The current landscape of legal professional privilege

Public policy purpose of legal professional privilege

Legal professional privilege supports the public interest by encouraging ‘the obtaining of legal advice and promoting observance of the law’.¹ It preserves the lawyer-client relationship by encouraging the client to make a full and frank disclosure of relevant information, thus allowing the legal advisor to fully apprehend his or her client’s potential rights and liabilities. In this manner legal professional privilege supports the due administration of justice. The privilege applies and extends beyond the protection of confidential communications for the purpose of confidential legal advice to communications for the purpose of legal representation and advice in actual and anticipated litigation.

As the High Court majority explained the rationale in the case of Baker v Campbell:

It is necessary for the proper conduct of litigation that the litigants should be represented by qualified and experienced lawyers rather than that they should appear for themselves, and it is equally necessary that a lawyer should be placed in full possession of the facts to enable him to give proper advice and representation to his client. The privilege is granted to ensure that the client can consult his lawyer with freedom and candor, it being thought that if the privilege did not exist ‘a man would not venture to consult any skilful person, or would only dare to tell his councellor half his case’.²  

On this formulation, the privilege outweighs the competing public interest to have all relevant information available to facilitate a trial or an investigative process so that in the interests of a fair trial all relevant material should be available to the court.

Key elements of legal professional privilege

A standard formulation of legal professional privilege is that:

1. communications, whether oral or in writing, that are
2. confidential in character, and
3. are brought into existence for the dominant purpose of, either:

1. enabling the client to obtain, or the legal adviser to give, legal advice or the provision of legal services, or
2. for use in existing litigation or litigation which is within the reasonable contemplation of the client

are privileged and in consequence their disclosure cannot be compelled by a court, investigative body or other statutory authority.

Communications between the client, or his legal adviser, and a third party, such as an expert witness, will also attract privilege where they are confidential and take place for the purpose of preparing for existing or reasonably contemplated litigation.³ 

Whether the litigation in question is reasonably contemplated, is a question of fact to be determined upon an objective standard.⁴ A mere vague apprehension of litigation is generally insufficient and a court will consider the degree of imminence of the litigation.

Applicable law

The uniform Evidence Acts which govern Federal and Australian Capital Territory (ACT) proceedings⁵,  as well as those in New South Wales (NSW) and Tasmania⁶, make provision for client legal privilege in the limited circumstances of ‘adducing evidence’ in proceedings to which the Acts apply. The Acts operate to bar the adducing of privileged communications by the parties unless this is done voluntarily or falls outside of a number of situations that the Act expressly provides for.

By contrast the common law is concerned with the broader public interest which legal professional privilege supports. It is essentially concerned with the confidentiality of legal advice, along with the litigation extension that protects communications made between a lawyer, client and third party in preparation of anticipated litigation.

This distinction is important. The giving of evidence at a trial, or the giving of evidence in court for the purpose of an interlocutory hearing, constitutes the adducing of evidence, and will be governed by the Act. In addition, there is debate and inconsistencies surrounding the extent to which the uniform Evidence Acts will and should govern pre-trial procedures.⁷ 

By contrast there are many situations that do not amount to the adducing of evidence, but where the common law recognises that legal professional privilege may exist. Various examples for this may be found in the pre-trial phase of litigation such as providing discovery, answering interrogatories, answering a subpoena or answering a notice to produce documents. In addition, the common law recognises privilege in circumstances that fall entirely outside of the scope of litigation, including when a regulator demands compulsory production under statutory powers.⁸

Dominant purpose test

Both the uniform Evidence Acts and common law prescribe the ‘dominant purpose test’ to determine whether a communication is sufficiently linked to legal advice or litigation preparation to be privileged. In Grant v Downs⁹ the High Court laid down a ‘sole purpose’ test, which restricted the availability of legal professional privilege in Australia. In part, the provision of client legal privilege under the uniform Evidence Acts was an attempt by the legislature to broaden the ambit of legal professional privilege. However, in Esso Australia Resources Ltd v Commissioner of Taxation¹⁰ the High Court held that legal professional privilege arises at common law if there is a dominant purpose of seeking legal advice, rather than a sole purpose. ‘Dominant’ has been held to mean ‘a ruling, prevailing, or most influential’ purpose.¹¹ A primary or substantial purpose may not be sufficient.

One recent development to note is the High Court’s decision in Z v New South Wales Crime Commission.¹² This case is of narrow application, but is also significant because in its decision the High Court distinguished between lawyer-client communications that are for the dominant purpose of giving or receiving legal advice and those that are for an ancillary purpose. The client was an informant who sought legal advice from the appellant who was a lawyer about providing information to the police anonymously. The court ultimately held that privilege did not protect communications between the lawyer and client regarding the client’s identity from disclosure to the NSW Crime Commission because these communications were ancillary to the dominant purpose of receiving legal advice.

