............................[Sgnd]................................

EVIDENCE - LEGAL PROFESSIONAL PRIVILEGE - where report of Commissioner of Taxation's expert filed - where second report of same expert filed with substantial changes - where second report significantly less favourable to applicant taxpayer - where applicant seeks access to drafts of second report and file notes of associated meetings - whether onus of proving drafts not forwarded to Commissioner privileged discharged - held not privileged - whether privilege waived in respect of documents forwarded to Commissioner - held privilege not waived

Australian Securities and Investment Commission v Macleod [2024] FCAFC 174

Australian Securities and Investments Commission v Southcorp Ltd

Baron v Gilmore [2018] NSWSC 439

Brookfield v Yevad Products Pty Ltd [2006] FCA 1180

Commissioner of Taxation v Alcoa of Australia Ltd [2025] FCA 651

Esso Australia Resources Limited v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49

Malone v La Playa Nominees [2021] VSC 271

Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1

New Cap Reinsurance Corporation Ltd (In Liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258

Traderight (NSW) Pty Ltd v Bank of Queensland Limited [2013] NSWSC 211

1. These reasons concern the Commissioner of Taxation's objection, on the basis of legal professional privilege, to the applicant being granted access to certain documents produced in response to summonses issued at the applicant's request.
2. The Commissioner's privilege claim is in respect of communications, file notes and draft reports prepared by an expert, Mr Anh Nguyen, then a partner at KordaMentha, or staff assisting Mr Nguyen.

1. The privilege claim arises in the context of the applicant's application to review the Commissioner's decision disallowing an objection against income tax assessments issued to the applicant. A controversy in the proceedings concerns whether certain deposits recorded in the applicant's bank statements represent assessable income or, as the applicant asserts, amounts advanced pursuant to loan agreements between the applicant and associated entities.
2. Mr Nguyen was engaged by the Commissioner to provide an opinion regarding the extent to which the applicant had substantiated its claims that entries in the bank accounts related to loans and therefore did not represent assessable income. Mr Nguyen considered 38 entries with a total value of $41,477,454, although the Commissioner's assessments treated only some of these entries (the Relevant Deposits) as representing assessable income. Two reports prepared by Mr Nguyen have been filed in the Tribunal.
3. The First Nguyen Report is dated 1 July 2024. This report concluded that 28 of the 38 transactions, amounting to approximately $31M in value, were substantiated as not representing assessable income; of those entries, approximately $8.6M had formed part of the Relevant Deposits that had been included in the Commissioner's assessments.
4. The Second Nguyen Report is dated 8 November 2024. In this report, Mr Nguyen opines that there were errors in the First Nguyen Report and that only 18 of the 38 transactions, amounting to approximately $20M in value, were substantiated as not being assessable income. Consequently, of the total amount in dispute, the value of entries accepted as substantiated reduced from approximately $8.6M to approximately $2.8M.
5. For the purposes of cross-examining Mr Nguyen at the hearing of the substantive review, the applicant wants access to draft reports and appendices, communications and file notes of meetings between Mr Nguyen and/or his staff and the Commissioner's legal representatives in the period between the first and second reports. The Commissioner resists such access being granted on the basis that the documents comprise privileged communications.
6. Why, as a matter of transparency in public administration, the Commissioner would not simply make the material available to the applicant was not explained. Nor did I seek an explanation. The Tribunal's role is to determine whether the Commissioner is entitled to the privilege. If the right to the privilege applies in the circumstances, it is no part of my role to review the Commissioner's decision to exercise that right.
7. Similar observations apply with regard to submissions by Ms Kovacs, who appeared with Mr Schatz for the applicant, that cross-examination of Mr Nguyen in the final hearing would be conducted "with one hand tied behind our backs" without access to the contested documents, and the response of Mr Raffell, who appeared for the Commissioner and argued that the applicant would be able to fully explore the veracity of Mr Nguyen's opinion in cross-examination without access to the contested documents.
8. Considerations of this kind might be relevant if the Tribunal's task involved the exercise of a discretion. For the reasons already indicated, it does not. Accordingly, I have not had regard to those submissions other than as context for whether there would be a relevant inconsistency, as discussed below, in allowing the Second Nguyen Report into evidence while maintaining the privileged status of the Category 2 documents (described below).

Summary of documents for which privilege is claimed

1. The documents which ultimately became the subject of the Commissioner's objection are summarised in a schedule to a statement of Mr Borrelli, a solicitor and senior associate in the employ of Gadens, the solicitors acting for the Commissioner in this matter.[1]
2. The documents were produced in response to summonses issued at the request of the applicant to the Commissioner, Mr Patrick Walsh of Gadens (the solicitor on the record for the Commissioner), Mr Nguyen and KordaMentha. The applicant summarised the documents as falling into two categories.
3. The Category 1 documents are drafts of the Second Nguyen Report, and drafts of an amended appendix D to the Second Nguyen Report, that were not sent by Mr Nguyen or KordaMenta to the Commissioner's representatives. The applicant denies that these documents are privileged but says that, if they were privileged, the privilege has been waived for the same reasons submitted in respect of the Category 2 documents.
4. The Category 2 documents were sent to the Commissioner's lawyers. They comprise annotations on a copy of the First Nguyen Report and on other documents said to be privileged: file notes of meetings between KordaMentha and the Commissioner's lawyers and others; draft reports; and related emails. The applicant says any privilege attached to these documents has been impliedly waived.
5. The Commissioner maintains that all of the documents and communications were privileged and remain so. The Commissioner denies that any waiver has occurred.

