The plaintiffs claimed that the Glencore documents were created for the sole or dominant purpose of the provision by a law firm, Appleby (Bermuda) Limited (Appleby), for legal advice to the plaintiffs in respect to the corporate restructure of Australian entities within the Glencore group. Appleby has claimed that the Glencore documents were amongst documents described as the "Paradise Papers" which were stolen from Appleby's electronic file management systems and provided to a global media organisation.
The plaintiffs claimed that the defendants obtained copies of the Paradise Papers, and that the Glencore documents were subject to legal professional privilege.
The defendants argued that no cause of action was disclosed by which the plaintiffs would be entitled to an injunction. As an alternative argument, the defendants considered that they were entitled and obliged to retain and use the documents in question by reason and for the purposes of section 166 of the Income Tax Assessment Act 1936 (Cth) (the ITAA). This section provides that the Commissioner must make an assessment of a taxpayer's taxable income from the taxpayer's returns "and from any other information in the Commissioner's possession".
There was no issue that the Glencore documents were the subject of legal professional privilege. However, given that the Glencore documents were in the possession of the defendants, the Court held that they were able to be used in connection with the exercise of their statutory powers unless the plaintiffs were able to identify a basis on which the Court could restrain that use. The plaintiffs contended that legal professional privilege was in itself sufficient for the Court to grant the injunction.
In a unanimous decision rejecting the plaintiffs' application, the High Court made the following remarks:
Further, that the plaintiffs' case for creating a new, actionable right was not in accordance with how the common law develops, the Court commenting that legal professional privilege "is not the area which might be developed in order to provide the remedy sought".
This decision particularly highlights the interplay between cybersecurity, data protection and the protection of confidential documents. As indicated in this case, if data is leaked and confidentiality is waived for documents of this kind and fall into the ATO's possession, there is a strong risk that the ATO will be allowed to use this information in accordance with their statutory powers to ensure taxpayers, particularly large corporations, are paying the right amount of tax.
Now that the gates are open, the broader ramifications of the decision are yet to be seen, however the Court's stance against awarding an injunction for privileged documents that have lost their confidentiality and the ATO's crackdown on tax avoidance schemes that use blanket claims of legal privilege, are likely indicative of things to come. Steps should be taken to ensure you are aware of what corporate documents, if any, are subject to legal professional privilege and which documents may be exposed to potential access by third parties.
McCabe Curwood is experienced in advising its clients on privacy, privilege and confidentiality issues. Please contact us if you require advice on any matters covered by this article.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice that is specific to your particular circumstances.