Breaking the Rules: Too late – you've lost your privilege
Betty Sarkissian, CSO Senior Solicitor
An extract from a seminar dated 11 March 2015
We all know that legal professional privilege, or its statutory equivalent, client legal privilege, holds a special place in the eyes of the law. Bearing in mind that legal professional privilege is regarded as being so sacred, what does the law say about when the privilege can be lost?
Recapping briefly on what the privilege involves: essentially there are two categories of legal professional privilege, namely:
(a) legal advice privilege; and
(b) litigation privilege.
Waiver of privilege is an intentional act done with knowledge whereby a person abandons a right or privilege by acting in a manner inconsistent with that right or privilege. Waiver can be either express or implied. In most cases, a dispute arises as to whether or not a waiver of privilege ought to be implied.
Waiver of privilege can be implied in a number of ways. First, by "issue waiver" when a party relies upon the substance of a privileged communication to raise an issue in a legal proceeding, thereby putting the party's state of mind into issue. Secondly, privilege can be waived by implication if there is partial disclosure so that it would be inconsistent and unfair to permit a party to disclose and use part of a document, but claim privilege over the remainder of it. And in some cases, a waiver of privilege has been implied where a privileged communication is inadvertently disclosed.
Tracing the case law
Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475
For a number of years, this was the leading Australian authority on the doctrine of implied waiver. The High Court unanimously found that waiver of legal professional privilege ought not to be implied in the circumstances of that case. However, each judgment set out different reasons. All that could be gleaned from that decision was that the doctrine of implied waiver is governed by considerations of "fairness" but there was no unity about what that involved.
Hooker Corporation v Darling Harbour Authority (1987) 9 NSWLR 538
In 1987 when a single judge of the NSW Supreme Court was confronted with the question of whether there had been a waiver of privilege by the defendants, his Honour applied his own formulation of "fairness." This case involved a list of documents prepared for discovery by the defendants' solicitor that inadvertently included a privileged document, namely, notes made of a meeting with the defendant's solicitors. When inspection was given of the documents, the plaintiff took the opportunity of copying the privileged notes. Upon realising the error, the defendants' solicitor notified the plaintiff's solicitors of his intention to claim privilege.
An affidavit was filed by the defendant's solicitor stating that, while he had no independent recollection of considering the particular document, insofar as no claim for legal professional privilege was made in respect of it — that was through inadvertence.
Justice Rogers hearing the case cited the High Court's decision in Maurice. He noted that any use that had been made of the document had not been by the defendants, but by the plaintiff.
His Honour was taken to a number of United States authorities, and he derived particular assistance from one of those, Transamerica Computer Co Inc v International Business Machines Corporation 573 F 2d 646 (1978) ("Transamerica"), primarily because he saw a correlation of the facts in that case to the Hooker Corporation case. The Transamerica case involved a protected document disclosed by mistake in circumstances where there was an "exceptional accelerated discovery process". IBM had been compelled to produce for inspection 17 million pages of documents within a three month period.
Justice Rogers agreed with the reasoning of the Circuit Court of Appeals, and thereby found that there were considerations which made the task of discovery burdensome and which resulted in the inadvertent inclusion of the protected communication in the list of documents. His Honour held that the protection of legal professional privilege was not waived.
Meltend Pty Ltd & Ors v Restoration Clinics of Australia Pty Ltd & Ors 145 ALR 391
From that sympathetic standpoint, we move to Meltend where Goldberg J in the Federal Court refused to follow Hooker Corp. In Meltend the respondent filed a list of documents which mistakenly included a privileged document. The applicant's solicitor inspected the documents, and subsequently requested a copy of the letter in question. In reply, the respondent's solicitors claimed the letter was subject to privilege and had been included in the list by mistake.
In his evidence, the respondent's solicitor stated that he had considered each document on the list to see whether it was relevant and/or privileged. However, at the time he settled the list, he didn't appreciate that the letter in question was a privileged document.
His Honour found that the document was privileged, but was not prepared to find that the applicant's solicitor must have realised that the inclusion of the letter was an obvious error, nor that she was seeking to take advantage of such an error.
Justice Goldberg concluded that there had been either an express waiver or imputed waiver of privilege in relation to the letter. His Honour reasoned that the respondent's solicitor had the requisite knowledge (in this case of the right to claim privilege) to enable him to waive privilege.
Justice Goldberg said that if he's wrong that there was an express waiver, then a waiver of privilege should be imputed by operation of the law. Having regard to the issues raised on the pleadings, he considered that the contents of the letter were relevant, and that it would be in the interests of a fair trial to allow the applicant to make use of the letter.
It seems that the emphasis in this case was more on the potential disadvantage to the recipient of the mistakenly disclosed communication, than on the conduct of the privilege holder.
Mann v Carnell (1999) 201 CLR 1
As can be seen, the concept of "fairness" has the capacity to amount to different things to different minds. In this case, a legal report and advice had been provided to the Australian Capital Territory Government in relation to litigation involving the appellant. The litigation settled, and the appellant wrote to an independent Member of the ACT Legislative Assembly, Mr Moore, describing the litigation as a "monumental waste of public funds." Mr Moore sought an explanation from the respondent in her capacity as the Chief Minister for the ACT. The Chief Minister forwarded a letter to Mr Moore enclosing a copy of the advices received and informed Mr Moore that the legal advices were confidential. Mr Moore forwarded a copy of the letter to the appellant but did not provide a copy of the legal advices. The appellant sought preliminary discovery and inspection of the legal advices. He submitted that legal professional privilege had been waived by the respondent by forwarding the advice to Mr Moore.
