04 December 2006
Key Points:
You must think carefully before disclosing the substance or gist of legal advice in open correspondence or public statements, having regard to the possible unintended consequences.
A string of recent cases has confirmed that the protection of legal professional privilege is likely to be lost where a voluntary disclosure is made of the "gist" or "bottom line" of legal advice. This article highlights the risk of such bottom line disclosures and how unintended waiver of legal professional privilege can occur as a result of statements made to the media, to the Australian Stock Exchange and, as confirmed in AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 5) [2006] FCA 1234, to the Government, a Royal Commission or a United Nations Inquiry.
Imputed waiver of legal professional privilege
Legal professional privilege exists to protect the confidentiality of legal advice provided by a lawyer to his or her client. In Mann v Carnell (1999) 201 CLR 1, the High Court confirmed that where a recipient of legal advice discloses that advice to a third party, or acts in a way inconsistent with his or her right to preserve the confidentiality of the advice, the right to confidentiality conferred by legal professional privilege may be lost.
It does not matter that the recipient of the advice did not intend to waive privilege in this way. If, on an objective analysis, there was an intentional act that was inconsistent with the maintenance of the confidentiality, privilege may be found to have been waived.
Recent cases on gist or bottom line disclosure
In a number of recent cases, recipients of legal advice that have disclosed the bottom line or gist of that advice have lost the ability to claim privilege over the underlying advice so as to protect it from disclosure. In Bennett v The Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237, a recipient of legal advice disclosed the conclusions, but not the reasoning, of legal advice that it had received. It did so in order to emphasise the strength of its position and induce a settlement. The Federal Court found that this disclosure meant that a claim for privilege could not be maintained in the underlying advice. Justice Tamberlin stated that "it would be inconsistent and unfair, having disclosed and used the substance of the advice in this way, to now seek to maintain privilege in respect of the relevant parts of that advice which pertain to the expressed conclusion."
This approach was followed in the Victorian Supreme Court case of Switchcorp v Multimedia Limited [2005] VSC 425. Multimedia had released a statement to the Australian Stock Exchange regarding litigation commenced by Switchcorp. The statement included the following: "The Board's lawyers have been instructed to vigorously defend the claim and have advised that the plaintiffs' claim will not succeed." Justice Whelan found that there had been a "clear and deliberate disclosure of the gist or conclusion" of the legal advice and, as such, legal professional privilege in respect of that advice had been waived.
In the recent AWB case, AWB was found to have made various disclosures of legal advices to the Independent Inquiry Committee of the United Nations, the Cole Royal Commission and the Federal Government. In some instances these disclosures were made to the public at large via the Cole Royal Commission's procedures. Justice Young found that each disclosure was voluntary. AWB had been entitled to maintain legal professional privilege and was "under no compulsion to reveal the gist or substance of legal advice that had been obtained by AWB". AWB elected to make the disclosures because it considered that it was in its commercial interests to do so. The disclosures were often made in the presence of AWB's legal representatives but no objection was raised by them on grounds of legal professional privilege to such evidence being given.
AWB's attempt to voluntarily disclose the gist or substance of legal advice but to seek to claim legal professional privilege over that advice was unsuccessful. Justice Young found that the actions of AWB were inconsistent with the maintenance of the confidentiality of the legal advice and constituted a waiver of privilege.
Preventing unintended loss of privilege
The consequences of an unintentional loss of privilege can be grave. Confidential material that may be quite negative or incriminating but may have otherwise been protected will have to be disclosed. Tactical or strategic advantages in a dispute can be lost as a consequence. If it becomes necessary to fight to preserve legal professional privilege, delay and increased costs will result. In Bennett and in Switchcorp, the parties were required to disclosure their otherwise confidential legal advice to the opposing parties in the litigation to which that advice related. The consequences of the AWB's unintended waiver of privilege will unfold in public over coming months.
These cases also highlight the range of circumstances in which such a loss of privilege can occur: statements to the press, ASX announcements, settlement negotiations, statements made while under examination by a Royal Commission and representations made to government. Recipients of legal advice must think carefully before disclosing the substance or gist of legal advice in open correspondence or public statements, having regard to the possible unintended consequences.
Disclosure of something less than an advice's bottom line is less at risk of constituting a waiver. In the AWB case, Justice Young confirmed that a mere reference to the existence of legal advice will not usually amount to a waiver of privilege. Nine Films & Television Pty Ltd v Ninox Television Limited [2005] FCA 356, involving a dispute over intellectual property rights in the television programme "The Block", demonstrated this distinction. Ninox was reported in the media as stating that, "We've engaged Stuart Littlemore QC and he has reviewed everything in great detail and we're moving forward based on his recommendations." Nine contended that Ninox had, by this statement, waived privilege over Mr Littlemore's legal advice. Justice Tamberlin found that Ninox's statement was not a waiver of privilege, ruling that the mere announcement that advice has been sought and the subsequent action taken on that advice will not be sufficient to amount to a waiver. However, he did state that if there was a clear link between the statement regarding the advice and the subsequent action taken, it could be argued that there had been a waiver.
Courts have also recognised that in certain circumstances legal advice can be disclosed to a third party in a way that maintains confidentiality and therefore privilege is also preserved (or, more accurately, a "limited waiver" of privilege occurs). In Goldberg v Ng (1994) 33 NSWLR 639, President Kirby (as he then was) acknowledged that privilege can be retained, or a "limited waiver" effected, where "the holder of the privilege has disclosed the relevant communication upon the condition that privilege and confidentiality be maintained and that condition has been accepted." The ability to disclose advice in this way without losing the protection of privilege was confirmed in April by Justice Cowdroy of the Federal Court in Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 (we looked at this in our last edition).
If disclosure of legal advice or its "bottom line" to third parties such as commercial advisers is absolutely necessary, it should be expressly for a limited and specific purpose and on terms that require the recipient to maintain the confidentiality of the advice. No disclosure of legal advice is completely without risk of unintended waiver. However, where non-legal advisers are engaged and aspects of legal advice must be shared with them, this approach can be particularly useful.
For further information, please contact Paul James and Damien McAloon.
