Litigation 101: legal professional privilege for business

Georgina Penglis, Roxana Carrion, Trina Storm and Karen Ingram
12 May 2022 Time to read: 4.5 MIN

Legal professional privilege protects the confidence in communications made between client and legal adviser (or with third parties, in certain circumstances).

What is legal professional privilege?

Legal professional privilege, or client legal privilege as it is referred to under statute, (LPP) protects certain communications from mandatory disclosure. The overarching objective of LPP is to promote the administration of justice by encouraging full and frank disclosure from client to legal adviser.

LPP will apply if:

  • there is a confidential communication, whether oral or in writing, passing between:
    • a client and its lawyer (including in-house counsel), or between their agents; or
    • a client, or its lawyer, and a third party; and
  • which came into existence for the dominant purpose of:
    • legal advice – the giving or receiving of legal advice or the provision of legal services;
    • litigation – being used in actual litigation, or litigation reasonably contemplated by the client.

In Australia, LPP is a rule of substantive law that exists under the common law.

In addition, in certain jurisdictions, namely, the Commonwealth, NSW, Victoria, Tasmania, the ACT and the NT, legal advice privilege and litigation privilege are also recognised by statute (Evidence Act 1995 (Cth), Evidence Act 1995 (NSW), Evidence Act 2001 (Tas), Evidence Act 2008 (Vic), Evidence Act 2011 (ACT) and the Evidence (National Uniform Legislation) Act 2011 (NT)).

In broad terms, the Evidence Acts govern privilege issues on occasions when evidence is adduced at trial, while the common law governs questions concerning privilege which arise pre-trial, except to the extent otherwise provided by statute or rules of court.

Overall, when considering which privilege regime applies, it is important to consider the circumstances giving rise to the question of privilege, the jurisdiction and the relevant rules of court, where litigation is involved.

The party claiming LPP bears the burden of establishing that LPP applies to a particular communication.

Elements of LPP

Confidentiality is paramount

LPP attaches only to communications made in confidence. The communication must begin and remain a confidential communication. Once it is treated in a manner inconsistent with maintaining confidentiality, the communication is no longer confidential in nature.

The Evidence Acts provide that a document or communication is confidential if the person who made the communication or prepared the document, or the person to whom it was made or for whom it was prepared, was under an express or implied obligation not to disclose its contents.

Communications which are confidential and meet the dominant purpose test are protected, as well as certain confidential documents prepared for the dominant purpose of legal advice or litigation

LPP protects the confidence in communications made between client and legal adviser (or with third parties, in certain circumstances). In some cases, it protects the confidence in documents that are not actually delivered, provided they were prepared for the dominant purpose of legal advice or litigation.

Dominant purpose test

The dominant purpose is one that predominates over other purposes, it is the prevailing, paramount or most influential purpose. Where two purposes are of equal weight, neither is dominant in the relevant sense. This element will not be satisfied if one purpose for the creation of a document is to obtain legal advice, but there are one or more equally significant purposes. In this context, “significance” is an objective, not a subjective test: a court or regulator will be asking: “What was or is the central reason for the creation of the document?”.

"Legal advice" is widely construed

For the purpose of LPP, the concept of "legal advice" is fairly wide. It is not only that part of the advice setting out the law, but extends to advice about what action should prudently and sensibly be taken in the relevant legal context. However, it does not extend to advice that is purely commercial or of a public relations character.

"Legal advice" also includes surrounding communications between the client and their lawyer, even if it contains extraneous matters, as long as it was prepared for the dominant purpose of giving legal advice.

Litigation must be actual or reasonably contemplated

For LPP to apply, the litigation in question must be in existence or reasonably contemplated at the time of the communication. Litigation will be reasonably contemplated if there is a real prospect of litigation, as distinct from a mere possibility, but it does not have to be more likely than not. A vague apprehension of litigation will be insufficient.

Circumstances in which LPP can be claimed

LPP is likely to apply to:

  • legal advice received by a client from its lawyer. This includes legal advice (written or oral) provided to the Board by the General Counsel or the company's external lawyers;
  • routine communications exchanged between a client and its lawyer, as long as it relates to the lawyer giving the client legal advice or assistance. For example:
    • requests for legal advice from the client;
    • requests from the lawyer for further information or instructions;
    • draft legal agreements; and
    • communications exchanged in the course of a legal transaction;
  • communications between the various legal advisers of a client;
  • internal file notes, memos or minutes of meeting recording communications between a client and its lawyer, relating to the lawyer giving the client legal advice or assistance; and
  • communications between a client's lawyer and expert, retaining the expert in relation to actual or anticipated litigation. However, note that once the expert’s report is relied on in the litigation, privilege may be waived over the instructions that have been given to the expert.

It is unlikely that LPP will apply to:

  • documents that are not confidential in nature sent by a client to its lawyer. For example, press releases, ASX reports;
  • communications between a client and its lawyer which contains commercial or operational information only;`
  • communications exchanged between lawyers acting for parties in a transaction that do not have a common interest;
  • an expert's internal working notes and draft reports; and
  • privileged communications that have been widely distributed.

How can LPP be lost?

LPP will be lost if it is waived. Waiver occurs where the party entitled to the privilege performs an act inconsistent with preserving the confidence of the communication. Waiver can be express or implied. Both express and implied waiver are recognised under the common law and in the Evidence Acts.

Express waiver involves the disclosure to a third party of the actual document or communication, to which privilege would otherwise attach.

Implied waiver occurs where the party entitled to the privilege does not directly disclose the privileged material but acts in a manner inconsistent with the maintenance of the confidentiality which the privilege is designed to protect. For example, implied waiver occurs by referring to part, or all, of the privileged material in a non-confidential context – even referring to the gist of the advice could amount to waiver, for instance by stating that the person is acting in accordance with legal advice.

Once LPP is waived, it is waived for all purposes. This means that a party cannot waive privilege over a communication in one context (for example, in the course of a piece of litigation) and then assert privilege over that same communication in a different context at a later time (for example, in the course of a subsequent investigation by a regulator).

Practical guide for business to claiming and keeping LPP

  • Limit dissemination

    Limit the dissemination of legal advice within the business to those who need to see it. Ensure that the advice is given only to those individuals who need to see it. Discourage business personnel from on-forwarding legal advice or commenting on it between themselves.

  • Avoid intermingling

    Avoid, to the extent possible, the creation of documents where legal advice is intermingled with other material which is plainly not privileged, for example, material which is purely commercial or operational in nature.

  • Document the dominant purpose

    Contemporaneously document the reason for the creation of privileged material, in particular, where the dominant purpose is not immediately obvious.

  • Be careful of waiver

    Care should be taken when referring to legal advice. Do not disclose the gist, substance or conclusions to third parties without considering waiver.

GET IN TOUCH

Roxana Carrion

Sydney
Special Counsel
Disclaimer
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.