Australian case signals need for greater vigilance to protect privilege

Jenny Cooper, Senior Associate and Nick Christiansen, Solicitor | Friday 30 March 2007

The ability to seek and receive legal advice freely and without fear of disclosure is fundamental to the solicitor-client relationship. 

However, a recent Australian case highlights that both solicitors and their clients need to be extremely vigilant about how they use and refer to legal advice to ensure that privilege is not accidentally waived. 

Privilege may be waived where:

• reference is made to the fact that legal advice has been received and relied on (even if the content of the advice is not disclosed); or
  
  
• disclosure of legal advice is made to a third party, even if it is only for a limited purpose.

Clients therefore need to be cautious when making any reference in correspondence or public statements to the fact that they have received legal advice.

They should avoid stating that they have relied or acted on legal advice, as this may amount to a waiver of privilege. 

Clients should also be cautious about providing privileged material to a third party, even if it is provided on terms that expressly do not waive privilege.

Privilege may still be lost if the purpose of providing the material is considered to be inconsistent with maintaining privilege (e.g. to persuade an investigative body not to bring proceedings).

Existing case law in New Zealand

A good general statement of the current New Zealand law relating to waiver of privilege is contained in Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145, CA.

In that case Justice McGrath said that: "As it is the essence of privilege that the material to which is attached is confidential, where a party's use of that material destroys that confidentiality, even if unintentionally, or is inconsistent with the party legitimately continuing to assert it, the privilege is treated as waived."

There are two ways in which privilege may be lost:

• if confidentiality is lost as a result of disclosure (whether intentional or not); or
  
  
• if the material is used in a way that would make it unfair for privilege to continue to be maintained.

It is a matter for the court's objective judgment whether or not the party claiming privilege has, by its conduct, done something inconsistent with maintaining the privilege.  This is not always easy to determine.

It has been generally accepted in New Zealand case law to date that a reference to privileged material that does not disclose its content does not amount to a waiver.

However, if the party to whom the privilege belongs has attempted to use the reference to privileged material to advance his or her position then privilege may be waived.

This is a narrow dividing line, as the case  of AWB Limited v Cole [2006] FCA 571, outlined below, demonstrates.

Australian developments

AWB Limited (AWB) is the successor to the Australian Wheat Board.  Between 2002 and 2006, AWB was involved in a number of investigations into its sale of wheat to Iraq. 

Two of these investigations were internal and two were external (by the United States Senate, and the Independent Inquiry Committee (IIC) of the United Nations). 

In November 2005 the Australian Governor-General set up a Royal Commission, appointing the Honourable Terence Cole QC as Commissioner, to inquire into whether AWB had breached any laws in relation to shipments of Australian wheat to Iraq.

Commissioner Cole issued AWB and some of its employees with notices  under the Australian Royal Commissions Act 1902 (Cth) requiring them to produce documents.

Many of the documents sought related to the other investigations into AWB’s sales to Iraq, and contained legal advice. 

AWB brought proceedings against the Commissioner in the Federal Court seeking a declaration that the documents were protected by legal professional privilege. 

Issue of waiver

The Commonwealth (which intervened on behalf of the Commissioner) claimed that AWB had waived privilege in documents relating to its internal investigations by the following disclosures:

• by AWB executives in presentations to Australian Government officials;
  
  
• by Andrew Lindberg (AWB managing director and board member) to the IIC in his interview with the IIC’s investigators;
  
  
• by AWB producing documents to the Commission under notices to produce after waiving claims of legal professional privilege; and
  
  
• by AWB executives and officers in evidence given to the Commission during public hearings and by the production of documents.

An example of the type of disclosures relied on is the following statement by a senior executive of AWB to Australian Government officials: "I can assure you that AWB has not been involved in any illicit payments to the Iraqi regime or breaches of sanctions.  AWB has conducted an internal audit and an independent legal review by a law firm, and both had found no wrongdoing."

The Federal Court considered the following issues in assessing the effect of these disclosures:

• whether AWB's disclosures divulged "the gist or substance" of its legal advice;
  
  
• whether AWB "consciously deployed that advice so as to advance its own commercial or other interests"; and, if so
  
  
• whether that disclosure had resulted in a waiver of privilege in the advice, and, if so, whether this waiver extended to any associated materials.

AWB said that it had merely referred to the existence of legal advice, without disclosing its content. 

However, the court held that AWB had sought to make it publicly known that it had received legal advice, conducted investigations, and found no evidence that it had engaged in improper or unlawful conduct that breached the UN sanctions. 

Justice Young stated: "I am satisfied that AWB made a conscious and voluntary decision to deploy the gist or substance of this legal advice in its dealings with the Australian Government, the IIC and the Commission because it considered that it was in its commercial interests to do so.  These actions are inconsistent with the maintenance of confidentiality in the legal advice."

The court also held that: "the disclosure of privileged communications to a third party can result in an imputed waiver of privilege, even if there is no intention of waiving privilege and disclosure is for a limited and specific purpose". 

The fact that the disclosures were made in confidence to government officials or investigators did not prevent a finding that privilege had been waived.

Having waived privilege in its legal advice by disclosing its "gist", AWB was also required to disclose:

• any other legal advice it obtained about the same subject or same issue; and
  
• any documents and information taken into account in preparing the legal advice.

Conclusions

AWB v Cole has received widespread attention in Australia (including prompting a review of the law of privilege by the Australian Law Reform Commission) and is likely to influence future judgments on this issue in New Zealand. 

The Federal Court's decision is consistent with the distinction in the New Zealand case law between disclosure of the mere existence of legal advice (which is not a waiver of privilege) and attempting to gain an advantage by referring to the advice (which will amount to a waiver of privilege).

But the fact that a waiver was imputed from brief references to legal advice, and the wide scope of the waiver that resulted, demonstrates how easy it is to inadvertently waive privilege, and the potentially far-reaching consequences of doing so.

The case highlights the dilemma often faced by companies involved in regulatory investigations or subject to public allegations of wrongdoing between minimising the commercial damage by being seen to have acted responsibly and to be cooperating with the authorities, and minimising legal exposure by maintaining privilege. 

While there may be good reasons for disclosure of legal advice that outweigh the risk of waiver, if in doubt, the safest course is not to refer to it at all.

* This update is the first in a series from Bell Gully on legal privilege.

For further information, please contact your usual Bell Gully advisor or:

AUCKLAND

Roger Partridge
Partner

Jenny Cooper
Senior Associate

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Mike Colson
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Mark O'Brien
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