Comptroller of Income Tax v ARW: Discovery, Legal Professional Privilege & Investigatory Audit

In Comptroller of Income Tax v ARW and ARX, the High Court of Singapore addressed whether documents, communications, and other papers generated during an investigatory audit by a public authority are protected by legal professional privilege. The 1st Defendant, ARW, sought discovery of documents related to tax refunds, an audit, and the Plaintiff's decision to take action. The Plaintiff, Comptroller of Income Tax, resisted, claiming irrelevance, lack of necessity, litigation privilege, and legal advice privilege. The court allowed discovery of the documents, finding them relevant and necessary, and that neither litigation nor legal advice privilege applied.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Discovery of the three classes of documents was allowed, as these are relevant and necessary for the fair and efficient disposal of the matter, with neither litigation nor legal advice privilege applying.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

The court addressed whether documents from an investigatory audit by a public authority are protected by legal professional privilege. Discovery of documents was allowed.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Comptroller of Income TaxPlaintiffGovernment AgencyDiscovery OrderedNeutral
ARWDefendantCorporationDiscovery OrderedNeutral
ARXDefendantCorporationDiscovery OrderedNeutral

3. Judges

Judge NameTitleDelivered Judgment
Aedit AbdullahJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Lim Wei LeeWongPartnership LLP
Alvin YeoWongPartnership LLP
Oh Sheng LoongWongPartnership LLP
Jaikanth ShankarDrew & Napier LLC
Shirleen LowDrew & Napier LLC
David FongDrew & Napier LLC

4. Facts

  1. The 1st Defendant's group of companies underwent a Corporate Restructuring and Financing Arrangement in 2003.
  2. The 1st Defendant obtained a $225m loan from a Bank, which was returned to the Bank on the same day.
  3. The 1st Defendant filed returns from 2004 to 2006, claiming tax refunds for interest expenses on the loan.
  4. The Plaintiff awarded the 1st Defendant approximately $9.6m in tax refunds.
  5. In July 2007, the Plaintiff reviewed cases with significant tax refunds and conducted an audit of the 1st Defendant.
  6. The Plaintiff concluded that the 1st Defendant had used a tax avoidance arrangement and wrongly claimed the Tax Refunds.
  7. The Plaintiff invoked s 33 of the Income Tax Act and issued notices of additional assessment, which was challenged by the 1st Defendant.

5. Formal Citations

  1. Comptroller of Income Tax v ARW and another, Suit No 350 of 2014 (Summons No 1465 of 2015), [2017] SGHC 16

6. Timeline

DateEvent
Corporate Restructuring and Financing Arrangement occurred.
Returns filed by the 1st Defendant indicating interest expenses for the $225m loan.
Returns filed by the 1st Defendant indicating interest expenses for the $225m loan.
Plaintiff reviewed cases with significant tax refunds.
Audit of the 1st Defendant completed.
Advice from the Plaintiff’s Law Division concerning the 1st Defendant’s Corporate Restructuring and Financing Arrangement.
Present proceedings commenced by the Plaintiff.
1st Defendant filed the present application.
Hearing date.
Hearing date.
Judgment reserved.

7. Legal Issues

  1. Legal Professional Privilege
    • Outcome: The court held that neither litigation privilege nor legal advice privilege applied to the documents in Groups 2 and 3.
    • Category: Substantive
    • Sub-Issues:
      • Litigation Privilege
      • Legal Advice Privilege
    • Related Cases:
      • [2007] 2 SLR 367
      • [2016] 5 SLR 590
  2. Discovery of Documents
    • Outcome: The court found that the documents sought were relevant and that disclosure should be ordered as it would be necessary at this stage for the fair and efficient disposal of the matter.
    • Category: Procedural
    • Sub-Issues:
      • Relevance
      • Necessity

8. Remedies Sought

  1. Reversal of tax refunds
  2. Damages

9. Cause of Actions

  • Reversal of unjust enrichment
  • Deceit or fraudulent misrepresentation
  • Conspiracy by unlawful means
  • Liability as a constructive trustee or fiduciary

