PwC says legal advice ‘highly preferred’ to shield documents

Accounting giant PwC says it recommended to multinational clients to use legal advice as part of its packaged consulting services because employing lawyers allows dealings to be privileged and documents to be treated as confidential.

The Australian Tax Office (ATO) launched a landmark lawsuit against big four accounting firm PwC last June to test the firm’s use of legal privilege to deny access to crucial documents on behalf of its client, international meat processor JBS, during tax audits.

PwC has admitted privilege is part of the reason legal services are ‘highly preferred’ in offering packaged services to clients. Credit:Ryan Stuart

The ATO has been on a mission to stamp out the “reckless” and “baseless” use of legal privilege in tax matters, as the legal and consulting industries become increasingly blended to provide multinational companies with packaged services.

Appearing before the Federal Court on Thursday, Dr Suzanne McNicol QC, acting for the ATO, recited an email from PwC partner Glenn Russell that stated it would be “highly preferred” if the ongoing business relationship with global meat processor JBS was treated as a legal service.

“The reason you say it’s highly preferred is because of the potential protection of legal professional privilege. That’s right, isn’t it?” Dr McNicol said during cross-examination.

Mr Russell said legal privilege, which places a shield of confidentiality over documents and correspondence, was part of the reason legal services were highly preferred but also because that was the nature of the services requested.

“Yes I acknowledged there is a benefit that privilege could attach to legal advice,” Mr Russell said.

Mark Robertson QC, representing JBS, on Wednesday said all his clients’ dealings with PwC were made under the assumption of privilege which should not be able to be retracted unless JBS had waived that right.

“Once privileged, always privileged,” Mr Robertson said. “And that is to be tested at the time the words are uttered. It’s irrelevant how the solicitor, with or without the clients’ knowledge, performs the tasks that it is undertaken to the client to take.

“We say despite all the material before your honour and the complexity that is apparent, this is a very, very simple case of JBS contemplating that they would be engaging legal practitioners, exposing all their secrets to the legal practitioners, and from that moment, the cone of silence, as it were, descends over those communications.”

Mr Roberston added the multinational company did not hire PwC for commercial advice, rather the nature of the relationship was strictly to advise how the company could lawfully operate in an Australian context.

“They don’t engage barristers, solicitors and legal practitioners and multidisciplinary practices to ask whether they should invest in Australia? Whether they should buy subsidiaries? They have made that commercial decision,” he said.

“They’ve made that decision. The board of directors in Brazil has made the serious decision without any input whatsoever from PwC to undertake several major transactions.”

The case continues on Friday.

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