InHouse lawyer and legal professional privilege

Dye v Commonwealth Securities Ltd (No 5) [2010] FCA 950

Catchwords:

PRIVILEGE – legal professional privilege – whether in-house lawyer is an independent legal adviser – nature of requirement of independence – in-house lawyer independent and communications with him capable of being privileged – Rich v Harrington distinguished and questioned.

Issue:

Legal professional privilege in the context of an InHouse lawyer for the Commonwealth bank in respect of disclosure of documents and the application of test of legal professional privilege.

Katzmann J:

5.

As this is a question of pre-trial production rather than the adducing of evidence, the common law and not the Evidence Act 1995 (Cth) governs the determination of the issues: Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67, 201 CLR 49 (Esso) at [17]-[28] per Gleeson CJ, Gaudron and Gummow JJ, [64] per McHugh J.

6.

The test of whether a communication or document is subject to legal professional privilege is whether the communication was made or the document was prepared for the dominant purpose of obtaining or providing legal advice or to conduct or aid in the conduct of litigation in reasonable prospect: Esso at [61] per Gleeson CJ, Gaudron and Gummow JJ. In its ordinary meaning the dominant purpose is a reference to “the ruling, prevailing, or most influential purpose”: Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404 at 416.

7.

The question of whether a purpose is the dominant purpose is to be determined objectively but “the subjective purpose will always be relevant and often decisive”: Esso at [172] per Callinan J. See, too, Sydney Airports Corporation Ltd v Singapore Airlines Ltd [2005] NSWCA 47 per Spigelman CJ at [6].

8.

Legal professional privilege extends to several classes of documents, including:

(1) Communications between a party and the party’s professional legal adviser, if confidential and made to or by the adviser in his or her professional capacity and with a view to obtaining or giving legal advice or assistance, even if the communications are made through agents [or employees] of the party and the solicitor or either of them.

(2) Documents prepared with a view to being used in the way described in category (1) above, although not in fact so used.

(3) Communications between the various legal advisers of the client, such as between the solicitor and the solicitor’s partner or agent, with a view to the client obtaining legal advice or assistance.

(4) Notes, memoranda, minutes or other documents made by the client or officers of the client or the legal adviser of the client of communications which are themselves privileged, or contain a record of those communications, or relate to information sought by the client’s legal adviser to enable the adviser to advise the client or to conduct litigation on the client’s behalf.

(5) Communications and documents passing between the party’s solicitor and a third party if they are made or prepared when litigation is anticipated or commenced, for the purposes of the litigation, with a view to obtaining advice as to it or evidence to be used in it or information which may result in the obtaining of such evidence.

(6) Communications passing between the party and a third person (who is not the agent of the solicitor to receive the communication from the party) if they are made with reference to litigation either anticipated or commenced, and at the request or suggestion of the party’s solicitor; or, even without any such request or suggestion, they are made for the purpose of being put before the solicitor with the object of obtaining his or her advice or enabling him or her to prosecute or defend an action.

(7) Knowledge, information or belief of the client derived from privileged communications made to the client by the client’s solicitor or agent.

See Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR 244 at 245-246 (Sterling) where the authorities in support of these propositions are also cited.

  1. The other relevant principles may be summarised as follows:

(1) It is not sufficient for a party merely to assert a claim for client legal privilege; the party making the claim must establish the facts giving rise to the privilege. Verbal formulae (even if unchallenged) will not be enough: Grant v Downes ([1976] HCA 63; 1976) 135 CLR 674 (Grant v Downes) at 689 per Stephen, Mason and Murphy JJ; Esso at [52] per Gleeson CJ, Gaudron and Gummow JJ; National Crime Authority v S (1991) 29 FCR 203 at 211 per Lockhart J; Kennedy v Wallace [2004] FCAFC 337, 142 FCR 185 at [13] per Black CJ and Emmett J.

(2) The privilege attaches to communications, which may be oral or in writing or a combination of both; it does not inhere in the document itself: Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501 (Propend).

(3) Copies of documents made for the dominant purpose of obtaining or giving legal advice or professional legal services relating to actual, anticipated or pending proceedings are privileged, even if the originals are not: Propend.

InHouse lawyer

 

11.

In Rich v Harrington [2007] FCA 1987, 245 ALR 106 (Rich) Ms Rich, a partner in the legal and accounting firm of Price Waterhouse Coopers (PwC), who had commenced proceedings against the partners alleging direct and indirect sex discrimination and victimisation, challenged the respondents’ claim of legal professional privilege in respect of certain categories of document. One category was legal advice from lawyers in PwC’s own Office of General Counsel (OGC), which Ms Rich challenged on the basis that the relationship between the respondents and the OGC was not such as to give rise to the privilege. As Branson J understood it, Ms Rich submitted, first, that the independence of legal advice provided by the OGC could not rise above the independence of the person who holds the office of General Counsel because that person supervised and had ultimate responsibility for the work of the OGC; and second, that the OGC’s legal advice was not independent because General Counsel, who was also a partner in PwC, had been both legal adviser and client.  Her Honour did not find it necessary to form a concluded view as to the validity of the second submission but said (at [41]) that the first seemed to be correct. Regardless, her Honour approached the issue on the basis that the question was whether, having regard to the nature of the dispute between Ms Rich and PwC that formed the subject matter of the proceeding, the relationship between OGC and PwC was a professional relationship which secured to the OGC’s advice an independent character despite the fact that the General Counsel, and one other senior solicitor in the OGC, were also partners in PwC.

