Attorney-General George Brandis is facing fresh calls to resign amid explosive claims he directed the government's chief legal adviser not to raise an argument in the High Court that would have scuttled a secret political deal with the West Australian government.
In the latest chapter in a toxic row between Senator Brandis and former solicitor-general Justin Gleeson SC, reports emerged on Friday that the Attorney-General instructed Mr Gleeson not to point out legal flaws in a deal involving Alan Bond's failed Bell Group of companies.
Mr Gleeson, acting for the Commonwealth and the Australian Taxation Office in the High Court, reportedly defied the instruction.
He argued laws allowing the WA government to leapfrog other creditors, including the Tax Office, to recoup almost $1 billion from the Bell Group was contrary to federal tax laws and constitutionally invalid. The High Court agreed.
Labor and the Greens said alleged attempts by Senator Brandis to prevent Mr Gleeson making politically inconvenient arguments in the High Court amounted to "corruption".
Mr Gleeson had a legal duty to the court to raise the points, senior lawyers told Fairfax Media.
The deal between the federal Coalition and WA governments was not publicly known. However, West Australian Treasurer Mike Nahan confirmed in state Parliament on May 18 the state government had an "understanding" with the Commonwealth that the latter would not "take an action to the High Court on the ATO and tax issues".
Mr Gleeson resigned as the government's chief independent legal adviser on October 24, saying his relationship with Senator Brandis was "irretrievably broken".
It followed months of controversy about a legally contentious direction issued by Senator Brandis before the July 2 election which prevented ministers and government departments, including the Tax Office, seeking advice from Mr Gleeson without the written approval of Senator Brandis.
The direction took effect on May 4, about a month after hearings concluded in the High Court dispute. The case appears to be the pivotal moment in the breakdown of his relationship with Senator Brandis.
Opposition Leader Bill Shorten said Senator Brandis appeared to have engaged in "morally bankrupt and, at worst, corrupt" behaviour by prioritising a political deal with party colleagues in WA at the expense of his duty to the Commonwealth.
The Tax Office was seeking to recoup $300 million from the Bell Group.
Mr Gleeson said in submissions to the High Court that the drafter of the WA law which gave the state priority in clawing back funds from the companies "has either forgotten the existence of [federal tax laws]...or decided to proceed blithely in disregard of its existence".
"The Bell Act is wholly inconsistent with the federal tax regime as it applies to insolvent companies and their liquidators, and their obligations with respect to payment of tax liabilities," Mr Gleeson said.
Mr Shorten said "the only ethical course of action that Malcolm Turnbull has is to sack George Brandis and he should sack George Brandis today".
Shadow attorney-general Mark Dreyfus branded the reports disturbing and said they showed Senator Brandis "conspired with the Western Australian government to act contrary to his duty to the Commonwealth, contrary to the constitution, contrary to the Commonwealth law and Justin Gleeson has done exactly his duty to the Commonwealth to put in the submissions that he did on behalf of the tax commissioner".
Greens justice spokesman Nick McKim said the "primary allegiance of the Attorney-General is to the law, not politics", arguing Senator Brandis should already have lost his job and that the Prime Minister was failing to lead by keeping him in cabinet.
A spokesman for Senator Brandis said "the government does not comment on litigation in which the Commonwealth was a party".