisfied, and the communication would not be privileged.[56]

• Where a non-legal practitioner at PwC Australia sent an email to the client, requesting that the client provide information about a matter relating to a proposed transaction (and no substantive emails were authored by the Australian legal practitioner) this would not be part of the ‘continuum of communication’ between lawyer and client but rather suggests a situation where the non-legal advice was of equal weight so that the dominant purpose test was not satisfied and the communication was not privileged.[57]

• Where the Australian legal practitioner gave the client substantive advice on matters of Australian taxation law, that advice was generally privileged. This would include cases where the Australian legal participant requested that a non-legal participant provide them with draft advice which was subsequently reviewed by the Australian legal practitioner and adopted as their own advice.[58]

• Where draft advice was prepared by one PwC Australian legal practitioner on matters of Australian taxation law for review by a second Australian legal practitioner who was to give that advice to the client, disclosure of the document would generally tend to reveal the substance or content of a privileged communication (legal advice to be given by the second practitioner) and was therefore privileged.[59]

It is clear from His Honour’s judgment that while a multi-disciplinary practice is not precluded from claiming legal professional privilege for advice sought by or given to clients,[60] those involved with an MDP must be extremely careful to ensure that all requirements of a claim for privilege are met, particularly that a clear lawyer-client relationship exists, with the actions of non-lawyers being conducted at the request of, or under substantive supervision by, a lawyer.[61]

As a matter of practice, it can be expected that where a privilege claim is made by an MDP, the ATO will scrutinise such claims closely, and seek more detailed information than might otherwise be the case. Indeed, this is illustrated by the additional information which would be required under the ATO’s Legal Professional Privilege Protocol (2022).

In this context, there is a conflict between the current jurisprudence, which requires individual analysis of each document/communication, and the realities of modern technology which mean that it is increasingly difficult to manage the process effectively where privilege claims may be made for tens of thousands of documents. If communications in the electronic information age are to be analysed individually, this could tie up lawyers (on both sides) and courts for lengthy periods of time and require significant resources. This problem is exacerbated by both the intrinsic nature of legal professional privilege, which creates many difficult issues of characterisation on which reasonable minds might differ, and the ATO’s insistence that claimants should not rely solely on electronic ‘vetting’ of disputed communications in order to determine whether a particular document is privileged.

The approach taken by Moshinsky J of analysing a small portion of the thousands of documents in dispute as an indicative sample is a clear recognition of the difficulties encountered in dealing with the impact of the large numbers of documents and other communications generated by modern technology.[62]

It seems reasonable to suggest that the current principles may have been developed in a different and quieter era, and that they may need to be adapted to be ‘fit for purpose’ in the modern era – perhaps by adopting or adapting an approach similar to that taken by Moshinsky J (and others) in recent times.

3 The Privilege is a Shield, Not a Sword

That is, a claim of privilege can be used to defend a person from being required to produce documents or other communications, but cannot be used to attack another person – eg, it cannot be used to require a person to hand over privileged documents which have come into their possession.

Thus, for example, in FC of T v Donoghue,[63] a law clerk who was engaged in a dispute with Donoghue over fees for work allegedly done sent large quantities of privileged material to the ATO without the client’s knowledge or consent. The ATO used these materials to assess Donoghue for additional tax and penalties totalling some $30.4m. Donoghue took action to recover the stolen documents and prevent their use.

The Full Federal Court rejected Donoghue’s claim,[64] and held that:

[52] ... The common law of legal professional privilege operates as an immunity from the exercise of powers requiring compulsory production of documents or disclosure of information. It is not a rule of law conferring individual rights, the breach of which may be actionable. Consequently, no action lies against a party who receives documents which are privileged merely because those documents are privileged.[65] ...

[58] ... At best the law of privilege afforded Mr Donoghue an immunity against being compulsorily required to disclose communications with his attorneys. Where the Commissioner did not use any such power to obtain the documents in question, whether they were privileged was of no moment.

Accordingly, the Federal Court declined to order the ATO to return the documents to Donoghue.[66]

Subsequently, the High Court decision in Glencore International AG v FC of T[67] re-emphasised that the privilege can only be used defensively as a shield to enable a person to resist attempts to compel them to disclose privileged communications.[68]

In Glencore, the company claimed legal professional privilege over documents which contained legal advice to Glencore from a firm of Bermuda lawyers on the restructure of Australian entities in the Glencore group. The documents had been stolen from the Bermuda lawyers, published as part of the ‘Paradise Papers’ and subsequently accessed by the ATO. Glencore took action seeking an order that the ATO return, destroy or undertake not to use these documents (and any copies).

The High Court declined to order the ATO to return the privileged documents to Glencore, observing[69] that:

[12] The plaintiff’s argument cannot be accepted. Fundamentally it rests upon an incorrect premise, namely that legal professional is a legal right which is capable of being enforced ... [and] may found a cause of action ... The privilege is only an immunity from the exercise of powers which would otherwise compel the disclosure of privileged communications.[70]

Accordingly, ‘no action lies against a party who receives documents which are privileged merely because those documents are privileged. ... the common law of privilege is silent when the question which arises does not concern compulsory production ...’. [71]

While technically correct, the principle produces some unusual results, including those discussed in sub-paragraph 4 below.

4 The ‘Shield’ Principle May Apply Even Where the Privileged Materials Used to Assess a Taxpayer Have Been Obtained by the Third Party Illegally

Recent cases have confirmed that the principle that the privilege can only be used as a shield applies even where the privileged materials have been obtained illegally – and arguably where the person who acquired the materials suspects, or perhaps knows, of the illegality.

Thus, in Denlay v FC of T[72] (‘Denlay’), a Mr Kieber had stolen data disks from LGT and passed the data on those discs on to ATO officers. While the Court was of the view that ‘a reasonable suspicion may be attributed to the Commissioner’s officers that Mr Kieber had obtained information from LGT by unlawful means’, the Court held that the terms of s 166 Income Tax Assessment Act 1936 (Cth) (‘ITAA36’) imposed a duty on the ATO to use all information in its possession to assess the taxpayer, even if that information had been unlawfully obtained before being passed on to the ATO. [73]

Similarly, in FC of T v Donoghue the Full Federal Court stressed that the common law of privilege is ‘silent when the question which arises does not concern compulsory production’.[74] Accordingly, while the Court was ‘prepared to assume’ that it would have been ‘reasonably obvious’ to Main (an ATO officer) that some of the documents supplied by Moore to the ATO could have been confidential, under s 166 ITAA36 the Commissioner ‘is not only entitled but obliged to use information which is in his possession even if he knows it is subject to a claim for breach of confidence and even if he knows it is privileged’.[75]

Perhaps the widest statement of the principle was the obiter by Button J in the NSW Supreme Court in the tax recovery case of DFC of T v Anglo-American Investments Pty Ltd, where His Honour stated that: ‘Any unlawfulness in the process of information gathering by officers of the [ATO] that precedes the formal making of an assessment will not of itself, constitute conscious maladministration’.[76] This seems to erect a type of notional ‘Chinese Wall’ between information gathering and the assessment function. However, as an obiter statement by a Supreme Court judge, the statement does not carry strong precedential weight.

An interesting question which arises is whether this principle can be extended, and if so, how far. Can it apply to other situations where the ATO has a ‘duty’ to take certain action? Is it sufficient that these other duties are implied rather than express? What if an ATO officer was directly involved in the theft of materials which are used to assess a taxpayer?

While aspects of this element of LPP are contentious, the basic principle is now well-established, and is one area where technology and other developments do not appear to have had a significant impact (to date).

Interestingly, a somewhat similar position applies under the rule in Bunning v Cross[77] and related statutory provisions such as s 138 of the Evidence Act 1995 (Cth) which provide that, subject to the court’s approval, evidence that has been obtained illegally can be used in the investigation or prosecution of an offence. In exercising this discretion, the court must give consideration to the public interest in convicting those who commit criminal offences as well as the public interest in protecting persons from unlawful and unfair treatment. Such evidence may therefore be admissible where the public interest in securing a conviction outweighs other factors.[78]

D The Communication Must Have Been Created for the Dominant Purpose of Either:

a. giving or obtaining legal advice; or

b. for the purposes of litigation which is under way or in ‘reasonable contemplation’[79]

There are several elements to these requirements:

(i) the test is the ‘dominant’ purpose – that is, the ‘ruling, prevailing, paramount or most influential’ purpose[80] – for which the communication was created initially.[81] Where there are two (or more) purposes of equal ‘weight’, no one purpose would be ‘dominant’[82] and accordingly the privilege will not apply;

(ii) the test for dominant purpose is objective, though evidence of subjective purpose may be relevant;[83]

(iii) where the communication was created for the dominant purpose of giving or obtaining legal advice, communications between a lawyer and a third party will be privileged.[84]

However, the privilege will not generally apply where a document has been created for another purpose but is then sent to (‘routed through’) a lawyer for advice purely in order to attract the privilege.[85] Thus, the privilege will not apply where a document is created for the purpose of an accounting activity (eg, completing a tax return), and is subsequently sent to a lawyer to advise on an issue which has emerged in relation to the document. Nor will the privilege apply to non-privileged documents that are simply ‘attached’ to a privileged document.

