In the recent Victorian Supreme Court decision of IOOF Ltd v Maurice Blackburn  VSC 311 the Court found that certain documents prepared during the investigation period of a class action, prior to receiving instructions from a client, were subject to legal professional privilege. The Court found that there was no reason that the firm of lawyers could not be both the client and the lawyer in the period before it was retained by the first client. The decision is of particular significance to class action lawyers and is an interesting development in the area of privilege.
IOOF Holdings Ltd (IOOF) commenced proceedings on 14 December 2015 against Maurice Blackburn Pty Ltd (the Firm) and Harbour Litigation Funding (the Funder) alleging that the Firm and the Funder were in possession of whistleblower documents that contained confidential information to IOOF. Orders were sought requiring the defendants to deliver up all documents containing information confidential to IOOF and to restrain the defendants from using or disclosing such information. The Firm and the Funder claimed legal professional privilege over this information.
Documents in dispute
In June 2015 a number of articles were published in the media regarding allegations made by an employee of IOOF, including claims that IOOF were involved in insider trading and plagiarism. This subsequently resulted in a drop in shares which continued to fall for a further period of time. During this period, the Firm did not yet have a client with respect to the class action against IOOF, and were named applicant in the agreement with the Funder with the intention that the future plaintiff could also sign the agreement when the matter progressed. This period is referred to in the judgment as the "First Period."
The Firm claimed privilege over documents created during the First Period as part of the preliminary investigation, including draft and final brief to counsel, file notes of telephone conferences and meetings with the IOOF employee, emails and research notes. The Firm claimed that these documents were created for the dominant purpose of obtaining legal advice from Counsel at the Firm in relation to a confidentiality issue that arose out of the communications with the IOOF employee.
On the 17 July 2015, the Firm received instructions from its first client to investigate the class action on its behalf. Documents were prepared as part of the investigation including briefs and file notes of communication with counsel, copies of memorandum of advice from counsel regarding prospects of success, internal memos and file notes of discussion with the IOOF employee, and communications with the Funder regarding prospects of success. This period is referred to in the judgment as the "Second Period."
The Firm publicly announced the investigation into the class action in October 2015 and published an online registration portal, where further clients registered their interest into the potential class action. Following the establishment of the online portal, documents were created as part of the preparatory work for the potential class action, including documents relating to registrations, and communications with the IOOF employee and Counsel at the Firm. This period is referred to in the judgment as the "Third Period." The Firm argued these documents were privileged to their first and further clients under section 118 and section 119 of the Evidence Act 2008 (Vic) (the Act).
The Funder also made separate claims for privilege under section 118 and section 119 of the Act over documents comprising communications with the Firm.
In relation to the documents prepared during the First Period, including those prepared by Counsel at the Firm in giving advice to the Firm, IOOF claimed that the documents were not subject to privilege as there was no lawyer and client relationship. Further, IOOF submitted that even if there was found to be a lawyer and client relationship, the dominant purpose was not for providing legal advice, but rather to "work up" a potential class action and to assist in negotiations with the Funder in relation to funding.
IOOF submitted that the documents prepared during the Second Period were not prepared for the first client alone, and noted that the first client's name did not appear on any of the documents, nor was there any payment of fees by the first client. Alternatively, IOOF claimed that the documents were produced for prospective clients, and not for the dominant purpose of providing legal advice to the first client. Further, IOOF claimed that there was no real prospect of litigation at the time the documents were produced and therefore there was no "anticipated proceedings" as required under section 119 of the Act.
In deciding whether the Firm documents were subject to privilege, the Victorian Supreme Court turned to the relevant provisions of the Act, being section 117 to section 119, and applied the 'dominant purpose' test.
The Court rejected the submissions made by IOOF regarding the documents produced during the First Period and held that there was no reason to preclude the Firm from being the client receiving legal advice. In these circumstances, the documents were prepared by the client (being the Firm) for the dominant purpose of a lawyer (Counsel at the Firm) providing legal advice to the client regarding confidentiality issues and prospects of success, therefore falling within the scope of section 118 of the Act. For the sake of completeness, the Court added that if there were any documents created during the First Period prior to there being any meaningful view on prospects or before any intention to gain or give legal advice, these documents would not be subject to privilege.
The Court rejected IOOF's submission that the dominant purpose of the investigation was to "work up a class action." The commercial interest in the preparation of documents during the First and Second Period of the investigation did not override the first client's entitlement to claim privilege where documents were created for the dominant purpose of providing legal advice. The Court held that this privilege is that of the first client and not the Firm. Further, upon inspecting documents relating to "internal document management" and documents described as "administrative task lists," the Court found that these documents fall within section 119 of the Act as the documents were created for the management of an anticipated litigation, form part of professional legal services and are subject to privilege.
For the purposes of "anticipated or pending" proceedings as required under section 119 of the Act, the Court held that while there is no certainty to a class action until members have indicated they are willing to participate in the class action, the positive view on prospects and funding provide that the potential of a class action was more than just a mere possibility.
The proceedings have otherwise since been resolved on a walk away basis. As part of the resolution, the Firm agreed to no longer pursue the class action.
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