THE STATUS of third-party professional privilege in the Victorian Supreme Court has been left up in the air following a decision handed down by Master Evans on 23 July.
The Orica Australia Pty Ltd v Limit (No. 2) Limited (Orica)judgment has considerably narrowed the interpretation of “advice privilege”, moving away from the broader approach adopted by the Full Federal Court in Pratt Holdings Pty Ltd v Commissioner of Taxation.
Allens Arthur Robinson litigation partners Belinda Thompson and Richard Harris have warned clients that it is no longer safe to assume that third-party communications — even those made for the dominant purpose of obtaining legal advice — will be privileged from production in a Victorian court.
The Orica decision, if followed, could make it more difficult for law firms to conduct business with external advisers.
“I think it impacts the potential ease of doing business with them [third parties],” Thompson said.
Harris agreed that the decision marked a significant shift away from the treatment of agency relationships in Pratt, with broader practical implications for firms;
“It will affect some retainer arrangements. I think some accountants and investment bankers go out of their way to ensure that there is not an agency relationship between them and their client, and if they set up their arrangements like that, under Pratt, that’s probably OK. Under Orica, that’s probably not OK,” Harris said.
The decision could have wider implications for the way law firms structure their legal advisory services, Thompson warned: “It has implications broadly for how you structure your legal practice, because it’s dealing with advice privilege.”
The traditional approach taken by lawyers has been to assume a dichotomy between litigation privilege and advice privilege. “Litigation privilege has traditionally extended to communications with third parties, even if the third party wasn’t acting as an agent of the client,” Thompson said.
“So communications with experts and the like, that all attracts privilege— provided that it’s for the predominant purpose of preparation for litigation.”
Before the Pratt decision it was also widely accepted that legal advice privilege didn’t extent to third-party communications, unless the third party was acting as an agent for the client. The Full Federal Court in Pratt advocated an approach based on the substance of the advice — rather than the form — creating the dominant purpose test.
Thompson believes that the subsequent reasoning in Orica falls short of the benchmark set by Pratt and previous decisions, and warrants an appeal,
“Master Evans has not analysed the historical flow of precedents in any detail,” she said, “I think that it needs to be borne in mind that it’s a decision of the Master, and we do have a Full Federal Court decision that looked in quite careful detail at the precedent and whether or not, in today’s day and age, the distinction between advice privilege and litigation privilege was warranted.
“I think you’d consider that you’ve got very persuasive authority to the contrary in the Full Federal Court, and I’d be interested to see if this decision is appealed.”
If there were such an appeal, she said, enterprising lawyers would probably argue that the case should not be followed on precedent, since the reasoning in Orica appears to be more concerned with the conduct of the case than broader evidentiary principles.
In one section of the judgment, Evans scathingly singles out an affidavit produced by Jane Fenwick, Senior Associate of Clayton Utz, describing the document as “laconic” in its explanation of the link between the legal advice and the subject matter of the dispute.