On 17 March 2015, the Federal Court of Australia quashed a multi-million dollar tax assessment against Garry Donoghue by the Australian Tax Office, as the documents used to make the assessment were subject to legal professional privilege.

In this Alert, Senior Associate Stephanie Tan and Law Graduate Marc McCaughey discuss the wide-reaching scope of legal professional privilege and consider it in light of this recent decision.


In January 2010 Simeon Moore, a law student at Bond University met Garry Donoghue, a businessman involved in a number of litigation disputes. Moore suggested that he could help Donoghue with the disputes and proceeded to provide Donoghue with advice, an arrangement that continued for the next 7 months. In August 2010, Moore issued an invoice to Donoghue for over $700,000 for the work he had provided. The presiding judge described this sum as "outrageously extortionate" and noted that if the entries on the invoice were accurate Moore must have worked "each and every hour of each and every day" for periods of up to 17 days straight.

The relationship between Moore and Donoghue quickly deteriorated. This culminated in Moore releasing all of the information he had gathered during the course of advising Donoghue to the Australian Tax Office (ATO). In December 2011 Donoghue was issued a tax assessment in excess of $30 million. Donoghue then brought proceedings in the Federal Court seeking to have the assessment declared invalid as it was formed using documents subject to legal professional privilege. On 17 March 2015 his application was successful and the tax assessment struck down. It should be noted that the ATO may appeal the decision.

Legal Professional Privilege

Legal professional privilege is a well-established legal right to have confidential communications between a lawyer and a client, for the dominant purpose of obtaining legal advice or the provision of legal services, protected from disclosure.

The rationale behind the privilege is that it serves the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers.1

For communications to be protected from disclosure they must be:

  • Confidential;
  • Made for the dominant purpose of obtaining legal advice or the provision of legal services; and
  • Made in the course of a lawyer-client relationship.

Legal professional privilege is not confined to judicial proceedings but extends to all forms of compulsory disclosures of evidence to an authority.2 Additionally, legal professional privilege protects from disclosure all types of communications, whether oral or written, hard copy or electronic.

There are certain legislative exceptions to legal professional privilege. As it is a common law right it may only be abrogated by clear intention within a statute. Legal professional privilege is a privilege that attaches to the client and so it follows that it can only be waived by the client. It can be waived by doing something inconsistent with the confidentiality the privilege is supposed to protect.


In the Federal Court, there were three major questions concerning legal professional privilege:

  1. Was there legal professional privilege?
  2. Was there a legislative exception to legal professional privilege within the Income Tax Assessment Act 1936 (Cth) (ITAA)?
  3. Was legal professional privilege waived?

Existence of Legal Professional Privilege

The key difficulty in establishing legal professional privilege was the question of whether there was a solicitor client relationship between Donoghue and Moore. Initially Moore provided advice to Donoghue independently in his capacity as managing director of a company named Scientes. However, soon after their business relationship began Donoghue retained Moore's father's firm, Moore & Associates, as his solicitors on the recommendation of Moore.

Donoghue contended that he believed Moore was either an agent of or employee of Moore & Associates responsible for assisting his father's legal practice. Although Moore took steps to remain independent from Moore & Associates and attempted to be seen as an adviser to Donoghue, the evidence supported Donoghue's position. Logan J looked at the correspondence and conduct of Moore and came to the conclusion that he was working for his father in the provision, via Moore & Associates, of legal advice to Donoghue.

Logan J did note that even if Moore was not working for Moore and Associate's, he may be seen as an agent for the purpose of Donoghue's dealing with the firm. In this situation, the communications made and documents entrusted to Moore by Donoghue for the dominant purpose of obtaining legal advice or the provision of legal services would still be subject to legal professional privilege.3

Was Legal Professional Privilege Excluded?

From the outset, Logan J noted the integral role of legal professional privilege and the strict requirements for its exclusion:

"Legal professional privilege is an important common law privilege, a concomitant of the governance of society by the rule of law. A statute is not to be construed as excluding it unless by clear words or necessary implication."4

The ATO turned to two sections of the ITAA in an attempt to find an express abrogation, or such implication, of legal professional privilege. However, Logan J refused in both cases to come to the conclusion that legal professional privilege was excluded. S 166 of the ITAA, which allows the Commissioner to make an assessment using "any other information in his possession", did not authorise the Commissioner to use information subject to legal professional privilege. Further, the Commissioner's right of access in s 263 of the ITAA, which "makes lawful that which otherwise would be unlawful" was too general to oust legal professional privilege.

Waiver of Legal Professional Privilege

Finally, the ATO submitted that the legal professional privilege in the documents provided by Moore was waived when Donoghue attached the documents to an affidavit as part of his initial application to the Court. Logan J quickly dismissed this as the purpose of attaching the documents was to identify the subject of the claim. His Honour agreed with previous authorities stating the test for waiver of legal professional privilege as:

"(Not) being met by the mere availability for inspection, or the acquisition of knowledge of a privileged communication. If that was sufficient, any inadvertent disclosure would suffice."5


Logan J found that as there was legal professional privilege in the documents provided by Moore, the assessments made by the ATO using those documents were invalid and should be quashed. Additionally, the documents must be returned to Donoghue or destroyed and could not be used for further tax assessments.


The Donoghue decision displays both the wide scope and strength of legal professional privilege. Legal professional privilege is not restricted solely to the traditional idea of a lawyer providing legal advice to a client. It can also arise through an agent of a client or, as in this case, in certain circumstances where the communications are not between a client and a qualified legal professional. Additionally, the decision demonstrates that a client's right to legal professional privilege will not easily be excluded or waived. The purpose of legal professional privilege is to encourage clients to be frank with their lawyers when disclosing confidential information and this decision should promote confidence in making such disclosures. For more information, please contact HopgoodGanim's Litigation and Dispute Resolution team.


1 Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49; 168 ALR 123, at [35].

2 Baker v Campbell (1983) 153 CLR 52; 49 ALR 385; 57 ALJR 749.

3 Wheeler v Le Marchant (1881) 17 Ch D 675 at 685 per Cotton LJ.

4 Baker v Campbell (1983) 153 CLR 52; The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543.

5Australian Competition and Consumer Commission v Cathay Pacific Airways (2012) 207 FCR 280 at [25] as per Buchanan J.

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