The decision is also an interesting example of statutory abrogation of legal professional privilege, in this case under the provisions of the New South Wales Crime Commission Act 1985.

Claiming privilege

In practical terms, a party who wishes to claim that a document or communication is privileged must make this claim before its contents are disclosed to the court or investigating authority. There are three points in a trial process where making a claim for privilege is of great importance – discovery, responding to a notice to produce, and responding to a subpoena. It may also arise in the course of cross examination.

In all cases the privilege must be claimed in relation to each specific request rather than as a general claim in relation to a range of information. Where a party is offering discovery or responding to a notice to admit it must, in most jurisdictions, describe the document with sufficient detail so that the nature of the document, author and recipient are clear without, of course, disclosing the privileged material itself.

If there is a contest about a claim for privilege it will generally need to be supported by affidavit evidence sworn by the lawyer, client or both to prove that the communication was confidential and created for the dominant purpose of providing legal advice or in anticipation of litigation. There may be limited cross-examination on the issue, and the court (or another judge) may examine the material to rule on the claim.

Legal professional privilege is a substantive right

In Baker v Campbell¹³ the High Court determined that legal professional privilege is a substantive common law right and not merely a rule of evidence. This distinction is not just a matter of legal theory. It has significant practical implications.
Firstly, as a fundamental right, privilege can be invoked outside the context of adversarial litigation where rules of evidence would apply, such as pursuant to coercive statutory powers or a search warrant.

Secondly, courts will not hold privilege has been abolished by statutory provisions except by express language or clear and unmistakable implication.¹⁴

Thirdly, courts will tend to avoid an overly narrow or technical approach to the identification of communications or documents that fall within the scope of legal advice privilege.¹⁵ 

Conflicting public policies

Recently the tension that exists between the need to expose information to public scrutiny and the need to preserve the lawyer client relationship has been highlighted by two high profile investigations into the activities of Australian companies:

• the Cole Inquiry investigated and ultimately made findings alleging widespread acts of corruption perpetrated by the Australian Wheat Board under the UN Oil-For-Food Programme in Iraq, and
• federal and state investigations into the off-shore restructure and foundation for asbestos liabilities of James Hardie.

James Hardie investigations

The James Hardie investigations serve as an illustration of how there may be circumstances where the legislature believes that the public interest in securing the production of information outweighs that of legal professional privilege. The James Hardie (Investigations and Proceedings) Act 2005 (Cth) allows the Australian Securities and Investments Commission (ASIC) to proceed as efficiently as possible by expressly abrogating legal professional privilege for material relating to James Hardie. The Act complements the Special Commission of Inquiry (James Hardie) Records Act 2004, which similarly abrogated privilege in New South Wales. Under the terms of this legislation the Jackson Inquiry had full access to all legal advices and communications in that matter, notwithstanding that under ordinary principles it would have been generally privileged.

Cole Inquiry

Legal professional privilege was a vexatious issue throughout the conduct of the Cole Inquiry.¹⁶ The AWB claimed privilege over large volumes of documents and sought multiple declarations from the Federal Court that it not be compelled to produce these documents to the inquiry.

In his report, Commissioner Terrence Cole, said that ‘circumstances may arise where it is appropriate for the public interest in discovering the truth to prevail over the private interest in the maintenance of legal professional privilege’.¹⁷ He recommended that the Royal Commissions Act 1902 be amended to permit the Governor General in Council by Letters Patent to determine that, in relation to the whole or a particular aspect of matters which were the subject of inquiry, legal professional privilege should not apply.¹⁸

Australian Law Reform Commission (ALRC) reference

In the wake of the Cole Inquiry the Attorney-General issued a reference to the ALRC to investigate the operation of legal professional privilege in Australia, and in particular, whether modification or abrogation of the doctrine would be desirable and in the public interest to ensure more effective performance of Commonwealth investigatory functions, including investigations initiated by the ATO, ACCC, ASIC, and APRA.

The ALRC’s inquiry is currently in its early days and is not due to report until December 2007. The issues at stake are significant. Abrogation of legal professional privilege in the face of Commonwealth investigations could significantly undermine the lawyer client relationship as it currently exists.

The lawyer-client relationship

The scope of legal professional privilege is confined to the professional relationship that exists between a lawyer and his or her client. This relationship has a number of necessary characteristics including:

• that a lawyer hold the requisite qualifications to practise law
• that the lawyer be independent of the client and in a position to provide objective advice, and
• that advice be for a proper purpose.

