Prime Minister Malcolm Turnbull is resisting calls to sack George Brandis after the Attorney-General was accused of throwing former treasurer Joe Hockey "under a bus" to distance himself from a deepening legal scandal.
Senator Brandis was forced to deliver a statement in Parliament on Monday amid explosive reports he directed former solicitor-general Justin Gleeson, SC, not to raise an argument in the High Court that threatened an alleged secret deal with the Western Australian government.
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The Attorney-General denies acting against the Commonwealth's interest or knowing of a secret deal allegedly struck with the West Australian government.
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George Brandis drops Joe Hockey in it
The Attorney-General denies acting against the Commonwealth's interest or knowing of a secret deal allegedly struck with the West Australian government.
The alleged deal, involving Alan Bond's failed Bell Group of companies, allowed the conservative WA government to leapfrog creditors including the Tax Office to claw back almost $1 billion from the companies.
Labor accused Senator Brandis of corruption after reports emerged that the Attorney-General directed Mr Gleeson not to point to legal flaws in the plan when it was challenged in the High Court by other creditors.
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But Senator Brandis said the claims were "absurd" and Mr Turnbull accused the opposition of "conspiracy theories" and "falsehoods".
"We are seeing now the absolute embodiment of post-truth politics, falsehoods from the Leader of the Opposition," Mr Turnbull said in Parliament.
Labor senator Penny Wong said Senator Brandis had thrown his former colleague Mr Hockey "under a bus" after he told the Senate it was Mr Hockey who had been locked in discussions with the WA government.
"How convenient that you go after the bloke who can't defend himself," she said of Mr Hockey, who now serves as Australia's ambassador to the United States.
Senator Wong said the Attorney-General had been "dragged kicking and screaming" to make the statement, "probably because Mr Turnbull finally asked [him] to".
In a statement delivered at noon, Senator Brandis said he was "not involved in and, at the time they took place, had no knowledge of the discussions between Mr Hockey and WA ministers" in March and April last year.
"Mr Hockey never mentioned them to me," Senator Brandis said.
He added that "if WA ministers considered their dealings with Mr Hockey to constitute some form of agreement", letters between Mr Hockey and his state counterpart Mike Nahan did not provide evidence of such a deal.
How convenient that you go after the bloke who can't defend himself
Mr Nahan said in response to questions in state Parliament earlier this year there was an "understanding" with the Commonwealth that "it would not take an action to the High Court on the ATO and tax issues" associated with the carve-up of the Bell Group's assets.
According to reports in The West Australian, Senator Brandis instructed Mr Gleeson not to point out legal flaws in WA laws which gave effect to the carve-up.
Mr Gleeson subsequently appeared in the High Court for both the ATO, which was seeking to claw back about $300 million, and the Commonwealth. He argued the laws were contrary to federal tax laws and constitutionally invalid. The High Court agreed.
The Bell Group case has been cited as the pivotal moment in the breakdown in the relationship between Senator Brandis and Mr Gleeson, who sensationally resigned on October 24 over a long-running feud with the Attorney-General.
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.
Asked on Sky News if he instructed Mr Gleeson not to run specific legal arguments in the High Court, Senator Brandis said: "I'm not going to disclose legal advice."
But he told the Senate he ultimately accepted Mr Gleeson's advice that the Commonwealth should intervene in the case along with the ATO.
Senator Brandis and the then assistant treasurer Kelly O'Dwyer wrote to the WA Attorney-General on April 4, noting the potential inconsistency between federal tax laws and the WA law.
They said the Commonwealth was "obliged" to continue in the High Court case but remained "concerned to explore" with the WA government "a sound mechanism for the resolution of issues surrounding the Bell Group litigation".
Senator Brandis said the opposition had "absurdly" suggested "I have somehow failed sufficiently to protect the interests of the Commonwealth" by allegedly siding with WA at the expense of Commonwealth taxpayers.
"Every decision I made in this matter did protect the interests of the Commonwealth," he said.
Labor and the Greens are pushing for a Senate committee inquiry into the latest chapter in the row between Senator Brandis and Mr Gleeson. Potential witnesses may include Mr Hockey, although he could not be compelled to give evidence.
Mr Hockey has been approached for comment.