23 September 2021
There have been a number of developments relating to legal professional privilege (LPP) over the last two weeks, including:
This article deals with the CUB decision.
The Full Federal Court decision in the CUB case, handed down on 21 September 2021, is an important reminder of the difficulties taxpayers encounter when responding to information notices and the degree of vigour and expertise required to successfully keep confidential communications that attract LPP or documents which fall within the Commissioner’s accountants concession.
The challenges this case considers have been brewing for some years.
A claim that LPP or the accounting concession applies to a particular communication is liable to be challenged by the Commissioner, particularly when:
CUB sought to have a formal notice issued by the Commissioner seeking detailed information about LPP and accounting concession claims made by CUB set aside on the basis the notice was issued for an improper purpose. Although CUB was unsuccessful in having the notice set aside, the case highlighted an important legal consideration in privilege disputes with the Commissioner, one which was accepted by CUB, the Commissioner and endorsed by the Full Court, namely, the determination of whether a communication is privileged is a matter for the Court, not the Commissioner.
If one of the Commissioner’s purposes in issuing the notice was to determine whether the communications were privileged, the notice would have been set aside.
The Commissioner is authorised to issue a notice under section 353-10 of the Taxation Administration Act 1953 “for the purpose of the administration or operation of a taxation law.” The Federal Court in Re Citibank Limited v Commissioner of Taxation  FCA 196 (16 June 1988) held that the Commissioner’s power to obtain information and evidence does not abrogate LPP.
As the power to obtain information and evidence does not abrogate LPP, it follows that this power does not include the power to determine whether privilege actually applies, as the only way to definitively make that determination is to look at the communication.
The Full Court accepted the Commissioner could ask questions to enable him to determine whether or not to challenge the claims for LPP.
We are aware that the ATO has agreed to appoint independent barristers to review representative samples of LPP claims as a way of verifying the robustness of the review process applied by a taxpayer. That process may be an appropriate way to resolve an otherwise intractable LPP dispute with the Commissioner. In addition, we note the ATO draft protocol on LPP includes a provision for alternative dispute resolution.
If you have any questions regarding privileged documents or other tax disputes, please speak to us or contact us here.
Author: Stephen Jones
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.