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Legal Professional Privilege and Client Legal Privilege

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What is Legal Professional Privilege ("LPP")?

LPP is a legal right that protects from disclosure confidential communications (whether oral or written) between a lawyer and a client made for the dominant purpose of seeking or providing legal advice or for use in existing or anticipated legal proceedings1.

For a communication to be the subject of LPP it must:

  1. be confidential;
  2. be made in the course of lawyer-client relationship; and
  3. be made for the dominant purpose of:
    a)  seeking or providing legal advice; or
    b)  for use in existing or anticipated legal proceedings.

What is Client Legal Privilege ("CLP")?

Uniform Evidence Legislation

Evidence Acts govern the production of evidence at trial in Vic, NSW, TAS, and the ACT2 and in the Commonwealth Courts3. These Evidence Acts do not apply to pre-trial scenarios which are still regulated by the common law LPP.

The Evidence Acts establish the statutory CLP which, if applicable, attaches to protect from disclosure both legal advice and communications between a client and their lawyer or certain other persons in connection with an existing or anticipated Australian or foreign legal proceeding.

The Commonwealth Evidence Act 1995 has a dominant purpose test for CLP (see sections 118 and 119)4.

CLP is slightly broader than LPP at common law:

  1. 'Client' is defined to include the employer (not being a lawyer) of a lawyer and an employee or agent of a client thereby specifically extending the privilege to in-house lawyers (see s117).
  2. Communications between a client and a third party and/or a lawyer and a third party are included in the litigation arm of the privilege (see s119(a)).

Principles of LPP and CLP

Dominant Purpose Test

'Dominant' has been held to mean a 'ruling, prevailing or most influential' purpose. A primary or substantial purpose may not be sufficient.5

If a document is created for a dominant purpose, but it is also intended to be used for a subsidiary purpose that would not by itself have led to the creation of the document, that subsidiary purpose will not mean a loss of LPP.6

'Anticipated legal proceedings' has been held to mean:

  1. a reasonable probability or likelihood of proceedings to be determined by an objective view of the circumstances;7
  2. a real prospect of litigation, as distinct from a mere possibility, but it does not have to be more likely than not.8

Communications with Third Parties

At common law LPP has been recognised for communications that are made through an agent of the party seeking privilege or agent of the solicitor.

In Pratt Holdings Ply Ltd v The Commissioner of Taxation (2004) 207 ALR 217; (2004) FCAFC 122 the Full Federal Court held that LPP extends to communications with third parties (other than agents) that are made for the dominant purpose where there is no actual or anticipated litigation. The decision also establishes that where the dominant purpose for commissioning a report from third parties is to obtain legal advice on it, whether it is commissioned by the client principal or the client's lawyers, privilege will exist.

In this case Pratt commissioned a report directly from its accountants. Pratt told the accountants that the intended use of the report was to prepare for the purpose of obtaining legal advice from its solicitors. Pratt's accountants provided the report to Pratt and Pratt then forwarded it to its lawyers for legal advice.

The Full Federal Court held that the important consideration was not the nature of the accountant's relationship with Pratt but the function that it performed for Pratt. If the function was to enable Pratt to make a communication in order to obtain legal advice then LPP should apply.

The Full Federal Court did note some important limitations:

  1. the third party must be engaged or directed to prepare the communication by or on behalf of the client;
  2. commercial advice is unlikely to be privileged;
  3. there is no privilege merely because the document was provided to a lawyer; and
  4. the client must not treat the communication in a manner that is inconsistent with the dominant purpose – a client should not filter, adapt or exercise independent judgment in relation to a document from a third party.

The case was remitted to the trial judge who held that the dominant purpose test had not been satisfied on the facts.

Foreign Lawyers

In Kennedy v Wallace [2004] FCAFC 337 the Full Federal Court held that LPP was available in relation to legal advice from foreign lawyers.

In this case, reports alleged that Kennedy was hiding money through dealings with Swiss banks. Kennedy made notes in preparation for his meeting with his Swiss lawyer whilst in a hotel in London. ASIC subsequently seized those notes. LPP was claimed over the notes.