The advice must be ‘legal advice’ rather than eg, accounting advice on how to structure a tax arrangement.[86] However, ‘legal advice’ is broader than merely telling the client what the law is[87] and extends to advising on what the client ‘should prudently or sensibly do’ in the circumstances.[88] That is, legal advice is not limited to ‘pure’ legal advice, but ‘includes other information communicated from the lawyer to the client (or vice versa) to enable the lawyer to advise and the client to make informed decisions in a relevant legal context’;[89]

(iv) the privilege does not protect ‘collateral facts’ which the lawyer may observe in the course of representing the client;[90]

(v) privilege may arise where there is a ‘continuum of communication’,[91] ie, where ‘information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required ...’;[92]

(vi) it has been held that ATO officers are entitled legally to examine a communication briefly in order to determine whether the material might be privileged;[93]

(vii) the privileged portion of a communication can be ‘saved’ if that portion can be ‘severed’ from the balance without destroying the meaning or coherence of the remaining material;[94] and

(viii) while this paper focusses on privilege for legal advice, it is useful to note that:

• ‘litigation’ refers to adversarial proceedings;

• the better view appears to be that tax disputes in the AAT are ‘adversarial’ in nature[95] – though the contrary view has been expressed;[96]

• litigation will be in ‘reasonable contemplation’ if there is a reasonable objective likelihood that litigation will be pursued against the person in question;[97] and

• ‘litigation’ includes obtaining information in order to determine whether to litigate or settle.[98]

While tangential to the main thrust of this article, these principles provide valuable guidance in a difficult area.

E Loss of the Privilege

The privilege can be lost in a number of ways – by:[99]

1 express abrogation by statute

This requires a clear statement of legislative intent to waive by express words or necessary implication.[100]

2 express (intentional) waiver by action

Express waiver occurs where the client (or their lawyer)[101] intentionally discloses the gist or essence of the privileged communication – eg, by serving a witness statement on a litigious opponent.[102]

3 implied waiver by the client (or their lawyer)[103]

Implied waiver occurs where there is no intention to waive the privilege, but the privilege holder’s actions are inconsistent with the privilege being retained[104]. This applies, for example, where the person discloses the substance, gist or content of the legal advice[105] – eg, by reading excerpts of the legal advice aloud to third parties[106], or referring in legal proceedings to documents attached to an affidavit.[107]

The better view in Australia has been that mere reference to the fact of a communication containing legal advice without reference to its contents will not per se constitute waiver,[108] nor will disclosure to a party with whom the person shares a common interest privilege or joint privilege.[109] Similarly, production of a document under compulsion of law[110] will not per se waive privilege, so that where a person is required by a court order or notice from a regulator to produce a communication, compliance with that requirement will not necessarily constitute an implied waiver of legal professional privilege in related proceedings or against third parties.[111]

The Full Federal Court decision in Commissioner of Taxation v Rio Tinto[112] provides a good illustration of the dividing line. Interestingly, the case concerns unintentional waiver by the Commissioner in response to the taxpayer’s notice to produce certain scheduled documents, which is the reverse of the situation that more commonly occurs where the Commissioner issues a notice requiring the production of documents by the taxpayer. The case is a striking example of why there has been concern about implied waiver in the giving of particulars when completing privilege claim forms under the ATO’s Legal Professional Privilege Protocol (2022) (n 7).

The Full Court explained the position thus:

[71] By his answers to Rio Tinto’s requests, the Commissioner disclosed that the eight privileged scheduled documents were relevant to reaching his state of satisfaction and exercising his discretions. Although the validity of his state of satisfaction and the exercises of his discretion are key issues in the substantive proceeding ... , the mere acknowledgment of the relevance of privileged documents to the key issues does not amount to an act inconsistent with the maintenance of privilege. ...

[72] The Commissioner has not, however, simply said that the eight privileged scheduled communications were relevant to reaching his state of satisfaction or exercising his discretions. Nor has he said that he took them into account in so doing. ... Instead, he identified his bases for satisfaction and exercises of discretion as the matters evidenced in the scheduled documents. In so doing, the Commissioner did more than make an assertion about the relevance of these communications. In his particulars, the Commissioner has said that he took into account the matters evidenced by numerous documents, including the eight privileged scheduled documents. In so doing, the Commissioner has made an assertion that puts the contents of these eight documents in issue, or necessarily lays them open to scrutiny,. with the consequence that there is an inconsistency between the making of the assertion and the maintenance of the privilege.

[73] ... It is only by disclosing the contents of the documents to scrutiny, that the bases for the Commissioner’s satisfaction and exercises of discretions can be examined. As a consequence, an inconsistency arises between the assertion made by the Commissioner in his particulars and the maintenance of privilege in the scheduled documents.

[74] It follows that the Commissioner is to be taken to have waived privilege over the eight privileged scheduled documents, notwithstanding that, in his letter of 22 October 2004 and the accompanying lists, he disavowed any intention of so doing. In providing particulars that in substance state the bases for his satisfaction and exercises of discretion by reference to these documents, the Commissioner has waived such privilege as there would otherwise have been in them.

More recently, in TerraCom Ltd v ASIC[113] (‘TerraCom’) the company was held not to have waived privilege by making a confidential disclosure of parts of a privileged Report to a firm it had hired at the request of its legal adviser to advise on communication strategies in response to allegations of falsification of analysis certificates of export coal.

However, TerraCom was held to have waived privilege in the report by disclosing the gist of the privileged advice through publication of:

(i) an open letter to shareholders, stating that an independent forensic investigation had ‘found no evidence of wrongdoing’ by TerraCom’s CEO and CFO; and

(ii) an announcement on the ASX stating that an ‘independent forensic investigation ... found that the allegations against [the CEO and CFO] were unfounded and that neither had done anything wrong’.

The Federal Court held that having regard to the content, context and evidence in the case, these actions created an implied waiver of the privilege. Stewart J stated[114] that:

[61] ... reliance by TerraCom on the finding in the PwC report of no wrongdoing by its CEO and CFO is inconsistent with the maintenance of the privilege ... [because] TerraCom was taking advantage of that finding to deflect criticism of its officers and itself, the effectiveness of the deflection being heightened by characterising the investigation that led to the report as an independent forensic investigation. That was to employ the finding of PwC for a forensic or commercial advantage ... It cannot at the same time claim that the report is privileged ...

[62] ... It would operate a tangible unfairness if TerraCom could, in effect, hide behind its statements as to the conclusion of the report whilst at the same time maintaining privilege over the report and thereby keeping it beyond being tested by ASIC ... .[115]

Particular care needs to be taken because of the potential application of ‘collateral waiver’, under which, where privilege is waived in relation to one issue, this may result in (collateral) waiver of the privilege in related documents.[116]

4 Limited waiver

It seems that where a communication is disclosed to a third party (eg, the ATO or other regulators) on a confidential basis and for a limited purpose, this will not result in waiver of the privilege in those documents against other parties.[117]

However, parties need to take great care to ensure that the scope of any limited waiver is clear and agreed to by the other party, particularly in light of the ATO’s approach of requiring disclosure of very detailed particulars which might lead to an inadvertent or unintentional waiver[118] – discussed below.

F The Fraud Exception

The privilege does not apply to a communication which is a step in the facilitation or commission of a fraud.[119]

In this context, ‘fraud’ is interpreted widely to include not only a crime or fraud as generally understood[120], but also ‘anything that might be described as a fraud on justice, or a purpose contrary to the public interest’ (including shams and trickery),[121] ‘sharp practice’,[122] or ‘any unlawful or wicked act.’[123]

The exception applies whether or not the legal adviser was aware of, or had participated in, the fraud.[124]

There was an unusual twist in DPP (Cth) v Kinghorn, where the taxpayer argued (unsuccessfully) that the Commonwealth’s breach of privacy laws was an unlawful action which negated the Commonwealth’s claim of privilege.[125]

IV The ATO Legal Professional Privilege Protocol[126]

For some years, the ATO has expressed increasing concern at what it sees as spurious claims for legal professional privilege, which it believes are intended to improperly block ATO access to materials where there is no reasonable basis for a claim of privilege.

The ATO has been particularly concerned[127] in relation to:

• Contrived arrangements where there is a purpose of concealing communications from the ATO (including where LPP is actively promoted as a feature of tax advice).[128]

• Routing advice through a lawyer purely in order to artificially attract LPP[129] and shield communications from the ATO.[130]

• Legal engagements entered into after the substance of advice was provided by non-legal persons.[131]

• Unsolicited ideas which are proactively marketed prior to any legal engagement.[132]

• Communications exclusively between non-lawyers who do not perform functions in furtherance of a solicitor-client relationship.[133]

• Unclear and potentially overlapping or inconsistent capacities and relationships allocated to different members of a firm.[134]

The ATO took two approaches to seeking a resolution of these problems.

