The danger of referring to legal advice – a rich and complex vein

19 December 2007

Corporations, directors and legal counsel often desire, and for good reason, to refer to the fact that legal advice has been taken in relation to a particular issue or dispute.

A common practice has been to state that advice exists, without saying what that advice is, followed by a comment that the company or directors hold a particular opinion – for example, that an action against the company will not succeed.

A recent Federal Court decision suggests that this practice is a dangerous one, which may lead to privilege in the underlying advice being waived.

Referring to advice

It is not uncommon for parties to refer to the existence of legal advice in media releases, annual reports and notices to the Australian Stock Exchange (ASX). The reference will usually only be to the existence of legal advice, and not the substance or conclusion of that advice. This is because deploying the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege and legal professional privilege is waived.¹

A statement to the ASX that read: ‘The Board’s lawyers have been instructed to vigorously defend the claim and have advised that the plaintiff’s claim will not succeed’ has been found to amount to a waiver of privilege.²  The practice of not referring to the substance or conclusion of legal advice is generally adopted even though not all instances where the substance or conclusion of legal advice has been publicly disclosed have resulted in a court deciding that privilege is waived.³

Rich v Harrington – waiver without express disclosure

The recent Federal Court decision of Rich v Harrington⁴  suggests that courts may be willing to take a broad view of what acts or statements will result in the disclosure of the substance or conclusion of legal advice. Rich v Harrington involves claims of sexual discrimination and victimisation by a former partner of an accounting firm. In the course of the dispute, the lawyers for the firm wrote to the lawyers for Rich and stated:

. . . as to complaints made in relation to matters from 2 July 2004, our client has acted at all times with the benefit of external advice and does not believe there has been any victimisation or other conduct for which compensation could properly be sought. 

It was contended that the letter waived privilege in the legal advice referred to in it because it in effect disclosed the substance or conclusion of that advice. In fact, it would seem that the letter was deliberately framed so as to avoid any allegation of waiver of privilege; on its face the letter does not disclose the substance or conclusion of the ‘external advice’ referred to.

In deciding that privilege had been waived, Justice Branson asked ‘whether the respondents by [the] letter deployed the substance or the effect of their external legal advice for forensic purposes’.⁵  Her Honour found that a fair reading of the letter lead to the conclusion that it was calculated to convey the message that the conduct of the client was undertaken on external advice and in accordance with that advice, and, for that reason, the firm did not believe that there had been any victimisation or other conduct for which compensation could properly be sought.⁶

Her Honour also found that the statement that the firm had ‘acted at all times with the benefit of external advice’ was apparently made for the purpose of fortifying the claim that it had not engaged in victimisation, or in other conduct for which compensation could properly be sought. Her Honour said that ‘implicit in the calling-in-aid of the external legal advice for this purpose was the claim that the external legal advice supported the conduct’ of the respondents.⁷ As the gist or conclusion of the external legal advice referred to in the letter had thus been disclosed, any legal privilege in that advice had been waived.⁸  

The danger

Rich v Harrington demonstrates that there is a real risk that privilege in advice will be waived if the existence of legal advice is referred to together with a comment about the conduct of a party. Any communication where the existence of legal advice is referred to in order to emphasise and promote the strength and substance of a case, or to justify particular actions, may lead to a waiver of privilege. This is because the conduct of the party, or any belief held by a party, may be inferred to be based on the legal advice referred to, even though the substance or conclusion of that advice is not disclosed. In these circumstances, even mentioning the existence of ‘advice’ will need to be carefully considered.

Future guidance from the High Court?

The High Court may provide guidance on this issue next year as special leave has recently been granted⁹ for an appeal from a Victorian Court of Appeal decision where that court found that a press release issued by the Victorian Attorney-General disclosing the recommendation made in advice from three senior counsel did not amount to a waiver of privilege.¹⁰

With the Australian Law Reform Commission’s report into legal professional privilege also soon to be delivered to the Attorney-General and likely to be tabled in Parliament early next year, 2008 promises to be another year where legal professional privilege continues to receive detailed attention.

This article was written by Graeme Johnson, Partner and Tim Grave, Senior Associate from the Litigation group.

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1. See, for example, Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237.
2. Switchcorp Pty Ltd v Multimedia Ltd [2005] VSC 425.
3. Secretary to the Department of Justice v Osland [2007] VSCA 96.
4. [2007] FCA 1987.
5. [2007] FCA 1987 at [31].
6. Ibid at [32].
7. Ibid at [32].
8. Ibid at [34].
9. Special leave granted 14 December 2007.
10. Secretary to the Department of Justice v Osland [2007] VSCA 96.

 

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