1. Both parties filed written outlines of submissions which were supplemented by oral submissions over an extended, full-day hearing.
2. The Commissioner filed three statements by Mr Borelli which Mr Borelli adopted (with minor corrections). Mr Borrelli provided details of the documents in respect of which the Commissioner claims privilege. The applicant's counsel, Ms Kovacs, cross-examined Mr Borelli at some length. I found no reason to doubt the honesty of Mr Borelli's evidence. I accept Mr Borelli's evidence.
3. The applicant relied upon three statements of Mr Justin Pennay who is the solicitor with the day-to-day conduct of the matter on behalf of the applicant. Mr Pennay's statements attached various correspondence and other documents and detailed procedural events and communications between the parties. Mr Pennay was not cross-examined. His evidence is uncontroversial. I accept the evidence in Mr Pennay's statements.
4. The applicant also relied on documents produced by the Commissioner in response to the summons issued to the Commissioner on which privilege was not claimed.
5. Additionally, the applicant produced an aide memoire of key dates and events.[2] That document summarises, by reference to the documentary evidence, meetings between KordaMentha and the Commissioner's representatives and other events that occurred between the filing of the First and Second Nguyen Reports, as follows:

Mr Borrelli called Mr Nguyen to "seek his availability to discuss his evidence in these proceedings with the Commissioner's lawyers".

Ms O'Connor of KordaMentha made notes on the First Nguyen Report.

Second meeting (during which Mr Nguyen informed the Commissioner for the first time that there were one or more material errors in the First Nguyen Report).

1. The Commissioner did not suggest there were any inaccuracies in this chronology.
2. A second document[3] produced by the applicant is a table recording some of the more significant changes between the First and Second Nguyen Reports, including the following entries:

(a) 2 June 2015: a 1,000,000 RMB withdrawal from Hengwei - $204,040 substantiated, changed to $198,297 substantiated. > > (b) 3 December 2015: $413,830 substantiated, changed to not substantiated. > > (c) 3 December 2015: $835,596 substantiated, changed to not substantiated. > > (d) 9 December 2015: $837,538 substantiated, changed to not substantiated.

3. The content of an additional entry in this document may be summarised as follows:

Total amount said to be referrable to Hengwei loan agreements:

1. For completeness, I note that there were also changes that increased the value of some substantiated entries. But the net effect of the changes was, as the numbers set out earlier indicate, to materially reduce the total amount Mr Nguyen considered to be substantiated.
2. Ms Kovacs submitted that the Tribunal could find as facts those stated in paragraphs 11 to 59 of the applicant's written submissions, which are largely reproduced as Appendix 1 to these reasons with emphases, footnotes and some language suggestive of value judgements omitted. These paragraphs appear to comprise an uncontroversial chronological account of events that occurred, largely drawn from Mr Borrelli's statements or other documents filed in the Tribunal. I did not understand Mr Raffell to submit otherwise. I make the findings in Appendix 1.
3. Both parties submitted that, if I considered it would assist my task, I should examine the contested documents. I have taken up that invitation to the extent indicated below.

**Category 1 documents (documents not sent to Commissioner's representatives):

Has the Commissioner discharged the burden of proving he is entitled to privilege over these documents?**

1. Legal professional privilege protects the confidentiality of certain communications made in connection with giving or obtaining legal advice or legal services, including representation in litigation. The privilege reflects a view that a person should be entitled to obtain legal advice without fear of being prejudiced by subsequent disclosure of communications with their lawyer.
2. The rationale for the privilege is that the public interest in the administration of justice is served by encouraging full and frank disclosure by clients to their lawyers. The rules regarding legal professional privilege are the product of balancing the public interest in encouraging frank disclosure by clients to their lawyers and the usual desirability, in the interests of justice, of ensuring all evidence relevant to issues in a case is available to the tribunal of fact.[6]
3. Exercising the right to legal professional privilege inhibits access to potentially relevant evidence. It is perhaps for that reason that the law casts the burden on the party claiming privilege to establish entitlement to the privilege. In any case, it is common ground that the Commissioner bears the burden of establishing on the balance of probabilities that the privilege applies to the Category 1 documents.
4. The essential common law principles pertaining to legal professional privilege relating to communications contained in documents are not in dispute, and have been expressed authoritatively in these terms:

a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction . . . it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.[7] > > (Emphasis added.)

