Published on 18/11/2009

Confidentiality and privilege.

Issues:

• Does the Evidence Act alone now prescribe the tests for the protection of confidential documents and communications?
• If not, in what circumstances does the common law apply?
• If privilege does not apply to all communications between lawyer and client, then do the restrictions amount to qualifications on the duty to the client?
• How permeable and satisfactory is a “Chinese Wall”?
• Do the Courts help build them or bust them?

Desired Outcomes:

• An appreciation of the relevant test.
• The ability to work out whether future instructions could give rise to a conflict with the rights of a former client and what to do about it.

1. Confidential communications and privilege

Privileged communications are excluded because their disclosure would harm a fundamental principle or relationship that society deems worthy of preserving at the expense of litigants having all relevant material for litigation.

Baker v Campbell (1983) 153 CLR 52*

The primary modern rationale for the doctrine rests in the notion of the rule of law; in particular, that the privilege is the necessary corollary of the right of persons to obtain skilled legal advice, in circumstances in which full disclosure is protected and hence encouraged

Not just privilege of evidentiary matter but also to execution of search warrants

Evidence Act 1995 (Cth), ss 118-126*

OnIy applies in respect of proceedings and applies the 'dominant purpose' test.

Section 117 defines “confidential communication” as made in such circumstances that when it was made where two people were involved, one of them was under an express or implied obligation not to disclose it’s contents whether or not it arises under law. The term client is defined in s118 it includes under (a) an employer of a lawyer

Section 118 says evidence is not to be adduced if on objection by a client the court finds that adducing the evidence would result in disclosure of
(a) a confidential communication for the dominant purpose of the lawyer providing legal advice to the client.
(b) talks about 2 or more lawyers acting for the client and
(c) talks about a confidential document prepared by the lawyer - for the dominant purpose of legal advice.

Section 119 creates legal professional privilege between third parties (ie lawyer/expert, client/expert). It must still be for the dominant purpose. The dominant purpose is different it is professional legal services relating to a proceeding. You must have litigation on foot or anticipated or pending.

Section 120 does not apply in non EA jurisdictions. It is about a privilege that is available where the litigant is not represented. Here we have an unrepresented party being able to get a report from another for the purpose of the proceeding.

Sections 121 – 126 are about circumstances in which the privilege can be lost.

Section 121(2) is of general relevance where the court would be prevented from enforcing an order of the court. There was an exception because the court had made an order and that order had to be enforced.

Re Bell; Ex parte Lees

There was a matrimonial dispute. The question that arose in the divorced proceedings were who was going to have custody of the child. The other question was about matrimonial property. Despite the fact that the husband had custody, she refused to accept this and took the child and disappeared. The lawyer went into court to file a document in relation to the matrimonial property dispute. The husband concluded that the lawyer was in touch with the wife. The husband sought the information of the location of the wife. The lawyer refused on the basis of privilege. The court sent the lawyer to goal for contempt.

Section 122 – if the client consents then the privilege will not prevent the disclosure of the information. Also s 122(2) the privilege does not apply if the client has knowingly and voluntarily disclosed the information to another in circumstances not protected the privilege. It is possible to waive the privilege. The question arises as to whether waiver can be accidental. You have to knowingly and voluntarily disclose to another. Section 122(4) – substance of evidence has been disclosed with the express or implied consent of the party to another person

Section 123 – in a criminal proceeding.

Section 125 applies in circumstances where the privilege has been used to assist in misconduct, furtherance of commission of fraud.

AG for NT v Kearney

The “public interest privilege” of the executive government is the subject of s 130 of the Evidence Act 1995 (NSW) which codifies and clarifies the common law as laid down in Sankey v Whitlam. There, the High Court decided that if the government claims that certain documents or information are privileged from being given in evidence on the grounds of a countervailing public interest (“public interest privilege”), the court itself may examine the material to see whether there are reasonable grounds for claiming that privilege

Grant v Downs (1976) 135 CLR 674

Most of the judges said the document will only be protected if it is prepared for the sole purpose of seeking legal advice. A court can examine the document to determine whether a claim has been made out

Esso Australia Resources Limited v The Commissioner of Taxation [1999] HCA 67 (21.12.99)

Advice privilege protects verbal or written communications between a lawyer and client from disclosure in legal proceedings or otherwise, where such communications are confidential and made for the dominant purpose of requesting or providing legal advice.