A majority of the High Court held that did not permit a waiver of privilege to be imputed by law because disclosure to a member of the Territory's parliament for the limited purpose of him considering the reasonableness of the Government's conduct was not conduct that was inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.
With Mann v Carnell, came a shift from the emphasis being on "fairness" to the emphasis being on "inconsistency."
As a result of this change in the common law, s. 122(2) of the Evidence Act (1995) was amended so as to allow otherwise privileged evidence to be adduced where the client or party has acted in a manner inconsistent with maintaining the privilege. As the Explanatory Memorandum states, the amendment ensures that the new provision is concerned with the behaviour of the privilege holder, as opposed to the intention of the privilege holder.
Osland v Secretary to the Department of Justice (2008) 234 CLR 275
The next significant case in the law of implied waiver of privilege was Osland and is a good illustration of the inconsistency principle. In support of a decision not to grant mercy to Mrs Osland, Victoria's Attorney General issued a press release stating that he had obtained a joint advice from three Queens Counsel which recommends "on every ground that the petition should be denied."
In a unanimous decision, the High Court concluded there was no inconsistency between disclosing the fact of, and the conclusions of, an advice for the purpose of informing the public that the Government's recommendation was based upon independent legal advice, and on the other hand wishing to maintain the confidentiality of the advice itself. Their Honours said that any inconsistency depends upon the circumstances of the case, and that questions of waiver are matters of fact and degree.
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 303 ALR 199
That brings us to the most recent landmark case in this area: Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd ("ERA"). This case caused an earthquake for lawyers and you will soon see why. The respondents (or the Armstrong parties) commenced proceedings against the appellants (or the ERA parties) in the District Court of NSW seeking damages for the loss allegedly suffered by reason of the ERA parties' conduct in connection with certain agreements. In the course of court-ordered discovery, the ERA parties' solicitors Norton Rose advised the Armstrong parties' solicitors Marque Lawyers that a number of documents the subject of client legal privilege had inadvertently been disclosed in discovery, contrary to its clients' instructions. Norton Rose sought to have the documents returned and an undertaking that they would not be relied on in the proceedings or otherwise. Marque Lawyers refused to return the documents and give the undertaking, not because it disputed that they'd been mistakenly disclosed, but because it asserted that any privilege attaching to the documents had been waived. The appellants filed a notice of motion seeking injunctive and other forms of relief.
The matter came before her Honour Bergin J at first instance who found that four of the 13 documents in dispute were not disclosed inadvertently. The other nine documents were found to have been inadvertently disclosed because the intention to claim privilege was evident from the inclusion of their duplicates in the privileged section of the discovery lists.
The Armstrong parties appealed to the NSW Court of Appeal in respect of the nine documents. The Court of Appeal found that privilege in the nine documents had been waived. The matter then proceeded on appeal to the High Court.
The fascinating thing about the judgment of the High Court is that on the same set of facts, the Court applied the law of waiver of privilege and concluded that there was no inconsistency in the position taken by the ERA parties' lawyers such that waiver should be imputed to those parties.
In a joint unanimous judgment by French CJ and Kiefel, Bell, Gageler and Keane JJ, their Honours considered the following matters of fact were relevant:
- The fact that nine of the disputed documents were listed in both the privileged and the non-privileged sections of the lists of documents was strongly indicative of mistake;
- Norton Rose's letter to Marque Lawyers advising that some privileged documents had been incorrectly listed as non-privileged was important in conveying the true position of the ERA parties, and ought to have dispelled any doubts held by Marque Lawyers about the claims for privilege;
- That letter was sent promptly once Norton Rose became aware that mistakes had been made.
- That letter was sent before the senior associate at Marque Lawyers had fully inspected the documents.
It was also highly relevant to their Honours that the fact of mistake was not disputed by the Armstrong parties.
The High Court came to this view after examining the law of implied waiver of privilege, and having regard to the principles in Mann v Carnell. Importantly, what the High Court also said was that the considerations articulated in Mann v Carnell in relation to waiver at common law, apply with equal force in relation to the statutory question posed by s. 122(2) of the Evidence Act.
One of the shockwaves caused by this case was when the High Court turned to look at the question of mistaken disclosure in the context of discovery. Their Honours considered that where:
"a privileged document is inadvertently disclosed, the court should ordinarily permit the correction of the mistake and order the return of the document if the party receiving the document refuses to do so." (at ).
The Court acknowledged that in large commercial cases, mistakes are more likely to occur. They also recognised that courts will normally only permit an error to be corrected if a party acts promptly. Further, if it would be unfair to the receiving party to order the return of the privileged documents, relief may be refused. However, there was nothing said about whether this type of inadvertence could amount to an implied waiver of privilege – such as was done in previous cases like Meltend. Is the High Court saying that cases of genuine, undisputed mistake in the context of discovery can never amount to inconsistent conduct so as to ground a waiver? Furthermore, there is no mention of how such an inadvertent disclosure sits with the provisions of the Evidence Act, particularly s. 122 (2) and (3). In any event, one can certainly detect an attitude of greater lenience towards parties when mistakes are made in the course of discovery.
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