At first instance Gyles J denied LPP. Although a significant purpose of the meeting was to obtain legal advice, this was not the dominant purpose. His Honour also held that the party claiming privilege must establish a connection between the communication and the administration of justice in Australia. Gyles J held that Kennedy's conduct was aimed at preserving the secrecy of his dealings in Switzerland from ASIC.

The Full Federal Court upheld Gyles J's decision that LPP was denied. Kennedy had not established that the dominant purpose of the notes was to obtain legal advice. The Full Federal Court disagreed with Gyles J on two issues:

  1. LPP should not be treated as a jurisdictionally specific right. Administration of justice considerations extend beyond Australia;
  2. It would not ordinarily be necessary to prove that foreign lawyers were subject to professional standards akin to those in Australia or to adduce evidence about the supervision of foreign lawyers by foreign courts.

In-House Lawyers

LPP and CLP can apply to in-house lawyers' communications that satisfy the dominant purpose test.

In Sydney Airports Corporation Ltd v Singapore Airlines Ltd and Qantas Limited [2005] NSWCA 47 the New South Wales Court of Appeal stated "the fact that an in-house solicitor is entitled to claim privilege on behalf of his or her employer client is now well established" (per Spigelman CJ at [18]). Spigelman CJ referred to the decisions in Waterford v Commonwealth (1987) 163 CLR 54 and The Ritz Hotel Ltd v Charles of the Ritz Ltd (No.4) (1987) 14 NSWLR 100. Spigelman CJ also noted that this proposition was confirmed by the broad definition of a 'client' in the Evidence Act.

In Commonwealth and Air Marshall McCormack v Vance [2005] ACTCA 35 the ACT Court of Appeal looked at the issue of in-house LPP and supported the proposition outlined in the Sydney Airports case. In this case the Court also overruled the trial judge's view that privilege could not be afforded to in- house lawyers who did not hold current practising certificates.

In Seven Network Ltd v News Ltd [2005] FCA 142 the Federal Court noted that the "dominant purpose test has particular importance in relation to the position of in-house counsel because they may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise" (at [4]).

Whilst LPP and CLP may extend to in-house lawyers, the decisions highlight that the Court will more closely scrutinise in-house claims and that additional considerations will apply. This is because of the variety of roles, including non-legal roles, that in-house lawyers often undertake for their employer organisations. The following issues are especially relevant in the context of in-house lawyers.

a) Independence and practising certificates

LPP will only protect communications that are made in the course of a professional relationship of lawyer and client. The Courts have continued to pay particular attention to the independence of an in-house lawyer.

In Waterford, Brennan J explained the importance of independence. In obiter His Honour suggested that the law requires that a legal adviser must be independent of the client "in order that the personal loyalties, duties or interests of the adviser should not influence the legal advice which he gives or the fairness of his conduct of litigation on behalf of his client" (at 70). In Waterford the High Court extended LPP to in-house government lawyers.

Seven Network

In Seven Network, News Ltd claimed LPP over 22 documents. Most of these documents were internal communications between News executives and its Chief General Counsel. Seven objected on the basis that the General Counsel lacked the necessary independence.

The Federal Court examined each of the documents and concluded that the dominant purpose test was not satisfied for 17 out of the 22 documents. This was so even though some of the documents were labelled 'Privileged- contains legal advice'.

In this case the Chief General Counsel of News Ltd was actively engaged in making commercial decisions. He was a director and alternate director of six companies in the News Group, he was a member of the Partnership Executive Committee, and was actively involved in commercial negotiations for the Group.

Tamberlin J was not convinced that the in-house lawyer was acting in a legal context or role in relation to all the documents for which LPP was claimed or that the claims for privilege were based on an independent and impartial legal appraisal (at [38]).

