The ATO has had something of a ‘thorny’ relationship with Legal Professional Privilege (LPP) – bleating about it often and challenging claims in the courts too little. They finally challenged the PwC claim in the Federal Court and, to the extent that the case has run its course, won in a majority of the claims (see related TT article). About the time that the Federal Court case began to be heard, the ATO released a draft version of the protocol it proposed, for parties who proposed making claims for LPP. This raised its own controversy (see related TT article). As part of the consultation about this draft, the public was invited to make submissions and the Law Institute of Victoria did so, not only citing bad behaviour of the ATO, but warning that ATO officers, who sought to interfere with lawyers LPP duties to clients, would be exposed to criminal proceedings under s39 of the Legal Profession Uniform Law (see related TT article). I described this as a ‘counterbalancing offence’, which ought to temper the ATO’s approach, if tempted to weaponise its position, through use of criminal law proceedings. This attracted some attention in the Financial Press (see related TT article). The LIV has reminded its lawyer members of their duties to their clients, with regard to LPP (particularly in the tax sphere) and the ‘counterbalancing offence’ protections they enjoy, under s39 of the Uniform Law. This was in the form of the following article, by University of Melbourne senior lecturer: Eu-Jin Teo, in the May 2022 edition of the Law Institute Journal.
PRIVILEGE AND THE MAJESTY OF THE LAW
ATO OFFICERS WHO SEEK TO PRESSURE PRACTITIONERS IN RELATION TO CLAIMS OF LEGAL PROFESSIONAL PRIVILEGE MAY EXPOSE THEMSELVES TO CULPABILITY.
Victorian Law Institute Journal (LIJ) readers hardly need be reminded of the importance of legal professional privilege. Indeed, from a review of the cases, a publication no less august than The Laws of Australia has observed that: “In the absence of instructions by the client to waive, it is the legal adviser’s duty to claim the privilege on behalf of the client”.
In recent times, however, the Australian Taxation Office (ATO) has been somewhat bellicose in its opposition to claims of legal professional privilege. The ATO insists that legal practitioners who, in its view, make unfounded privilege claims, leave themselves open to sanction for breaching their obligation to comply with the Federal Commissioner of Taxation’s (Commissioner) coercive information-gathering powers in ss353-10 and 353-15 of sch 1 to the Taxation Administration Act 1953 (Cth) (powers which, the ATO accepts, are subject to legal professional privilege). In this regard, The Australian Financial Review has reported that “the ATO ‘frequently pushes taxpayers, and their advisers hard, to waive LPP, or push [sic] for disclosure, in circumstances that breach that privilege, or make it difficult for the lawyers to give frank and fearless advice, on privilege issues’”.
Interesting then, is s39 of the Legal Profession Uniform Law. Headed “Undue influence” (evocative, potentially, of generations of case law on actual undue influence), the section provides as follows:
“A person must not cause or induce or attempt to cause or induce a law practice or a legal practitioner associate of a law practice to contravene this Law, the Uniform Rules or other professional obligations. Penalty: 100 penalty units.”
Section 39 (and its equivalent in non-Uniform Law jurisdictions) has attracted scant commentary, and is yet to be judicially considered. While the precise contours of the provision are, therefore, still to be determined, the conduct that has been described in the LIV’s 12 November 2021 Draft Legal Professional Privilege Protocol public submission to the ATO (which The Australian Financial Review then highlighted) should, at the very least, give one pause for thought in relation to s39.
Conduct by the executive vis-à-vis s39 clearly raises broad rule of law concerns, quite apart from the general issue of Crown immunity (the Legal Profession Uniform Law does not purport to bind the Crown). The potential application of the section to the Crown in right of the Commonwealth raises further issues in relation to intergovernmental immunity and s109. These matters have been sketched out in a paper delivered at this year’s Australasian Tax Teachers Association Conference and, for reasons of space, will not be canvassed in detail here.
Suffice to say for now, however, that it would appear to be an extraordinary anomaly if the “great unwashed” were bound by s39 . . . but a servant, agent or officer of the Crown (or other person acting on the Crown’s behalf) was not so constrained, and was, therefore, free to interfere with lawyers’ duties generally, and, in this instance, a duty as important as protecting legal professional privilege (which has been held by the High Court to be a fundamental right of a person, in a system that comports with the rule of law). Surely this outcome would be inimical to a stated purpose of s39, namely “to ensure that clients of law practices are adequately protected”?
Further, it could not seriously be contended that ATO officers driving on Victorian roads (even in Commonwealth cars), to compulsorily access physical premises pursuant to their powers under s353-15 of sch 1 to the Taxation Administration Act 1953 (Cth), would not be subject to the requirements of the Road Safety Act 1986 (Vic) and the Road Safety Road Rules 2017 (Vic). By parity of reasoning, mutatis mutandis, would it not appear, therefore, that ATO officers likewise would have to abide by s39 of the Uniform Law when exercising their information-gathering powers under s353-10?
No necessary inconsistency would appear to exist, for s109 purposes, between s39 and ss353-10 and 353-15, as legal professional privilege already operates as a constraint on ss353-10 and 353-15 independent of the existence of s39.
While pursuing the hardly objectionable objective that the legally “correct” amount of tax be paid, it would seem therefore that well meaning but overzealous ATO officers could potentially expose themselves to criminal culpability if they seek to pressure practitioners in relation to claims of legal professional privilege, contrary to s39 and its equivalents. n
Eu-Jin Teo is a senior lecturer at the University of Melbourne and is principal examiner for the LIV Administrative Law Accredited Specialisation Scheme.
[Tax Month – May 2022 – Previous Month, 11.5.22]