The High Court of Australia recently decided, in the case of Glencore International AG v Commissioner of Taxation, that legal professional privilege operates “only defensively, as a means of resisting compulsory production, and does not confer a positive right to restrain the use of privileged material disclosed without authorisation”.

The Glencore case, which involved the use of privileged documents by the Australian Taxation Office against a taxpayer, considered documents obtained by the ATO as part of the leaked Paradise Papers which emerged as a result of the cyberattack on the Appleby law firm.

The High Court determined that legal professional privilege cannot be used as a “sword”, The Association of Corporate Counsel noted, “to restrain an agency from using privileged material already in its possession”.

Instead, claims can only be made defensively as a “shield”, it continued, “to resist an attempt by a court or an agency to compel production”.

In addition, the High Court held that privilege holders must “resort to the equitable doctrine of breach of confidence for protection” once privilege communications are disclosed.

This, the ACC argued, is “potentially worrying news” for lawyers who work in-house.

The decision, it said in a statement, “could further incentivise cybercriminals to attack law firms and hold sensitive client information ransom, threatening disclosure”.

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ACC Australia and Asia Pacific vice-president and managing director Tanya Khan said the association is concerned about the ramifications of the Glencore decision.

“Allowing the government or any other third party to retain and use privileged documents in this manner undermines client candour and may encourage stolen privileged documents to be leaked in Australia,” she said.

ACC is keen, however, to contribute to the development of protocols between the regulators and the legal profession “on how material potentially the subject of legal professional privilege should be appropriately managed in these circumstances”, it added.