The Federal Court recently handed down a decision in respect of the attempt by TerraCom, an Australian resources and energy company, to seek a declaration that a report seized by the Australian Securities and Investments Commission (ASIC) during an investigation was subject to legal professional privilege (Report).
Brief overview of the facts
The Report, which came into ASIC’s possession by means of a warrant executed at one of TerraCom’s site offices, was said to contain sensitive information regarding alleged fraudulent commercial conduct allegations against the company including the falsifying of coal certificates (Fraud Allegations). TerraCom argued that the Report was drawn by PwC for the purposes of enabling TerraCom’s solicitors to provide legal advice in light of Fraud Allegations.
ASIC opposed TerraCom’s application on two primary grounds:
- TerraCom had not provided enough evidence to prove that any legal professional privilege attached to the PwC report; and
- Any privilege over the PwC report had been waived by TerraCom’s previous disclosure of the substance of the report to other parties.
Legal professional privilege
A document held by a party may be subject to ‘legal professional privilege’ if the party claiming privilege over the document can demonstrate that the document came into existence, or was otherwise used for, the dominant purpose of giving/receiving legal advice.
On the first issue of legal privilege over the Report, the Court applied the common law test for legal professional privilege, ‘the dominant purpose test’:
“A person can resist the giving of information or the production of documents which would reveal communications between a client and their lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings.”
The Court found that the Report in and of itself did not come into existence for the purpose of giving legal advice but nonetheless came into existence for the purpose of being used by TerraCom’s solicitors to provide legal advice in anticipation. For this reason, the Court found that the report carried an attachment of legal professional privilege.
Waiver of legal professional privilege by inconsistent disclosure
ASIC otherwise argued that the report had its privilege waived since TerraCom has disclosed the substance of the report on numerous occasions so that the company could exonerate itself of any wrongdoing.
His Honour aptly reiterates the principle of waiver by inconsistent disclosure:
Implied waiver of privilege “reflects a judgment that the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect”; that judgment “is to be made in the context and circumstances of the case, and in the light of any considerations of fairness arising from that context”
The Court then considered ASIC’s reliance on three categories of disclosure of the substance, gist or conclusion by TerraCom of part or all of the PwC Report outside of the privileged ‘lawyer-client relationship’ as amounting to waiver:
- Communication to Teno (TerraCom’s Communications Advisory Firm);
- Open letter to Shareholders on 12 March 2020; and
- The ASX announcement on 3 April 2020.
In consideration of the above disclosures, the Court found that TerraCom had waived legal privilege over the PwC Report. The Court explains that TerraCom deliberately made statements about the Report’s findings and its conclusions for the purpose of attempting to exonerate itself from any wrongdoing.
The Court illustrated that it would ‘operate a tangible unfairness if TerraCom could, in effect, hide behind its statements as to the conclusion of the Report whilst at the same time maintain privilege over it.’
Is disclosed subject matter separable from the rest of the report?
On the issue of whether the entire Report or just the disclosed subject matter should have privileged waived, the Court decided that the ‘subject matter’ was so inextricably integrated with the whole of the report it would be misleading not to waive privilege over the whole of the Report.
Conclusion
Stewart J in conclusion found that the partial disclosure of the contents of the subject matter led ‘ineluctably’ to the waiver of the legal privilege in respect of the entirety of the report. The proceeding was dismissed with costs. The lesson reinforced by this case is that if a document is to be protected by legal privilege and remain with the ‘cone of silence’, it should not be distributed, nor its contents revealed, to any person out that cone of silence lest privilege is found to be waived.
If you require advice or assistance, please contact a member of our Litigation & Dispute Resolution team.
References
1. https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2022/2022fca0208
| Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
Liability limited by a scheme approved under Professional Standards Legislation. ©2022 Rigby Cooke Lawyers |