Accountants, lawyers and the privileged class: R v Special Commissioner of Income Tax

Key Points:

It's likely that only those communications by and to lawyers acting in their professional capacity will be truly confidential and unavailable to the Australian Taxation Commissioner.

I enjoy my rights, but I revel in my privileges. - Mason Cooley

Legal professional privilege is a fundamental right attaching to qualifying communications between lawyers and their clients.

The ATO has conceded there are good grounds for extending the privilege to communications between accountants/tax agents and their clients.

A recent UK case has confirmed that legal professional privilege attaches to lawyer-client communications only, even in the context of advice on the application of the law relating to tax.

Background - what does legal professional privilege cover?

In its basic form, legal professional privilege (LPP) applies to communications (whether oral or written) brought into existence for the dominant purpose of:

obtaining or giving legal advice ("advice privilege"); or preparing for existing or reasonably anticipated litigation ("litigation privilege"). LPP can extend to copies made of original documents and can include notes made of privileged communications, made by either the client or lawyer.

The privilege is considered to be a right of the client (rather than the lawyer) and has its roots in the notion that fairness and the public interest require that a person be able to make full and frank disclosure to his or her legal advisor without the risk of prejudice and damage by subsequent compulsory admission.

LPP is considered to be fundamental to the proper administration of justice and the "oldest of the privileges for confidential information known to the Common Law" (Berd v Lovelace (1577) 21 Eng. Rep. 33).

What...