The Federal Court (Wigney J) has held that legal advice received by a taxpayer, the contents of which had been partially disclosed in proceedings challenging certain assessments issued by the Commissioner against the taxpayer, was not subject to legal professional privilege because of the partial disclosure.
Wigney J said, at paras 37-38
"More fundamentally, it may be readily inferred that Mr Krok’s purpose in disclosing the gist, substance or effect of the advice was, and is, to advance his case in his taxation appeals. It may therefore readily be concluded that Mr Krok’s purpose in 'deploying' a partial disclosure of the advice was, and is, to secure a forensic advantage in the proceedings. In these circumstances it would be unfair to deny the Commissioner an opportunity to see the full text of the otherwise privileged communications.
The unfairness is manifest. Whilst Mr Krok seeks to deploy the partially disclosed advice to support his case that the arrangements were not a sham and were not for the purpose of securing a tax advantage, the Commissioner is effectively denied the opportunity to scrutinize the advice and test whether what has been disclosed is accurate and complete. The partial disclosure of the advice has, in other words, necessarily put in issue and laid open to scrutiny the confidential communications."
Wigney J concluded, at para 41:
"In all the circumstances, the partial disclosure of the advice provided to Mr Krok, or the disclosure of the gist, substance or effect of it, is inconsistent with the confidentiality that would otherwise attach to the communications recording the advice. The privilege that would otherwise attach to these communications has accordingly been waived."
Accordingly, the taxpayer was obliged to make the legal advice available to the Commissioner through the discovery process.
Krok v FCT  FCA 51 (Federal Court, Wigney J, 6 February 2015).