Legal professional privilege is derived from the common law and from legislation, such as the Evidence Act 1995 (Cth), at both a state and federal level. It is important to remember that legal professional privilege (which is often referred to as client privilege) is a fundamental right that vests in the client.

Confidential communications between a lawyer and his client, one or more lawyers acting for the client, or lawyers acting for the client and a third person (such as an expert witness) for the dominant purpose of providing legal advice or professional legal services in relation to a current or pending legal proceeding are protected by legal professional privilege.

Legal professional privilege also extends to confidential documents prepared for the purpose of giving or obtaining legal advice and for the purpose of a legal proceeding. Legal professional privilege may be abrogated by some common law exemptions and by the express and / or necessary implication of legislative provisions.

For example, if a client seeks legal advice in an attempt to further a crime or fraud, this advice and related communications will not be subject to legal professional privilege. Further, a claim of legal professional privilege is unlikely to be able to be maintained if it is being used to frustrate a process of law. Legal professional privilege applies in the context of criminal investigations and in the context of regulatory investigations by authorities such as the competition authority.

Legal professional privilege in the context of civil litigation

In the context of civil litigation, where the court may order documents to be produced during processes such as discovery, such orders will not require documents that are subject to a claim of legal professional privilege to be produced. However, the documents will need to be identified in a list of documents that is provided to the party seeking discovery.

What is protected by legal professional privilege?

Communications and / or documents must be confidential and have occurred or come into existence for the 'dominant purpose' of obtaining legal advice or in relation to actual or anticipated litigation in order to attract legal professional privilege.

The purpose for which a communication occurs or a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document's creator, or of the person who authorised or procured it, is not necessarily conclusive.

'Dominant' has been held to mean a 'ruling, prevailing or most influential' purpose. In determining whether the dominant purpose exists, the courts will examine the circumstances of the case objectively, rather than considering the subjective view of the person making the communication.

Typically, legally privileged communications occur between a client and his legal adviser, but can include those between a client and a third party (eg consultant) where the client engages the third party to produce something (eg tax advice) for the purpose of obtaining legal advice.

If the dominant purpose test is met, legal professional privilege may extend to documents such as:

  • Notes, memoranda or other documents made by staff of the client, if those documents relate to information sought by the client's legal adviser to enable legal advice to be provided
  • A record or summary of legal advice, even if prepared by a non-lawyer, but not to the client's opinions on, or stemming from, the legal advice
  • Drafts, notes and other material brought into existence by the client for the purpose of communication to the lawyer, whether or not they are actually communicated to the lawyer, or
  • A lawyer's revisions of the client's draft correspondence

Are communications with in-house counsel protected by legal professional privilege?

In Australia, courts have considered whether in-house lawyers are protected by legal professional privilege by assessing whether they are acting in their capacity as a lawyer and have the requisite independence to provide unfettered advice.

To attract legal professional privilege, communications / documents must be made in a lawyer's capacity as a lawyer in order to provide the client with legal advice or for the purpose of actual or anticipated litigation.

Communications made by in-house lawyers who act beyond their role as a legal adviser (eg by weighing in on operational matters) will fall outside the scope of legal professional privilege. This is also the case if a communication or document is found to have been made for mixed purposes.

Exercising independent professional judgement is a key factor that will be considered in establishing whether in-house counsel is acting in the capacity of a lawyer. Claims for legal professional privilege have been rejected on the basis that in-house counsel have not acted at sufficient arm's length from their client, such as when documents are produced by in-house lawyers who are subject to the directions of their managers and therefore giving rise to the impression that they lack the necessary independence.

Legal professional privilege has also been denied in relation to communications where in-house lawyers have been involved in the commercial decision-making of a transaction.

Whether an in-house lawyer has a practising certificate has also been considered by courts in Australia when deciding whether legal professional privilege should apply to their advice. While failing to have a current practising certificate is not necessarily fatal to a claim of legal professional privilege, it may lead to a court inferring that the communications made and documents created by the in-house lawyer are not for the purpose of providing legal advice or for the purpose of litigation.

Does legal professional privilege apply to the correspondence of non-national qualified lawyers?

Legal professional privilege is available in relation to legal advice from foreign lawyers, provided that the 'dominant purpose' requirement is met.

How is legal professional privilege waived?

A client will be deemed to have waived legal professional privilege if the client acts in a way which is inconsistent with the confidentiality which the legal professional privilege is supposed to protect. Waiver of legal professional privilege may be implied in some circumstances.

It is important to maintain the confidentiality of communications and documents that legal professional privilege attaches to. Legal professional privilege has been deemed to be waived in circumstances where the substance, general essence or conclusion of legal advice has been communicated in a public forum such as a media statement, board papers that have been provided to third parties or during negotiations.

Legal professional privilege in the context of merger control

Under the Competition and Consumer Act 2010 (Cth), the Australian Competition and Consumer Commission (ACCC) has broad powers to compel the production of documents, including by way of subpoenas and search warrants.

The general principles of privilege (as outlined above) apply to competition or merger control in Australia, and in respect of enforcement action taken by the ACCC.