5. It is important to bear in mind, though, that legal professional privilege is concerned with communications and not with documents per se. If privilege attaches to a document, it is because it constitutes or records a communication prepared, given or received for the purpose of obtaining legal advice or assistance.[8]
6. In Australian Securities and Investments Commission v Southcorp Ltd, Lindgren J identified a number of principles relevant to expert reports, including that:

Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications.[9]

7. However, if a draft report was as a matter of fact prepared for the dominant purpose of being considered and commented upon by the client's lawyers, the privilege would apply on the basis that the document was prepared with the intention of being used as a means of communication with the client's lawyers.[10] That may be so even if the document was not ultimately provided to the lawyers if it was prepared for that dominant purpose.[11]
8. In summary: a draft report of an expert prepared for comment by a lawyer would be privileged; a draft report prepared for the purpose of the expert developing their own opinion would not.[12] If a draft was prepared for more than one purpose it would be privileged if prepared predominantly for communication with a lawyer for the purpose of legal advice or representation.
9. The Commissioner submits that an inference should be drawn that the drafts of the Second Nguyen Report and of appendix D to the report that were not sent to the Commissioner's lawyers were nevertheless prepared with the requisite dominant purpose. Mr Borelli's evidence establishes that the contested documents are drafts of drafts of the Second Nguyen Report and appendix D that were in fact sent to the Commissioner's lawyers and establishes a close proximity between the dates of the contested documents that were not sent to the Commissioner's lawyers and the drafts that were sent to the Commissioner's lawyers.
10. I accept that those facts could be capable of supporting an inference that the contested draft reports and appendices were prepared with the dominant purpose of communicating with the Commissioner's lawyers. However, they are also capable of supporting an inference that they are mere working documents not intended to be communicated to the Commissioner's lawyers. I can identify no basis for concluding the inference urged upon me by the Commissioner is more likely. Indeed, that they were not communicated to the Commissioner's lawyers, without further relevant facts, in my view makes the inference that they were not intended to be so communicated the more likely inference.
11. In respect of some of the documents, it is not even clear who prepared the draft, Mr Nguyen or a staff member. Without more, an inference that a draft prepared by a staff member assisting Mr Nguyen was prepared predominantly for KordaMentha's internal purposes such as review by Mr Nguyen is more likely than that such a draft was prepared for the dominant purpose of being provided to the Commissioner's lawyers.
12. The difficulty for the Commissioner is that there is no obvious explanation for why, if the documents were intended to be communicated to the Commissioner, that did not occur. Mr Nguyen, or the staff member or members who assisted him, could be expected to have been able to provide evidence of the predominant purpose for which the documents were prepared, or at least as to the objective circumstances in which they came into existence and were retained by KordaMentha rather than being forwarded to the Commissioner's lawyers, from which a relevant inference may have been drawn.
13. However, the Commissioner chose not to adduce any evidence by Mr Nguyen or his staff. Nor did Mr Raffell invite me to inspect any particular documents that might cast light on the purpose for which the contested drafts were produced. I can only determine the matter by reference to the evidence before the Tribunal and any inference to be drawn from facts established by the evidence.
14. In the circumstances, I find myself in a similar (in fact, less favourable to the Commissioner) position to Ball J in Baron v Gilmore who stated, in relation to the draft reports in contention in that case, that:

There is no evidence of the purpose for which those drafts were brought into existence. The only evidence is that they were communicated to the plaintiffs and their advisers. However, that is not sufficient to attract a claim for privilege. At a minimum, the drafts would need to be brought into existence for the dominant purpose of including them in communications with the plaintiffs or their legal advisers so that they can be said to form part of the communications. Consequently, in my opinion, there is insufficient evidence to justify the claim for privilege in respect of documents falling into this category.[13]

15. Consistent with the approach adopted by the Court in Malone v La Playa Nominees,[14] in the absence of evidence that any particular draft report or appendix was prepared for comment by the Commissioner's lawyers, or a persuasive basis for drawing an inference to that effect, I am not persuaded that the Commissioner has discharged the burden of establishing he is entitled to privilege in respect of the Category 1 documents.

1. In the hearing, Mr Raffell indicated that, if I were to reach this conclusion, the Commissioner would submit in the alternative that electronic annotations made by Ms O'Connor on 20 September 2024 on the First Nguyen Report should be redacted.[15]
2. Ms O'Connor attended a confidential meeting with the Commissioner's lawyers on that date which Mr Borrelli deposed was for the purpose of discussing Mr Nguyen's evidence in the proceedings. The annotations bear the same date as the meeting. Mr Borrelli observed that the annotations "may, at least in part, record her [Ms O'Connor's] understanding of confidential oral communications which occurred between the Commissioner's lawyers and Korda Mentha at that meeting on 20 September 2024".[16]
3. Mr Raffell also stated that "there are also other notes that Mr Borrelli talks about relating to the first report, which are apparently recorded in worksheets within the amended appendix D" and, again in the alternative to the primary submission that the documents were privileged, sought a ruling that these notations be redacted.[17]
4. Mr Borrelli identified six documents, apparently drafts of Appendix D to the report or spreadsheets within that appendix, produced by KordaMentha which he stated contain electronic notations made by "someone at KordaMenta" recording the person's understanding of confidential discussions with the Commissioner's lawyers on 20 September 2024. Mr Borrelli also observed that these documents are similar in nature to documents produced by Mr Nguyen. However, Mr Borrelli went on to state that:

due to the significant volume of worksheets in these various files, I have not yet had an opportunity to determine whether this is the case or not. I can provide this information at the hearing.