Tamberlin J made the following comments on independence:

  1. The "courts recognise that being a lawyer employed by an enterprise does not of itself entail a level of independence. Each employment will depend on the way in which the position is structured and executed"(at [4]).
  2. His Honour acknowledged that the commercial reality meant that in-house lawyers may provide commercial advice. This should not necessarily disqualify the documents from LPP, but where in-house lawyers are involved the matter is necessarily one of "fact and degree and involves a weighing of the relative importance of the identified purposes" (at [5]).

Vance9

Vance was an appeal from the decision of Crispin J in the ACT Supreme Court. The case examined a claim for LPP over communications involving legal officers employed by the Australian Defence Force ("ADF") who did not hold practising certificates.

At first instance, Crispin J held that the ADF lawyers' failure to hold practising certificates was fatal to their claim for LPP. His Honour stressed the importance of independence notwithstanding the In-House environment. He noted that ADF lawyers were not sufficiently independent of the rules and culture of the ADF. His Honour was critical of the fact that the performance reviews involved input from the ADF formal chain of command, ADF lawyers were employed within an authoritarian structure in which obedience could be enforced by penal sanctions and there was no requirement to be a member of the Law Society or like professional association.10

The ACT Court of Appeal in allowing the appeal held that the failure to hold a practising certificate was not fatal to a claim for CLP (at [22]).11 However, it held that holding a practising certificate could be a very "relevant fact" to take into account in determining whether an in-house lawyer was "acting in accordance with appropriate professional standards and providing the independent professional legal advice such that would attract a claim for [CLP] under the Evidence Act" (at [30]).

The ACT Court of Appeal did not disagree with the principles outlined by Crispin J at first instance relating to an organisation's culture. In relation to in-house lawyers the Court of Appeal acknowledged that "real questions as to the nature of their role and duty may arise" (at [25]).

b) Dominant Purpose and whose purpose?

In Sydney Airports an in-house lawyer at SACL requested a report in relation to the malfunction of an aerobridge at Sydney Airport. Singapore Airlines instituted proceedings against SACL and the company that constructed the aerobridge.

The in-house lawyer's written instructions to the expert specified that the report was commissioned in contemplation of litigation and anticipated liability on SACL's behalf and that its contents were to be kept strictly confidential. CLP was claimed over the report pursuant to the litigation arm of the Evidence Act privilege (section 119).

At first instance McDougall J denied CLP. It was held that the dominant purpose test was not satisfied. SACL had failed to establish objectively that its dominant purpose in commissioning the report was for use in litigation, even though His Honour accepted that this was the solicitor's subjective intention and this was mentioned in the instructions.

McDougall J held that the report was commissioned for four purposes (at [15]):

  1. for use in litigation which the in-house lawyer thought was likely;
  2. to enable SACL to understand the cause of the accident;
  3. to allay concerns of the regulatory body and get the aerobridge back in service; and
  4. for SACL operational reasons – to avoid further similar accidents.

The Court of Appeal held that SACL failed to establish that the report was commissioned for the dominant purpose of seeking litigation advice and denied CLP. Even though the litigation purpose may have been the most important single factor that led to commissioning of the report, when all of the other purposes were considered together, that purpose was not shown to be dominant (at [55]).

The Court of Appeal upheld the finding that the subjective intention of the in-house lawyer was to be given weight in the assessment of privilege and that CLP should be determined at the time the report was commissioned (at [8] and [9]).

Further, the Court of Appeal held that the trial judge had not erred in considering the special status of the legal practitioner as a corporate solicitor. The Court stated "an in-house solicitor is, by reason of his or her position, more likely to act for purposes unrelated to legal proceedings than an external solicitor who, in the normal course, has no relevant function other than that involving legal proceedings and/or legal advice" (at 24).

Waiver of Privilege

LPP is a privilege that attaches to the client and can only be waived by the client. LPP may be waived by doing something inconsistent with the confidentiality the privilege is supposed to protect. Waiver may be express or implied. The in-house environment may increase the potential risk of waiver.

The Evidence Acts also deal with the loss of CLP in sections 121 – 126, inclusive.  Under section 122(3) of the Commonwealth Evidence Act CLP will be waived if:

  1. the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or
  2. the substance of the evidence has been disclosed with the express or implied consent of the client or party. 

