Government consultation on legal professional privilege in Commonwealth investigations

The Attorney-General's Department (AGD) and Treasury are undertaking a joint review into the use of legal professional privilege (LPP) in Commonwealth investigations and have released a discussion paper for public consultation. This review formed part of a larger package of regulatory response to strengthen regulatory arrangements to ensure they address what the Commonwealth regards as significant issues of concern arising from the systemic problems identified from the PwC tax investigation in relation to the use of LPP and the failure by PwC to properly protect the confidentiality of Commonwealth information. 

The consultation is open for submissions until 28 February 2025. 

Current LPP issues in Commonwealth investigations

It is increasingly common for Commonwealth agencies to issue significant compulsory information requests on investigation targets such as businesses and individual respondents. Respondents have to navigate the challenge of seeking to satisfy their disclosure obligations and asserting their right to limiting the scope of production appropriately, including through making legitimate LPP claims. 

The consultation paper identified a number of key LPP issues in Commonwealth investigations: 

• current processes to resolve LPP claims in Commonwealth investigations are not uniform and can be complex, lengthy and costly. Changing operating environments with technological advances means large volumes of electronic material can be within scope for review, assessment and production, increasing potential time and cost for both Commonwealth agencies and respondents to review relevant material; 
• respondents claiming LPP over communications where they do not have a reasonable basis for asserting that the communication is privileged; 
• respondents failing to engage with Commonwealth agency requests for additional information in a timely manner; and 
• respondents making broad claims, including those for LPP, over communications requested or seized by a Commonwealth agency. 

Given the above shortcomings, bad actors may seek to intentionally obstruct or frustrate Commonwealth investigations in order to avoid disclosing embarrassing or prejudicial communications. Legitimate respondents may also struggle to navigate LPP claims when dealing with a large volume of communications for compulsory information production. 

As an example of the scale of this issue, the consultation paper notes that there are over 133,000 unresolved LPP claims outstanding across 27 active Australian Taxation Office matters, 75 per cent of cases involving claims made over a year ago. This suggests, as with the conduct of PwC, that much of the Commonwealth’s concerns arise from the taxation sector, although we consider similar concerns exist across a range of Commonwealth agencies.

Potential changes to LPP processes considered 

While the AGD and Treasury has flagged that there will be a second consultation paper released later this year setting out possible reform options in detail, they have foreshadowed possible options that may be put forward for further consultation to improve current LPP processes: 

• greater alignment of LPP processes adopted by Commonwealth agencies to improve consistency; 
• facilitating further opportunities for Commonwealth agencies to work more collaboratively with respondents to streamline scope of LPP claims; 
• statutory clarification to support respondents to confidently provide information to a requesting Commonwealth agency, without fear of waiver of LPP;
• introducing legislative penalties (criminal, civil and/or administrative) to deter LPP claims being made without a proper basis or with an improper intent; and
• introducing specialised LPP support court processes, for example, court-appointed LPP examiners to consider the underlying communications and adjudicate claims, or the appointment of special court registrars to consider and determine LPP disputes. 

This approach flows on from recent initiatives by Commonwealth agencies, particularly the ATO, the ACCC and ASIC, to streamline how LPP claims should be advanced, and the front-end work that should occur in properly identifying the basis of an LPP claim, so its legitimacy can be assessed by the Commonwealth. In addition, in certain recent ongoing cases, Commonwealth agencies have been challenging LPP claims, asserting waiver and orders have been made that effectively result in the disclosure of internal reports that concern the conduct in dispute in these cases,^[1] and in the case of PwC, disclosure of a range of client communications concerning the taxation affairs of a client.^[2]

Commonwealth investigations are invariably sensitive and highly likely to have brand and reputational issues for businesses. From the outset, responding to these investigations requires experience and the correct framework, to manage not only a Commonwealth investigation, but the identification and assessment of critical records and whether they can properly be subject to an LPP claim. 

Increasingly, in our experience, senior business executives and internal lawyers are required to go on oath and provide statements to the Commonwealth in court cases where LPP claims are disputed. While it should be recognised that there may be legitimate differences of opinion on whether a particular communication, or range of communications, are properly privileged, the Commonwealth is increasingly testing the factual basis for contested LPP claims raised by a business. Claims of LPP without a proper factual basis run the risk of not only alienating a Commonwealth agency towards a business, but ensuring a more thorough approach is taken throughout any investigation and making any favourable outcome or a resolution harder to secure.

What does this mean for your business?

Both courts and Commonwealth agencies  are increasingly taking a more critical review of LPP claims (see our previous article on the Singtel Optus v Robertson case where we considered LPP claims in the context of a business commissioning an external forensic investigation report). 

In-house counsel should ensure that they and their business teams: 

• clearly understand when LPP will apply; and
• consider taking proactive measures to implement document processes and procedures to ensure there is a clear evidentiary record to support LPP claims and to minimise the risk of improper LPP claims being made or LPP being waived. 

We would be happy to provide a refresher on LPP in light of recent case proceedings and the current Government consultation if it is of interest. If you are keen to know more, please reach out to any of the key contacts listed. 

[1]TerraCom Ltd v ASIC [2022] FCA 208; ASIC v Noumi Ltd [2024] FCA 349.
[2]Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278