In general terms, apart from a solicitor in private practise, legal advisors for the purposes of privilege will generally include:

• counsel
• a lawyer who is qualified in another state or a foreign country
• a patent attorney
• an industrial advocate
• a solicitor or legal officer who is in government employment or employed by a government agency
• a solicitor who is also a trustee
• a solicitor acting for two parties
• a solicitor acting for one party
• a solicitor acting for one party and for another person who has a common interest in the litigation, though not a party, and
• an 'in-house' or corporate lawyer.¹⁹

In-house counsel

The key issue for in-house, salaried or corporate counsel is whether they are sufficiently independent of their employer for the lawyer-client relationship to exist. Further, clients may have serious problems preserving privilege if in-house counsel do not hold practising certificates, which the courts consider to be a safeguard against the pressure of independence.²⁰ 

The ACT recently considered this issue in Commonwealth v Vance²¹ which turned on the question of whether advice provided by a RAAF legal officer to the Commonwealth was privileged. The legal officer was admitted to practise but did not  hold a current practising certificate. The court considered that:

..the possession of a current practising certificate can be a very relevant fact to take in to account in determining whether or not an employed lawyer…is employed in circumstances where they are acting in accordance with appropriate professional standards and providing the independent legal advice such that would attract a claim of privilege under the Evidence Act.

The key question for companies that employ in-house counsel is how, in addition to requiring in-house counsel to hold a current practising certificate, can they demonstrate that their in-house lawyers are independent? A list of factors that may be gleaned from the decisions in Waterford and Vance may include:

• the advice of in-house lawyers must not be subject to direction or alteration by non-lawyers, or by lawyers who are acting in a non-legal capacity
• a management structure whereby lawyers are supervised by other lawyers, as opposed to non-lawyers, is desirable
• lead counsel or the head of a legal unit should report to the board or CEO
• lawyers should be clearly identified as such by their job title
• documents and communications that are prepared by lawyers should indicate that there is an expectation that privilege will apply
• in-house lawyers should be provided with opportunities for continuing legal education
• the particular ethical standards expected of lawyers must be made clear to both legal and other staff
• legal and non legal duties carried out by lawyers must be clearly delineated, and
• these requirements should be explicitly set out in corporate policy documents and be the subject of training for senior management.

Two hats

Where an in-house lawyer is wearing ‘two hats’ and is, for example, also a director or  company secretary, courts may be reluctant to find that communications between the company and the lawyer are privileged. In Seven Network v News Ltd²², claims for privilege were rejected by Justice Tamberlin on the basis that the chief general counsel, who also held several directorships in News Group companies and had widespread involvement in commercial activities, was not acting in a legal capacity.²³ In Standard Chartered Bank of Australia v. Antico²⁴ the NSW Supreme Court rejected a company’s claim for legal professional privilege for minutes of board meetings. The court found that the director who was also a lawyer had made the statement at the meeting primarily as a director and was not providing confidential legal advice.

Similarly, in Bella Rosa Holdings Pty Ltd v Hancock Prospecting Pty Ltd²⁵ the Western Australian Supreme Court held that communications made between an accountancy firm and a company secretary, who was also a solicitor instructed to make investigations for the purpose of proceeding with envisaged litigation, were not privileged. The court found that the communications were made for mixed purposes and that the company secretary was acting in his capacity as company secretary and not in his capacity as in-house counsel.²⁶ 

Fraud exception

The fraud exception to legal professional privilege has achieved some prominence through the case brought by Mrs McCabe against British American Tobacco Australia Service (BATAS) in Victoria which raised the document retention policies of tobacco companies, and also the Cole Inquiry. These decisions have served to reinforce the principle that communications between lawyers and his or her clients, the purpose of which is to effect dishonest or fraudulent conduct, do not attract legal professional privilege. If one considers the purpose for which privilege exists, one must also consider that effecting dishonest conduct is the antithesis of the due administration of justice. On this understanding the fraud exception merely confines legal professional privilege to the scope of the rationale that supports it.

Waiver

Waiver under statute

In proceedings governed by the Commonwealth, NSW or Tasmanian Evidence Acts client legal privilege will not be waived when the disclosure is made in the course of making a confidential communication. For example, under section 122 of the Evidence Act 1995 (Cth) the privilege set out under sections 118, 119 and 120 will be lost when, in court proceedings, the client consents to the evidence being adduced or the client knowingly and voluntarily disclosing the substance of the evidence.

Therefore, under the Act, an involuntary disclosure to another person will not generally lead to a waiver where the disclosure is a confidential communication ‘to any person who is bound not to disclose it’.

Waiver at common law

At common law privilege may be waived through the intentional disclosure of a communication. It may also be imputedly waived, even though this may be contrary to the subjective intentions of the party.

The High Court’s decision in Mann v Carnell²⁷ clarified the uncertainty that had previously existed in Australia under the earlier decision of Goldberg v Ng.²⁸

In Goldberg the respondents made a professional conduct complaint against their solicitor to the Law Society of New South Wales (Society). In answer to the complaint, Goldberg prepared statements, with annexures that included a draft brief to counsel, and submitted them to the Society’s professional conduct department. In doing so, Goldberg told the Society that the statements and annexures were confidential and he wished to retain his legal professional privilege in them. The society dismissed the complaint on the ground that there was no evidence of professional misconduct or unsatisfactory professional conduct. Subsequently, in the course of Supreme Court proceedings against Goldberg, the respondents served a subpoena on the Society requiring it to produce the confidential documents.

