Australia: Privilege and in-house counsel: Tips to avoid waiver of privilege part 2

Key Points:

There are some simple steps in-house counsel can take to ensure privilege isn't waived.

In the last edition of Insights, we gave some tips to help ensure privilege applies to in-house counsel's work product. In this follow-up article, we discuss the principles governing waiver of privilege, and steps organisations should take to avoid waiver.

Once privilege attaches to a communication, it is critical to ensure that privilege isn't waived by a failure to keep the communication confidential. Inadvertent waiver of privilege can happen all too easily if an organisation doesn't have the right policies in place to keep legal communications confidential, or if its employees are unaware of the risks of waiving privilege and how to avoid them.

Confidentiality paramount to maintenance of privilege

Confidentiality is an essential pre-condition to the existence (and maintenance) of privilege. Subject to limited exceptions (for example, disclosure to a party with whom the discloser shares a "common interest" in legal advice or litigation), failure to keep a privileged communication confidential will waive the privilege.

Once privilege is lost, it is lost for all purposes and against all parties – not just the party to whom the legal communication was disclosed. In light of this, and given the sensitive and candid nature of many communications between a business and its lawyers, the consequences of waiving privilege can be dire.

Express and implied waiver of privilege

In addition to express waiver (ie. actual disclosure of a privileged communication), an implied waiver can arise if the privilege-holder has acted inconsistently with the maintenance of the privilege.

For example, an organisation risks waiving privilege by referring to the privileged communication in a non-confidential forum, such as negotiations with another company, disclosure to regulators, or a media statement. Even disclosing merely the gist or conclusion of legal advice may be a waiver of privilege in respect of the whole advice.

Scenarios which might amount to waiver of privilege

Common scenarios which may result in an implied waiver of privilege include:

1.  Disclosing the substance or gist of legal advice in media or stock exchange releases. In Switchcorp Pty Ltd v Multiemedia Limited [2005] VSC 425, Multiemedia made the following announcement to the ASX in relation to litigation between itself and Switchcorp:

"The Board's lawyers have been instructed to vigorously defend the claim and have advised that the plaintiff's claim will not succeed."

The court held that this was a "clear and deliberate disclosure of the gist or the conclusion of legal advice received by Multiemedia", which amounted to waiver of privilege. Multiemedia was ordered to produce to Switchcorp all documents constituting the advice referred to in the ASX announcement.

2.  Disclosing legal advice to a third party to support the privilege-holder's position or advance their commercial interests. In Rich v Harrington [2007] FCA 1987, PricewaterhouseCoopers partners waived privilege in legal advice by stating in a letter from PwC's solicitors to its opponent's solicitors:

"...our client has acted at all times with the benefit of legal advice and does not believe there has been any victimisation or other conduct for which compensation could properly be sought."

3.  Discussing legal advice in board papers which may later need to be produced (for example pursuant to a subpoena or in discovery in litigation). In Seven Network v News Ltd (No 12) [2006] FCA 348, discovery of board papers containing the statement, "our legal advice is that the risk of damages being awarded against [the company] is low", was held to waive privilege in the legal advice.

Despite the ease with which privilege can be waived, there are some easy steps an organisation can (and should) take to minimise the risk of waiving privilege in legal advice and communications it receives.

Tips for organisations to minimise the risk of waiving privilege

1.   Do not disclose the substance, gist or conclusion of legal advice Be careful not to disclose the substance (or even the gist or conclusion) of legal advice in external communications. Remember, disclosure can occur even without an express statement. For example, saying "we have received legal advice and are confident of our prospects" may be enough to waive privilege, as it effectively discloses the substance of the underlying advice.

2.  Minimise circulation of legal communications around the businessCirculating legal advice internally increases the risk of waiver of privilege. The more people who have seen the advice, the less likely a court will view it as still having the necessary confidentiality to be privileged. Moreover, the more people who see the advice, the more likely it is that someone may inadvertently disclose it outside the organisation.

Avoid lengthy email chains, the "reply all" button and forwarding legal advice to people who are only tangentially involved in the issue. Better yet, where possible, introduce a policy of not forwarding privileged emails beyond the initial sender/recipient(s).

3.  Minimise the reference to legal advice in board minutes and papersExercise caution when recording discussion of legal matters in board minutes. Ideally, minutes should briefly state that an issue the subject of legal professional privilege was discussed, rather than dealing with that issue in detail. If legal advice must be recorded, keep it in a separate document which can be annexed to the board papers, or at least in a separate section with a heading such as "subject to legal professional privilege". This also applies to agendas and notes taken during the meeting.

By following these steps and remaining alert to the risk of waiver of privilege, organisations can minimise the likelihood of waiving privilege over the legal advice and communications they receive.

Thanks to Michelle Barraclough for her help in writing this article.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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