First, it increased its formal challenges to what it sees as dubious claims to privilege, resulting in a series of cases over recent times.

Second, in late 2021, the ATO issued a Draft Protocol in which it set out its ‘recommended’ procedure for persons claiming legal professional privilege,[135] followed in June 2022 by the issue of a revised (Final) Protocol developed after consideration of feedback on the Draft Protocol and consultation with the Law Council of Australia and other professional groups.[136]

It is crucial to note that the ATO Protocol is not a binding legal document – it represents simply the ATO’s (administrative) views on various issues relating to legal professional privilege and the ATO’s ‘recommended’ steps that persons should take in seeking to claim the privilege. Nevertheless, the Protocol does impose some informal pressure on claimants – for example, the Protocol states that if claimants do not follow the ATO’s ‘recommendations’, they can expect the ATO to take a closer interest in their affairs and that the ATO will probably seek further information through service of a notice under s 353-10 in Sch 1 to the TAA requiring the claimant to provide further information, documents and other materials.

Interestingly, the Protocol is somewhat similar in part to the earlier ASIC Information Sheet 165, ‘Claims of legal professional privilege’.

A Elements of the ATO Protocol

The ATO Protocol is an important document, though detailed treatment is beyond the scope of this article.

There are several significant nuances in the Final protocol.

First, in the ATO webpage that leads into the Protocol,[137] the ATO statement of its general position on LPP should be noted before jumping straight to the Protocol. That statement observes that:

The ATO strongly supports legal professional privilege (LPP) and encourages taxpayers to obtain professional tax advice, including high-quality legal advice.

When we undertake investigations, we seek to ensure we’re provided with information to which we’re legally entitled. We can’t compel the provision of information that is properly subject to LPP.

When we issue a formal notice, we need sufficient information so we can decide whether to accept, review or challenge a claim of LPP.

We’ve seen instances where LPP has been inappropriately asserted in an attempt to withhold information. This hinders our investigative functions and can result in extended disputes about information gathering, instead of focusing on resolution of the issue.

Second, the title of the Protocol ‘Compliance with formal notices – claiming legal professional privilege in response to formal notices might be thought to contain the clear implication that non-compliance with a notice may be an offence and carry severe penalties – putting claimants and advisers on notice!

Turning to the language of the Protocol, although the Protocol requirements are couched in permissive language and stated to be voluntary, some commentators have expressed concern that practitioners and clients may feel considerable pressure to comply with the Protocol recommendations, which state that claimants should indicate whether they had followed the steps recommended in the Protocol in making the claim of privilege, used any computer-assisted processes, or based assessment of LPP on assumptions or pre-determined judgments which guided the assessment of LPP.[138]

The significance of that requirement is that as noted, the Protocol indicates that if its recommended steps are not followed, this may lead to the ATO focussing greater attention on the claim of privilege, and following up with coercive formal requests for further information[139] and, potentially, subsequent penalty action. Pressure may also be felt by claimants if the ATO indicates that failure to waive privilege may result in cancellation of an immunity agreement.

In terms of structure, the Protocol is constructed around a three-step process:[140]

• Assess – Your situation and your communications;

• Explain – Particularise the basis of your LPP claim; and

• Advise – Tell us how you approached your LPP claim.

Within that simple structure, the Protocol works through the ATO’s views on the required elements for a valid claim of legal professional privilege in some detail. While the issues raised and information sought by the ATO in the Protocol are (generally) technically correct, there are areas of dispute, and the Protocol is lengthy, detailed, and its ‘recommendations’ appear likely to take considerable time and resources to satisfy, particularly in the digital age.

For example, the Protocol requires among other things that each communication (eg, each email) be reviewed separately,[141] ‘without making “blanket” claims or using assumptions or pre-determined judgments.[142]

Feedback on the Draft Protocol from the Law Council of Australia.[143] The Tax Institute[144] and other bodies suggested – inter alia – that as a result of this requirement, in large scale information requests, which might involve claims to LPP in relation to tens of thousands of individual communications, it was ‘impractical ... to comply with all the required steps and particulars articulated in clauses 13, 16 and 28’.[145] This was particularly so as the ATO indicated that in its view, taxpayers should provide the basis for their LLP claim by the date specified for compliance with the notice under s 353-10 TAA (Sch 1),[146] and did not regard it as necessary or appropriate for LLP claims to be examined by someone independent of the ATO audit team.[147]

The Law Council also pointed out that the level of detail required by the (then) ‘standard particulars’ in the Draft Protocol went beyond what would be required under, for example, the Federal Court Rules 2011 (Cth).[148] This issue was exacerbated by the ATO’s view that claimants would need to review their electronic LPP claims personally, because the ATO was of the view that ‘computer-assisted processes alone are not a reasonable basis for determining [that] LPP applies’.[149] However, in practical terms – as noted above – computerised categorisation of electronic documents (at the very least at the initial stage) may be the only practical means of dealing with claims for LPP affecting tens of thousands of documents.

For example, the information which the Protocol recommends that a claimant should provide includes (among the 15 categories of information sought[150]):

• the number of pages in the document;

• the title, or subject line;[151]

• the identity and role of every person between whom the communication is made, including all people who have received the document (name, position, organisation);

• whether the communication was forwarded, and if so an explanation of the purpose of forwarding it;

• how confidentiality in the communication was maintained; and

• how it was assured that privilege was not lost.

Additional Particulars are recommended for in-house counsel[152] and for ‘specific engagements’.[153]

Claimants are also advised to check for ‘communications which are usually not privileged’,[154] and, if the claim involves any such communications, to ensure that the claim for LPP is ‘appropriate’ and they have ‘appropriately described the document’.[155]

Under Addendum 1 of the Protocol,[156] legal practitioners are advised that the ATO also ‘expects’ that:

• the practitioner will have advised their client of the Protocol, the possible approaches to making claims for the privilege and the likely ATO response;

• the practitioner has received instructions from their client prior to making an LPP claim and the claim is covered by those instructions;

• the client understands the nature and scope of the claims they are making; and

• the practitioner has made reasonable enquiries to ensure there is a proper basis for the claim of privilege.

Another concern expressed by practitioners was that full compliance with the level of detail required by the Protocol ‘recommendations’ (even allowing for the exceptions carved out by the ATO[157]) in key areas was so broad that it raised the possibility that compliance with those requirements might create a conflict between a lawyer’s duty to the court and their duty to the client,[158] or create the possible consequence [159] that the claimant might be deemed to have waived LPP.[160]

In response to these concerns as to possible implied waiver, the ATO obtained a legal opinion from the Australian Government Solicitor, which was heavily qualified and concluded that the AGS ‘expected’ that ‘in the majority of cases’ there would be a ‘low risk’ of waiver, and even in the ‘unlikely’ event that waiver was triggered, this was ‘likely’ to operate as a limited waiver against the ATO and not against the world at large.[161] However, the ATO acknowledges (correctly) that it ‘cannot warrant that no-one else other than the Commissioner will contend that privilege has been waived by following the Protocol’.[162]

The ATO response to these criticisms was to insert in the Final Protocol a clause stating that compliance with the Protocol was not required to the extent that eg, disclosure of the subject line of an email would involve waiver of privilege or a breach of a lawyer’s ethical or professional duties. The practical effect of this clause is unclear, since it places on the taxpayer (and advisers) the obligation of (correctly) identifying when disclosure would cross these boundaries – with the ATO likely to have a different view in many cases.

The ATO also indicated that it would ‘try to limit the cost of compliance’[163] and that in its view the Final Protocol represented ‘a balanced approach to addressing our duty as a regulator ...’.[164] In support of this view, the ATO observed – correctly – that in order to make an informed decision about whether to challenge a claim for LPP, the ATO requires information about the communication and the basis on which LPP is claimed, and that there ‘is authority that a person asserting LPP should provide evidence or make submissions in support of their claim ...’.[165] This right to information is, however, carefully constrained and the ATO view suggests that it views compliance costs as being secondary to the obligation to discharge the burden of making a “proper” privilege claim.

The cumulative result of this and other issues was that the Draft Protocol attracted spirited criticism from a number of bodies. It seems likely that the Final Protocol will also generate continuing debate, and while the changes made by the ATO to the Draft Protocol may provide some reassurance, they are unlikely to resolve all issues.

Some basic concerns will doubtless remain, particularly because, despite the significant extent of the information required under the Protocol ‘recommendations’ the ATO notes that ‘... following the Protocol does not mean that we will never have concerns about your LPP claims or challenge your claims, though this is less likely’.[166]

In commenting on the Final Protocol, the President of the Law Council in particular highlighted concerns about the particulars required by the Protocol and confirmed the risk of breach of the ethical duty of lawyers in failing to make proper LPP claims.[167] The President also said the Law Council continued to look forward to working with the ATO to strike the appropriate balance between the Commissioner obtaining information and preserving LPP confidentiality.

