LPP “Smorgasbord” wars: Commissioner not entitled to all taxpayer’s documents

Articles Written by Kathryn Bertram (Partner), Annemarie Wilmore (Partner), Marc Eastmure (Associate)

On 25 March 2022, Moshinsky J handed down (in part) the highly anticipated decision: Commissioner of Taxation v Pricewaterhouse Coopers [2022] FCA 278, finding that only a portion of the respondent’s documents over which it claimed legal professional privilege (LPP) were truly subject to LPP.

This case underlines the importance of carefully considering and substantiating claims of LPP on a document-by-document basis when responding to the Commissioner’s information and document requests. It shows the Commissioner is prepared to test and/or resist a taxpayer’s claims of LPP.


The decision was issued with significant portions of the reasons redacted to preserve confidentiality. The respondents must, within seven days, propose updated redactions to the reasons so that more of the reasons may be provided to the public.

The case concerned the Federal Commissioner of Taxation’s (the Commissioner) challenge against the respondent’s (PricewaterhouseCoopers (PwC) Australia (PwC Australia)) claims on behalf of its clients, that certain documents were subject to LPP, and therefore did not need to be produced to the Commissioner in response to a formal notice to produce documents under s 353-10 of Sch 1 to the Taxation Administration Act 1953 (Cth).

PwC Australia’s client was Flora Green Pty Ltd – the head company of the multiple entity consolidated group of a Brazilian international meat processor (JBS) – and the various subsidiaries of JBS, whose taxation affairs were being audited by the ATO.

PwC Australia declined to provide approximately 44,000 documents on the basis they were subject to LPP. The Commissioner disputed the LPP claims over approximately 15,500 documents. However, for the purposes of the trial, only 100 sample documents (50 selected by the Commissioner and 50 selected by PwC Australia and its clients) were considered. Where a sample document comprised an email and attachment(s) it would be treated as two or more documents. Accordingly, there were 116 individual sample documents to be considered.

The Court was assisted by amici curiae, or friends of the court, being three barristers who provided independent submissions on the relevant legal principles regarding LPP. In addition, the amici curiae had the benefit of reviewing the sample documents, and provided submissions to the Court about whether the claims for LPP were in accordance with established jurisprudence.

The Commissioner’s concerns regarding the LPP claims

There is an inherent tension between the need for the ATO to have access to all relevant documentary evidence when performing its function of administering Australia’s taxation laws and the public interest in withholding protected communications subject to LPP. This case exemplifies this tension.

The Commissioner challenged PwC Australia’s LPP claims (on behalf of its clients) in this case on three grounds, being that:

  1. the form of the engagements between PwC Australia and JBS did not establish a relationship of lawyer and client sufficient to ground a claim for LPP;
  2. further or alternatively, as a matter of substance, the services provided by PwC Australia to JBS pursuant to the engagements were not provided pursuant to a relationship of lawyer and client sufficient to ground a claim for LPP; and
  3. alternatively, the documents were not, or did not record, communications made for the dominant purpose of giving or obtaining of legal advice from one or more lawyers of PwC Australia.

The Commissioner in his submissions focused on PwC Australia being a multidisciplinary partnership (MDP), comprised of accountants, tax agents, other non-legal practitioners and legal practitioners.

In a nutshell, the Commissioner was concerned that LPP applied “a cloak” to the entirety of PwC Australia’s various services. Senior Counsel for the Commissioner drew an analogy to a smorgasbord where the diverse services offered by PwC Australia were the food:

“The Glad Wrap that goes over the platter is [the lawyer]. And it’s attractive to the client because the Glad Wrap holds it all together and comes with the [LPP] covering… In the meantime, the covering cannot be taken off… [I do] not get an opportunity to see the platter, it’s opaque, and the range of smorgasbord of offerings.”

The decision

Moshinsky J rejected grounds (1) and (2) of the Commissioner’s challenge. His Honour was not satisfied, as a general proposition, that no relationship of lawyer and client came into existence.

This meant it was necessary to consider whether each of the sample documents, on a document-by-document basis, were subject to LPP by virtue of having been created for the dominant purpose of giving or obtaining legal advice.

Moshinsky J considered a critical part of the context was that the services were provided by an MDP and that overseas PwC firms were involved in many of the same projects under separate engagements and which, in certain cases, were not able to provide legal services.

Of the 116 individual sample documents, His Honour decided that:

  • 61 were not subject to LPP;
  • 49 were subject to LPP in full; and
  • 6 were subject to LPP in part.

What’s to come?

It will be necessary to wait for the release of the updated redacted reasons to understand how Moshinsky J arrived at his decision in relation to each of the sample documents. Nevertheless, given this case only concerned 116 documents, the Court is listing it for a case management hearing to discuss the further conduct of the matter, and likely the approach to determining the privileged status of the remaining documents.

Around the time of the case’s trial, in September 2021, the ATO issued for consultation a Draft Legal Professional Privilege Protocol (Protocol). The ATO notes in the Protocol that, when followed, it will usually have all of the information it needs to be able to make a decision on what to do next and that in many cases it is likely that it will accept a claim without any further enquiries. We expect the ATO will not update the draft Protocol until the conclusion of this proceeding, which could still be some time away if the decision is appealed.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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