Photocopies are also privileged

Baker v Campbell (1983) 153 CLR 52*

A claim of privilege is not confined to judicial or quasi judicial proceedings and extends to

Nickmar v Preservatrice Skandia Insurance (1985) 3 NSWLR 44*

It was held that legal professional privilege only attaches to documents prepared by third parties (not being servants or employees of the entity called upon to produce the documents) when they are prepared for or in contemplation of litigation or for the purpose of giving advice or obtaining evidence with reference to such litigation

Sevic v Roarty (1998) 44 NSWLR 287

Privilege – Compulsion of Law privilege is not waived if disclosure was made under a compulsion of law. See also EA s122(2)(c)

Citibank v FCT [1985] ATC 4714*

The Full Federal Court held that the doctrine of legal professional privilege applied to restrict the powers of the Federal Commissioner of Taxation under Section 263 of the Income Tax Assessment Act 1936. The Court also held that the (Commonwealth) taxation officer was obliged to ensure that Citibank, and in particular its staff, had, in the circumstances, adequate opportunity to make claims of privilege on behalf of its clients

CAC v Yuill (1991) 172 CLR 319

As later explained by the High Court in Daniels, a critical plank of the reasoning of the High Court in Yuill was that the then Companies Code 1981 fell to be construed against that background understanding that client legal privilege was merely a rule of evidence

Daniels v ACCC [2002] HCA 49

Now that it is understood to be a rule of substantive law and an important common law immunity

The High Court again pointed to the well-settled rule that statutory provisions should not be constred as overriding common law rights, privileges or immunities without the legislation providing so by express words ot as a necessary implication. If investigations by authorities were to be hampered by the Court's ruling then, the Court suggested, that would be short-lived since Parliament would intervene to amend the legislation.

A majority of the High court said that Yuill might be decided differently today

James Hardy Act specifically overrides privilege

Pyneboard Pty Ltd V TPC (1983) - High Court

General principle that a statute will not be construed to take away a common law right unless the legislative intent to do so clearly emerges, whether by express words or by necessary implication.

[In] deciding whether a statute impliedly excludes (Privilege) much depends on the language and character of the provision and the purpose which it is designed to achieve. The privilege will be impliedly excluded if the obligation to answer, provide information or produce documents is expressed in general terms and it appears from the character and purpose of the provision that the obligation was not intended to be subject to any qualification. This is so when the object of imposing the obligation is to ensure the full investigation in the public interest of matters involving the possible commission of offences which lie peculiarly within the knowledge of persons who cannot reasonably be expected to make their knowledge available otherwise than under a statutory obligation. In such cases it will be so, notwithstanding that the answers given may be used in subsequent legal proceedings.

Waterford v The Commonwealth (1987) 61 ALJR 674

Onus of proof of privilege rests on party claiming it.

2. Qualifications on duty to the client

A-G (NT) v Kearney (1985) 158 CLR 500*

It is not available if a client seeks legal advice in order to facilitate the commission of crime or fraud or civil offence (whether the adviser knows or does not know of the unlawful purpose)

O'Donovan v Vereker; O'Donovan v Forsyth (1987) 76 ALR 97*

Privilege can not be claimed for advice that goes to the promotion of an illegal act. Barrister became involved in promoting tax avoidance scheme so there was no privilege (as opposed to simply providing advice on the legality of such a scheme)

Section 127 creates a privilege in respect of religious confessions. (p430 UEL)

Section 128 creates a privilege against self-incrimination. A witness can object in civil and criminal proceedings against giving evidence on the ground that it may tend to prove that the witness has committed an offence or is liable to a civil penalty. However, section 187 provides that a corporation may not claim the self incrimination privilege.

3. Government and corporate lawyers

Farrow Mortgage Services Pty Ltd (in liqu) v Webb 39 NSWLR 601*

Question of joint privilege as, for example, in the case of joint directors. Where two or moie persons communicate with their legal advisor and certain communications attract Privilege, that Privilege 'belongs to all the persons who joined in seeking the advice. The privilege is a joint privilege.'

All to whom the Privilege 'belongs' must concur in its waiver.

Privilege attached to legal advice obtained by a company is not lost when the advice is disclosed to its directors - not because of their common interest but because the company can only 'function' by the " actions and declarations of human beings",

"Common interest is not in this context a rigidly defined concept. A mere common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely on it."

A-G (NT) v Kearney (1985) 158 CLR 500

In circumstances where legal advice is given by an “in-house” legal adviser the privilege should only apply to advice given by such persons who are listed on a roll of legal practitioners and hold a current practising certificate in a State/Territory of Australia or work under the supervision of such a person. Ultimately, any doubt as to whether or not a person is a legal adviser, subject to these guidelines, is a matter which may be decided by a Court

Waterford v The Commonwealth (1987) 61 ALJR 674

The majority of the Court had no difficulty in holding that “salaried” lawyers employed in government departments, especially the Crown Solicitor’s Office, were in the same position as solicitors or barristers in private practice, and as such their communications were subject to privilege if they contained legal advice.

