The ever-evolving scope of legal professional privilege: Key considerations for in-house counsel

The ever-evolving scope of legal professional privilege: Key considerations for in-house counsel

21 September 2021 By Felicity Healy and Mark Wilks
Key considerations for in-house counsel

Often referred to but frequently misunderstood, the law surrounding legal professional privilege (LPP) can be confusing for lawyers and clients alike, wrote Felicity Healy and Mark Wilks.

But with many regulators demanding huge volumes of documents, understanding the scope and limits of LPP is becoming increasingly important.

What are the critical considerations in-house counsel needs to keep in mind when it comes to LPP, and how can the risk of waiver be reduced?

Dating back to the 16th century, the modern law of “legal professional privilege” originated from the English common law and was, at first, a right that belonged to a lawyer rather than their client.

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While there have been many explanations provided for the evolution and development of the doctrine, it is generally accepted that its guiding purpose is to facilitate full and frank disclosure to legal advisers to enable suitable and timely legal advice.

However, there is a clear tension between the public’s interest in having complete disclosure of all material relevant to a dispute and the expectation that a client can speak openly with their lawyer without fear of their communications being made public.

In Australia, legal professional privilege is both a common law and statutory right, and both may be available depending on the particular situation.

In its simplest form, the protection permits clients to refuse to disclose certain material that might otherwise be required to be produced in legal proceedings or regulatory investigations.

The ability of organisations to rely upon LPP to resist production of documents is regularly tested, often by regulators such as the Australian Taxation Office (ATO) who seek to obtain access to information for the purpose of facilitating an investigation or enforcement.

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Given the practice of many regulators to demand huge volumes of documents, an understanding of the scope and limits of LPP is becoming increasingly important. In particular, the ability to maintain a claim of LPP in an in-house scenario can be challenging given the need to juggle competing demands of the organisation and multiple agendas of stakeholders.

This is further complicated by the prevalence of instant communication tools, often with multiple recipients and a consequent reduction in formality.

An understanding of the essential components of a valid LPP claim and how to prevent its waiver will arm in-house counsel with the ability to ensure that their organisation can continue to enjoy the benefits of confidentiality that LPP evolved to protect.

What is required to make out a claim of LPP?

By way of example, see Evidence Act 1995 (NSW), Evidence Act 2008 (VIC), Evidence Act 2001 (TAS), Evidence Act 2011 (ACT), and Evidence Act 1995 (Cth).

Claims for LPP are often only tested when something has gone wrong, making it important to have a good understanding from the outset.

In its simplest form, there needs to be:

  • the existence of a client and lawyer relationship;
  • a confidential communication or document; and
  • the communication (or document recording the communication) must have been brought into existence:
    o for the dominant purpose of providing legal advice (advice privilege); or alternatively
    o in respect of litigation or anticipated litigation (litigation privilege).

The key aspects and terms of this test are defined below:

  • Document

In this context, the term “document” includes more than simply letters and emails.

The legislation gives this term a wide meaning (see s2D of the Acts Interpretation Act) and accordingly, is broad enough to capture drawings, sound recordings, photographs, text messages and instant messenger messages.

In-house lawyers should not feel compelled to limit LPP claims to only those “traditional categories of documents.

In the recent decision of Asmar & Ors v Albanese & Ors ((No 2) [2021] VSC 324), the court was asked to make an assessment of whether text messages between two non-lawyers could be adduced into evidence.

In those proceedings, Associate Justice Matthews held that the series of text messages did attract privilege on the basis that, even though the messages were not communications directly with counsel, they were communications discussing how instructions to counsel should be framed.

Importantly, the disclosures were intended to be confidential and not disseminated outside the organisation.

  • Email chains

There is an increasing body of case law in both Australia and the UK to the effect that the court should treat each recipient in an email chain as if they had received a separate and distinct communication for the purpose of assessing privilege.

While this is yet to be tested at an appellate level, where legal advice is to be circulated within an organisation it would be prudent to initiate a new email thread to ensure dissemination is consciously limited.

  • Use of labels

While potentially helpful when conducting document reviews, simply labelling a document privileged will not inform the question as to whether the communication is in fact protected from production.

In each and every case there will need to be an assessment undertaken and all elements of the requisite test will need to be met.

Having good record-keeping practices in place will help create an understanding across the organisation that in-house lawyers should be responsible for distributing legal advice.

  • Litigation privilege

Where a claim for litigation privilege is asserted, it extends not just to legal proceedings within Australia but also to proceedings overseas.

Section 119 of the Evidence Act identifies that the client in this instance can include anyone who may be, might have been, was or is a party to proceedings (even if the proceedings are only anticipated or pending but have not yet commenced).

This will be important for organisations that operate in multiple jurisdictions and have their head office in Australia.