It is perhaps worth noting that while it may have very justifiable concerns about the behaviour of a small number of taxpayers and advisers, the ATO needs to ensure that it does not take an unreasonably broad approach to the requirements it expects taxpayers and their advisers to meet in claiming LPP, lest it expose itself to public opprobrium or perhaps, in extreme cases, to allegations either that it is acting oppressively,[168] or (perhaps) causing or inducing a breach of s 39 of the Legal Profession Uniform Law 2015.[169]

V The Way Forward: Hiding In Plain Sight? The Australian Law Reform Commission Report (2008)

It seems clear that much would be gained in relation to the law, policy and practice of the privilege in Australia by re-examining the 2008 Report of the Australian Law Reform Commission on ‘‘Legal Professional Privilege and Commonwealth Investigatory Bodies’ [“ALRC Report 2008”][170] which provided an extensive and well-researched analysis of the privilege.

It is important to note that the Report was commissioned because: first, there were concerns that the judicial rules as to the abrogation of the privilege needed to be clarified. This was a serious concern because of the problems faced by a Royal Commission which had been investigating certain conduct of the Australian Wheat Board.[171] Second, there was a significant concern about the slow progress in resolving privilege claims in the ATO’s Project Wickenby investigations.[172]

The ALRC reference was undertaken by a group of eminent academics and jurists of the highest order, independence and objectivity. The jurists included the current Chief Justice of the High Court, Justice Kiefel, a former High Court Chief Justice, Justice French, and two long serving and senior judges of the Federal Court, Justices Kenny and Collier. The Commission was supported by a distinguished advisory committee which included the Solicitor-General, the head of the Commonwealth DPP, senior executives of many Commonwealth investigative agencies and leading Counsel from the independent Bar.

While detailed analysis of the ALRC’s comprehensive 561 page report is beyond the scope of this article, pre-eminent amongst the many important recommendations made by the ALRC was the creation of a virtual legislative code on privilege,[173] with a follow-up five year review of the legislation to examine the effectiveness of the recommended procedures for making and resolving privilege claims.[174]

A key proposal in the Report was the proposed creation of a ‘default’ rule under which the privilege would apply unless it was either abrogated or modified by Federal legislation,[175] with detailed safeguards applying in such cases.[176] This would go perhaps a little further than the current approach of the High Court in cases such as Daniels.[177]

Of interest in the tax sphere would be the recommendation to create a legislative version of the privilege, following the New Zealand model, which would apply to tax advice given by professional tax advisers (basically tax agents).[178]

The ALRC made extensive recommendations in respect of legislation for the practice and procedure of Commonwealth investigators with respect to the privilege, including:

• The mechanism for making a privilege claim.[179]

• A basic rule that merely providing a description of documents or ‘bundles’ would not amount to waiver.[180]

• Procedures for determining a reasonable time for provision of information requested.[181]

• Policies and procedures to address apparent unintentional disclosures by unrepresented persons.[182]

• Procedures for receiving apparently privileged information from a third party.[183]

• Requirements to notify the claimant of decisions.[184]

• Procedures where a federal body disputes a privilege claim.[185]

• Dealing with electronically stored information.[186]

In addition, the ALRC made recommendations for ‘ensuring professional integrity’ of lawyers claiming privilege through ‘education and accountability.[187]

So far as appears, the ALRC Recommendations have not been adopted or implemented. Interestingly, s 47 of the Regulatory Powers (Standard Provisions) Act 2014 (Cth) contains a residual default provision on legal professional privilege in Commonwealth legislation, but does not appear to have been a result of the ALRC recommendations

The failure to implement the ALRC recommendations might seem puzzling, but may indicate that the rational, principle-based legislation for the privilege proposed by the Commission was a ‘hard sell’, perhaps because (among other possible explanations):

• it would require politicians and the Parliament to use their time and political capital for the politically unpalatable task of resolving a competition between government agencies and professional advisers and taxpayers;

• lawyers might be reluctant to move away from the (relatively) ‘safe haven’ of gradual judicial evolution of the privilege if this creates a risk of parliamentary curtailment or modification of the privilege; and/or

• in the same vein, government agencies (such as the ATO) might not want to risk parliamentary limitations on what they could achieve through direct executive action such as the creation of the ATO Protocol.

The experience with the ATO Protocol may suggest that the ghosts of old problems are still rattling their chains. Indeed, it may be that with the dramatic growth and increasing sophistication of information technology and document digitisation, the old problems may now be larger and even harder to deal with.

To be clear. we are not criticising the ATO – the ALRC Report never seems to have played much of a part in the development of any LPP policy or practice in tax or elsewhere.

It is long past time to make use of the ALRCs insights (dusted off and updated) – the Commission’s detailed analysis and recommendations still offer a sound and detailed framework to address current and future problems.

VI Conclusion

Legal professional privilege is of fundamental importance in our society, but remains one of the more contentious legal doctrines, and events in the past few years have done nothing to calm this trend. Indeed, recent events have exposed the stresses involved in the process of claiming LPP in a rapidly developing, technology-based context.

Consideration of the various elements of legal professional privilege suggests that most elements are undergoing a slow and sometimes painful evolution in the courts. Whether it is an orderly evolution is open to serious question, with some developments, such as the ATO Protocol arguably edging towards revolution.

One thing is clear: the development of the privilege to date has created an invidious situation where all stakeholders have concerns – perhaps in part reflecting the fact that in today’s technology-based environment the centuries old existing framework and procedures for the privilege are no longer fit for purpose.

The case is accordingly building for a legislative solution, and arguably the best way forward would be for the Federal Parliament to use the ALRC Report as the base for a legislative framework creating a rational and principle-based approach to the practice and procedure of the privilege. Such an approach could codify, protect and ‘future-proof’ the privilege, ensure agencies are appropriately empowered and taxpayers appropriately protected, and also respond more effectively to the real-world environment of digital technology in which most communications are currently made and to the increasingly innovative ways in which legal advice is likely to be sought and given now and in the future.

Parliament having set the framework, the courts would then be called on to apply the privilege in a way that is consistent with the letter and spirit of the legislative provisions ie so as to increase and maintain the coherence, clarity and credibility of the privilege and enable it to operate effectively in a constantly evolving legal and business environment.

&#6[1] Adjunct Professor, James Cook University and the University of New South Wales. The authors wish to thank the blind reviewer of an earlier version of this Article, who provided a number of helpful suggestions which the authors gratefully adopted.

&#6[1] Barrister (NSW).

[1] The privilege protects the communication, rather than eg, the document in which it may be contained: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 (‘Propend Finance’).

[2] For convenience we will refer to the dominant purpose as meaning sole or dominant purpose.

[3] See generally, AGS, ‘Legal Briefing No 117 - Legal Professional Privilege and the Government’, 30 June 2021 [‘AGS Legal Briefing No 117]; and cf T Oppenheimer, R Loveridge and S Rabinowitz, Privilege: The UK Perspective’ Lexology 8 February 2021; Clements, Dunn and Bell v Commissioner of Australian Federal Police 2002 ATC 4072, 4074-5. It has been held that it is for the recipient of a statutory notice to determine for themselves whether or not a particular communication is privileged: cf A v B and the Financial Reporting Council [2020] EWHC 1491 (Ch) – recognising that if the recipient decides (wrongly) that the communication is not privileged and produces the document, they may be liable to the client for breach of their duty to maintain the privileged status of the communication.

[4] See eg, Commissioner of Police (Qld) v Barbaro (2020) 6 QR 186.

[5] In CUB Australia Holding Pty Ltd v FC of T (2021) 112 ATR 733 (‘CUB Australia’) (upheld on appeal: (2021) 287 FCR 71 (Middleton, McKerracher and Griffiths JJ)), the taxpayer argued, unsuccessfully, that the ATO was seeking access to documents for an improper purpose – to determine the validity of CUB’s claim to privilege. Moshinsky J rejected this argument and held that the ATO was exercising its s 353-10 Taxation Administration Act 1953 (Cth) (‘TAA’) power for the proper purpose of determining whether or not it should challenge CUB’s privilege claim, not to finally determine the validity of CUB’s claims to privilege.

[6] See eg, ATO National Tax Liaison Group, ‘Key Messages – Legal Professional Privilege’ (‘Key concerns with purported LPP claims, and Key concerns with LPP processing engagements’) 30 November 2018. This is a serious issue, as a lawyer has a professional duty to ensure that any claims for privilege are soundly based: K Lauchland, Legal Professional Privilege – Lawyers’ Responsibility to Adequately Found the Claim’, (1993) 14 The Queensland Lawyer, 54.

[7] ATO (Draft) Legal professional privilege protocol - Compliance with formal notices – claiming legal professional privilege in response to formal notices; Legal professional privilege (LPP) protocol [‘ATO Protocol’] – Draft: Sept 2021; Final version (June 2022). Sadly, it seems that this trend is not confined to Australia – a similar trend has been noted in eg, Ireland: A Cox, ‘Legal Privilege and Regulators – The DPC Speaks’, Lexology, March 22, 2021. However, at the same time, the ATO needs to ensure that it does not act unreasonably in opposing claims to privilege, lest it be found to have acted oppressively: cf Hyder v FC of T (2022) 114 ATR 516 (‘Hyder’).

