Opposition says attorney general may have ‘conspired with the West Australian government’ to cut an allegedly unconstitutional deal

Labor and the Greens have queried whether the attorney general, George Brandis, has engaged in “corrupt conduct” over an alleged sweetheart deal with the West Australian government that could have cost the commonwealth hundreds of millions of dollars.

On Friday, the West Australian reported that Brandis instructed the then solicitor general, Justin Gleeson, not to run a particular argument in the high court when a creditor of the collapsed Bell Group and its liquidator challenged the constitutionality of a Western Australian law to take control of the group’s $1.8bn.

The report alleges that Brandis told Gleeson an understanding had been reached between the federal and WA governments to end two decades of litigation.

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But when the Australian Tax Office, which was owed $300m by the Bell Group, approached Gleeson to represent it, the solicitor general defied Brandis’s will by using the exact argument he had instructed him not to.

The article claims Brandis clashed with his state counterpart, Michael Mischin, over the case because the ATO had used the argument.

On 4 May Brandis issued the controversial legal services direction that required Gleeson to get consent from the attorney general before acting as counsel for any other part of the government including departments or agencies like the ATO.

On 16 May the high court unanimously held the WA law was invalid because it was inconsistent with federal tax law.

On 18 May, the WA treasurer, Mike Nahan, told the WA parliament the government had “an understanding” with the commonwealth that it would not take action in the high court but the ATO and Gleeson did then join the action and win.

On Friday the shadow attorney general, Mark Dreyfus, said to Sky News: “What this story says is that he conspired with the Western Australian government to act contrary to his duty to the commonwealth, contrary to the constitution and contrary to commonwealth law.”

He said it also showed that Gleeson had “done exactly his duty to the commonwealth to put in the submissions he did on behalf of the tax commissioner”.

Dreyfus said the Western Australian law amounted to a plan to ignore the hundreds of millions of dollars owed to the ATO.

“It seems ... Brandis was prepared to go along with that special act, a special deal for his mates in Western Australia at the expense of the commonwealth.”

Asked if Brandis could be excused because he had arguably done the right thing by Western Australian taxpayers, Dreyfus said, “not when it’s inconsistent with the constitution and commonwealth laws”, which he said it were the attorney general’s “first duty” to uphold.

Dreyfus said that Brandis was “unfit” to hold office and should resign, both because of the Bell litigation revelation and because Labor believes he lied to the Senate about whether he consulted Gleeson before making the legal services direction. Brandis has always denied misleading parliament.

Dreyfus said the Bell litigation story appeared to reveal the “underlying conflict” between the pair and that Brandis’s conduct was “scandalous”.

Gleeson and Brandis’s clash over the legal services direction eventually culminated in Gleeson’s resignation after warnings it interfered with the independence of the solicitor general.

Brandis withdrew the direction when it became clear the Senate would disallow it. On Wednesday the Senate disallowed it anyway to prevent the attorney general remaking the direction at a future date.

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The Greens’ justice spokesman, Nick McKim, said if the report was correct, Brandis should “immediately resign or be sacked”.

“It appears Senator Brandis was trying to interfere with the solicitor general to stitch up a politically cosy deal for the Western Australian Liberal government,” he said. “An attorney general instructing a solicitor general to ignore the law and effectively the constitution would be an extraordinary abandonment of the rule of law.

“No wonder Senator Brandis was so keen to establish himself as a gatekeeper to the solicitor general.”

On Facebook, the opposition leader, Bill Shorten wrote: “If this is correct, the attorney general’s integrity is destroyed. Malcolm Turnbull must sack him.”

At a media conference in Canberra, Shorten said Brandis’s actions were “at best morally bankrupt and at worst corrupt”.

“The only ethical course of action that Malcolm Turnbull has is to sack George Brandis, and he should sack George Brandis today,” he said.

Asked to respond to claims the attorney general had acted corruptly, a spokesman for Brandis said only “the government does not comment on litigation in which the commonwealth was a party”.

The finance minister, Mathias Cormann, told Sky News he was not aware of “the ins and outs of it”. He said he couldn’t shed “any light” on it because he had not seen and would not discuss the content of legal advice to the government.

Cormann said Dreyfus and Labor had “a long track record of overreach when it comes to matters related to my good friend and valued colleague the attorney general”.

“This is just another example of them getting way ahead of themselves,” he said, despite professing ignorance of the details of the story.