All of the members of the High Court held that there had been no express or intentional waiver by Goldberg of his legal professional privilege in the statements and annexures. However, the court divided on whether waiver should be imputed by operation of law. Justices Deane, Dawson and Gaudron for the majority held that considerations of fairness required that privilege be waived because disclosure of the advice to the Society was voluntary and calculated to demonstrate the reliability of Goldberg’s denial of the respondent’s allegations.²⁹

Justices Toohey and Gummow dissented in separate judgments, each expressing the view that waiver should not be imputed because the disclosures by Goldberg were made to a third party for a limited and specific purpose.

1. Mann v Carnell
   In Mann v Carnell the High Court clarified any confusion caused by the decision in Goldburg v Ng holding that the essential principle in determining whether waiver may be imputed is one of inconsistency between the conduct of the client and maintenance of confidentiality. Their Honours opined that a finding of inconsistency could be informed by fairness, but that fairness was only a subsidiary test and insufficient in itself.^30.
   
   In Mann, Kate Carnell, the Chief Minister of the ACT (ACT) conveyed legal advice on a confidential basis to a member of the ACT’s Legislative Assembly so that he could consider the use of public money to settle legal proceedings. The court held that this disclosure was not inconsistent with the maintenance of legal professional privilege because the privilege attached to the ACT and that there had been no disclosure to a third party sitting outside of the relationship of lawyer and client.
   
   The implication of the decision in Mann is that so long as there is no inconsistency between the client’s conduct and the maintenance of confidentiality then considerations of fairness are irrelevant. However, where a client discloses some element of a privileged communication to secure a forensic advantage but then seeks to shield behind privilege then imputed waiver may arise. That is because of the inconsistency which arises from making a partial disclosure while later asserting privilege over the balance of the communication.
2. Conduct resulting in imputed waiver
   On this basis courts have found waiver to be imputed where a client:

• puts his or her own state of mind at issue, where that state of mind was, to any extent, created in reliance on legal advice, or
• uses a privileged document to explain his or her own actions, such as in Goldberg v Ng, or
• partially discloses a privileged communication, and the disclosed portion would tend to make it unfair or misleading to maintain the privilege³¹, or
• puts the nature of the legal advice or its conclusions at issue or makes reference to the substance of legal advice in a public statement. For example, in the recent case of Switchcorp Pty Ltd v Multiemedia Ltd³² Justice Whelan held that the statement 'the Board’s lawyers have been instructed to vigorously defend the claim and have advised that the plaintiff’s claim will not succeed' in an announcement to the ASX, constituted ‘a clear and deliberate disclosure of the gist or the conclusion of legal advice’ and that privilege was waived because this disclosure was inconsistent with maintaining the confidentially of that advice.³³

Disclosure by mistake

Importantly where a document has been unintentionally disclosed through accident or mischance, such as where a document is sent to the wrong person or included in the wrong bundle of documents, waiver will not necessarily be imputed. In the case of discovered documents, if inspection has occurred and disclosure has come about by way of obvious mistake, waiver will generally not be imputed.³⁴

If the confidentiality of the document has not been breached and express notice is given to the recipient of the existence of the privilege it is unlikely that waiver will be imputed.

Common interest privilege

An exception to the standard rules on imputed waiver exists where documents or communications are disclosed confidentially to a party with sufficient ‘common interests’ in a pending or anticipated litigation.

The question of whether the interest is sufficient to attract common interest privilege is a question of fact for each case, as demonstrated by the decision in Network Ten Limited v Capital Television Holdings Ltd & Anor.³⁵ Here the court held that ‘only in the narrow sense that each for its own individual purposes was concerned to assess the position of the claim…was there a common interest’ and this was insufficient to attract common interest privilege. Beyond this the concept of a ‘common interest’ is largely undefined by Australian law.

Common interest privilege does not appear to extend to parties involved in developing commercial arrangements. In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd and Ors³⁶ Justice Giles held that where one company obtains legal advice and discloses it to others with a view to developing a commercial arrangement among them, but each has a separate commercial interest in the advice given, common interest privilege will not attach because there is an insufficient identity of interest.

How to capture and maintain privilege

Some non-exhaustive steps which might prudently be adopted include:

1. Communications relating to legal advice should not be combined with any non-legal or administrative tasks.
2. Potentially privileged material should be kept confidential and obligations of confidence should be imposed on any person to whom the advice is disclosed within the organisation.
3. External consultants should be retained by the legal adviser for the requisite advice or litigation purpose. Such advice may then be used properly to enable the lawyer to advise the client.
4. Public statements should be closely considered and should not refer to legal advice.
5. Privileged documents that are disclosed to a company board or senior executives should be clearly labelled as such and contain a warning along the following lines: ‘Note: The following comprises legal advice. It is the subject of legal professional privilege maintained by the company. It is confidential and must not be disclosed to anyone outside the company without the advice of general counsel/external lawyers’.
6. References to legal advice in non-legal documents should be avoided. Where the advice is referred to in minutes of meetings the board should refer to the existence of the legal advice but not its substance.