Matters of policy and legal advice may be intermingled in the one document ...... The appellant’s submission fails to appreciate that the sole purpose test is a test that looks to the reason why the document was brought into existence. If its sole purpose was to seek or to give legal advice in relation to a matter, then the fact that it contains extraneous matter will not deny to it the protection of the privilege.

Grant v Downes (1976) 135 CLR 674

Citibank v FCT (1988) 88 ALR 144

On search warrant need time to be able to claim and argu privilege properly.

4. Confidential information

5. The Chinese Wall problem – conflicts of interest

Mallesons Stephen Jaques v KPMG Marwick (1990) 4 WAR 357

The Court " would restrain a solicitor from acting where there is a real and sensible possibility of confidential information being disclosed or used to the detriment of a former client".

Prince Jefri Bolkiah v KPMG [1999] 2 WLR 215

Subsequent to Prince Jefri’s dismissal as chairperson of the BIA, the Brunei Government commenced an investigation into the conduct of the affairs of the BIA, including the destination and present location of money which had been transferred from the BIA’s funds while Prince Jefri was the chairperson. The Brunei Government sought to retain KPMG to assist in the investigation. KPMG took the view that it could accept the instructions because it had ceased to act for Prince Jefri more than two months previously; hence he was no longer a client. However, aware of the possibility of a conflict of interest because the investigation was likely to be adverse to Prince Jefri’s interests and the firm possessed confidential information relating to his financial affairs, the firm erected an information barrier.

Primary Disqualification It is settled law that a lawyer who has acquired relevant confidential information from a former client cannot subsequently act against that former client and is automatically disqualified

Secondary Disqualification After the initial disqualification of a lawyer, the court must decide whether to disqualify the lawyer's firm as well. Courts have often answered this question by using the presumption of imputed knowledge, which presumes that the disqualified lawyer shared the confidential information of the former client with the entire firm. The onus is upon the firm to show that the relevant knowledge has not been transferred and that there is no risk that it will be.

While common law jurisdictions have agreed that the former client's confidential information should not be put at risk, they have been divided over how strict this standard should be. The court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must to a real one, and not merely fanciful or theoretical. But it need not be substantial

The typical means of preventing the flow of confidential information within firms is through the use of an organisational device called a Chinese wall. This may incorporate a number of mechanisms including: structural mechanisms, such as ensuring that the lawyers work in different departments; geographical mechanisms, such as placing the lawyers in different buildings or States; and procedural mechanisms, such as limiting access to files and databases. There "is no rule of law that Chinese walls or other arrangements of a similar kind are insufficient to eliminate the risk". However, they would be viewed with suspicion. Factors which caused KPMG problems were rotating staff, the staff worked in the same building and were accustomed to working with each other and they were ad hoc chinese walls.

6. Search warrant guidelines

ln Baker v. Campbell (1983) 153 CLR 52 - the question posed in the case stated was:

"In the event that legal professional privilege attaches to and is maintained in respect of documents held by (a lawyer) can those documents be properly made the subject of a search warrant issued under s.101 of the Crimes Act?"

The question was answered 'No'

The effect of these guidelines, in summary, is that. where the lawyer or Law Society is prepared to co-operate with the police search team, no member of that team will inspect any document identified as potentially within the warrant until the lawyer or Law Society has been given the opportunity to claim legal professi9nal privilege in respect of any of the documents so identified.

Where a claim is made in such circumstances. no member of the police search team will inspect any document the subject of the claim until either
(a) the claim is abandoned or
(b) title claim is dismissed by a court

If no lawyer, or representative of the Law Society, is in attendance at the premises the subject of the search warrant then, if practicable, the premises or relevant part of the premises should be sealed and execution of the warrant deferred for a period which the executing officer in his/her discretion considers reasonable in all the circumstances to enable any lawyer or responsible person connected with the premises to attend or, if that is not practicable, to enable arrangements for another person to attend the premises.

Where the lawyer or Law Society agrees to assist the search team the procedures set out below should be followed:-
• in respect of all documents identified by the lawyer or Law Society and/or further identified by the executing officer as potentially within the warrant, the executing officer should, before proceeding to further execute the warrant (by inspection or otherwise) and to seize the documents, give the lawyer or Law Society the opportunity to claim legal professional privilege in respect of any of those documents;
• if the lawyer or Law Society asserts a claim of legal professional privilege in relation to any of those documents then the lawyer or Law Society should be prepared to indicate to the executing officer the grounds upon which the claim is made and in whose name the claim is made; and
• in respect of those documents which the lawyer or Law Society claim are subject to legal professional privilege, the search team shall proceed in accordance with the guidelines as follows. In respect of the remaining documents, the search team may then proceed to complete the execution of warrant.

All documents which the lawyer or Law Society claims are subject to legal professional privilege shall under the supervision of the executing officer be placed by the lawyer and/or his/her staff, or the Law Society and/or its representatives, in a container which shall then be sealed.