The Federal Court has found that a taxpayer had impliedly waived his right to legal professional privilege in relation to legal advice he had obtained, which he partially disclosed in sworn affidavits to support his appeal against assessments raised by the Commissioner.

  • The assessments related to offshore transactions involving tax havens and the creation of certain tax structures on the taxpayer becoming a resident of Australia (and on later leaving Australia for the UK).
  • The Commissioner claimed the transactions were a sham.
  • The taxpayer claimed that affidavits only involved disclosure of the “gist” of the legal advice and that it was necessary to disclose the fact that legal advice had been taken and acted on in order to counter the Commissioner’s claim of “sham”.

However, the Federal Court found that the disclosure was inconsistent with the maintenance of the privilege and that, furthermore, it had been undertaken to achieve some “forensic advantage”.

In particular, the Court found that there had been a disclosure not of just the “gist” of the advice but some of the purpose and reasoning behind it.

Moreover, the Court found that the purpose in disclosing the advice was to secure a “forensic advantage” in that it enabled the taxpayer to argue that the arrangements were not a sham and were not for the purpose of securing tax advantages while at the same time the Commissioner would, otherwise, be effectively denied the opportunity to scrutinise the whole advice and test whether what had been disclosed was accurate.

(Krok v FCT [2015] FCA 51, Federal Court, Wigney J, 6 February 2015.)

[LTN 25, 9/2/15]