Australian Wheat Board Ltd v Honourable Terrence Rhoderic Cole (No.5) [2006] FCA 1234

The AWB case arose from notices to produce documents under section 2(3A) of the Royal Commissions Act 1902 (Cth). The AWB sought declarations that approximately 900 documents were protected from production to the Commission by legal professional privilege by virtue of these documents being brought into existence for the dominant purpose of obtaining or giving legal advice.

The documents at issue spanned a period of years from about 2002 to 2006. Over that period AWB was involved in a number of investigations concerning its sales of wheat to Iraq under the United Nations’ Oil For Food Programme. AWB conducted two internal investigations, known as Project Rose and Project Water. In addition, AWB was exposed to investigations by the Permanent Investigations Committee of the United States Senate, the Independent Inquiry of the United Nations and ultimately the Cole Inquiry. Throughout this period it sought advice from several Australian law firms about the investigations, as well as retaining counsel to conduct internal investigations.

In general terms the AWB decision has three important implications.

Firstly, the case confirms that internal investigations conducted by lawyers, in the context of a professional legal relationship, attract privilege.

Secondly, where the findings of those investigations and related legal advice are disclosed to an external inquiry, a regulator, or public forum to preserve a company's reputation, privilege may be waived.

Thirdly, the decision may have the effect of broadening the fraud exception to legal profession privilege and illustrates the need for lawyers, including in-house counsel, to be vigilant about the circumstances in which advice is sought and its real purpose.

Advice privilege

Justice Young ultimately held that some 550 of the AWB documents were privileged. In doing so he held that professional communications between AWB and its lawyers concerning internal and external investigations were capable of attracting legal advice privilege where they were part of a ‘continuum’ of advice provided to the AWB by its lawyers.³⁷ His Honour rejected the Commonwealth’s argument that ‘factual investigations by lawyers, such as a review of documents and interviews of persons involved in a matter under investigation, can be separated from the ultimate legal advice given by lawyers as a result of their factual investigations’.³⁸

To this end, Justice Young considered that the scope of the dominant purpose test is largely defined by the scope of the professional relationship that exists between a lawyer and a client. His Honour accepted the lawyers’ retainers as evidence of the scope of the professional relationship, in addition to affidavit evidence proving the lawyer’s understanding of the purpose of particular communication³⁹,  specifically, that he or she was giving legal advice.

Waiver

Justice Young decided that privilege had been waived over 316 documents on the basis that AWB’s disclosure of these documents was inconsistent with the maintenance of confidentiality in the legal advice. This aspect of the decision has significant implications for companies that use legal advice, including the findings of internal investigations that are conducted by lawyers, to exculpate themselves from allegations of wrong doing.

In his explanatory statement his Honour stated that:

The cumulative effect of AWB’s disclosures is that, down to 17 January 2006 when Lindberg gave evidence to the Commission, AWB was openly claiming that its legal advice showed that there was no evidence that it had engaged  in any wrongdoing in connection with its supply to wheat to Iraq under the Oil-for-Food Programme…

I am satisfied that AWB made a conscious and voluntary decision to deploy the gist or substance of this legal advice in its dealings with the Australian Government, the [United Nations] and the Commission because it considered that it was in its commercial interests to do so. These actions are inconsistent with maintenance of legal professional privilege.⁴⁰

Public relations advice

Significantly, this decision followed another ruling of Justice Young in AWB v Cole (No 1) with respect to a claim for privilege over a document entitled Cole Inquiry: Draft Statement of Contrition.⁴¹ This document was prepared by Dr Peter Sandman, a crisis management expert and public relations consultant, and advised the AWB that it should ‘over-apologise’, sooner rather than later, and via a statement by its managing director, so as to deal with the reputational damage it would suffer as a result of the inquiry.

The AWB argued that the document was covered by legal professional privilege. However, in a ruling on 17 May 2006, Justice Young rejected the claim for privilege on the basis that the statement was not written for the purpose of obtaining legal advice.

Fraud exception

Ten documents were not privileged by operation of the fraud exception. These documents related specifically to portions of the AWB’s investigations concerning Tigris Corporation Ltd (Tigris). The Commonwealth contended that the AWB and Tigris entered into a transaction whereby the AWB agreed to inflate the price in two contracts for supply of wheat to the Grain Board of Iraq (GBI).