[8] For example, in CUB Australia (n 5) there were over 20,000 documents in question, while in Federal Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278 (Moshinsky J) (‘PwC’) there were over 40,000 documents at issue, with the ATO disputing claims for LPP in relation to some 15,500 of these documents.

[9] See eg, M Wilks and F Healy, Corrs Chambers Westgarth,‘The ever-evolving scope of legal professional privilege: key considerations for in-house counsel, Lexology, 6 October 2021.

[10] See eg, SB McNicol, Client Legal Privilege and Legal Professional Privilege: Considered, Compared and Contrasted, (1999) Australian Bar Review 34.

[11] Propend Finance (n 1) 685.

[12] By ensuring the parties can ‘prepare their contending positions in private, without adversarial interference and ... the fear of premature disclosure’: Lizott v Aviva Insurance Company of Canada 2016 SCC 52.

[13] Or perhaps prosecution under provisions of the Commonwealth Criminal Code Act 1995 (Cth) such as ss 11, 134, 135. In addition, if the matter proceeds to court, the ATO would normally seek an award of costs, and may also consider reporting the claimant’s actions to the relevant professional body: see generally G Redenbach and A Mobrici, ‘Trends and updates on ATO challenges to taxpayer LPP claims’, Foley’s List, 24 November 2021.

[14] Glencore International AG v FCT [2019] HCA 26; (2019) 265 CLR 646 [especially [12] to [23] (Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ) (‘Glencore’). Earlier, the recognition of the privilege by the High Court in Baker v Campbell (1983) CLR 52 as applying in response to a police search warrant was another historically significant development.

[15] Attorney-General (NT) v Maurice [1986] FCA 91; (1986) 65 ALR 230, 235 (Woodward J) – though the lawyer may have an ostensible authority to waive the privilege, even if this is contrary to the client’s instructions: Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49, [79] (‘Esso’); FCT v Coombes (1999) [1999] FCA 842; 92 FCR 240, [37] (Sundberg, Merkel and Kenny JJ); Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, 13 (Gleeson CJ, Gaudron, Gummow and Callinan JJ); AGS, ‘Legal Briefing No 117, n3.

[16] See Esso (n 15).

[17] In the ‘ATO Protocol’ (n 7), Final June 2022 at [13], the ATO states that ‘Where computer-assisted technology is used, it is our view that you will still need to review your LPP claims, as computer-assisted processes alone are not a reasonable basis for determining if LPP applies’, though it goes on to state vaguely that ‘[14] We do, however, see opportunities for taxpayers to include computer-assisted processes to improve efficiency, timeliness and accuracy while reducing the cost of compliance when determining whether a communication may be privileged ...’. No explanations or examples are given.

[18] P McNab, ‘ATO wins legal professional privilege dispute and sets new COVID-19 PE risk guidance’, Lexology, February 24, 2021.

[19] Propend Finance (n 1).

[20] See AWB Ltd v Cole (No 1) [2006] FCA 571; (2006) 152 FCR 382 [102] (Young J) (‘AWB No 1’). As noted, in PwC (n 8), for example, there were some 44,000 documents involved. In terms of ‘eligible’ communications, the AGS, ‘Legal briefing No 117 (n 3) notes in ‘Other material’ (citations omitted) that privilege may - where other requirements are satisfied - extend to research memoranda, collations and summaries of documents, draft pleadings or agreements, draft affidavits and chronologies, whether or not actually communicated to the client, while ‘advice privilege’ may also generally cover materials such as notes, drafts, charts, diagrams, and spreadsheets et al prepared by the client as a way of organising information to be communicated to the legal adviser, whether or not the materials are actually communicated to the legal adviser.

[21] PwC (n 8) [141 (Moshinsky J); Propend Finance (n 1) [4]-[19] (Brennan CJ); [54], [65], [70], [103]-[111] (Gaudron J); [122], [139]-[147] (McHugh J); [201]-[205], [222] (Gummow J); [237]-[238], [240]-[241] (Kirby J); Toohey J and Dawson J dissenting; Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd (No 4) [2014] FCA 796 [30] (Beach J) (‘Asahi Holdings’); Kenquist Nominees Pty Ltd v Campbell (No 5) [2018] FCA 853, [12] (Thawley J); 12 Years Juice Foods Australia Pty Ltd v FC of T [2015] FCA 741, [16]-[17] (Edmonds J) (‘12 Years Juice Foods’); Kirby v Centro Properties Ltd (No 2) [2012] FCA 70 (Finkelstein J) (‘Kirby’).

[22] TEC Hedland Pty Ltd v Pilbara Infrastructure Pty Ltd [2020] WASC 364 [29] (Hill J).

[23] FC of T v Donoghue [2015] FCAFC 183; (2015) 237 FCR 316 (Kenny, Perram and Davies JJ) (‘Donoghue’).

[24] Though there are exceptions – eg, the privilege will not necessarily be lost where legal advice is disseminated to appropriate persons within a corporation: see eg, (USA) Scholtisek v Eldre Corp 441 F Supp 2d 459 (WDNY 2006) (Judge LG Foschio) – and see the discussion of ‘limited waiver’ below.

[25] At least where the sender acts promptly to rectify the error – eg, through an equitable action for breach of confidence: Donoghue (n 23).

[26] K Larizadeh, A Smart and M Moussaoui, Legal advice privilege and foreign lawyers’, Akin Gump Litigation Alert, Sept 14, 2020. The courts will not enquire as to the qualifications or regulatory arrangements of a foreign ‘lawyer’: (UK) PJSC Tatneft v Bogolyuboy [2020] EWHC 2437 (Comm); A Milner ‘Privilege round up of significant cases in 2020 Lexology, November 11, 2020.

[27] Waterford v Commonwealth [1987] HCA 25; (1987) 163 CLR 54, 60-64 (Mason and Wilson JJ, 70-73 (Brennan J), 79-82 (Deane J), cf 95-101 (Dawson J); Attorney-General (NT) v Kearney [1985] HCA 60; (1985) 158 CLR 500; see also Kirby (n 21) [28]-[29] (Bromberg J).

[28] Minter v Priest [1930] AC 558; Greenough v Gaskell [1833] EngR 333; (1883) 1 My & K 98; 39 ER 618; Kirby (n 21) [88] (Bromberg J); Andrianakis v Uber Technologies Inc [2022] VSC 196, particularly [47], [98]-[99], [101]-[102], [139], [142], [160] (Mathews AsJ) (‘Andrianakis’).

[29] Kirby (n 21) [28]-[29] (Bromberg J); Confidential communications between a lawyer and a non-lawyer (eg, an accountant) will attract the privilege provided they satisfy the dominant purpose test and other requirements: Pratt Holdings v FC of T [2004] FCAFC 122; (2004) 136 FCR 357 (‘Pratt Holdings’); PwC (n 8) [154]-[155] (Moshinsky J). The communications can be between a lawyer and client or their agents, or between a lawyer or client and a third party: PwC at [156]-[170] (Moshinsky J).

[30] See The Tax Institute ”Submission to the Australian Taxation Office /Draft Legal Professional Protocol/Australian Taxation Office, published 16 November 2021 [‘Tax Institute Submission’], Addendum 1 – para 12(e), 12(f).

[31] Such problems are not confined to Australia: see eg, DS Ewens, Canada: Privilege Where Legal Advice Rendered by a Law Firm of Collaborating Lawyers and Accountants’, Moodys Tax, 16 April 2021.

[32] Such as the ‘Big-Four’ MDPs (Deloittes, Ernst and Young, PricewaterhouseCoopers and KPMG.

[33] PwC (n 8). Originally, many portions of His Honour’s judgment dealing with particular documents were redacted, though substantial additional portions were later released.

[34] Under the ‘Statement of Works’ that PwC and JBS entered into (in most instances with JBS Australia), JBS ‘appointed’ PwC non-legal practitioners assisting in the provision of legal services as the ‘agents’ of JBS for the purpose of communication of legal advice and services with the PwC legal services team, and confirmed that PwC non-legal practitioners might assist in provision of legal services ‘under the direction’ of PwC Australian legal practitioners.

[35] PwC (n 8) [8] (Moshinsky J).

[36] PwC (n 8) [20] (Moshinsky J).

[37] The number and sample of documents changed over time for various reasons.

[38] PwC (n 8) [21], (Moshinsky J).

[39] Some PwC participants were located in overseas offices and made it clear that they were not able to provide legal advice: ibid.

[40] ‘Friends of the Court’, appointed to assist the court (eg, by recommending how sample documents should be classified). The three amici curiae were all experienced lawyers.

[41] See His Honour’s comments in PwC (n 8) [932].

[42] Ibid.

[43] See, for example, Documents 71, 97, 100-101, 105, 116.

[44] There is considerable overlap between the categories.

