Taxation Law - Wickenby Legal Professional Privilege

Ever since 2004 we have consistently heard of Project and Operation Wickenby. The first is headed up by the ATO and the second by the Australian Crime Commission (ACC). The first is looking at the civil consequences of tax avoidance or tax evasion or tax fraud or money laundering and the second from a criminal law perspective. Project Wickenby comprises a multi-agency taskforce focused on the activities of Strachans SA of Geneva, a company providing specialist company and trust administration services together with international tax and financial consultancy. Philip Egglishaw and Philip De Figuieredo are principals of Strachans, tax haven specialists who are at the centre of Wickenby. They both allegedly arranged schemes for a number of well-known Australian taxpayers to allegedly minimize or evade tax. Essentially a Strachans scheme involved sending money offshore by paying inflated invoices presumably issued by related entities, claiming a tax deduction for those payments and either repatriating the funds back to Australia normally as loans for which a further tax deduction was claimed for interest payments or through the use of credit or debit cards to drawn down on funds for lifestyle expenses daily or weekly depending on the drawdown limit but no more than $10,000 per transaction. There is nothing sophisticated about these arrangements. They were nothing more than blatant frauds involving a large number of people who were effectively manipulating offshore payments for their own benefit.  Of course once legal manoeuvres started, the use of legal professional privilege became important in order to protect confidential information and documents.

Central to any ATO or ACC Wickenby investigation is the operation of the doctrine of legal professional privilege as it is there to assist clients. As stated on a number of occasions this is the client’s privilege and not the lawyers and therefore lawyers instructed by their clients need to be mindful of their obligations to the client should they be contacted by either of these two organizations. In the case of the ATO the application of legal professional privilege is clearer but in the case of the ACC there have been a number of amendments which have assisted to strengthen their hand. Specifically the first set of amendments deal with the situation where a summons or notice is received from the ACC precluding its disclosure or the underlying investigation to anyone other than to their legal advisor. The Federal Court has expressed the view that the recipient of a notice from the Australian Crime Commission has the right to claim legal professional privilege on behalf of the person who holds that privilege. That is, if an accounting firm receives such a notice they would have an obligation to seek legal advice to claim privilege over client documents in their possession which they have reason to believe were the subject of privilege. The recipient would have an obligation to preserve legal professional privilege by reason of the character or status of the documents as being privileged. As a result the ACC is obliged to give the recipient of the notice, the accounting firm, the opportunity to obtain legal advice and claim privilege on its behalf as well as its clients. The obligation rests with the recipient and does not provide the client of the recipient with the opportunity to claim legal professional privilege once a notice has been served on the accounting firm. The rule seems to be – first in best dressed and should the accounting firm fail to take appropriate steps this will leave their clients exposed as the accounting concession has no validity in these circumstances.

Given that Wickenby is all about a whole of government approach involving a multi-agency task force initiative, legislation was also put in place which allowed the sharing of information between all relevant agencies. Enough has been said about them previously in other articles but it should not be forgotten that this is a very powerful weapon as it limits the opportunity for taxpayers or their advisers to benefit from playing off once agency against the other.   Consistency and simplicity of approach saves both time and money and enhances the ability of those agencies investigating taxpayer(s) to achieve a successful outcome. Information including documents needs to be protected where prejudicial to clients. An incomplete picture can be extremely damaging to clients where information including documents may be released to the authorities without protection. It is in this environment where privilege can be used to great effect to assist the client to achieve the best possible outcome in the circumstances whether civil or criminal. In all tax matters including where a taxpayer wishes to make a voluntary disclosure or where detected or are engaged in a taxation dispute with the Tax Office, retain Frank Egan of LAC Lawyers to obtain the benefit of this fundamental right.