Australia: High Court rules on inadvertent disclosure of privileged material in discovery

Clayton Utz Insights
Last Updated: 26 November 2013
Article by Mary Still

The High Court has made clear that inadvertent disclosure of privileged material does not amount to a waiver, where it occurs in a court-ordered process and is responded to promptly.

In the high-pressure context of litigation, errors can occur, but now the High Court has ruled on whether a party can undo an inadvertent disclosure of privileged material made during discovery.

High Court decision on privilege

The High Court has handed down a decision which took a pragmatic approach to dealing with inadvertent disclosure by ordering the return of the privileged documents. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46, the High Court made it clear that the pursuit of "satellite interlocutory proceedings" of the kind before it was a distraction from resolving the real issues in dispute between the parties, which also incurred considerable costs and squandered the resources of the courts.

Documents produced during discovery

The parties had been ordered to give verified, general discovery in the proceedings. After the appellants served their verified Lists of Documents and disks on the respondents, some correspondence was exchanged between their respective solicitors. The upshot of this correspondence was a claim by the appellants' solicitors that 13 documents, the subject of client legal privilege, had inadvertently been disclosed contrary to their clients' instructions. The respondents' solicitors refused both to return the documents and to give the undertaking which the appellants sought, not because they disputed the assertion of inadvertence, but because of their view that any privilege attaching to the documents had been waived.

Expense commenced proceedings in the Supreme Court of NSW, which eventually found their way to the High Court. The High Court considered the approach adopted by the primary judge, the Court of Appeal and that adopted by English courts, but ultimately took a different approach to each of those.

Discovery is a court-ordered process so the court has the power to correct errors

The High Court noted that the context in which the mistaken disclosure arose was during court-ordered discovery. This gives the court jurisdiction to correct errors which do occur – and while every effort should be made to be accurate, mistakes can occur. The Court held that, while a party is required to give discovery, the process is not intended to remove any other entitlement to maintain the confidentiality of a document. It follows that a court should allow for the correction of a mistake and order the return of the document, if the party receiving it refuses to do so. This requires the party seeking to correct an error to act promptly, and relief may be refused if it would be unfair to order the return of the privileged documents.

Resolving the dispute between parties is paramount, not tangential technical arguments

The High Court considered the approach required by the Civil Procedure Act 2005 (NSW) with respect to case management. It held that the direction which the Supreme Court should promptly have made in this case was to permit the appellants' solicitors to amend the Lists of Documents, together with consequential orders for the return of the disks to enable the privileged documents to be deleted. Such a direction would have served to defuse the dispute and dissuaded the respondents from alleging waiver.

Further, the Court held that, in reality, there was no question of waiver sufficient to be agitated before it. The documents disclosed during the discovery process were privileged, and the appellants' solicitors' claim that disclosure occurred by mistake was not disputed. The court thus held that any allegation of waiver was going to turn on a legal, technical argument tangential to the main proceedings, and should not have been made.

Solicitors have a responsibility to deal professionally and ethically

The High Court also considered solicitors' responsibilities and expressed concern about creating a dispute over the correction of a mistake. It commented that requiring a court to rule on waiver and the grant of injunctive relief was not consistent with the positive duty imposed by the Civil Procedure Act to facilitate its purposes.

The Court went on to note the new Rule 31 of the Australian Solicitors' Conduct Rules, which has been adopted in Queensland and South Australia and which NSW proposes to adopt. This rule deals with the duty of a solicitor to return material, which is known or reasonably suspected to be confidential, where a solicitor is aware that its disclosure was inadvertent. It concluded that such a rule should not be necessary, but provides "an example of professional, ethical obligations of legal practitioners supporting the objectives of the proper administration of justice".

Impact of the decision

The High Court has made clear that inadvertent disclosure of privileged material does not amount to a waiver, where it occurs in a court-ordered process and is responded to promptly. This clarifies the law on waiver in this context.

It also provided a warning to litigants and their representatives not to get entangled in side issues which distract them from resolving the real dispute between the parties.

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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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