5. Again, it is not clear to me why the Commissioner seeks to have the annotations redacted - commonly they appear to be prompts for further consideration of particular entries and the like, with little significant commentary. More importantly, given the various dates, the volume of pages; the lack of specificity in the submissions; and Mr Borrelli's reference to Ms O'Connor's notations "at least in part" recording confidential communications, it is not clear which particular annotations are said to be privileged. I am not prepared to rule on whether annotations should be redacted without a clear understanding of the annotations for which a ruling is sought.
6. Although this issue was mentioned in Mr Borrelli's statement it was not dealt with at the hearing. Nor did the applicant make specific submissions regarding the redacting of annotations if I concluded the draft documents that were not provided to the Commissioner's lawyers were not privileged. Accordingly, I will allow time for the Commissioner to identify the relevant annotations and, if the parties consider it desirable to do so, for short written submissions regarding these annotations to be exchanged. That will also give each party an opportunity to reflect upon their position in respect of the annotations in light of the matters addressed in these reasons.

**Category 2 documents (annotations, file notes, draft reports, emails):

Has the applicant discharged the burden of proving the Commissioner waived privilege?**

1. It is common ground that the applicant bears the burden of proving on the balance of probabilities that privilege has been waived.
2. The foundation of the common law relating to waiver of legal professional privilege is that the privilege exists to protect the confidentiality of communications between a client and their lawyer; and it is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement.[18]
3. In this matter, the Commissioner is the relevant client. There is no suggestion that the Commissioner expressly waived privilege in communications contained in the Category 2 documents. The issue is whether the privilege was impliedly waived.
4. An intention to waive privilege may be imputed where the conduct of the client is inconsistent with the maintenance of confidentiality. Although subjective intention may be relevant, determination of the relevant intention does not depend on evidence of the subjective intention of the client, as the holder of the privilege, but rather may be imputed from their objective actions and conduct.[19]
5. The principle is informed by considerations of fairness which look, as it was once expressed, to whether the person has "approbated" and therefore should be prevented as a matter of fairness from later "reprobating". In more modern terms, this has been expressed as whether the person has elected to obtain some advantage from disclosure to which the person would not otherwise be entitled, so as to deny the person from later electing to the contrary. Has the person sought an advantage by disclosure of privileged communications that as a matter of fairness should preclude later reliance on the privilege to deny access to records of relevant communications?
6. This issue was canvassed in the recent judgement Hespe J in Commissioner of Taxation v Alcoa of Australia Ltd.[20] Her Honour observed, consistently with High Court authority, that the consideration of fairness informing a view about inconsistency between the conduct of a party and maintenance of confidentiality is "not some overriding principle of fairness operating at large."[21]
7. Rather, her Honour stated that a judgement that conduct of a party is relevantly inconsistent with maintenance of confidentiality must be made in the context and circumstances of the case and in the light of any considerations of unfairness arising from those circumstances. The purpose of the disclosure must have been to give rise to a forensic advantage. It is the forensic unfairness, as between the holder of the privilege and the challenger, in the inconsistent conduct of the privilege holder, that gives rise to waiver.[22]
8. Accordingly, it is not sufficient that the interactions between the Commissioner's representatives and Mr Nguyen may have had some influence on the Second Nguyen Report. For instance, it is to be expected that lawyers may have some influence on an expert's report to ensure it is in an appropriate form. It is also to be expected that lawyers will raise queries where aspects of a report might benefit from clarification, such as where the basis for an opinion expressed in a report is unclear or to test that the expert's reasoning is explicable.
9. As Ball J stated in Traderight (NSW) Pty Ltd v Bank of Queensland Limited:

It is common for a party's legal advisors to communicate with an expert retained by the party for the purpose of giving instructions and commenting on the form of the expert's report. In some cases, those advisors may test tentative conclusions that the expert has reached and in doing so may cause the expert to reconsider his or her opinion. In some cases, the legal advisors may suggest wording to be included in the report which expresses in admissible form an opinion stated by the expert in an inadmissible form. The court depends heavily on the parties' legal advisors to assist experts to address properly the questions asked of them and to present their opinions in an admissible form and in a form which will be readily understood by the court. Equally, the court depends heavily on the parties' legal advisors to ensure that any opinion expressed by an expert is an opinion the expert holds for the reasons that the expert gives and that the expert otherwise complies with the Expert Witness Code of Conduct. That requirement is reinforced by the acknowledgment that the expert is required to give concerning the code. The fact that legal advisors have communicated with an expert and provided comments on drafts of a report in a way which is consistent with discharging the first obligation is not a reason of itself for supposing that they have failed to discharge the second. . .[23] > > (Emphasis added.)