Whilst it is clear that documents subject to legal professional privilege are protected from compulsory disclosure and requests for production by regulators (such as the ACCC), it is often impossible to ascertain if documents are privileged if the production of the documents is required immediately. If that is the case, the person or company that is the subject of the immediate requirement to produce documents ought to identify the potentially privileged documents, and reserve the right to assert a claim of privilege. The potentially privileged documents should be produced separately, and in a sealed package, to the regulator. If agreement cannot be reached with the regulator as to whether the documents are privileged, the issue of privilege will be determined by the Court.

Typically, records of internal investigations will be privileged where they were generated for the purpose of providing legal advice on the subject matter of the investigation. On the other hand, records of a transaction will generally not be privileged, even if that transaction is later investigated.

Waiver of legal professional privilege

Recent cases have highlighted that parties and practitioners must take care to avoid the unintentional waiver of legal professional privilege. For example, in ASIC v Park Trent Properties Group Pty Ltd [2015] NSWSC 342, the Supreme Court of New South Wales held that the defendant had waived privilege over legal advice provided in the preparation of a compliance manual by voluntarily disclosing the manual to the Australian Securities and Investments Commission (ASIC). Key to the court’s finding was that:

  • The legal advice shaped the substance of the manual, and
  • The manual was deployed to obtain an advantage

This decision reaffirms that privilege can be waived by disclosing the effect of the legal advice, regardless of whether the advice itself is disclosed. Accordingly, it reminds parties to think twice before voluntarily disclosing compliance material that has been prepared by lawyers.

The Western Australian Supreme Court recently found that the privilege in lawyer-client emails may be waived if a third party is copied. In TEC Hedland Pty Ltd v. The Pilbara Infrastructure Pty Ltd [2018] WASC 300, the central issue was whether the maintenance of the privilege is inconsistent with the use of the relevant communication. TEC had agreed to supply electricity to Pilbara. B&V, the party copied into the emails between TEC and its lawyers, had been engaged to perform a test procedure. The test procedure was one of the issues in dispute. The court referred to the Full Federal Court decision of Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237 and endorsed the principle that:

'for a client to deploy the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege'.

The court concluded that TEC had waived privilege over the emails with its lawyers by copying B&V. This case confirms the importance of ensuring only essential parties, and not third parties, are copied into privileged communications.

Illegality

The principle that legal professional privilege does not apply to communications made for improper and / or illegal purposes is well settled. The Federal Court has applied this principle in circumstances where the lawyers involved were not necessarily aware of the illegality. In Aucare Dairy Pty Ltd v Huang [2017] FCA 746, there was evidence to indicate that the defendant, Huang, had moved and / or placed ownership of assets of an insolvent company beyond the reach of Aucare, with whom the insolvent company had previously been in a failed joint venture with. The court found that Huang's lawyers knew and / or participated in the alleged fraud, despite the plaintiff not having suggested this and there being no direct evidence that this was the case. The court ordered production of privileged correspondence between Huang and her lawyers. This case emphasises that there is a risk that where there is evidence of illegality and / or improper purpose by a party, that party will not be entitled to legal professional privilege.

Directors

In Equititrust Ltd (in Liq) (Receivers appointed) (Receivers and Managers Appointed) v Equititrust Ltd (in Liq) (Receiver appointed) (Receivers and Managers Appointed) (No.3) [2016] FCA 738, the Federal Court held that a director may only claim privilege over documents containing legal advice if it relates in some way to the director in his / her personal capacity, and not merely to the operations of the company. A former director of Equititrust claimed privilege (both joint and common interest) over a range of documents produced by Equititrust that contained legal advice. The court held that only 11 of the 625 disputed documents were privileged. In relation to joint privilege, the court found that there was scarce evidence that the director had personal concerns in the matters raised by the documents disputed and clarified that: legal advice addressed to a director or 'the Directors' did not necessarily mean that the advice was provided on the basis of joint privilege; and the fact that a director was involved in procuring the legal advice did not on its own establish joint privilege. In relation to common interest privilege, the court highlighted that commonality of interest is a prerequisite for the privilege to apply – the mere fact that legal advice was communicated to Equititrust does not mean that its directors had a common interest privilege in that advice; and the fact that a company can only act though its directors does not give rise to a common interest. This case reminds directors of the need to clearly identify legal advice obtained in their personal capacity in order for it to be subject to privilege.

Trustees

In Hancock v Rinehart (Privilege) [2016] NSWSC 12, Gina Rinehart claimed privilege over documents produced by her former lawyer pursuant to a subpoena issued by her daughter, Bianca, as the new trustee of the Hope Margaret Hancock Trust (Gina was the former trustee). The Supreme Court of New South Wales found that there was no evidence to support Gina's claim of privilege. Gina had not adduced any evidence about the circumstances and purposes of the disputed documents, including whether the documents had been created for Gina in her capacity as trustee. The court noted that if the costs of obtaining legal advice are paid from the trust fund, the suggestion is that advice was obtained on behalf of the trust and not the trustee personally. This case reiterates the position that legal advice obtained by a trustee belongs to the trust and not the trustee personally.

Gowri Kangeson

Gowri Kangeson

Partner
[email protected]
T +61 39274 5428

Nicholas Tyacke

Nicholas Tyacke

Partner
[email protected]
T +61 9286 8502