The Federal Court has found that most of the 23 documents obtained by the ATO, in the course of conducting an audit of the taxpayer, and associated entities, were protected by legal professional privilege (LPP).

The documents were original emails, forwarding chains of emails and attachments. The matters to which the documents related included a dispute involving a lease, the sale and purchase of property, business affairs in China, a commercial contract and immigration advice. These involved the taxpayer or companies of which the taxpayer was a director.

The Court accepted that 19 documents were privileged and one other document was partially privileged on the basis that:

  • the documents were brought into existence for the dominant purpose of giving or obtaining legal advice;
  • a third party involved in the communications was an agent of the taxpayer for the purposes of communicating with the lawyer to obtain or receive advice;
  • a Chinese lawyer who provided much of the advice was a qualified lawyer; and
  • communications between the taxpayer and the in-house legal department of related entities in China arose in the course of a professional relationship of client/lawyer. In this regard, the Court said the unqualified lawyers working in the  in-house legal department were acting under the supervision of a qualified lawyer.

Accordingly, the Court held that the taxpayer was entitled to claim legal professional privilege over the majority of documents.

Two limbs

The privilege protects two kinds of confidential communications between a client and his or her lawyer. The first kind is where the communications are confidential and made for the purposes of seeking or being provided with legal advice. The second kind is where the communications are made for the purpose of existing or reasonably contemplated judicial or quasi-judicial proceedings. These two limbs of the privilege are called the advice privilege and the litigation privilege.

(Song v FCT [2018] FCA 840, Federal Court, Davies J, 2 August 2018.)

FJM 8.18.18

[LTN 151, 8/8/18; Tax Month – August 2018]


Comprehension questions (answers available)

  1. Were the documents seized by the ATO during their audit later held to be protected by Legal Professional Privilege?
  2. Was this under the second limb of the privilege: ‘Litigation Privilege’?
  3. Does the communication with the Lawyer have to be in a professional capacity (for the privilege to exist)?
  4. Did it matter than one of the lawyers practised in China?
  5. Did it matter that some of the communications were with non-lawyers in an in-house legal department?
  6. Did it matter that someone other than the lawyer and the client saw some of the documents (had the privilege been waived)?




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