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Is LPP under siege?

The fallout from the PwC Tax Leak Scandal has been significant for the legal profession, and indeed is ongoing. The details of the scandal, and the lessons that can be learned from it, have been covered previously in Proctor.

Many of the allegations in the scandal are yet to be resolved, and investigations remain on foot. While the main concerns revolve around an alleged leaking of confidential information, there were also allegations that PwC had claimed legal professional privilege (LPP) over documents which were not covered by the privilege. Although this remains a contested issue, PwC did accept a fine of $642,000 in relation to 170 claims of LPP.

The scandal prompted the Federal Government to undertake a range of measures, including review of the use of LPP in Commonwealth investigations. That has prompted the release of a discussion paper on the issue, which seems to be largely based on the assumption that misuse of LPP when responding to government enquiries is rampant. What is of great concern, however, is that the paper provides little if any evidence in support of this contention.

The PwC scandal is of course an outlier, which the government would appear to recognise given that the matter is barely mentioned in the paper. The fact that ongoing investigations have yet to produce anything other than a negotiated fine with the ATO (agreed on a ‘no-admissions’ basis) is no doubt also a factor.

The only case cited in the paper isCommissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278. In that case, the court was required to determine whether or not LPP attached to certain documents; it did so via undertaking an analysis of a sample of the documents involved.

Although the court found that several documents had been ‘routed’ through a lawyer for the purpose of attracting LPP, for the most part the decision deals with the complexities of LPP when a document is brought into existence for more than one purpose, and the particular complications which can arise for multi-disciplinary practices.

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TR CoCounsel

While just over half the sample documents were found not to be privileged, the decision hardly supports the contention that misuse of LPP is a significant issue. It is supportive of the fact that LPP is a complex concept; given LPP belongs to the client, not the lawyer, it is unsurprising that lawyers take a conservative approach.

In the absence of any decided cases supporting the paper’s concerns, reference is made to the curiously vague observations of various – and largely anonymous – stakeholders. Nowhere in the paper are these concerns detailed or specific examples given.

The paper does make several references to the Australian Law Reform Commission report, Privilege in Perspective: Client Legal Privilege in Federal Investigations. That report, when considering the issue of LPP claims, notes:

While there is no clear evidence of chronic abuse of claims of client legal privilege, there are some cases that cause concern, and also evident distrust on the part of federal investigatory bodies that claims are not being made legitimately in every case.

The ALRC’s view is that the best strategies for addressing alleged instances of misuse or abuse of claims of client legal privilege are to clarify and enhance the existing disciplinary frameworks that apply to lawyers. The aim should be to ensure that cases of actual abuse are detected and punished, rather than introducing specific penalty provisions concerning client legal privilege.

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Despite this finding form the ALRC, the discussion paper contemplates new disciplinary measures, noting (at 11):

AGD and Treasury have heard from some Commonwealth agencies that current settings may not adequately deter improper LPP claims. We have heard that possible options to address this may include expanding existing penalties or creating new targeted penalties in Commonwealth legislation to deter improper LPP claims (these could include criminal, civil or administrative penalties).

Leaving aside the curious point that the paper is proposing action based on what has been ‘heard’, the creation of new penalties flies in the face of the findings of the report on which the discussion paper itself largely relies.

What the paper does accept is that LPP claims have become more complex and time-consuming as the ability to access greater volumes of documents, which may actually be the nub of the problem. On reading the paper, it is difficult to avoid the conclusion that the underlying issue is the result of the increasing size, complexity and cost of assessing LPP claims, rather than misuse of LPP by lawyers.

Before bringing in a new penalty regime that might have the effect of inhibiting the independence of lawyers when carrying out their duties, perhaps the true nature and extent of the problem should be determined.

QLS members are welcome to email policy@qls.com.au if they want to give feedback to the policy team on this issue.

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One Response

  1. Good on you Shane. You have drawn the attention of us to a bureaucratic “glass jaw”. Having now read the discussion paper, it is amazing how lawyer bashing is the response to an issue that is not of our making.

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