It was contended that the inflation was a means of extracting funds from the United Nations escrow account so as to repay a debt of approximately US$8 million which GBI owed to Tigris and to provide the AWB with funds of approximately $2 million. That was done to enable a payment to GBI through a related transportation company Alia, in relation to wheat that was allegedly contaminated with iron filings previously sold to GBI under the Oil-for-Food Programme.

 The AWB agreed to pay GBI in settlement of the iron filings claim in about October 2002. Ultimately the payments were made because of the intervening invasion of Iraq. In finding that the documents were not privileged, Justice Young stated that the transaction was ‘deliberately and dishonestly structured …to work a trickery on the United Nations and was contrary to public policy’⁴² and ‘it would be contrary to public policy for privilege to enure in communications of this kind’.⁴³

His Honour concluded that the fraud exception ‘encompasses a wide species of fraud, criminal activity or actions taken for illegal or improper purposes’ and extends to ‘trickery’ and ‘shams’.⁴⁴ In a legal context ‘sham’ refers to a series of actions which ‘take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences’.⁴⁵

Ingot Capital Investments Pty Limited & ors v Macquarie Equity Capital Markets & Ors [2006] NSWSC 530

Whereas the AWB case dealt with legal advice privilege, Ingot Captial Investments v Macquarie Equity Capital Markets Limited & Ors sets out the recent case law in Australia in respect of litigation privilege.⁴⁶

The case is significant as it restricts the availability of litigation privilege in AAT proceedings. It also has the broader implication of calling into question litigation privilege in proceedings before other administrative decision makers, including those involving the ACCC, ASIC, Commissioner of Taxation, coronial inquiries and royal commissions.

Facts

The Ingot case arose in the context of a review by the Administrative Appeals Tribunal  (AAT) of a decision by the Australian Prudential Regulation Authority. Corrs Chambers, Westgarth (Corrs) engaged an expert to provide Corrs and counsel retained by Corrs with expert advice for th e purpose of assisting Corrs in providing legal advice to the client in connection with matters that were the subject of the AAT proceedings and considering evidence filed in the AAT proceedings.

The expert did not provide oral or written evidence in the AAT proceedings and all communications between the expert and Corrs and counsel were regarded and treated as confidential and privileged.

The case considered whether the documents were protected by ‘litigation privilege’ under section 119 of the Evidence Act or, if the Evidence Act did not apply to proceedings in the AAT, whether common law litigation privilege applied. Advice privilege was not argued by the applicants.

With respect to the availability of the statutory litigation privilege, Justice Bergin found that the AAT was not a ‘proceeding’ for the purpose of the Evidence Act and as such section 119 did not apply.

In deciding that common law litigation privilege was also not applicable her Honour concluded that the overall review process of the AAT was non-adversarial and as such litigation privilege would not be available. Her Honour also considered Justice Young’s analysis in AWB v Cole (No 1) in which Justice Young held that litigation privilege did not apply to a document prepared in anticipation of a royal commission. In that decision Justice Young considered that a royal commissioner ‘…simply carries out investigations, determines the facts and prepares a report and recommendations...[and] does not finally determine any rights or obligations…’⁴⁷

British American Tobacco Australia Service Ltd v Cowell (Representing the Estate of McCabe (deceased) – (2002) 7 VR 524

The privilege aspects of the McCabe decision were set against the backdrop of very emotive tobacco litigation. The plaintiff, Ms Rolah McCabe, sued British American Tobacco Australia Service (BATAS) for damages, alleging that she had contracted lung cancer as a result of her addiction to smoking. In the belief that the defendant had not made proper discovery, the plaintiff’s solicitors brought an application to strike out the defence alleging that the defendant had destroyed potentially relevant documents at a time when litigation was apprehended, rendering it impossible for the plaintiff to receive a fair trial and that indeed, the defendant had, through its lawyers, misled the court and the plaintiff as to the true situation concerning discoverable documents.

Document retention policy

The key issue in the case, and the one that attracted widespread public attention, concerned BATAS’s ‘document retention policy’. In the first instance Justice Eames  accepted the plaintiff’s contention that the defendant’s solicitors, Clayton Utz, took steps to devise a ‘document retention policy’ which was designed to destroy documents that would be damaging to the defendant in anticipated litigation. Much of these findings were based on documents that the defendant claimed were privilege.

Waiver of privilege

The issue of waiver in the McCabe proceedings concerned an affidavit filed by Mr Maher. Mr Maher was a witness called by British American Tobacco in the proceedings. He was originally a solicitor at Mallesons and became in-house counsel legal officer at BATAS from July 1996. The affidavit had exhibited two letters to and from Mallesons which contained legal advice concerning the destruction of certain documents. The first was Mr Maher’s letter of 9 March 1998, which enclosed an annotated copy of an earlier letter from Clayton Utz dated 9 July 1992 to the defendant. The second letter was Malleson’s reply of 19 March 1998. The defendant clearly waived privilege in respect of these letters, but the question was whether a more general waiver could be implied from an express waiver to cover associated earlier legal advice.

