Protecting your client's interests - Legal Professional Privilege
ATO's Power to Demand Disclosure
The Australia Taxation Office (ATO) has the power to demand the production of information and documents in your custody or control. However, this power does not override a claim for legal professional privilege (LPP). The recent case of Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278 demonstrates the ATO will not shy away from challenging claims of LPP.
In that case, the ATO challenged PricewaterhouseCoopers’ (PWC) claim to LPP over 15,500 documents held by PWC or their clients. One issue was that PWC is a multi-disciplinary practice (MDP) that provides both legal and non-legal services to its clients. While the Court accepted that a lawyer/client relationship could be created by an MDP and that legal services were, at least on occasion, being delivered, the Court found that the majority of documents were not created for the purpose of giving or receiving legal advice. Therefore, those documents were not subject to legal professional privilege and not shielded from production to the ATO.
What is Legal Professional Privilege?
LPP applies where there is:
(a) Confidential communications or documents created;
(b) In a lawyer/client relationship;
(c) That meet the dominant purpose test.
To satisfy the dominant purpose test, the communication must be for the dominant purpose of giving or obtaining legal advice or for use in current or anticipated legal proceedings.
Why is Legal Professional Privilege Important?
Protecting privilege is important as it preserves the confidentiality of communications between lawyer and client. The Privilege applies to all forms of compulsory disclosure.
Key Takeaways
The existence of a lawyer/client relationship does not provide for a “blanket” claim for LPP. Each communication will need to satisfy the dominant purpose test (i.e. whether the communication was made for the dominant purpose of giving or receiving legal advice).
Non-lawyer tax advisers (Accountants) need to take care to protect clients’ LPP and ensure their clients are not inadvertently prejudiced. Where legal issues arise, it is important to get lawyers involved.