12.

Her Honour formulated the question of principle in the following way at [46]:

The requirement that the legal adviser be independent is principally concerned with the nature of the relationship between the client who claims client legal privilege and the legal adviser. The requirement that the communication be made for the dominant purpose of obtaining legal advice or to conduct or aid in the conduct of litigation in reasonable prospect is concerned with the object and subject-matter of the communication. Each criterion must be satisfied before a claim for client legal privilege will succeed.

13.

When considering the first criterion – the requirement of independence – she said (at [58]) that “the critical question” in the case before her was “whether the relationship between OGC and the respondents with respect to Ms Rich’s allegations was one of professional detachment”. To answer the question her Honour said (at [59]) it was necessary to consider the nature of Ms Rich’s allegations and their significance for General Counsel, in particular, and the OGC, in general:

As mentioned above, they were made by one partner against other partners. It seems uncontroversial that they were of a kind capable of tarnishing the reputation of the firm of which the OGC is a part. They cast aspersions of a personal, rather than a purely professional, kind on general counsel’s partners including those partners who comprised the leadership of her firm. The general counsel and the deputy general counsel were themselves likely respondents in the litigation in prospect. Because of its likely subject-matter, that litigation, should it eventuate, could reasonably be expected to attract a high level of media interest of a relatively sensational kind. For these reasons I conclude that Ms Rich’s allegations were by reason of their content inherently likely to engage the personal loyalties and the duties and interests of all partners of PwC – and probably many employees of the firm as well.

14.

The result (at [60]) was that the relationship between the OGC and the respondents was not such “as to secure to the advice of the OGC concerning Ms Rich’s allegations the objectively independent character” her Honour held was necessary to support the respondents’ claim of client legal privilege.

15.

With respect, her Honour might have overstated the content of the requirement that legal professional privilege will arise only where the advice has “an independent character”. Her Honour applied the decision of the High Court in Waterford v Commonwealth [1987] HCA 25; (1987) 163 CLR 54 (Waterford), a case concerning legal officers employed by the Commonwealth providing legal advice to the Commonwealth. A close examination of the judgments in that case does not seem to bear her Honour out.

16.

In Waterford Mason and Wilson JJ said at 62:

Whether in any particular case the relationship is such as to give rise to the privilege will be a question of fact. It must be a professional relationship which secures to the advice an independent character notwithstanding the employment.

17.

Similarly, Dawson J observed at 95-96:

Whilst there is something to be said for the distinction … between independent and employed lawyers, it is not a statement of the position at common law and there is authority in this Court and elsewhere for the proposition that legal professional privilege may attach to communications passing between a salaried legal adviser and his employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client. For this reason the legal adviser must be qualified to practise law and, it seems, subject to the duty to observe professional standards and the liability to professional discipline.

18.

Cf. Deane J at 80-2. Brennan J approached the matter differently but, in my respectful opinion, and contrary to what Branson J seems to have thought (Rich at [39]), none of the other members of the Court adopted his Honour’s approach.

19.

Thus, with the greatest respect, I doubt that the decision in Waterford requires anything more than that the legal adviser be professionally qualified and acting in a professional capacity. I note that in AWB v Cole (No 5) [2006] FCA 1234, 234 ALR 651 at 664 [44], to which her Honour did not refer, Young J considered that the question of independence involved no more than an inquiry into whether the lawyer was consulted in her or his professional legal capacity, although his Honour also pointed out that some cases have added a requirement that the lawyer who provided the advice must be admitted to practice.

25.

This case is distinguishable from Rich.

26.

As the Full Court observed in Harrington v Rich [2008] FCAFC 61, 166 FCR 440 at [26], in the course of refusing leave to appeal from her Honour’s decision:

Her Honour emphasises (at [59]) the fact that allegations were made by one partner (Ms Rich) against the others; that the allegations cast aspersions of a personal rather than of a purely professional kind against certain of the Partners; and that General Counsel and her deputy were likely to be respondents in any litigation instituted by Ms Rich. Whatever the merits of her Honour’s conclusions, they do not purport to lay down broad general principles governing the subsistence of legal professional privilege in relation to advice given by legally qualified members of a firm to other members of the firm.

27.

Whilst there are some similarities between the two cases, not least because they both involve allegations of sexual harassment and discrimination, and have both attracted media interest, there are also important differences. Here, the respondent’s in-house lawyers are not partners of the respondent. Nor are they actual or potential parties to the litigation. The allegations are made against employees. Mr Fredericks gave unchallenged evidence that he had not met any of the individual employees whose conduct is impugned, which undermines any suggestion that the applicant’s allegations are “inherently likely to engage [his] personal loyalties”.

28.

It could not be said of the employed lawyers here, as it was said of the OGC in Rich at [60], that given the nature and significance of the allegations the applicant was making against them, “the objectively independent character necessary to support the respondents’ claim” was missing and the in-house legal team was not in a position to give professionally detached advice to the respondent.

29.

I am satisfied on the evidence in this case that Mr Fredericks and the lawyers under his supervision were in such a position.

30.

The real question, then, is whether the documents in dispute meet the dominant purpose test.

Brisbane Barrister – David Cormack

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