10. Reliance upon the Second Nguyen Report without disclosing all the drafts of the report or associated communications could be relevantly unfair where, as in this case, disclosure of the final report gives the impression that the conclusions are the product of Mr Nguyen's independence and expertise. Such unfairness could arise if the formulation of Mr Nguyen's opinions in his second report was influenced by the Commissioner's representatives, inconsistent with the impression, created by its terms and its filing in the Tribunal, that it is the independent product of Mr Nguyen's expertise and judgement.
11. Ms Kovacs identified a small number of documents which she urged me to inspect. I did so.
12. The documents included a Gadens file note of a meeting on 24 October 2024 between Mr Raffell, Mr Nguyen, Ms Finlay of KordaMentha, and Mr Borrelli and Ms Kotevski of Gadens. That is a helpful document since it appears to record in near verbatim form a discussion of a draft of the Second Nguyen Report. I have carefully examined this file note. As would be expected, there is guidance from Mr Raffell about the form of the report along with queries and suggestions for consideration in the interests of clarity of the reasoning supporting the conclusions.
13. A brief covering email from Ms Kotevski also records that the meeting identified sections of the draft report requiring further clarity. There is also a very brief KordaMentha file note of the meeting which records that suggestions were made for the purpose of clarity and specifically references the duty to the Tribunal.
14. The meeting on 24 October 2024 was mainly concerned with section 2 of the draft report. I also examined a file note of a meeting on 28 October 2024 which was mainly concerned with section 3 of the draft report. That file note records that issues were raised regarding clarity and queries regarding particular aspects of the material in the report supporting its conclusions.
15. I have no reason to doubt the accuracy of the file notes. The two significant file notes were prepared by officers of the Court. There is nothing on the face of these documents to raise a concern regarding the final report being other than Mr Nguyen's independent work. They reveal what appears to have been a thorough view but nothing more than the types of queries one would expect to see from a lawyer's review of a complex document prepared to assist the Tribunal.
16. Ms Kovacs also suggested I examine Ms O'Connor's notations of 20 September 2024 on the First Nguyen Report mentioned earlier. I have done so. Nothing in the notations, which are minimal, would support an inference that the discussions influenced the content of the Second Nguyen Report in a way that would be inconsistent with maintaining confidentiality. Again, as with other material on which the Commissioner claimed privilege, it is not clear why the Commissioner resisted granting access, but that is irrelevant to my task.
17. On the basis of the findings set out in Appendix 1, Ms Kovacs submitted the Tribunal could draw various inferences including, crucially for the applicant's submission, that the communications between Mr Nguyen and the Commissioner's advisers influenced the content of the Second Nguyen Report not merely as to its form but as to its substance.
18. I decline to draw that inference. A finding to that effect would, in my view, be both vague and unhelpful. It may well be that on one view of the expression the privileged communications "influenced" the substance of the second report. As a result of an adviser seeking clarification of the foundation for a conclusion in an expert's report, the expert may identify that there is an error and take steps to correct it. That could be described as an influence going to the substance of the report.
19. However, for the reasons already given, it is not sufficient for the applicant to discharge its burden of establishing that waiver is to be imputed merely to show that a communication influenced the substance of a report. For waiver to be imputed there must be an inconsistency between the maintenance of confidentiality and the conduct of the client. That would be established in this case if there were evidence that the Commissioner instructed or coerced Mr Nguyen to change his report such that the report could be said to not be the product of Mr Nguyen's own expertise and independent deliberations.
20. In considering this aspect, I am acutely conscious of two matters. One is that, as Ms Kovacs emphasised, this is an unusual matter: none of the cases concerning draft reports drawn to my attention concerned an expert making substantial changes to a report already filed in a tribunal or court. The second is the apparently substantial interactions between KordaMentha and the Commissioner's representatives between the filing of the First and Second Nguyen Reports.
21. On one view, both of those aspects could be seen as weighing in favour of an inference regarding the degree of influence that might have been exerted by the Commissioner's representatives over Mr Nguyen or his colleagues. On the other hand, it must be borne in mind that the Commissioner was represented, at the meetings referenced by Ms Kovacs, by counsel and representatives of a major, independent law firm, who can be assumed to have been aware of the obligations in respect of evidence of expert witnesses, all the more so in the context in which the discussions took place after the filing of the First Nguyen Report.[24]
22. It would be a significant inference indeed to conclude that the Commissioner's counsel and solicitors had influenced Mr Nguyen (or, where they attended, allowed employees of the Commissioner to do so) in a way that would mean it would be unfair in a forensic sense for the Second Nguyen Report to give the impression, as it does in its terms, of being Mr Nguyen's independently-held opinion based on his professional expertise. Of course, the applicant will be free to test Mr Nguyen's opinion in cross-examination, including how he came to materially change the views expressed in his first report to those in the second.
23. However, just as Ball J concluded in Traderight, there is nothing in the materials brought to my attention in this case to justify a conclusion that the Commissioner's lawyers have failed to discharge their obligation to ensure that the opinions expressed by Mr Nguyen are opinions he holds independently and for the reasons he has given in his reports, and instead have influenced Mr Nguyen to the extent that the Second Nguyen Report is not the product of his own independent judgement and expertise. For the reasons set out above, in my view the applicant has not established on balance that there would be a relevant unfairness in the Commissioner maintaining privilege over the Category 2 documents while relying on the Second Nguyen Report in these proceedings.
24. Accordingly, I am not persuaded that waiver of privilege in the Category 2 documents should be imputed. In case I am wrong in my conclusion that the Category 1 documents are not privileged, I note that I would reach the same conclusion and for the same reasons that waiver of privilege in those documents should not be imputed.

