Multi-Disciplinary Partnerships and Legal Professional Privilege

Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278

Overview

The recent Federal Court decision in Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278 considered whether the doctrine of legal professional privilege (LPP) will apply to communications involving multi-disciplinary partnerships with legal and non-legal partners. 

Having found that, as a matter of form and substance, there was an extant lawyer-client relationship sufficient to be able to ground a claim for LPP, the Court then determined whether each document in a sample set of documents was privileged or not privileged, having reviewed each of them on a document-by-document basis.

Background

PricewaterhouseCoopers (PwC) was engaged by an Australian subsidiary of the JBS global group to provide tax and legal services to Australian and overseas group entities: [61]-[62].  The judgment describes PwC as a multi-disciplinary partnership between legal and non-legal partners, providing legal and non-legal services: [44].  Services were provided to the JBS entities under the terms of an Umbrella Agreement with PwC, and nine Statements of Work (SoW).  Each SoW provided that JBS appointed the non-legal practitioners as its agents for the purpose of communications to and from the “legal services team”: [18], [186].

In the course of an audit, the Commissioner of Taxation issued statutory notices under section 353-10 of Schedule 1 to the Taxation Administration Act 1953 (Cth) to a PwC partner and to the head company of the Australian group, compelling the production of documents: [4].  LPP was claimed over approximately 44,000 documents, and the Commissioner disputed claims over approximately 15,500 documents, comprising emails and attachments: [5], [6]. 

Issue

The Commissioner sought declaratory relief on the grounds that: (a) a relationship of lawyer and client was not sufficiently established to ground a claim for LPP, (b) as a matter of substance, PwC did not provide services pursuant to a relationship of lawyer and client sufficient to ground a claim for LPP, and alternatively (c) the disputed documents were not (or did not record) communications made for the dominant purpose of giving or obtaining legal advice: [8].

The issue in the case was whether the documents were privileged under the common law LPP doctrine (and not section 118 of the Evidence Act 1995 (Cth)): [135].  It was not in issue that the relevant communications were confidential: [136].

Given the number of documents in dispute, and after several case management hearings, the Court heard separately the question of whether the Commissioner was entitled to the relief sought in respect of 100 sample documents: 50 identified by the Commissioner and 50 by the respondents: [11], [12].  Since the Commissioner did not have access to the sample documents, amicus curiae were appointed: [14].

Outcome

The Court did not accept grounds (a) and (b), as it was satisfied that a lawyer-client relationship did exist between PwC legal practitioners and the JBS parties: [20]. 

As to ground (a), the Court found that, as a matter of form, the SoWs did establish a lawyer-client relationship sufficient to be able to ground a claim for LPP, identifying the client, the lawyers, the non-legal practitioners assisting the lawyers, and the services to be provided: [190].  While the appointment of non-legal practitioners to “assist” the lawyers, and to act as agents for the client, was “perhaps confusing”, it did not necessarily lead to a conflict of interest: [192].

As to ground (b), the Commissioner contended that, as a matter of substance, the work done pursuant to the SoWs was not provided under a lawyer-client relationship sufficient to ground a claim for LPP.  However, the Court found that it was not possible to determine this on a global basis, but whether the documents are privileged was to be determined having regard to each particular document: [195], [204]-[205].

Therefore, for the purposes of ground (c), it became necessary to consider whether LPP applied to each of the sample documents on a document-by-document basis: [21]. 

The Court considered that the question of whether a document is, or records, communications made for the dominant purpose of giving or receiving legal advice (and therefore whether privilege applies to a document) is to be determined by reference to the content of the document, its context, and the relevant evidence relating to the document: [218].  Privilege is not established merely because a communication was made pursuant to an SoW, but it was necessary to determine whether the communication was made with the requisite dominant purpose: [219]. 

Consideration of the documents spans over 146 pages of the Judgment (pages 78-224) and is summarised in an Annexure (pages 229-232).  Forty-nine of the sample documents were found to be privileged, six partly privileged and 61 not privileged [22].

In summary, the documents generally found by the Court to be privileged included:

• Advice given by a PwC lawyer on matters of Australian tax law (including where the advice was drafted by a non-lawyer at the lawyer’s request, substantively reviewed by the lawyer and adopted as their own advice): [931(g)].
• Draft advice prepared by a PwC lawyer for review by another PwC lawyer on matters of Australian tax law, with a view to the advice being provided by the second lawyer to the client: [931(h)].

Documents generally found not to be privileged included:

• Advice given by a PwC non-lawyer on matters of stamp duty (including by email or memorandum), including where a PwC lawyer was copied in on or a party to the email: [931(a)].
• Advice given by a PwC non-lawyer on matters of valuation, including where a PwC lawyer was copied in on or a party to the relevant email: [931(b)].
• Email exchanges between PwC non-lawyers in relation to matters of accounting: [931(c)].
• Accounting advice prepared by a PwC non-lawyer, provided by a PwC lawyer to the client: [931(d)].
• Email exchanges between a PwC non-lawyer and an overseas PwC firm where no substantive advice was given by a PwC lawyer: [931(e)].
• Email exchanges between a PwC non-lawyer and the client requesting information from the client, where no substantive emails are authored by a PwC lawyer: [931(f)].

What’s next?

At the time of writing, the proceeding is still before the Court, and orders have been made for the parties to file proposed orders to give effect to the Court’s reasons, together with submissions. 

It is also noted that, in September 2021, the Commissioner released for consultation a draft legal professional privilege protocol, setting out the ATO’s recommended approach for claiming LPP in response to requests for information under its formal information gathering powers.   A finalised protocol is expected to be published by 30 June 2022 or shortly thereafter.