Under section 126, if CLP is waived in a document or communication, for example by reason of section 122, privilege over other privileged documents or communications will also be lost if it is reasonably necessary to enable a proper understanding of the (first) document or communication.

Switchcorp Pty Ltd & Ors v Multimedia Ltd [2005] VSC 425

Switchcorp sought access to all documents constituting or recording legal advice referring to Multimedia's announcement to the Australian Stock Exchange that "The Board's lawyers have been instructed to vigorously defend the claim and have advised that the plaintiff's claim will not succeed."

Justice Whelan noted that the issue regarding implied waiver "is whether, informed by considerations of fairness where necessary, the Court perceives inconsistency between the particular disclosure and the maintenance of confidentiality" (at [17] and see [21]).

LPP was denied on the basis that:

  1. there had been "a clear and deliberate disclosure of the gist or conclusion of legal advice received by Multimedia from its lawyers about the outcome of the proceeding" and an "inconsistency between the statement and the ...confidentiality of the advice to which it refers" (both at [21]); and
  2. it was unfair to permit Multimedia to cast aside confidentiality of the advice to make the statement and to then insist upon that confidentiality when inspection was sought of an otherwise discoverable document (at [22]).

Witness Statements

Privilege will attach to a witness statement brought into existence for the purpose of existing or anticipated legal proceedings.  However, once the witness statement is disclosed to the other party to the proceeding, privilege is waived although, if it is disclosed under a coercive process of the Court, disclosure will be subject to an implied undertaking that it not be used for any collateral purpose outside the litigation.12

Experts' Reports and Associated Documents

ASIC v Southcorp Ltd13 summarises the relevant principles:

  1. Instructions to the expert provided by the client's lawyer will ordinarily attract LPP.
  2. Copies of documents (whether or not the originals attract privilege) will also ordinarily attract LPP if made for the purpose of forming part of the communications between the client's lawyer and the expert.
  3. As the expert's working notes and drafts are not "communications", they do not attract LPP.
  4. The disclosure of the expert's report in the course of the proceeding will ordinarily result in a waiver of LPP in respect of the brief and associated documents provided to the expert. 

Endnotes

  1. ^ See Daniels Corporation International Pty Ltd v Australian Competition Consumer Commission (2002) 213 CLR 543.
  2. ^ Evidence Act 1995 (Cth); Evidence Act 1995 (NSW); Evidence Act 2001 (Tas.); Evidence Act 2008 (Vic.).
  3. ^ The High Court, Federal Court, Federal Magistrates Court, Family Court and Commonwealth Tribunals.
  4. ^ See Esso Australian Resources Limited v Commissioner of Taxation (1999) 201 CLR 49 at [2].
  5. ^ See Commissioner of Taxation v Spotless Services Limited (1996) 141 ALR 92 at 98; Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332.
  6. ^ See Esso Australian Resources Limited v Commissioner of Taxation (1999) 201 CLR 49.
  7. ^ ACCC v Australia Safeway Stores Pty Ltd (1998) 81 FCR 526 (at [29])— here the Court held that it was difficult to ascribe a dominant purpose before the evidence gathering/ investigative process phase was well advanced.
  8. ^ See Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] VSCA 59 at [19].
  9. ^ This decision relates to the interpretation of the CLP provisions in the Evidence Act 1995 (Cth).
  10. ^ See Crispin J's decision in Vance v Air Marshall McCormack (as Chief of Air Force) [2005] ACTCA 35, especially paras 25, 40, 47, and 84.
  11. ^ The appeal also succeeded because Crispin J had considered evidence in breach of the Parliamentary Privilege Act 1987.
  12. ^ See Complete Technology Pty Ltd v Toshiba (Australia) Pty  Ltd (1994) FCR 63.
  13. ^ (2003) 46 ACSR 438.

Filed under: Legal briefing IP Law

This legal briefing was written in 2011 and may not reflect the latest legal developments. We encourage you to contact us for up-to-date advice for your particular circumstances.