Waiver of legal professional privilege in regulatory investigations

Holding Redlich


Holding Redlich, a national commercial law firm with offices in Melbourne, Canberra, Sydney, Brisbane, and Cairns, delivers tailored solutions with expert legal thinking and industry knowledge, prioritizing client partnerships.
The company waived its right to legal professional privilege by disclosing a privileged report to ASIC in an investigation.
Australia Litigation, Mediation & Arbitration
To print this article, all you need is to be registered or login on Mondaq.com.

In the recent case of ASIC v Noumi Ltd [2024] FCA 349 (ASIC v Noumi), the Federal Court found that company had waived its right to legal professional privilege by voluntarily disclosing a privileged report to ASIC during an investigation.

The Court's decision arose out of a peculiar factual scenario, but the case will impact the way that legal professional privilege is dealt with in regulatory investigations.

What is legal professional privilege?

Legal professional privilege (LPP) (sometimes referred to as "Client Legal Privilege") protects confidential communications that are brought into existence for the dominant purpose of giving or obtaining professional legal advice or legal services including representation in legal proceedings. The protection allows the client to resist giving information or disclosing documents which would reveal the privileged communication.

LPP can also be claimed when responding to regulatory investigations or enforcement actions, such as an exercise of ASIC's compulsory information-gathering powers, so the recipient of the notice is excused from providing privileged communications and documents in response. The privilege belongs to the client, not the lawyer, meaning the client is able to choose whether to claim or waive privilege. Most broad information-gathering powers include provisions to protect documents covered by LPP in the empowering legislation.

What is "waiver" of LPP?

LPP can be "waived" (and therefore the privilege is lost) by the client either expressly waiving the right to claim privilege in the communication, or impliedly waiving privilege by acting in a manner which is inconsistent with maintaining the confidential nature of privileged the communication.

When determining whether privilege has been impliedly waived, the court will apply the test that was established in the High Court of Australia decision of Mann v Carnell (1992) 201 CLR 1. This case involved the disclosure of confidential legal advice by the then Chief Minister of the ACT to an independent member of the Legislative Assembly of the ACT. The High Court stated that inconsistency between the actions of the client and the maintenance of the confidentiality in the privileged communication will be the determinative factor. The existence and extent of such an inconsistency will be informed by the purpose of the privilege, the nature of any disclosure and considerations of fairness.

For example, in Mann v Carnell itself, the Court concluded that in the circumstances there was "nothing inconsistent with [the purpose of the privilege] in the Chief Minister conveying the terms of [the] advice, on a confidential basis, to a member of the Legislative Assembly who wished to consider the reasonableness of the conduct of the Territory in relation to litigation."

Voluntary Confidential Disclosure Agreements

In some investigations, ASIC offers a "Voluntary Confidential Legal Professional Privilege Disclosure Agreement" (sometimes referred to as a VDA) under which a party agrees to disclose privileged material to ASIC for the purpose of its investigation, but on the basis that it may seek to maintain privilege over the documents for other purposes, including for use as evidence in proceedings subsequently brought by ASIC.

There may be several benefits of these arrangements for both ASIC and the disclosing party but the recent case of ASIC v Noumi demonstrates that privilege cannot be maintained for all purposes and on all occasions.

ASIC v Noumi Ltd [2024] FCA 349

Prior to the ongoing proceedings between Noumi and ASIC, Noumi had attempted to cooperate with ASIC's investigation regarding "unsaleable inventory". This included Noumi entering into a VDA with the regulator under which Noumi disclosed various documents that were covered by LPP at common law. The VDA contained ASIC's standard terms with a few minor changes. Among the disclosed documents was an investigation report prepared by PwC that was directly relevant to ASIC's investigation (PwC Report).

Mr Macleod (the second defendant in the proceeding and the former CEO and managing director of Noumi) was unsuccessful in arguing that the PwC Report was not privileged at all, but was successful in arguing that Noumi had waived the privilege which was attached to the PwC Report and therefore, the PwC Report ought to be disclosed to him.

Mr Macleod sought to argue that privilege did not attach to the PwC Report in the first place because it was not created for the dominant purposes of legal advice to the company, but in any case, privilege had been waived due to Noumi's voluntary disclosure to ASIC. He argued that the PwC Report had significant implications for the ASIC investigation brought against him and it should be disclosed to him as a matter of fairness.

In his judgment, Shariff J gave the following reasons for the decision that privilege had been waived and that Mr Macleod should be given access to the PwC Report:

  • Noumi knew, or ought reasonably to have known, that disclosing the PwC Report to ASIC would allow ASIC "to identify witnesses to examine the topics to be explored with them, the questions to be asked, the answers they would give, the documents to obtain, the relevant documents to show witnesses, the likely evidence that would be given by witnesses and located in documents"
  • while the VDA prevented ASIC from using the PwC Report in legal proceedings, it permitted the "derivative use" of the information contained in the PwC Report against third parties. Such use of the PwC Report is inconsistent with maintaining confidentiality in the privileged communication
  • the potential use of the information within the PwC Report against Mr Macleod under the VDA was "a specific unfairness" and supported the conclusion that the disclosure was inconsistent with maintaining privilege
  • the public policy benefits of voluntary disclosure could have been achieved in the circumstances without creating a specific unfairness.

It was evident that the issue of unfairness towards Mr Macleod was a significant factor in Shariff J's decision to allow access to the PwC Report. Justice Shariff considered the public policy arguments put forward by both ASIC and Noumi and acknowledged that voluntary disclosure of privileged information can facilitate access to justice and reduce the time and cost required in conducting regulatory investigations and legal proceedings. Despite this, Shariff J concluded, in this case, that "[w]hether the sharing of that privileged material will give rise to waiver will be a matter to be determined on a case by case basis."

Key takeaways

Organisations should be aware of the laws relating to the maintenance of legal professional privilege and take care not to accidentally waive their right to privilege, especially in the context of a regulatory investigation.

VDAs are an effective way for regulators, such as ASIC, to obtain information for their investigations by voluntarily disclosure of privileged communications. However, the decision of ASIC v Noumi shows that a VDA may not be a complete answer in a challenge to privilege.

To avoid accidentally waiving privilege, businesses should:

  • ensure that key members within the organisation, including directors and senior executives, understand LPP and the rights and risks associated with privilege, both pre and during legal proceedings and regulatory investigations
  • have policies and procedures in place to prevent accidental waiving of privilege
  • be aware and consider the implications of ASIC v Noumi before entering into a VDA with a regulatory authority.

How can we help?

Our team can assist you in understanding LLP, staying up to date with any developments following ASIC v Noumi, and provide training to ensure your teams are aware of LPP and risks associated with disclosing privileged information. We can also advise on potential claims of privilege and effective compliance with regulatory investigations.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More