Justice Eames found that legal professional privilege had been waived on the general subject matter of legal advice relating to the documents, and allowed for the admission into evidence of a substantial number of documents containing legal advice, extending over an almost nine year period from early 1990 until late 1998. In making this determination Justice Eames considered that ordinary notions of fairness dictated that the plaintiff have access to the balance of the legal advice ‘as a matter of fairness’ on the basis that the defendant had used a portion of the advice to support their defence.⁴⁸

On appeal the Victorian Court of Appeal rejected the portions of Justice Eames’s judgment that referred to BATAS’s assertions of legal professional privilege and findings made on the basis of material arising from a wrong finding of imputed privilege waiver. The court stated that where privilege is waived in relation to one piece of, or part of an advice, there is an imputed waiver in relation to another if, and only if, that other is necessary to a proper understanding of the first.⁴⁹ On this basis, the Court of Appeal rejected Justice Eames’s decision that the express waiver of one advice waived privilege over the entirety of legal advice given over the relevant period. The Court of Appeal parred the waiver back to documents associated with the advice for which privilege was expressly waived.

The Court of Appeal further asked whether the exhibits had created ‘an inaccurate perception of the protected communication’.⁵⁰  However, the Court of Appeal considered that no such inaccurate perception had been created. It said that by ‘use of the enclosures full disclosure had been made and nothing more was needed to correct what otherwise would have been an ‘inaccurate perception’.

This decision had the result of reapplying privilege to communications that had been brought into the public arena by the decision of Justice Eames.

Application of the fraud exception

As a postscript, these matters have been recently reconsidered by Judge Curtis of the NSW Dust Diseases Tribunal in the case of (Re Mowbray) Brambles Australia Ltd v British American Tobacco Australia Services Ltd.⁵¹ The case concerned an action brought by Mowbray’s wife against Brambles in which she asserted that Mr Mowbray contracted terminal cancer as a result of exposure to asbestos fibres contained in Brambles’ brake pads. Brambles sought contribution for the judgment from BATAS, asserting that Mr Mowbray’s cancer was also caused by cigarettes. Brambles brought a motion to the tribunal that BATAS make further discovery of documents relevant to the proceedings. At the heart of Brambles’ claim was legal advice related to BATAS’s document retention policy. Significantly, the Tribunal held, on the prima facie level necessary to determine the interlocutory issue of discovery, that BATAS adopted its document retention policy in furtherance of a fraud within the meaning of section 125 of the Evidence Act 1995 (Cth) and that in consequence the advice was not privileged by operation of the fraud exception. The case was settled and did not proceed to a final hearing.

Conclusion

The High Court in Baker v Campbell and Esso Australia Resources Ltd v Commissioner of Taxation strengthened the notion of legal professional privilege in two ways. It confirmed its status as a fundamental common law right and overturned the decision in Grant v Downs, replacing the sole purpose test with the dominant purpose test.

Since then the uniform Evidence Acts have reinforced the dominant purpose test and the right to privilege in court proceedings and, to an extent, have restricted the circumstances where privilege can be lost, particularly through implied waiver.

There is, however, now a new attack on the extent to which privilege may be claimed stemming from the problems encountered by Commissioner Cole in the Commission of Inquiry into the AWB, and the earlier James Hardie Inquiry. These events have produced a reference to the Australian Law Reform Commission as to whether the public interest in bringing the maximum amount of information before a regulatory investigator or commission of inquir y outweighs the public policy of protecting privilege to the extent that it supports the due administration of justice.

The Administrative Review Council is also currently investigating the coercive powers of Commonwealth agencies to gather information. In its recent draft discussion paper it too has raised questions concerning the manner in which privilege is to be protected where Commonwealth agencies exercise their coercive powers.⁵²

An example which is encouraging the Commonwealth is the Jackson Inquiry into James Hardie. As noted earlier, NSW passed special legislation in anticipation of the inquiry which abrogated any right to assert privilege in the inquiry.⁵³

On 15 February 2007 ASIC initiated litigation against James Hardie and a number of its senior executives for breaches of the corporations law. This action will no doubt fuel the argument which will be advanced to the Law Reform Commission in relation to its reference.

It is therefore important to understand why privilege exists, what it does and does not seek to protect, and how it may be lost in order to operate legally and effectively in the current climate.

As a final point, it is suggested that most problems arise where a claim for privilege is being made when the essential elements to support that claim do not exist. Inappropriate resistance to disclosure of information which ought to be disclosed, through unfounded claims of privilege, fuels moves to erode or narrow the availability of the right which has at its heart the due administration of justice.

The appropriate remedy may not be to limit the right, but to sanction those who seek to abuse it by false assertion.