[45] See, for example, Documents 5, 9, 20-24, 31-33, 35-37, 39-40, 43, 47 (part), 50, 54, 71, 73, 77 (part), 87-88, 95-97, 101, 104, 105 (part), 106-107, 112.

[46] See for example Documents 2-3, 34, 45, 47-48 (part), 49, 60, 62, 111.

[47] See, for example, Documents 6-8, 11-12, 14-17, 25, 44, 60 (part), 70, 75, 78, 80-81, 85-86, 90, 92-93, 102, 109.

[48] See, for example, Documents 12-14, 18, 26, 28, 30, 56, 68, 70, 76, 80-82.

[49] See, for example, Documents 66, 68, 82, 85 (paras [611], [624], [726], [739] respectively).

[50] See PwC (n 8) [931](a)-(h) (Moshinsky J) for a more detailed explanation of these guidelines.

[51] Ibid, Document 26.

[52] Ibid, Document 65.

[53] Ibid, Documents 60, 61.

[54] Examples are Documents 26, 56, 60-61.

[55] Examples are Documents 82-83.

[56] An example is Document 7.

[57] An example is Document 44.

[58] Examples are Documents 2 and 3.

[59] An example is Document 34.

[60] And, in appropriate circumstances, for communications made in reasonable contemplation of litigation, though this paper does not address that limb of the privilege.

[61] Provided the lawyer is not merely acting as a ‘conduit’ or funnel through which the advice passes to the client: PwC (n 8) [173] (Moshinsky J). It will not be determinative that, eg, a non-lawyer co-worker is more experienced than the lawyer, or charges fees at a higher rate: at [123] (Moshinsky J).

[62] In Re Southland Coal Pty Ltd (rec & mgrs apptd) (in liq) [2006] NSWSC 899; (2006) 203 FLR 1, [82] (Austin J) (‘Southland Coal’), the court observed that no wholly satisfactory procedure for resolving privilege claims had been developed where large quantities of documents are involved – it seems that little has changed.

[63] Donoghue (n 23).

[64] Ibid.

[65] However, the Court pointed out at [52]-[57] – citing Propend Finance (n 1) 565-66 (Gummow J) and Daniels Corporation International Pty Ltd v ACCC [2002] HCA 49; (2002) 213 CLR 543, 552-3 (Gleeson CJ, Gaudron, Dawson and Hayne JJ) (‘Daniels’) and Lord Ashburton v Pape [1913] UKLawRpCh 80; [1913] 2 Ch 469 (‘Lord Ashburton’) – that a person whose privileged materials have come into the possession of a third party can take (prompt) action in equity to restrain their use or publication – and that Donoghue could have taken such action to recover the privileged materials (at least, he could have done so if he had been aware that the ATO had, and was making use of, his privileged materials).

[66] C Burnett, Legal privilege as a cause of action? The case of the Paradise Papers, (2019) New Zealand Law Journal 374; T Fishburn, ‘Privilege: ‘Paradise lost’: Glencore loses High Court bid to extend legal professional privilege’ (2019) 59 Law Society of NSW Journal, 90.

[67] Glencore (n 14).

[68] Applied subsequently in decisions including eg Okewood Pty Ltd v Commissioner of the Australian Federal Police (No 3) (“Okewood”) [2021] FCA 2, [33]-[44] (Banks-Smith J).

[69] Cf Okewood (n 68).

[70] In Glencore (n 14) the High Court observed that ‘the public interest in the administration of justice is sufficiently secured by the grant of immunity from disclosure’ at [32] (the Court), citing Propend Finance (n 1) 565-66 (Gummow J) and Daniels (n 65) 552-3 (Gleeson CJ, Gaudron, Dawson and Hayne JJ) and Lord Ashburton (n 65); Glencore (n 14) [32] (the Court).

[71] Citing Propend Finance (n 1) 565-66 (Gummow J), Daniels (n 65) 552-3 (Gleeson CJ, Gaudron, Dawson and Hayne JJ) and Lord Ashburton (n 65).

[72] [2011] FCAFC 63; (2011) 193 FCR 412 (Keane CJ, Dowsett and Reeves JJ).

[73] Ibid [81].

[74] Donoghue (n 23) [59] – that is, s 166 ‘exhibits a policy which explicitly privileges the need to have accurate assessments made on the information available over other private law rights’: at [74].

[75] Ibid [74].

[76] (2016) 103 ATR 649 [59]-[65] – not considered on appeal (2017) 347 ALR 134; [2017] HCASL 131 (special leave refused). Subsequently in La Mancha Africa Sarl v FC of T (2021) 113 ALR 846 Davies J held that s 166 also overrode the Harman litigious obligation.

[77] [1978] HCA 22; (1978) 141 CLR 54.

[78] For example, a perception that a court has approved unlawful conduct. Compare Smethurst v Commissioner of Police (Cth) (2020) 272 CLR 177 [64]- [65] (Kiefel CJ, Bell and Keane JJ) and R v Vincent (No 2) (2021) ACTSC 50, [40], [47]-[51] (Murrell CJ).

[79] The two ‘limbs’ of the privilege can be claimed in relation to the same communication: (UK) Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd [2022] EWHC 1136 (Comm).

[80] 12 Years Juice Foods (n 21) [13] (Edmonds J).

[81] ACC v Stewart [2012] FCA 29; (2012) 286 ALR 713 [76]-[82] (Stone J); 12 Years Juice Foods (n 21) [13] (Edmonds J).

[82] Southland Coal (n 62) [14.h] (Austin J), citing Odgers S Uniform Evidence Law (6th ed, Law Book Co 2004, [1.3, 10500]-[1.3. 10520], ASIC v Mitchell [2019] FCA 1484, [60] (Beach J) (‘Mitchell’).

[83] Asahi Holdings (n 21) [32]-[33] (Beach J). In some circumstances the purpose of the author or the person who commissioned the communication may also be relevant: Mitchell (n 82) [54]-[63], (Beach J).

[84] Propend Finance (n 1); Pratt Holdings (n 29) [137]-[138], [153]-[154] (Finn, Merkel and Stone JJ); AGS, Legal Briefing No 117 (n 3), n 44 and surrounding text.

[85] Asahi Holdings (n 21) [42] (Beach J) – though a document may obtain protection where eg, it is included bona fide in a brief to counsel. The contrary view expressed long ago by the likable rogue Peter Clyne was always wrong: see P Clyne Adventures in Tax Avoidance (with 120 Practical Tax Hints) Rydges, 1969.

[86] See eg, Barnes v FC of T [2007] FCAFC 88; AWB No 1 (n 28) [109]-[115] (Young J); cf Sports Direct International plc v The Financial Reporting Council [2020] EWCA Civ 177.

[87] In Andrianakis (n 28) [47], [98]-[99], [101]-[102], [139], [142], [160]. Mathews AsJ took a broad approach, and indicated that legal advice could include situations where commercial or other aspects of an (in-house) lawyer’s advice was ‘essentially part’ of the legal advice and could not be separated from it.

[88] AWB No 1 (n 28) [85]-[98], [127]-[134] (Young J); Balabel v Air India (1988) Ch 317; DSE (Holdings) v Intertan Inc [2003] FCA 1191; 135 FCR 151.

[89] This may include references to matters in the public domain or to meetings and correspondence that would not, in themselves, be privileged’ (ibid).

[90] For example, the client’s identity or address – unless disclosure of the client’s identity would reveal the essence of the legal advice provided: FC of T v Coombes (No 2) 99 ATC 4634, 4639-45 (Sundberg, Merkel and Kenny JJ).

[91] See eg Herbert Smith Freehills, ‘Dominant Purpose of Giving/Obtaining Legal advice’, Herbert Smith Freehills 2022, quoting Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] EWHC 3187 (Ch), and citing also Balabel v Air India [1988] 1 Ch 317, where Taylor LJ observed that ‘... Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach...’. See also G Edgecombe, L Hennessy, L Hogg and A Fanelli, ‘Federal Court cracks down on legal privilege clams – An operational hazard for the multi-disciplinary firms?’ and S Bower, R Kruger and I Rosu (Canada), ‘Legal Privilege, Email and the Continuum of Communication’ citing Alberta (Municipal Affairs) v Alberta (Information and Privacy Commissioner 2019 ABQB 274.

In PwC (n 8) Moshinsky J held on the facts that in a number of cases, PwC had failed to establish the required ‘continuum’.

[92] Herbert Smith Freehills, ‘Dominant Purpose of Giving/Obtaining Legal advice’, Herbert Smith Freehills 2022.

[93] JMA Accounting Pty Ltd v Carmody (2004) 139 FCR 537 [14]-[36].

[94] Elliott v DFC of T 90 ATC 4937; Perron Investments Pty Ltd v DFC of T 89 ATC 4310, 5043 (Lockhart J).

