Q&A: What clients wish they had known before entering the court room

By Danielle Woods, Elisa Holmes
29 Oct 2020
Two experienced barristers join us to share some tips and tricks for the next time you get involved in commercial litigation.

Question 1: What are the common traps you regularly see in the negotiation of contracts that come back to bite clients when faced with a dispute?

Danielle Woods: Not reading the terms of the contract before signing! I’m only half joking: a client needs to satisfy themselves that the written terms wholly and accurately reflects the deal that they believe they have negotiated and agreed to, and how (in practice) the parties expect the deal to be performed.  If there are additional matters, milestones or representations made by the other party on which your client is relying that aren’t included in the written contract, those good old ‘entire agreement’ or ‘no variation unless signed by both parties’ boilerplate clauses at the back of the contract may be their undoing if and when they raise the issue later. 

On a related note, another common trap is a lack of contractual administration to ensure that: a) the client’s frontline staff are aware of its terms; and b) the client meets their obligations and holds the other side to their obligations.

Elisa Holmes: By far the most common issue arising in the negotiation of contracts in my experience is the inadvertent inclusion of industry assumptions. By that I include things like the use of terms which are assumed to be widely understood in an industry, but when one scratches below the surface, let alone engages in the kind of intense scrutiny in which lawyers and judges engage in legal proceedings, the meaning of those terms is imprecise, or is not widely taken to mean what industry participants assume. In any event, lawyers and judges cannot be assumed to know the their meaning. Avoid the use of such terms. If their use cannot be avoided, make sure they are defined in plain English. And remember: bigger words are not inherently better.

Another, perhaps related, issue is the assumptions parties negotiating contracts make about the attitude or nature of the other party or parties to a contract. When negotiating a contract it is important for clients and their lawyers to imagine themselves in furious dispute with the other parties to the contract. What sort of clauses will they hope to be included in those circumstances? In the case of corporate parties, imagine that the relevant management or those involved in contract negotiation are long gone when a dispute arises, so that no assumptions are made about their general attitude, goodwill, and approach to that which forms the subject matter of the contract.

Question 2: What are the common misconceptions you see in litigation when dealing with legal privilege? What are your top tips for protecting privilege?

Danielle Woods: One misconception is that the inclusion of the word “privileged” (or its absence) at the top of the document is going to make or break a privilege claim: it is neither necessary nor is it, on its own, sufficient to make it privileged.  Similarly, the mere fact that a lawyer (external or inhouse) is a recipient, sender or copied to the email is not sufficient.  The dominant purpose of the communication, the obligations of confidentiality at play and that the confidentiality of the communication has been maintained (i.e. no waiver) are the most critical factors.

Having said that, it is a good tip to include words such as “privileged”, “confidential” and/or “not for external distribution” at the beginning of all communications involving lawyers and engaged experts so that the maintenance of the confidentiality of the communication remains at the front of mind of the recipient, and that potentially privileged documents are easily identified.

Elisa Holmes: The scope of common interest privilege is often misunderstood. It is very narrow. It applies only to parties with the same (or mutual) interest in the matter in respect of which legal advice was given. The consequence of the application of the privilege is that disclosure of privileged advice to that other person does not result in a waiver pf privilege. It may extend to insured and insurer, liquidators and administrators, and between partners, for example. Whilst it may also exist in respect of a company and directors the interest must be the same, and not merely loosely connected, or concerned with the same subject matter. “Interest” means a relevant legal interest and not general interest. And the relevant legal interest of each party must sufficiently overlap.

Although marking a document as “privileged” does not make it so, every document in respect of which privilege might be claimed ought to be marked as such. The main reason for this is that when paralegals or very junior lawyers are reviewing documents for privilege, they will not miss it.

Question 3: How can clients successfully manage confidentiality throughout the lifecycle of a dispute? What should clients be considering before a dispute arises?

Danielle Woods: Again the key objectives are being able to easily identify and locate privileged/confidential documents and also making sure confidentiality is maintained to the fullest extent possible. 

One thing to be considered before a dispute arises is implementing and maintaining a reliable and effective document management system, in which:

  • in-house legal teams’ communications are stored on a separate drive, access to which is restricted; and
  • communications that contain privileged or confidential material can be marked/tagged as such to trigger enhanced access restrictions as well as enabling them to be located when required.

Also, training staff as to the basics of record retention, discovery obligations, privilege and waiver.

In the litigation context, confidential material may be relevant to and need to be discovered or relied on in litigation. Steps can be taken in the course of the proceedings to ensure that disclosure is no wider than is absolutely necessary, such as confidentiality undertakings, interim non-disclosure orders or even just highlighting the limited purpose for which the material is being shared in covering letters when serving evidence and providing documents to experts etc.

Elisa Holmes: The most common issue which arises in respect of confidentiality is over-claiming. Corporate clients do not like to have their internal documents widely available and pored over by opponents who are often competitors or other parties with whom they are in dispute. But that does not make them confidential. The information contained in the documents must be truly confidential in nature and it must remain confidential. Clients should bear this in mind from the outset, and do as much as they can to preserve the confidential nature of the information so that they might maintain it throughout litigation. 

Another important matter is the nature of confidentiality regimes. Clients and lawyers should be aware that confidentiality regimes that limit access to lawyers only produce many difficulties in the context of litigation, and are nearly always extended at least in respect of documents which contain information that is material to a dispute. Lawyers owe duties to their clients and they need to be able to obtain instructions. Whilst limiting production to lawyers might work well to allow lawyers to filter the truly relevant from the peripherally relevant or immaterial, clients should be aware that documents truly relevant to the dispute will nearly always end up being disclosed to opposition clients.

Confidentiality is best protected by only claiming it in respect of documents which are truly confidential, and by creating a realistic and sustainable confidentiality regime in respect of those documents.

Danielle Woods has a broad commercial practice, with a focus on corporations, State taxation, insolvency and equity matters.  She enjoys the variety of work at the Bar and collaborating with her solicitors and fellow barristers.

Elisa Holmes specialises in commercial litigation, including equity, corporations, banking, insolvency and class actions. She has appeared in many complex and high-profile cases including the Takata airbags class actions (in the Supreme Court, Court of Appeal and High Court), the Halifax trans-Tasman insolvency proceedings (in which the High Court of New Zealand is sitting jointly with the Federal Court of Australia) and many similar matters in the Supreme Court and Federal Court. She has practised at the bar of England and Wales as well as New South Wales for 16 years.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.