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Comptroller of Income Tax v AQQCourt of AppealYes[2014] 2 SLR 847SingaporeCited to show that the Court of Appeal found that although the 1st Defendant had claimed the Tax Refunds under a tax avoidance arrangement, the Plaintiff was not entitled to recover the refunds by way of the Additional Assessments, but left open the possibility of a common law action for mistaken payment.
ARX v Comptroller of Income TaxCourt of AppealYes[2016] 5 SLR 590SingaporeCited to show that the Court of Appeal found that the communications in question were privileged, and that this privilege had not been waived.
Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte LtdCourt of AppealYes[2007] 2 SLR 367SingaporeCited for the principle that English law principles are applicable to determine the scope of sections 128 and 131 of the Evidence Act, subject to the limitation in section 2 of the Evidence Act.
Minister of Justice v Sheldon Blank (Attorney General of Ontario, The Advocates’ Society and Information Commissioner of Canada (Interveners))Supreme Court of CanadaYes[2006] SCC 39CanadaCited in Asia Pacific Breweries for the object of litigation privilege.
United States of America v Philip MorrisEngland and Wales Court of Appeal (Civil Division)Yes[2004] EWCA Civ 330England and WalesCited for the principle that what counts as a reasonable prospect need not be at the level of a 50% probability.
Winterthur Swiss Insurance Company and another v AG (Manchester) Ltd (in liquidation) & OrsEngland and Wales High Court (Commercial Court)Yes[2006] EWHC 839 (Comm)England and WalesCited for the maxim ‘Once privileged, always privileged’.
Waugh v British Railways BoardHouse of LordsYes[1980] AC 521United KingdomCited for the principle that it is not necessary that litigation is the sole purpose for the dominant purpose of creation of documents sought to be protected must be for litigation.
Re Highgrade Traders LtdEnglish Court of AppealYes[1984] BCLC 151England and WalesCited as authority for the proposition that the Court takes a broad, practical approach in determining the dominant purpose, considering what is overarching.
Plummers v Debenhams plcEngland and Wales High CourtYes[1986] BCLC 447England and WalesCited as authority for the proposition that the Court takes a broad, practical approach in determining the dominant purpose, considering what is overarching.
Three Rivers District Council v Bank of England (No 5)England and Wales High CourtYes[2003] QB 1556England and WalesCited for the principle that legal advice privilege protects communication between the client and his lawyer, covering both advice actually conveyed, and intended to be conveyed.
Balabel v Air IndiaEngland and Wales Court of Appeal (Civil Division)Yes[1988] 1 Ch 317England and WalesCited for the aim to allow a person to obtain advice from his legal adviser fully in confidence and that legal advice privilege arises where the communication is made for the purposes of legal advice.
Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (a firm)England and Wales Court of Appeal (Civil Division)Yes[1995] 1 All ER 976England and WalesCited for the principle that a solicitor’s professional duty extended to the commercial wisdom of a transaction in respect of which legal advice was also sought.

13. Applicable Rules

Rule Name
O 24 r 5, and O 24 r 7 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Income Tax Act (Cap 134, 2008 Rev Ed)Singapore
s 33 of the Income Tax Act (Cap 134, 2008 Rev Ed)Singapore
s 74(1) of the Income Tax Act (Cap 134, 2008 Rev Ed)Singapore
Limitation Act (Cap 163, 1996 Rev Ed)Singapore
s 6(1) of the Limitation Act (Cap 163, 1996 Rev Ed)Singapore
Evidence Act (Cap 97, 1997 Rev Ed)Singapore
Sections 128 and 131 of the Evidence Act (Cap 97, 1997 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Investigatory audit
  • Legal professional privilege
  • Litigation privilege
  • Legal advice privilege
  • Tax refunds
  • Tax avoidance arrangement
  • Additional assessment
  • Corporate Restructuring and Financing Arrangement
  • Discovery of documents

15.2 Keywords

  • Discovery
  • Legal professional privilege
  • Tax
  • Audit
  • Singapore

17. Areas of Law

Area NameRelevance Score
Legal Professional Privilege95
Income taxation90
Discovery80
Tax Avoidance75
Civil Procedure70
Evidence70
Administrative Law60
Contract Law30
Corporate Law20

16. Subjects

  • Tax Law
  • Civil Procedure
  • Discovery
  • Privilege