06 Sep 2019 6 September 2019
Legal professional privilege – a sword or just a shield?
Legal professional privilege (LPP) is an important common law protection for individuals which allows them to obtain competent legal advice without fear that the very legal advice can subsequently be used against them in legal proceedings. However, this protection, while real, is limited in that it can be used as a shield but not as a sword. The limits became apparent in the High Court decision in the recent Glencore v Commissioner of Taxation litigation – the facts of which can be succinctly summarised as follows.
In 2017, there was a leak of a set of some 13.4 million files emanating from an offshore law firm known as Appleby to an organisation called the International Consortium of Investigative Journalists. The huge file has become known as the rather exotically titled Paradise Papers and in it are revealed the details of hundreds of individuals and companies utilising a variety of secretive and complex tax schemes entered into by a number of prominent individuals and multinational corporations.
The ATO obtained possession of the documents and as a result began investigating the tax arrangements of Glencore. Much of the information in regard to Glencore concerned advice it had received from Appleby regarding the restructure of its Australian group.
Glencore demanded that:
- the ATO return the documents in its possession to Glencore; and
- the ATO provide undertakings that the ATO would not refer to, or rely in any way on, any of the relevant documents which were obtained through the Paradise Papers leak.
The primary basis for these two demands was that the documents were protected by LPP.
The ATO refused the demands and hence the court proceedings ensued.
The central point that would seem to follow from the High Court decision is that once the matter is in the public domain, in circumstances where the ATO was not itself complicit in securing the release of the documents, the ATO can, and perhaps must, use that information as it is information in its possession (see especially s 166 of the Income Tax Assessment Act 1936). If the ATO was involved in securing the improper release of the documents (which I understand is not alleged), there may well have been grounds for equitable relief for breach of confidential information that would entail an entirely different case where LPP would not be the central issue.
What all this underscores is that LPP can be used defensively as a shield to prevent documents being handed to the ATO on the grounds that they are protected. It cannot be used as a sword to force the return of documents otherwise publicly available and it cannot be used to force the ATO into a position where they cannot rely on the information revealed in those documents.
It would have been quite a different matter if the ATO knew of a document in Glencore’s hands which it demanded to see. That is where LPP counts and Glencore could have successfully resisted the demand on the basis that the document is protected by LPP.
It simply cannot be the case that the Paradise Papers are publicly available for all except the ATO to see, read and rely upon.
LPP is alive and well and practitioners need to be ready to claim it whenever it is appropriate to do so. It can however only be claimed as a defensive shield, not as a sword in the way Glencore sought to do.
As always, I welcome your thoughts and comments via the TaxVine feedback inbox.
Bob Deutsch, CTA