[95] AGS Legal Briefing No 117 (n 3) citing Re Farnaby and Military Rehabilitation and Compensation Commission [2007] AATA 1792; (2007) 97 ALD 788, [2]-[3] (RJ Groom DP) and Re VCA and Australian Prudential Regulation Authority [2008] AATA 580, [205] (Forgie DP), and noting that ‘Although not cited in Farnaby, there appears to be Federal Court authority in support of the AAT’s view as to the availability of common law litigation privilege in that jurisdiction’, referring to Comcare v Foster [2006] FCA 6, [38]-[39] (Greenwood J) and APRA v VBN [2005] FCA 1868; (2005) 88 ALD 403 (Ryan J).

[96] Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2006] NSWSC 530; (2006) 233 ALR 369, [55] (Bergin J).

[97] 12 Years Juice Foods (n 21) [14] (Edmonds J).

[98] (UK) WH Holding Ltd v E20 Stadium LLP [2018] EWHC 2784 (Ch).

[99] See eg, generally AGS, Legal Briefing No 117 – n3; and L Fox, L Pardey and L Williams, ‘Waiver of privilege the ‘transactions’ and scope of waiver revisited, Lexology Dec 29, 2020.

[100] See eg, CAC (NSW) v Yuill (1990) 20 NSWLR 386. However, a finding of express abrogation has not been a common occurrence Baker v Campbell (1983) CLR 52. Indeed, ASIC – semble – does not generally seek to rely on CAC (NSW) v Yuill [1991] HCA 28; (1991) 172 CLR 319; see ASIC Information Sheet 165 ‘Claims for Legal Professional Privilege’, particularly Section 3 and compare this to the Final ‘ATO Protocol’ (n 7) discussed below). However, note the impact of s 166 ITAA36 and the discussion above.

[101] Under the doctrine of ostensible authority: Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538, 543; Asahi Holdings (n 21).

[102] Goldberg v Ng (1994) 33 NSWLR 639, 670; Asahi Holdings (n 21) [83] (Beach J); (UK) PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm) (‘Barclays Bank’).

[103] See n 14.

[104] In Habermann v Cook Shire Council [2021] QSC 101, [31] (‘Habermann’) Henry J held that counsel’s advice that the plaintiff would be unlikely to establish liability and even if proved would not recover the amount sought produced no unfairness and, in any event, any such unfairness was trivial.

[105] Kirby (n 21) – even if this was not the intended result; TerraCom Ltd v ASIC [2022] FCA 208, [45]-[49], [64]-[67] Stewart J referring to the ‘... fineness of the distinctions drawn in this area’ [per Allsop CJ in ASIC v ANZ Banking Group (No 2) [2020] FCA 1013, [31]]. See also the examples given in A Milner, Privilege round up of significant cases in 2020’, Lexology 11 November 2020, and Herbert Smith Freehills LLP, Lexology July 1, 2021,’ Legal Professional Privilege: Waiver’. Compare Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, 13 (Gleeson CJ, Gaudron, Gummow and Callinan JJ).

[106] CDPP v Citigroup Global Markets Australia Pty Ltd [2021] FCA 511 (excerpts from a legal advice read aloud to a CDPP representative as part of an immunity ‘deal’); cf Santos Ltd v Fluor [2020] QSC 281.

[107] Bolton v ASIC [2018] AATA 4640.

[108] AWB No 1 (n 28) [135]-[143] (Young J); ASIC v ANZ (No 2) [2020] FCA 1013; Oztech Pty Ltd v Public Trustee of Queensland (No 8) [2016] FCA 712 Habermann (n 104) but see Barclays Bank Plc (n 102).

[109] Legal Services Directions 2017 and s 55ZH Judiciary Act 1903 (Cth); cf Built Environs (No 5) [2021] WASC 237; Lu v Fenson [2021] QDC 253; Herbert Smith Freehill LLP, Legal Professional Privilege: Protecting LPP when providing materials to third parties’, Lexology July 1, 2021.

[110] Cantor v Audi Australia Pty Ltd [2016] FCA 1391, [136]-[140] (Bromwich J); AWB v Cole (No 5) [2006] FCA 1234 (Young J) (‘AWB No 5’). However, a taxpayer may face a dilemma if refusal to permit the regulator access to a communication/s may result in a more aggressive or sceptical approach by the regulator, or a grant of immunity being refused or rescinded – see eg M Quayle and M Smyth, ‘The Cooperation Dilemma - Legal Professional Privilege in the ‘Why Not Litigate’ Era’, Herbert Smith Freehills, Asia Pacific Legal Briefings, 2 March 2020; S Murray, C Penny and M Stocks, ‘Loss of (or Waiver of) privilege – a warning to parties who openly reference legal advice in court documents’, Lexology August 10, 2020.

[111] Though note Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83, 95-99 (Deane, Dawson and Gaudron JJ), 106-11 (Toohey J), and 120-123 (Gummow J dissenting); Servic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287, 301; Denehy v Superannuation Complaints Tribunal and FSS Trustee Corporation ATF The First State Superannuation Scheme [2012] AATA 608, [11(f),(g)], [63] (Forgie DP); Utopia Financial Services Pty Ltd v ASIC [2017] AATA 269, [170](7)(18) (Forgie DP).

[112] [2006] FCAFC 86; [2006] 229 ALR 304.

[113] [2022] FCA 208.

[114] Ibid [84] (Stewart J).

[115] Ibid [61] (Stewart J). See also- among many others – Asahi Holdings (n 21); Galati v Deans [2019] NSWSC 1548, [21]-[31] (Ward CJ in Eq).

[116] As occurred in TerraCom (n 113) [63]-[64], [84] (Stewart J). Stewart concluded that partial disclosure of the PwC report led to the conclusion that privilege was waived in relation to the whole of the PwC report because it would be misleading to exclude portions of it. See A Rich and K Jovanovska, ‘All or nothing - Australian Court Rules Partial Disclosure of Private Report Waives Disclosure’, Legal Briefings, Herbert Smith Freehills, 31 March 2022; A Smeaton and S Barry ‘LPP: Can Privilege be waived over the whole or part of a report?’ Mondaq 27 May 2022. See also Barclays Bank (n 102); Guest Supplies Intl Ltd v South Place Hotel Ltd [2020] EWHC 3307 (QB), PJSC Tatneft v Bugolyubov, Kolomoisky [2020] EWHC 3225 (Comm); J Ellis, N Caton, M Spain and T Saleh, Privilege – you can’t have your cake and eat it too’ Lexology October 14, 2021; T Bowden, T McKinnon and R Hodge, ‘Privilege: When might a Limited Waiver become a Collateral Waiver?’ Lexology February 23, 2021; E Gracey and J McElroy, ‘Barclays ‘Waived’ Goodbye to Their Privilege: An Insight into the Cherry-Picking Rule’, Lexology September 29, 2020.

[117] Cantor v Audi Australia Pty Limited [2016] FCA 1391.

[118] See The Tax Institute Submission (n 30), Addendum 2, para 2.

[119] See for example Andrianakis (n 28) [211]-[226] (Mathews AsJ).

[120] Varawa v Howard Smith & Co Ltd [1910] HCA 11; (1910) 10 CLR 382; Aucare Dairy Pty Ltd v Huang [2017] FCA 746, [53]-[55] (O’Callaghan J); cf Addlesee v Dentons Europe LLP [2020] EWHC 238 (Ch).

[121] AWB No 5 (n 110) [41]-[44] (Young J); Propend Finance (n 1).

[122] In the UK: BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2010] EWHC 2176 (Ch); Barrowfen Properties Ltd v Patel [2020] EWHC 2536 (Ch).

[123] AWB No 5 (n 110) [210]-[211] (Young J). In the UK, Knight notes that the Court of Appeal held in Victorygame Limited, Surjit Singh Pandher v Ahuja Investments Limited [2021] EWCA Civ 993 that litigation privilege was not lost in circumstances where Victorygame had been misled as to the purpose of the information request it received from Ahuja: see T Knight, ‘Victorygame v Ahuja: Court of Appeal confirms that deception as to the purpose of a communication is not enough to defeat a well-founded claim to legal professional privilege’ Travers Smith – Legal Briefing – Corporate and Commercial Disputes, 16 August 2021.

[124] Clements, Deane and Bell Pty Ltd v Commr of Federal Police 2002 ATC 4072, 4114-15 (North J).

[125] [2020] NSWCCA 48; (2020) 102 NSWLR 72; cf CUB Australia Holding Pty Ltd v Commissioner of Taxation[2021] FCA 43; (2021) 385 ALR 731 (upheld on appeal: (2021) 287 FCR 7 (Middleton, McKerracher and Griffiths JJ); B Baker and J Phillipe-Wood, ‘Let’s share the information?’ Lexology, March 9, 2021; C Petrucci, CA Viney, J Singh and J Arnason, ‘Catch 22: Defending a Breach of Duty of Good Faith Claim and the Potential Waiver of Legal Privilege’, Lexology May 7, 2021.

[126] ‘ATO Protocol’ (n 7).

[127] ‘ATO Protocol’ (n 7) [11]-[12].

[128] ATO Protocol (n 7), June 2022 ‘Our concerns’ [12](a).

[129] ATO Protocol (n 7), June 2022 ‘Our concerns’ [12](b).