Endnotes

1. Explanatory Statement, Trade Practices Legislation Amendment Bill (No 1) 2005, item 18, 116-7
2. (1983) 49 ALR 385 at 393
3. Pratt Holdings Pty Limited v Commissioner of Taxation [2005] FCA 1247
4. Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 81 FCR 526
5. Evidence Act 1995 (Cth)
6. Evidence Act 1995 (NSW); Evidence Act 2001 (Tas)
7. see for example, Campbell, the Hon JC, ‘Some Aspects of Privilege Concerning Communications with Lawyers’ (2006) 27 ABR 264
8. Trade Practices Act 1974 (Cth) s 155 and Daniels Corporation International Pty Ltd v ACCC  (2002) 213 CLR 543
9. (1976) 135 CLR 674
10. (1999) 201 CLR 49
11. Mitsubishi Electric Australia Pty ltd v Victorian WorkCover Authority  [2002] VSCA 59
12. [2007] HCA 7
13. (1983) 153 CLR 52
14. Yuill v Corporate Affairs Commission (NSW) (1990) 20 NSWLR 386
15. Australian Wheat Board Ltd v Honourable Terrence Rhoderic Cole (No.5) [2006] FCA 1234 at [46]
16. Report of the Oil-For-Food Inquiry, paragraphs 7.42- 7.64
17. At paragraph 7.68
18. As above at Recommendation 14
19. Keith Steele, ‘Legal Privilege and Confidentiality in Australia’ in Markus Koehnan, Marc Russenberger and Erin Cowling, Privilege and Confidentiality: An International Handbook, International Bar Association, 2006 at 7
20. Waterford v Commonwealth (1987) 163 CLR 54
21. Commonwealth of Australia and Air Marshall Errol John McCormack in his Capacity as Chief of Air Force v Russell Vance [2005] ACTCA 35 (23 August 2005) at paragraph 30
22. [2005] FCA 142
23. See also Southern Equities Corp Ltd (in liq) v Arthur Andersen & Co (No 6) [2001] SASC 398, in which Debelle J of the South Australian Supreme Court held that it is unlikely that an in-house lawyer who is also a director of the company can be sufficiently independent of the company to attract legal professional privilege
24. (1993) 36 NSWLR 87 at 91-93
25. SCWA, proceeding 2105 of 1992, unreported
26. See Keith Steele, ‘Legal Privilege and Confidentiality in Australia’ in Markus Koehnan, Marc Russenberger and Erin Cowling, Privilege and Confidentiality: An International Handbook, International Bar Association, 2006 at 11-12
27. (1999)  201 CLR 1; [1999] HCA 0006
28.  (1995) 185 CLR 83
29. Ibid at 98
30. Ibid note 23 at [29]
31. Goldberg v Ng (1995) 185 CLR 83 at 110 per Toohey J
32. [2005] VSC 425
33. See also, Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 137 ALR 28, a statement to the effect that ‘Ampolex maintains that the correct ratio is 1:1 and has legal advice supporting this position’, was held to waiver privilege over the advice because it disclosed the ultimate conclusion of the advice, per Rolfe J
34. Hooker Corp Ltd v Darling Harbour Authority (1987) 9 NSWLR 538 at 543
35. Network 10 Limited v Capital Television Holdings Ltd (1995) 36 NSWLR 275 per Giles CJ
36. (1995) 37 NSWLR 405
37. Australian Wheat Board Ltd v Honourable Terrence Rhoderic Cole (No.5) [2006] FCA 1234 at [57]
38. Ibid at [45]
39. Ibid at [56]
40. Ibid at [195-196]
41. AWB Limited v Honourable Terence Rhoderic Hudson Cole (2006) 91 ALR 46
42. AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 5) [2006] FCA 1234 at [229]
43. Ibid
44. Ibid at [211]
45. Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471. Justice Young cited Australian Securities & Investments Commission v Mercorella (No 3) [2006] FCA 772 as an example of the denial of legal professional privilege to documents created in furtherance of a sham transaction. In that case, creditors of a managed investment scheme claimed privilege over documents relating to securities obtained from the defendant and certain companies in the scheme. The transactions were allegedly entered into to advance the interests of those creditors over and above the interests of other creditors in the scheme. Mansfield J held that the communications were in furtherance of a sham, and accordingly not privileged.
46.  [2006] NSWSC 530
47. AWB Limited v Honourable Terence Rhoderic Hudson Cole (2006) 91 ALR 46 at [161]
48. McCabe v British American Tobacco Australia Services Ltd (No 2) [2002] VSC 112 (unreported, 6 February 2002, BC200201641
49. British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197 at  [121]
50. See Attorney-General (NT) v Maurice (1986) 161 CLR 475
51.  [2006] NSWDDT 15
52. Administrative Review Council, Government Agency Cooercive Information-Gathering Powers, 2006 at 60
53. Special Commission of Inquiry (James Hardie Records) Act 2006

This article was written by Keith Steele, Head of Litigation, and Leah Ratcliff, Solicitor, Sydney.