  • Dominant purpose

The law concerning “dominant purpose comprises a substantial body of case law but can be distilled into an assessment of whether it is the ruling, prevailing or most influential purpose of the communication.

This may be challenging in an in-house context where an email chain might cover many topics, only one of which relates legal advice.

For this reason, it is important to keep legal topics separate from other matters and, preferably, include them in an entirely separate email or document.

  • Non-legal context

In an in-house role, it is common to find that lawyers are charged with undertaking a multitude of functions.

However, one of the critical assessments will be whether that person was acting in a professional legal capacity when providing legal advice or receiving information in order to provide that advice.

Where an officer of the company sends a communication that is not in connection with their role as a legal adviser to the company, no valid claim will be said to exist.

When can a claim for LPP be waived?

From time to time, situations will arise where it is in the best interests of the organisation to waive LPP. However, given possible contagion risk, and risks surrounding inadvertent waiver, this should only be undertaken consciously on a case-by-case basis.

Some of the more common scenarios involving potential waiver of LPP include:

  • Confidentiality

A critical component of any claim for LPP, confidentiality is one of the most common ways that privilege can be waived. In the event that the communication is no longer confidential or is treated in a manner that is inconsistent with an assertion that it is confidential, a waiver may be said to have occurred.

Ordinarily, dissemination within an organisation will not be sufficient to waive privilege even where there is widespread disclosure of the legal advice internally. In the event that an email containing privileged material is inadvertently distributed to the wrong recipient, the best practice is to contact the recipient immediately to:

  • note that the material is confidential;
  • state that it was provided in error;
  • state that there was no intention to waive privilege in the material; and
  • ask that the email and attachments be immediately deleted.
  • Third parties

Where documents containing legal advice are provided to third parties, the question of whether there has been a waiver will be influenced by the role of the third party.

In Built Environs WA Pty Ltd v Perth Airport (No. 5) [2021] WASC 237, the court held that APP (an independent certifier) received privileged communications from Perth Airport in its capacity as agent for Perth Airport and not in its capacity as an independent certifier.

Importantly the court found that, as agent, APP owed both contractual and equitable duties of confidentiality and as such had not acted in a way that was inconsistent with the maintenance of a claim for LPP.

It is useful to remember that, when providing confidential information to third parties, there should be a written record of the need to keep the information confidential and confirmation that there is no intention to waive privilege.

  • Disclosure waiver

A claim for privilege may be challenged on the basis that the substance of the advice has been openly disclosed, often in correspondence, thus losing both its confidential nature and protection from disclosure.

In ASIC v ANZ (No 2) [2020] FCA 1013, ASIC argued that ANZ had waived LPP by referring to the existence of legal advice in open correspondence. In that case, the court found that the letter, the subject of the proceedings, merely touched on but did not reveal the substance of the advice.

Accordingly, the claim for LPP was upheld. Simple phrases referring to the existence of legal advice will be insufficient to waive privilege but care should be taken to ensure that nothing more is revealed about the content or substance of the advice.

  • Limited waiver

Where it is proposed that documents be shared on the basis of a limited waiver, for example with a regulator, it is important to remember that caution must be taken to ensure that an express agreement is reached prior to disclosure (which includes an express obligation to keep the information confidential).

In some cases, due to the information-sharing arrangements between certain regulators, it may not be possible to gain sufficient comfort that a limited waiver will be effective.

In Cantor v Audi Australia Pty Ltd [2016] FCA 1391, the court held that the disclosure of privileged communication on a confidential basis to a German regulator did not amount to waiver of privilege in Australia, given that they had not been deployed in a manner inconsistent with the maintaining of privilege.

  • Inconsistent actions

The courts have shown a willingness to impute an intention to waive LPP where actions are clearly inconsistent with maintenance of confidentiality in a document.

Where the contents of a document have been openly disclosed or put into issue in proceedings, it will be much harder to refute a suggestion that there was an
intention to waive LPP.

In Oztech Pty Ltd v Public Trustee of Queensland (No 8) (2016) FCA 712, the court rejected the suggestion that privilege was waived over advice and briefing documents that were mentioned in a transcript attached to a letter which was disclosed in the proceedings.

In-house counsel plays a critical role in educating stakeholders about the manner and form in which communications containing legal advice are deployed, and ensuring that claims are not inadvertently waived.

Taking time to ensure that claims for LPP are properly set up at the outset will ensure that organisations can elect if and when they wish to maintain a claim for LPP. It is also important to be alert to the dangers posed by mixed-purpose communications.

Felicity Healy is a partner and Mark Wilks is head of commercial litigation at Corrs Chambers Westgarth.

The ever-evolving scope of legal professional privilege: Key considerations for in-house counsel
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