[130] Characterised by the ATO as ‘an abuse of LPP’, ‘ATO Protocol’ (n 7) June 2022, ‘Our concerns’ [11].

[131] ATO Protocol (n 7) June 2022, ‘Our concerns’ [12](c).

[132] ATO Protocol (n 7) June 2022, ‘Our concerns’ [12](d).

[133] ATO Protocol (n 7) June 2022 ‘Our concerns’ [12](e).

[134] ATO Protocol, (n 7) June 2022‘Our concerns’ [12](f) – for example, non-legal persons purporting to be an agent of the client in dealing with legal staff, an agent of the lawyer in dealing with the client, and potentially an independent expert on tax law matters.

[135] ATO Protocol (n 7) June 2022.

[136] I Murray-Jones and M Chang, ‘Claiming Legal Professional Privilege: ATO protocol finalised’, Thomson Reuters – Weekly Tax Bulletin, Issue 26 (24 June 2022, [507]. As a result of the consultations, the ATO had made a small number of significant changes to the Draft Protocol, though there remain issues on which the ATO and the Law Council do not agree.


[138] Protocol, [41], Table 2 – legal practitioners are asked in addition to indicate whether ‘the review of LPP enabled them to particularise LPP in the way recommended in this Protocol?’

[139] Protocol [11], [41].

[140] Protocol [15].

[141] Protocol [19]-[20] Compendium – Issue 7 – Particulars – standard – ATO response. The ATO states that the required particulars ‘may’ not be required on a document-by-document basis where the communications clearly only involve legal practitioners acting in their capacity as legal practitioners.

[142] Protocol [21].

[143] Submission by the Law Council of Australia, ATO Legal Professional Privilege Protocol – Australian Taxation Office, 19 November 2021.

[144] Submission letter and Appendices from P Godber (President) of the Tax Institute to Ms F Harako, Assistant Commissioner, Public Groups and Internationals, ATO, 15 November 2021.

[145] ATO Compendium – Compliance with formal notices – claiming legal professional privilege in response to formal notices, [‘Compendium’] Issue Number 1 – Issue raised - Cost of Compliance; see also Issue No 7 – Issue raised and ATO response; the Tax Institute Submission (n 30) Appendix A para 28. As noted above, in PwC (n 8) (Moshinsky J), the ATO disputed claims to LPP in relation to some 15,500 communications from a total of some 44,000.

[146] ATO Protocol (n 7) Compendium – Issue 5 – Compliance Time – ATO response.

[147] ATO Protocol (n 7) Compendium – Issue 5 – Compliance time – ATO response.

[148] ATO Protocol (n 7) Compendium – Issue Number 8 – Particulars standard – Issue raised; The Tax Institute Submission (n 30), Appendix A Example 1 and para 30. Ian Murray-Jones (Thomson Reuters) commented that ‘The level of detail that the ATO sets out for every communication would appear to make the task of cleaning the Augean stables look like child’s play’: Thomson Reuters’ online comment in LCA Resources, ATO Legal Professional Privilege Protocol.

[149] ATO Protocol (n 7), [13]. The fact that in Kenquist Nominees Pty Ltd v Campbell (No 5) [2018] FCA 853 and PwC (n 8), the Court resorted to analysing a representative ‘sample’ of some 48 (of 1,542) and 116 (of some 15,500) communications respectively, is suggestive. Presumably, the ATO will face similar problems of significant time and resources which will be required to evaluate Protocol responses individually and both by computer and manually.

[150] ATO Protocol (n 7) [38](a)-(n).

[151] In the Final Protocol, the ATO inserted additional wording to clarify that this information need not be supplied ‘to the extent that disclosure would also disclose the content of legal advice’ – Compendium – Issue number 8 – Particulars standard – ATO response. A similar change was made in relation to particulars required describing the dominant purpose for the communication and the legal issue being advised upon. Query, however, whether these changes will suffice to remove all problems.

[152] ATO Protocol (n 7) [39].

[153] Ibid [40](a)-(e).

[154] Listed in ATO Protocol (n 7) [23]-[29].

[155] ATO Protocol (n 7) [26], [28].

[156] Ibid, Addendum, ‘Considerations for legal practitioners’, [9].

[157] In the Final Protocol, the ATO inserted a clause stating that compliance with the Protocol was not required – in essence - ‘to the extent that eg, disclosure of the subject line of an email would involve waiver of privilege or a breach of a lawyer’s ethical or professional duties.

[158] ATO Protocol (n 7) Compendium, Issue number 7 – Issue raised; see also (n 145).

[159] ATO Protocol (n 7) Compendium Issue No 23 - ‘Issue raised: Waiver’; the Tax Institute Submission (n 30) Appendix A para 28(e).

[160] For example, in relation to the title or subject line of emails; see above re Denlay, Donoghue, and Anglo-American.

[161] ATO Protocol (n 7), Addendum 4 – Australian Government Solicitor advice, [2]-[4] – the advice was heavily qualified and unlikely to assuage claimants’ concerns. The AGS noted at [3] that where there are legitimate concerns that disclosure of information as recommended in the Particulars might result in a waiver, that information can be withheld because the Protocol is ‘voluntary’ – a concept challenged in feedback on the Draft Protocol – see for example the Tax Institute Submission (n 30) Appendix A, para 1.

[162] ATO Protocol (n 7) Compendium, Issue No 23 – Compliance time - ATO response; cf ATO Protocol (n 7) Addendum 2 – Additional aspects and the Tax Institute Submission (n 30) Appendix A para 26. The Protocol is similar to the ASIC detailed ‘Voluntary Confidential Legal Professional Privilege Disclosure Agreement’ which is contained in ASIC Information Sheet 165, and which, while it provides in effect in Clauses 1.1-1.3 that ASIC will not assert in any subsequent proceedings that the voluntary disclosure of privileged information to ASIC creates an implied waiver of privilege in those proceedings, is subject to the same issue as the ATO Protocol provisions, including that this would not prevent third parties from asserting that by volunteering the information, the claimant had impliedly waived their privilege: see Rumble E, Conflicting (public) interests affecting disclosure: Section 19 Examinations, legal professional privilege and public interest immunity’ (2014) 32 C&SLJ 44, 53.

[163] ATO Protocol (n 7) Compendium Issue number 1 – Issue raised - Cost of Compliance) – ATO response.

[164] Ibid. Compendium, Issue number 2 – Issue raised – (Cost of Compliance) - ATO response.

[165] Ibid Compendium, Issue number 1 – Issue raised - (Cost of Compliance), ATO response.

[166] ATO Protocol (n 7) [9].

[167] Law Council of Australia media release 22 June 2022 ‘ATO Legal Professional Privilege Protocol’.

[168] In Hyder (n 7) [217]-[218], Greenwood J found that the ATO had acted oppressively for a period of some three months by attempting to recover tax owing under both of two alternative tax assessments and would not have modified this position had court proceedings not been imminent.

[169] See Eu-Jin Teo, Under pressure’? Section 39 of the Legal Profession Uniform Law and the Federal Commissioner of Taxation’ (2022) 37(2) Australian Tax Forum 273. The Law applies in NSW and Victoria (with more limited legislation in other jurisdictions) and prohibits a person from causing or attempting to cause or induce a law practice or a legal practitioner associate of a law practice to breach the Uniform Law, Uniform Rules or other professional obligations, with a penalty for breach of 100 penalty units. The author sets out at pp 282-285 some hypothetical examples of ‘problematic conduct’ which might attract s 39 – but notes at pp 285-288 some potential impediments to the application of s 39 in such circumstances.

[170] Australian Law Reform Commission ‘Legal Professional Privilege and Commonwealth Investigatory Bodies’ (Report 107, 2008) Cth of Australia - the report covers some 561 pages and deals with relevant issues in considerable detail.

[171] See ALRC Report 2008 (n 171], 26.

[172] Ibid.

[173] Ibid. Recommendation 5-1 and related discussion.

[174] Ibid. Recommendation 6-4 and related discussion.

[175] Ibid. Recommendations 5-2, 5-3, 6-1 and related discussion.

[176] Ibid. Recommendations 7-1 to 7-7 and related discussion.

[177] Daniels (n 65); see also Glencore (n 14) [18] (the Court). .

[178] ALRC Report 2008, Recommendation 6-6 and related discussion.

[179] Ibid. Recommendation 8-3 and related discussion - Recommendation 8-3 is of itself interesting as it proposes a general code not that different in many respects from the ATO protocol.

[180] Ibid. Recommendation 8-4 and related discussion.

[181] Ibid. Recommendation 8-5, taking into account the factors listed in (a)-(f).

[182] Ibid. Recommendation 8-8 and related discussion.

[183] Ibid. Recommendation 8-9 and related discussion.

[184] Ibid. Recommendation 8-11 and related discussion.

[185] Ibid. Recommendation 8-14 and related discussion.

[186] Ibid. Recommendations 8-15, 8-16 and 8-17 and related discussion.

[187] Ibid. Recommendations 9-1 to 9-5 and related discussion.

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