1. In summary, the Tribunal's decision in relation to the Commissioner's objection to access will be:

(a) Category 1 documents - Not privileged. Access to be granted subject to possible redaction of annotations on draft Appendix D documents to be determined. > > (b) Category 2 documents - Privileged (privilege not waived). Access to be denied.

2. In view of the large number of documents involved; the potential for the same documents to appear in more than one of the bundles of documents produced in response to the summonses; and the uncertainty regarding annotations on the Category 1 documents, I will invite the parties to submit appropriate draft orders to give effect to these reasons.

1. On 30 June 2022, the applicant filed lay evidence comprising:

(1) a statement by Peidong Pan (Pan 1) together with Exhibit PDP-1; and

(2) a statement by Jason Sun together with Exhibit JS-1. 2. On 15 July 2022, the applicant filed its Statement of Facts, Issues and Contentions (SFIC). 3. On 5 August 2022, the Tribunal directed the Commissioner to file his SFIC and evidence by 19 August 2022. 4. On 30 September 2022, the Commissioner filed his SFIC. The SFIC included a schedule of the Relevant Deposits as Annexure A (among other annexures). 5. On 14 December 2022, the Commissioner filed an Amended SFIC (ASFIC). The ASFIC omitted Annexure A to the SFIC and included in its place Annexures A1 to A4 being schedules of the Relevant Deposits broken down into each of the four Relevant Years. 6. On 12 May 2023, the applicant filed further evidence being a second statement of Mr Pan (Pan 2) together with Exhibit PDP-2. 7. On 26 October 2023, following attempts by the parties to resolve the dispute in informal settlement discussions, the Tribunal directed the Commissioner to file his evidence by 22 December 2023.

After some months and several extensions of time, the Commissioner filed and served the following evidence:

(1) on 13 June 2024, an expert report of Professor Charles Qin dated 11 June 2024 and an expert report of Weizhong Wang dated 12 June 2024; and

(2) on 1 July 2024, the First Nguyen Report dated 1 July 2024.

1. The Commissioner engaged Mr Nguyen to, among other things, address whether there were sufficient "source documents" to "substantiate" that the principal loan amounts stated in each of the relevant Loan Agreements had been advanced from the relevant lender to the applicant.
2. Mr Nguyen considered 38 transactions with a total value of $41,477,454. All of these were transactions which the applicant asserts were made pursuant to the Loan Agreements however only a subset of the payments are comprised of Relevant Deposits. That is, there were deposits made pursuant to the Loan Agreements which were not assessed by the Commissioner as assessable income.
3. By the applicant's calculation, in the First Nguyen Report, Mr Nguyen concluded that he was able to "substantiate" or partially "substantiate" about 28 (of the 38) transactions with a total value of approximately $31,824,590 (out of a total $41,477,454). Of the 28 deposits that were substantiated, at least 12 of the deposits were Relevant Deposits (Nguyen Substantiated Relevant Deposits) with a total value of approximately $8,556,834.76.
4. On 5 August 2024, about a month after the service of the First Nguyen Report, the Commissioner served a Further Amended SFIC (FASFIC). The FASFIC raised for the first time the allegation that the Loan Agreements were shams.
5. By letter dated 14 August 2024, the applicant proposed that directions be made under which the Commissioner would:

(1) file a second FASFIC which gave further and better particulars of the sham

(2) amend Annexures A1 to A4 (see above at paragraph [15]) to identify the

transactions which the Commissioner would continue to dispute, having regard to the transactions which Mr Nguyen says were "substantiated" by reference to the underlying "source documents". Specifically, and by way of example, the applicant referred to three deposits Mr Nguyen said were "substantiated being deposits dated 18 July 2014 ($513,937.50), 29 July 2024 ($604,635) and 30 December 2014 ($999,982), each

1. On 15 August 2024, a directions hearing before Deputy President Lazanas was held at which the applicant proposed directions in the form proposed in its 14 August 2024 letter. On that day, the Tribunal directed that:

'1. On or before 26 September 2024, the respondent is to file at the Tribunal and

serve on the applicant a second further amended statement of facts, issues and

a) which pleads with appropriate specificity and particulars the allegation of

sham raised in paragraph [78] and in particular [78](a) of the respondent's

further amended statement of facts, issues and contentions dated 5 August

b) contains updates to Annexures A1 to A4 to show the transactions that the

respondent continues to dispute or, alternatively, no longer disputes, having

regard to the expert evidence of Anh Nguyen dated 1 July 2024.

2. On or before 17 October 2024, the applicant is to file at the Tribunal and serve on the respondent any amended statement of facts, issues, and contentions to address the sham allegations filed by the respondent in relation to Direction [1].

