LIV tells ATO there is a 'counterbalancing offence' it could commit - even by finalising its 'protocol' for claiming 'Legal Professional Privilege' in terms that 'overreach' the actual law

On Saturday 13.11.2021, the Law Institute of Victoria (LIV) made a submission to the ATO about its draft ‘protocol’ for claiming ‘legal professional privilege’ (a process it does not expect of itself). A central part of this submission is that the Commissioner (and his office) could be committing a State offence, by pushing too hard on LPP. This is an offence to protect lawyers from influence to breach their legal, professional and ethical obligations.

The Commissioner released his ‘protocol’ as a draft and called for submissions. Large swaths of tax professionals, and many taxpayers, believe it involves serious ‘overreach’, which is, in itself, very serious, as the privilege is so vital to rule by law (see related TT article). A very serious issue, of contention, is the ATO wanting taxpayers or advisers to disclose document headings and email subject lines to be disclosed, to help it assess whether to challenge the claim for privilege. That is all very well, but the ATO needs to decide whether to challenge the claim, for privilege, without that information (assuming the content of those headings/subject lines do disclose privileged communications). Amongst the most serious concerns is that disclosing the heading/subject line, could, itself, amount to disclosing the privileged communication and be a ‘waiver’ of that privilege.

A great many individuals and organisations are making submissions, to the ATO, about their draft Protocol for claiming ‘legal professional privilege’ (LPP), including the Law Institute of Victoria, which I’ve attached below, in full. A centre piece in this submission is to point out, to the Commissioner, that there is a ‘counterbalancing offence‘ which he must take into account, when interfering in lawyers’ professional obligations (which include LPP). This is under s39 of the Legal Profession Uniform Law (which is Schedule 1 to the Legal Profession Uniform Law Application Act 2014). This Uniform Law, currently governs lawyers in the two most populace states: NSW and Victoria, and could soon include those in Western Australia, too. Section 39 of the Uniform Law makes it an offence (against this State law) to exert undue influence on practising lawyers, to contravene applicable law, regulations or professional obligations. It provides as follows.

Section 39 Undue influence

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.

The term ‘professional obligations is defined inclusively, as follows:

Section 6 ‘professional obligations’ includes —

duties to the Supreme Courts; and
obligations in connection with conflicts of interest; and
duties to clients, including disclosure; and
ethical standards required to be observed —

that do not otherwise arise under this Law or the Uniform Rules

‘Professional obligations’ plainly includes a lawyer’s duty to claim LPP over relevant or potentially relevant documents, whilst determining, if need be, whether the claimed documents are subject to this privilege.

The LIV submission concludes that this offence is intended to, and does apply to, the Crown, in right of Commonwealth, and that there is no Constitutional reason for concluding that that it does not apply, to the Commissioner and his officers.

So, simply finalising this LPP protocol, in a form that involves ‘overreach’, could involve the Commissioner, and the relevant ones, of his officers, in contravening section 39 of the Uniform Law and, thus, committing the offence that this section creates.

The ATO frequently pushes taxpayers, and their advisers hard, to waive LPP, or push for disclosure, in circumstances that breach that Privilege, or make it difficult for the lawyers to give frank and fearless advice, on Privilege issues. The LIV Submission gives examples of this.

As a statutory officer, the Commissioner ought to take very seriously, the issue of whether he is responsible for committing State offences. Equally, he should be concerned, if a culture of exerting undue influence is prevalent or allowed to flourish. This could easily result in he, or his office, being guilty of this offence.

I have called this a ‘counterbalancing offence’ because there is, otherwise, little to prevent the Commissioner pressing too hard. Similarly, the issues of privilege are often fought out with the taxpayer, or their adviser, being charged with having committed a Federal taxation offence, for not producing (or allowing access to) documents, because they were privileged. The law is clear, that the Commissioner’s powers to compel production of, or access to, material, does not extend to documents subject to LPP. This State offence, introduces some balance, into this equation.