3. The matter is to be listed for case management telephone directions hearing on

1. At the directions hearing, the Commissioner's representatives agreed that the Commissioner would endeavour to provide a draft of the Second Further Amended SFIC (2FASFIC) two weeks prior to 26 September 2024, or on about 12 September 2024.
2. The Commissioner did not provide a draft 2FASFIC on 12 September 2024.
3. On Friday 13 September 2024, Mr Borrelli emailed Mr Stein, the solicitor on record for the applicant, stating:

'We are instructed that the Commissioner intends to provide a draft 2FASFIC to

the Applicant. However, the document is still being finalised. We expect that the

Commissioner will be in a position to provide it to the Applicant by mid -late next week.'

1. On Tuesday 17 September 2024, Mr Borrelli called Ms Alana O'Connor of Korda Mentha for the purpose of discussing Mr Nguyen's evidence to be given in these proceedings.
2. On Tuesday 17 September 2024, Mr Nguyen emailed Mr Borrelli of Gadens with the subject line 'Call back'. The email stated:

'Alana is on study leave today, please give me a call if required.'

1. On Tuesday 17 September 2024 at 2:07pm, Mr Borrelli circulated a Webex calendar invite to Mr Nguyen, Mr Raffell, Mr Walsh, Fiona Andrew (ATO), Damien Ong (ATO) and Ms O'Connor with the subject "Commissioner of Taxation". The meeting invite was for a meeting on Friday 20 September 2024 from 10am to 12pm.
2. On Thursday 19 September 2024, Ms O'Connor made notes on a copy of the First Nguyen Report. Ms O'Connor's notes were produced on 9 May 2025 pursuant to a direction made by Deputy President Lazanas on 8 May 2025 at the applicant's request. The Commissioner opposed the direction being made.
3. On Friday 20 September 2024:

(1) a meeting was held between Mr Nguyen, Ms O'Connor, Counsel for the Commissioner, Mr Raffell, Mr Walsh, Mr Borrelli and Ms Andrew via Webex (First Meeting).

(2) Ms O'Connor made additional notes on a copy of the First Nguyen Report.

Bundle that are subject to a claim for privilege; and

(3) at 3:50pm Mr Borrelli emailed a draft 2FASFIC to the applicant's solicitors.

1. About a week later, on Thursday 26 September 2024, the Commissioner filed the 2FASFIC. Unlike the draft provided on 20 September 2024, the 2FASFIC contained four concessions relating to the following transactions:

(1) $513,937.50 on 18 July 2014 and $604,635 on 29 July 2014, being two of the three example transactions referred to in the applicant's letter dated 14 August 2024; and

(2) $900,000 on 29 December 2017 and $800,000 on 15 February 2018, which had not been identified by the applicant as examples.

1. There were 12 concessions made in the First Nguyen Report with a total transaction value of approximately $8.6 million. In the 2FASFIC, the Commissioner only made four concessions with a total transaction value of $2.8 million.
2. The Commissioner did not concede:

(1) the sum of $999,982 on 30 December 2014, which had been referred to in the

(2) any other Nguyen Substantiated Relevant Deposits.

1. On Tuesday 8 October 2024, Mr Nguyen met with Mr Borrelli, Ms O'Connor, Mr Walsh, Ms Andrew, Mr Raffell and Ms Kotevski (Second Meeting). The Commissioner has advised that on this date, Mr Nguyen informed the Commissioner that there were one or more material errors or omissions in his report dated 1 July 2024.
2. On Tuesday 22 October 2024, Mr Borrelli spoke with "either Tara Finlay [of Korda Mentha] or Mr Nguyen" who advised him a draft of a second report of Mr Nguyen would be forthcoming.
3. On Wednesday 23 October 2024, Ms Finlay emailed Gadens a draft of the Second Nguyen Report (First Draft).
4. On Thursday 24 October 2024, a meeting was held between Mr Nguyen, Ms Finlay, Mr Raffell, Mr Borrelli and Ms Kotevski (Third Meeting). Mr Borrelli states the purpose of the meeting was to discuss the First Draft. Ms Kotevski of Gadens took a file note of the meeting over which a claim for privilege is made. "Someone" from Korda Mentha also took a file note over which a claim for privilege is made, but Mr Borrelli does not appear to know who that person was.
5. On Monday 28 October 2024, a further meeting was held between Mr Nguyen, Ms Finlay, Mr Raffell, Mr Borelli and Ms Kotevski (Fourth Meeting). Ms Kotevski took a file note of the meeting over which a claim for privilege is made.
6. On Tuesday 29 October 2024 at 6:47pm, some three weeks after Mr Nguyen informed Gadens that there was one or more material errors or omissions in the First Nguyen Report, Mr Borrelli emailed Mr Pennay stating that Mr Nguyen had identified numerous errors and omissions in his report, referring to section 4.7 of the then AAT Guideline on Persons Giving Expert and Opinion Evidence which required the Commissioner to notify the applicant of those errors or omissions "without delay". The Commissioner indicated Mr Nguyen was preparing a supplementary report which would be finalised on or before 11 November 2024.
7. At 6:56pm, Mr Stein replied to Mr Borrelli's email dated 29 October 2024 at 6:47pm stating:

'When did Mr Nguyen inform you that there was one or more material errors or omissions in his report?

Has Mr Nguyen changed his opinion on a material matter for any reason? If so, what is the change?

What rights are intended to be reserved by the Commissioner?'

1. On Wednesday 30 October 2024, Mr Borrelli sent an email in response to Mr Stein's email dated 29 October 2024:

'The answers to your questions as to the contents of Mr Nguyen's supplementary report will be contained in said report.'

Mr Borelli did not answer the question as to when Mr Nguyen informed Gadens that there was one or more material errors or omissions in his report.

1. On Thursday 31 October 2024, by consent the Tribunal directed the Commissioner to file and serve any further expert accounting evidence by 11 November 2024 and vacated the direction hearing listed for that day.
2. Further, at 4:25pm on 31 October 2024, Ms Finlay emailed Mr Borrelli, copying Mr Nguyen, attaching a further draft of the Second Nguyen Report (Second Draft).
3. On Monday 4 November 2024, from 3:30pm to 4:30pm, a meeting was held between Mr Nguyen, Ms Finlay and Mr Raffell via Webex (Fifth Meeting) which Mr Borrelli says was "for the purpose of discussing [the Second Draft]".
4. On Wednesday 6 November 2024, Ms Finlay emailed Mr Borrelli a further draft of Mr Nguyen's Report (Third Draft).
5. On Thursday 7 November 2024 at 11:30am, a meeting was held between Mr Nguyen, Ms Finlay, Mr Raffell and Mr Borrelli via Webex (Sixth Meeting) which Mr Borrelli says was "for the purpose of discussing [the Third Draft].
6. Later on 7 November 2024, at 4:05pm, Ms Finlay emailed Mr Borrelli a further draft of the Second Nguyen Report (Fourth Draft).
7. On Friday 8 November 2024, at around 9:00am, a meeting was held between Mr Nguyen, Ms Finlay, Mr Raffell and Mr Borrelli (Seventh Meeting) which Mr Borrelli says was "for the purpose of discussing [the Fourth Draft]".
8. Later on Friday 8 November 2024, at around 11:30am, Mr Nguyen, Ms Finlay and Mr Raffell (at least) met via Webex (Eighth Meeting), which Mr Borrelli says was "for the purpose of discussing 'the current draft of Mr Nguyen's second report at that time."
9. Later on 8 November 2024, at 4:55pm, Ms Finlay emailed Mr Borrelli a further draft of the Second Nguyen Report (Fifth Draft).
10. On Monday 11 November 2024, Gadens served the Second Nguyen Report.
11. The Second Nguyen Report contains a substantially different opinion to that contained in the First Nguyen Report in the following respects:

(1) Of the 38 transactions that Mr Nguyen reviewed, Mr Nguyen concluded that only 18 transactions were "substantiated" of an approximate value of $20,083,349 (compared with 28 transactions with a total value of approximately $31,824,590 in the First Nguyen Report).

(2) Section 2 of the Second Nguyen Report is a rewrite of Section 3 of the First Nguyen Report. Section 2 is intended to replace Section 3 of the First Nguyen Report: [2.1.6]. (On the other hand, some sections of the First Nguyen Report are intended to remain. Mr Nguyen states at [1.2.6], 'My response to [the Commissioner's] Questions 3 and 4 have not changed between KM1 and KM2. Please refer to sections 5 and 6 of KM1 for my response to these questions').

(3) There are apparent changes without an explanation for the change. For example, at [2.4.14] of the Second Nguyen Report, Mr Nguyen refers to an additional criterion in his assessment of the Hengwei Loan Agreements ('b. There are documents to show that the loan principal instalment amount was transferred to Mr Pan's Chinese Account/Hong Liu's Account and then transferred to a Facilitator in China') which did not appear in his assessment at [3.4.12] of the First Nguyen Report.

(4) In [3.1.3] of the First Nguyen Report, Mr Nguyen referred to "source documents" identified by Mr Pan. In the Second Nguyen Report, Mr Nguyen changed his reference to "source documents" to "asserted supporting documents" to refer to the same documents in section [2.1.3] but does not provide an explanation for this change in expression.

1. It appears that the First and Second Reports were intended to be read in conjunction because Mr Nguyen continues to stand by certain sections of his earlier report.
2. Although Mr Nguyen indicates that he had "become aware of errors" (Second Nguyen Report at [1.1.6]) and that the Second Nguyen Report provides an "update" of his opinions, he does not provide details of the circumstances in which he became aware of the errors or omissions.
3. The questions asked of Mr Nguyen by the Commissioner were unchanged between his first and second report: Second Nguyen Report [1.2.1]. The applicant had not put on any evidence of its own since 12 May 2023 - well before the service of the First Nguyen Report; nor had the applicant called into question any of Mr Nguyen's opinions in correspondence during that period.
4. The Commissioner's representatives had met with Mr Nguyen prior to serving the draft 2FASFIC on the applicant's representatives.

[1] Two other categories of documents were referenced in the Commissioner's outline of submissions:

(a) documents said to be irrelevant; and (b) a document said to be outside the scope of the summonses. At the hearing, I was advised that the applicant did not press for production of the category (a) documents and the Commissioner did not press his objection to production of the category (b) document which was dealt with in an earlier directions hearing: Transcript, P-3.